TAX BILL MAY SPUR UNINTENDED EFFECTS.Byline: Dave Skidmore Associated Press Associated Press: see news agency. Associated Press (AP) Cooperative news agency, the oldest and largest in the U.S. and long the largest in the world. Turmoil in the stock market. A surge in college tuition The examples and perspective in this article may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. College tuition costs. A boom in condominium sales at the expense of houses. The guessing is starting on possible unintended consequences For the "Law of unintended consequences", see Unintended consequence Unintended Consequences is a novel by author John Ross, first published in 1996 by Accurate Press. of the huge and complex tax bill. No one's arguing couples would have more children just to take advantage of the $500 per child credit, or that anyone could postpone death until after the Jan. 1 effective date of the larger estate tax exemption tax exemption, immunity from the requirement of paying taxes. Federal, state, and usually local law provide exemption from taxation for a wide variety of organizations, usually not-for-profit, such as churches, colleges, universities, health care providers, various . But even small changes in tax law can act as powerful levers, altering the way taxpayers conduct their financial lives, from what they buy and sell to when, how and how much they save. A classic case of unintended consequences, stretching the point only a bit, is the savings and loan crisis The Savings and Loan crisis of the 1980s was a wave of savings and loan association failures in the United States in which over 1,000 savings and loan institutions failed in "the largest and costliest venture in public misfeasance, malfeasance and larceny of all time. . A change in depreciation rules in the 1981 tax act spurred a boom in commercial real estate. But the favorable treatment was taken away by the 1986 act. The boom busted and hundreds of S&Ls that had invested heavily went belly up. Here are a few areas to watch prospectively. THE STOCK MARKET: Reducing the top rate on capital gains from 28 percent to 20 percent should make stocks a more attractive investment in the long run. But in the short term, an already high-priced market could be hit by a wave of selling from investors who have wanted to cash in their gains but were waiting to make sure the lower rate was signed into law. ``We've had a lot of clients with very large gains that have been . . . putting off big transactions that all of a sudden will hit the market,'' said Tom Ochsenschlager, a partner with the Grant-Thornton accounting firm. ``There could be so much selling that it would have a negative impact on the market. On the other hand, the money has to go somewhere, so it might go right back into the market,'' he said. INVESTMENT CHOICES: Over the long haul Long distance. Long haul implies traversing a state or a country. Contrast with short haul. , the capital gains cut could help some stocks more than others. Investors likely will prefer fast-growing companies over corporations offering big dividend checks, which will continue to be taxed at a top rate of 39.6 percent. ``It will be bad for utilities that historically have issued preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. and it will favor high-tech companies,'' said Leslie Samuels, a top tax official in Clinton's first term and now a partner at a New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of law firm. New IRA-Plus accounts, open to couples earning as much as $150,000, could reduce the popularity of such existing tax-favored investments as municipal bonds and variable annuities Variable annuities Investment contracts whose issuer pays a periodic amount linked to the investment performance of an underlying portfolio. , he said. ACCOUNTANTS AND LAWYERS: Tax attorneys, according to Samuels, will get more high-fee work designing complex transactions to turn ordinary income into capital gains. And clients anxious to take full advantage of the complex new breaks will stream into accountants' offices. ``This will get me into my retirement years,'' said Grant-Thornton's Ochsenschlager. |
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