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Goldman Sachs forecast higher taxes

page: 1

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posted on Mar, 25 2010 @ 03:35 PM

And a VAT to boot.

Tax policy has gained attention in recent days as a result of the tax increases used to pay for health reform. In fact, this is just one of several potential tax debates over the next several months, with the expiration of the 2001/2003 tax cuts and stimulus tax provisions scheduled for year end, proposed and recently enacted corporate tax proposals, and the possibility of some form of consumption tax on energy or, in the longer term, a broader value added tax.

There is little possibility of changes for 2010, apart from the expiration of some stimulus-related provisions, but tax rates in 2011 are almost sure to rise on higher incomes as well as capital income. One consideration for lawmakers will be the different effect that tax policy can have in a zero interest rate environment. This may reduce the negative effects associated with increased taxation of labor and capital, but could exacerbate the negative effect of any increase in consumption-related taxes.

The passage of health reform has done two things to focus attention on tax policy. First, it included a number of taxes to finance a portion of the new spending the package calls for. Second, it clears the agenda for the broader debate on tax policy that will begin in the next few weeks when Congress takes up its budget blueprint for 2011, which will lay the groundwork for the extension of some, but not all, of the tax cuts scheduled to expire later this year.

Tax policy over the next year is likely to see more substantial changes than at any point since 2001, and is likely to see taxation rise more than any point since 1993. After several years of relative stability in tax policy (the stimulus legislation was the one exception), the next few years will require decisions on several fronts:

Prepare to pony up and pay. Goldman focuses on mostly those who make more than 250,000 dollars but to think the government is going to get money from just that group is silly. The costs will be passed to the consumer.

[edit on 25-3-2010 by antonia]


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