Weekly Market Update by Retirement Lifestyle Advocates

          Happy New Year!  And, with the new year comes higher taxes, thanks to the Washington politicians.

          While I fully expect another difficult year for the economy and investing, the consumer spending-dependent US economy will have to withstand higher taxes in addition to record debt levels and inflation.

          This from “Zero Hedge” (Source:  https://www.zerohedge.com/political/heres-list-biden-tax-hikes-which-take-effect-jan-1):

When the Democrats finally passed the "Inflation Reduction Act" in 2022 (how's that going?), they included several tax hikes set to take effect on Jan. 1, 2023.

Americans for Tax reform's Mike Palicz has conveniently compiled a list of them, along with his take on their intended effects:

$6.5 Billion Natural Gas Tax Which Will Increase Household Energy Bills

Think your household energy bills are high now? Just wait until the three major energy taxes in the Inflation Reduction Act hit your wallet. The first is a regressive tax on American oil and gas development. The tax will drive up the cost of household energy bills. The Congressional Budget Office estimates the natural gas tax will increase taxes by $6.5 billion.

And, of course, this tax hike violates Biden's pledge not to raise taxes on Americans making under $400,000 per year. According to the American Gas Association, the methane tax will slap a 17% increase on the average family's natural gas bill.

$12 Billion Crude Oil Tax Which Will Increase Household Costs

Next up - a .16c/barrel tax on crude oil and imported petroleum products, which will end up on the shoulders of consumers in the form of higher tax prices.

The tax hike violates President Biden’s tax pledge to any American making less than $400,000 per year.

As noted above, Biden administration officials have repeatedly admitted taxes that raise consumer energy prices are in violation of President Biden’s $400,000 tax pledge.

As if it weren’t bad enough, Democrats have pegged their oil tax increase to inflation. As inflation increases, so will the level of tax.

$1.2 Billion Coal Tax, Which Will Increase Household Energy Bills

This one increases the current tax rate on coal from $0.50 to $1.10 per ton, while coal from surface mining would increase from $0.25 per ton to $0.55 per ton, which will raise $1.2 billion per year in taxes that will undoubtedly be passed along to consumers in the form of higher energy bills.

$74 Billion Stock Tax Which Will Hit Your Nest Egg — 401(k)s, IRAs, and Pension Plans

Democrats are now imposing a new federal excise tax when Americans sell shares of stock back to a company.

Raising taxes and restricting stock buybacks harms the retirement savings of any individual with a 401(k), IRA or pension plan.

Union retirement plans will also be hit.

The tax will put U.S. employers at a competitive disadvantage with China, which does not have such a tax.

Stock buybacks help grow retirement accounts. Raising taxes and restricting buybacks would harm the 58 percent of Americans who own stock and more than 60 million workers invested in a 401(k). An additional 14.83 million Americans are invested in 529 education savings accounts.

Retirement accounts hold the largest share of corporate stocks, accounting for roughly 37 percent of the outstanding $22.8 trillion in U.S. corporate stock, according to the Tax Foundation.

In 2017, corporate-sponsored funds made up $4.45 trillion in market value; union-sponsored funds accounted for $409 billion; and public-sponsored funds, which benefit teachers and police officers, added up to $4.25 trillion.

A tax on buybacks could dissuade companies from doing so, and US companies will face significant compliance costs, which will - again, be passed along to consumers.

$225 Billion Corporate Income Tax Hike, Which Will Be Passed on to Households

American businesses reporting at least $1 billion in profits over the past three years will now face a 15% corporate alternative minimum tax, which will be passed along in the form of higher prices, fewer jobs and lower wages, according to Americans for Tax Reform.

A Tax Foundation report from last December found a 15 percent book tax would reduce GDP by 0.1 percent and kill 27,000 jobs.

Preliminary cost estimates from the Congressional Budget Office found the provision would increase taxes by more than $225 billion.

According to JCT’s analysis, 49.7 percent of the tax would be borne by the manufacturing industry at a time when manufacturers are already struggling with supply-chain disruptions.

Which industry will likely be most affected? According to the Tax Foundation, "the coal industry faces the heaviest burden of the book minimum tax, facing a net tax hike of 7.2 percent of its pretax book income, followed by automobile and truck manufacturing, which faces a 5.1 percent tax hike."

        There is really no such thing as a business tax.  When businesses are required to pay additional taxes, the business simply adjusts the price of the product or service that the business offers in order to cover the tax.  This means that consumers pay more when purchasing a product or service.

          As I write this, I just paid my natural gas bill, which is how I heat my West Michigan home.  The bill that I just paid was significantly higher than the bill from the same time last year.  Now, after this tax is implemented, I can expect another 17% increase in the cost of natural gas.  That increase will be solely the result of new taxes.

          These taxes come at a time when the average American family is struggling due to inflation.  Discretionary income in many households is now a memory rather than a reality.  Making ends meet has become a nightmare for many households, and it’s now about to get worse.

          Michael Snyder, an author, and prolific economic commentator, recently noted that almost 2 out of 3 American households are now living paycheck to paycheck.  (Source: https://www.silverdoctors.com/headlines/world-news/15-facts-prove-a-massive-economic-meltdown-is-already-happening-right-now/)

          This (Source:  https://www.cnbc.com/2022/12/15/amid-high-inflation-63percent-of-americans-are-living-paycheck-to-paycheck.html) from CNBC:

As rising prices continue to weigh on households, more families are feeling stretched too thin.

As of November, 63% of Americans were living paycheck to paycheck, according to a monthly LendingClub report — up from 60% the previous month and near the 64% historic high hit in March.

Even high-income earners are under pressure, LendingClub found. Of those earning more than six figures, 47% reported living paycheck to paycheck, a jump from the previous month’s 43%.

“Americans are cash-strapped and their everyday spending continues to outpace their income, which is impacting their ability to save and plan,” said Anuj Nayar, LendingClub’s financial health officer.

Although consumer prices rose less than expected in November, persistent inflation has caused real wages to decline.

Real average hourly earnings are down 1.9% from a year earlier, according to the latest reading from the U.S. Bureau of Labor Statistics.

This leaves many Americans in a bind as inflation and higher prices force more people to dip into their cash reserves or lean on credit just when interest rates rise at the fastest pace in decades.

Already, credit card balances are surging, up 15% in the most recent quarter, the largest annual jump in more than 20 years.

At the same time, credit card rates are now more than 19%, on average — an all-time high — and still rising.

          As I stated last week, because of the actions of the politicians and the Fed, it’s my firm belief that severe deflation and economic pain lie ahead.

          Make sure you educate yourself and take action to protect yourself.


 

The radio program and podcast this week is a ‘best of’ program featuring an interview with the host of the “Mid-week Reality Check” podcast and frequent television commentator, Michael Pento. If you haven't yet had the chance, listen now by clicking on the "Podcast" tab at the top of this page.

 

“It’s important to realize that whenever you give power to politicians or bureaucrats, it will be used for what they want, not what you want.”

                                                        -Harry Browne

 

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