Taxes will rise, Kiplinger tells dealers at WANADA Annual Meeting

Taxes will rise, Kiplinger tells dealers at WANADA Annual Meeting

[I]Crowd of 300 hears renowned economic forecaster at Mayflower, Dec. 5[/I]

Make no mistake, economic forecaster Knight Kiplinger told lunch attendees at WANADAs Annual Meeting last week. Taxes are going to go up, up, and up on high-income earners.

Kiplinger, editor-in-chief of The Kiplinger Letter, Kiplingers Personal Finance magazine and Kiplinger.com, and a frequent speaker before business groups, predicts we will see more progressivity in the tax code for those earning more than $250,000. As part of the new health care law, there will be a 0.9 percent Medicare surtax for households earning more than $250,000 and a 3.8 percent surtax on unearned income (dividends and capital gains) in high-income households.

Kiplinger believes America will avoid the fiscal cliff and instead will take a bungee jump, with Congress coming to agreement in January, and making it retroactive if need be. That means there should be minimal effect on the local economy, even though there could be temporary furloughs of DC area based civil servants.

He expects Congress to produce the framework of a grand bargain in the next few weeks to address the larger question of tax reform and the long-term deficit, and that will be enough to calm the financial markets.

Some of Kiplingers other predictions for the longer term grand bargain:

There will be significant spending cuts, but they wont be automatic or draconian.

The minimum age for Medicare eligibility will rise from 65 to 66 or 67, and to 70 later.

Taxes will probably go up on dividends and capital gains for upper income earners.

The corporate income tax rate will likely come down. (Now, its highest in the world.)

The mortgage interest deduction may be adjusted in areas such as a deduction for the interest on a second home.

Kiplinger discussed four sources of spending in the economy:

Government: In the past few years, state and local governments have slashed spending while federal spending has increased. That situation is about to reverse, and then the hypersuccessful Washington metro area will be on the same level as other successful cities.

Exports have seen double-digit growth for several years. Next year, Kiplinger expects exports to grow around 5 percent.

Business. American business is sitting on $1.7 trillion in cash, Kiplinger said. That will have to be spent eventually. He expects more hiring in the next year or two with the corresponding drop in unemployment.

Consumers. Consumer confidence is starting to return, and Kiplinger expects low-level growth in consumer spending in the next year or so, but growth just the same.

Kiplinger told dealers that, as business leaders, it is their duty to make their priorities known to members of Congress.

He ended with a kind of blessing for auto retailers: May next year be as good a year as this year for auto sales. Dealers are hoping for better, and the analysts are indeed predicting it.

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