Where To From Here?
November 17, 2017
By Resnick Advisors
Before launching into our outlook on the economy and markets, let’s take a stab at framing the “big picture” of U.S. individual taxes. The Treasury Dept. has completed its slicing and dicing of 2015 return data, and here it is:
- The bottom 50% of taxpayers pays only 2.8% of taxes collected. We wonder if it’s even worth the effort of making them file!
- The top 10% of filers accounted for 70.6% of taxes collected. Please note that, to be in the top 10%, you have to have only $138,000 of adjusted gross income (which doesn’t seem like much to make the top 10%).
- It was surprising to see that adjusted gross income of $196,000 puts one in the top 5% of filers, accounting for 59.6% of taxes collected.
Think about all of this while pondering the debate on tax reform. Based on the above, it’s an exercise in moving dollars from one tax return line item to another (i.e., reducing your tax rate while increasing your taxable income by reducing your deductions). The same people will be paying most of the taxes. With respect to the belief that the wealthy pay no taxes, please note that the top 1% of earners pays 39.0% of taxes. So much for THAT myth!
With respect to the markets and global economy, we remain optimistic:
- Of the 43 countries on our radar, all but two continue to show positive growth.
- The employment picture is very strong.
- This is clearly an earnings-driven rally, with a positive outlook for continued earnings growth.
- The re-acceleration of economic growth in China, India, and the Euro Zone is relatively young and should carry our economy (whose recovery is getting old – 9 years now) forward into the next few years.
- The weakening dollar is helping U.S. exports and tourism.
- Business confidence is very positive.
- Consumer sentiment is high, causing people to spend.
- Inflation is tame.
The real threat to this positive environment continues to be geopolitical. Unfortunately, the timing and impact of these events is indeterminable. Your only mitigating force is your asset allocation.
As always, we would be happy to discuss any of this with anyone who would like to give us a call or send us an e-mail – firstname.lastname@example.org.