Definitive historical research demonstrates that higher tax rates do not disrupt the stock market, but they may unsettle your financial goals if you don’t have proper financial management. Higher tax rates directly impact earnings meant for investment.
Let’s look back to see how taxes and the stock market have evolved through the years.
In the 1950s to early 1960s – a period of generally good market performance – the top income tax rates were more than 90 percent, the estate tax rates topped at 77 percent and the capital gains were at 25 percent. In the strong economic period from 1982 to 1986, the top income tax rate was 50 percent, estates capped at 65 percent and capital gains were at 20 percent. During the wildly up-and-down 10 years from 2003 to now, the income tax rate was a historically low 35 percent, capital gains at a low 15 percent and estate taxes varied from 49 percent down to zero. Thus, there was seemingly no contributory action by tax rates for market action.
In the following short video, I discuss how higher taxes can affect your financial goals and ways we can mitigate those effects.
Want to see how much you could be losing from higher tax rates? Download our free tax investment calculator today and contact us to discuss a tax management strategy that will help you reach your financial goals.
Robert Fragasso, CFP®, is chairman and chief executive officer at Fragasso Financial Advisors, a Pittsburgh-based investment and financial planning firm. Due to industry regulations, comments are not permitted on this blog. If you would like to contact the author, please email us at firstname.lastname@example.org. Bob can also be reached for comment at 412-227-3200.