Last week, President Obama outlined elements of his first budget. Unfortunately, it contains tax increases that are likely to contribute to the current economic malaise. Mr Obama proposes that the 2001 and 2003 tax cuts that reduced the taxes on capital gains and dividends expire at the end of 2010.
Additionally Mr. Obama would allow the top income tax rate to rise from 35 percent to 39 percent beginning in 2011. This is no time to be increasing the taxes on any worker, high or low income. Such a large tax increase is now having a large and negative impact on the stock market.
Since Mr. Obama won the election the Dow Jones Industrial Average has dropped by over 23 percent and has declined by more than 17 percent since Mr. Obama’s inauguration on January 20. The stock market is telegraphing to our political class that a tax increase on stocks and high income tax rates for workers are not the right steps.
I encourage our Congressional representatives, U.S. Senators and the Obama Administration to make the 2001 and 2003 tax cuts permanent. While this action would not restore the equities markets to their prior lofty levels, it would increase stock prices at a time when investors are searching high and low for some good news.
Obama also wants to maintain the tax on estates worth more than $3.5 million, instead of letting it expire next year. And he proposes "a fairly aggressive effort on tax enforcement" that would target tax havens and corporate loopholes, among other provisions, the official said.
Mr. Obama’s proposals are putting significant downward pressures on the stock market. Be bold Mr. Obama. Keep the 2001 and 2003 tax cuts and challenge the demagogues in the Democrat party .