Fiscal Cliff Hangover

The title of this blog might be a little misleading because of the fact that we have yet to go over the Fiscal Cliff.  However, I have a bit of a hangover from the media coverage of the cliff.  I'm an avid viewer of CNBC and sure enough, they have a Fiscal Cliff countdown going on throughout the day. First off, I'm not trying to downplay the potential effects that the FC (I'll abbreviate it for now) will have on the economy, but I'm getting increasingly irritated on the lack of new information the media is provided.  Also, I feel as if the media is already assuming that we are going over the FC when it appears to be a 50/50 chance since Speaker of the House John Boehner and President Obama have appeared to "attempt" to compromise in the past few days. I was initially hoping for an increase in the top marginal tax rate (from 35% to 39%) but maybe Boehner and Obama can agree on something around 37% for top income earners.

Current tax rates for capital gains and dividends are also at stake.  For now, capital gains and dividend taxes are at 15% for the wealthy.  If we fall off the cliff, top income earners can see capital gains taxes increase to 20% and dividend taxes would go up to around 39%.  In fear of the cliff, many companies are now offering special dividends to investors this month to avoid the tax increases; another example of people assuming we are going over the cliff.  Better to be safe than sorry I guess?  I've stated a few facts and opinions so now I'll get to the punchline; I don't think an expiration to the Bush tax cuts for the wealthy will be as bad for the economy as some think. A tax increase for your $1 per share dividend? Spare me.  Again, these tax increase mainly affect the wealthy (aka the "job creators").  Investments in stocks are bets, and regardless of the tax rates, Americans love bets. Vegas anyone?

In my opinion, to avoid the FC we must return to Clinton-era tax rates for the wealthy, with a top marginal rate of 39.6% vs the Bush-era 35%. Clinton was an age of balanced budgets and economic growth.

 Hook 'em.