Will this be PM positive?

[jim4silver]

I was reading today that the Obama administration is trying to get an increase in the tax rate for stock dividends to 44.8% (the rate is currently 15%) as part of his 2013 budget plan. This would apply to individuals earning $200K or more and married people who file jointly making $250K or more. I am not posting this as a political debate issue or criticism/praise, but believe if it passes, it might be PM positive (and most likely stock market negative).

For example, many wealthy and middle class people have stocks that pay dividends and like to keep a substantial portion of their wealth in these stocks, especially now with bank CD rates paying less than one percent, and some stocks paying dividend rates much more than that. Under a 15% tax rate, they seem like a great deal if the stock market is staying flat or going up, since the individual is making more than having their money in the bank and is paying less taxes plus their underlying asset might be going up in value too. But if the rates are raised as outlined above, I believe it will cause some to re-think what they invest in. Some might decide to dump their stocks before the new law comes into effect, and many would probably adjust their stock purchases in the future once the law was in effect. Note that capital gains on PM sales is a max of 28% (collectible rate) on gains, this would be 20% less than for the dividend income. Couple this fact with the growing uncertainty in the world and money printing, and this could be another avenue that leads regular people (as opposed to PM bugs like me and many of you) into PM investments when they normally would not be thinking about them.

I am not saying if this occurs it will cause PMs to soar in and of itself, but it could be just one more factor that will help what I believe is already a very bullish PM environment in general.

Just my opinion.

PS Of course it is possible that this tax rate increase will not pass. I would imagine the republicans would not be pleased with it.

Any thoughts on this?

Jim

 

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[mts]

I do think this would be negative for the stock market which would likely be positive for PM's. I sure hope it doesn't pass. I don't see why we need such a high tax rate on dividends.

 

[clovis97]

I agree that a steep tax increase for a people in that tax bracket might sell off dividend stocks.

The few people that I know that actually are in that tax bracket, don't seem to love PM's, except in the form of ETF's or mining stocks, and they are leery of today's metal prices.

Another thing to consider is that these dividend stocks could be transferred to kids and grand kids, helping beat tax implications.

As well, there are many other vehicles for decent return. My guess is that if this did come to pass, much of this money would be dumped into muni bonds, which often pay as well, if not better, than many dividend stocks.

I cannot see Wall Street taking kindly to this proposed tax increase. This would greatly affect personal incomes of those on Wall Street, hedge funds, mutual funds, and take a serious bite out of stock prices that are bought for the dividend, whether it be for long term holding, or for a short play between the ex-date and day of record.

Just my two cents...

 

[Marchas45]

As well, there are many other vehicles for decent return. My guess is that if this did come to pass, much of this money would be dumped into muni bonds, which often pay as well, if not better, than many dividend stocks.

This is the last place I would dump my money, Most Municipalities are barely hanging on as it is. Dump your money there and you surely are Dumping it. Just my opinion of course. (learned that from Jim and mts)

 

[jim4silver]

As well, there are many other vehicles for decent return. My guess is that if this did come to pass, much of this money would be dumped into muni bonds, which often pay as well, if not better, than many dividend stocks.

This is the last place I would dump my money, Most Municipalities are barely hanging on as it is. Dump your money there and you surely are Dumping it. Just my opinion of course. (learned that from Jim and mts)

For years and years muni bonds have been very safe with great returns, but I believe as things unfold in the next couple of years, there will be a large number of municipalities declaring bankruptcy--and muni bond holders might end up like those holding Greek bonds. Meredith Whitney is a well known stock/financial pundit and she made the call about municipalities going bust a while back and has taken heat because her predictions have not come true yet, but I think she will be vindicated in the end. I think if/when things like this fall apart, it will happen pretty fast and be like a waterfall and events will happen so fast across the boards it will make your head spin.

I have seen at my local level government offices laying off and cutting back due to lack of revenue. Everyone always used to say get a gov job because you will have job security as opposed to the private sector, but that is not true anymore. Don't know if anyone else has noticed this, but I see more and more police cars shooting radar/writing tickets than ever before. Some stretches of highway have a cop or two every couple of miles day in and day out. Never used to see that before here in such great numbers. I guess that is one way to bring in more revenue.

Jim