Congress is deciding your portfolio’s future right now—so you might want to pay attention.
If investment success were an algebra equation, one variable would be the amount of after-tax income you can save.
Another variable would be the tax rate of your capital gains and how much of your losses you can deduct.
And yet another variable would be the irrational decisions you make to squeeze your portfolio through the various tax traps.
All that would apply even if Congress just simplified the tax code without changing the amount of money the government takes from us.
The current House and Senate proposals reduce overall tax revenue, but that doesn’t mean they will reduce it for you. Whether you’ll save anything depends on who you are and how you earn your income.
That, in turn, is already affecting financial markets. You’d best be on the right side of it.
Photo: Getty Images
Fairer, Simpler, Flatter? Not.
In Connecting the Dots six months ago, I said, “There will be no tax cut this year, and likely not in 2018, either.”
I still see almost no chance that anything will pass. Saying the parties are divided would be an understatement—it’s a chasm that separates not just Democrats and Republicans, but Republicans internally as well.
Add the lobbying firepower brought in by those who stand to lose, and I would consider it almost impossible that any significant changes will pass both houses. So we’re probably stuck with the present system.
Which is a problem because the present system is bananas. It rewards activities that hurt the economy, like unproductive debt, and punishes things that would help.
And it still doesn’t raise enough cash to balance the budget (though that’s also due to excessive spending, which is a different problem).
For a while, politicians were at least saying the right things. They talked about giving us a fairer, simpler, flatter tax code. That would be great… but it’s not what they decided to do.
