The Taxes Are Coming, The Taxes Are Coming

 Congress Needs to Act or the Market Will Crash At The End of 2012

Taxable investors will have every reason to dump stocks by the end of the year unless Congress takes action.

The Bush-era tax cuts—enacted in 2001 and 2003—are scheduled to expire at the end of this year. Unless Congress acts, most taxpayers will see rate and other increases

The existing 10% bracket will go away, and the lowest “new” bracket will be 15%. The existing 25% bracket will be replaced by the new 28% bracket; the existing 28% bracket will be replaced by the new 31% bracket; the existing 33% bracket will be replaced by the 36% bracket; and the existing 35% bracket will be replaced by the 39.6% bracket

Right now, the maximum federal rate on long-term capital gains and dividends is 15%. Starting next year, the maximum rate on long-term gains is scheduled to increase to 20% (or 18% on gains from assets acquired after Dec. 31, 2000, and held for over five years). The maximum rate on dividends will skyrocket to 39.6%.

People in the lowest two rate brackets of 10% and 15% currently pay 0% on long-term gains and dividends. Starting next year, they will pay 10% on long-term gains (or 8% on gains from assets acquired after Dec. 31, 2000, and held for over five years) and 15% and 28%, respectively, on dividends.

And let’s not forget the estate tax which will rise to 55%.