Neil: Welcome everyone I’m Neil Cavuto and well talk about going down with the ship. No not the Titanic us. Ship. Because it is tax filing time for millions of Americans this weekend and if you think your tax hit is bad now wait till a year from now when those Bush tax cuts could all be gone, that payroll tax break will almost definitely be gone, and whole new taxes will be on. Including a big one no one’s talking about when you sell your house to pay for Medicare, yeah a Medicare tax on your house. Is all this sinking in? Think on this Titanic anniversary that this is all just a pile of ship? Well I’m not shipping ya. Whew boy that was tough. No wonder why money guy Ed Butowsky has that sinking feeling.
Ed: How are you Neil?
Neil: Good, but you, uh, have concerns about the steady drumbeat of these taxes that even if one of them sticks were stuck.
Ed: Mmm hmm. I mean it depends on you know how you get your income but there is nothing good about this. And it’s really funny Neil because the government right now is literally doing the complete opposite of what I believe and most people believe they need to do to get the economy going and that is putting a blanket on top of growth and enterprise and obviously regulations you know don’t figure into this but everything they could possibly do to keep growth and the economy from expanding they’re doing.
Neil: You know we’ve had a very violate trading week we’ll take a peek at today off about better then about 136 points on the Dow. Not that this was the primary reason but I, I would think that people can look at a calendar and I think they can see what’s expiring all at the end of this year and how difficult it is for Washington to address a single issue let alone multiple planes stacked up at LaGuardia. How are they reconciling that? And the closer we get to these deadlines how do you think the markets respond to that?
Ed: Well look nobody likes anything that’s happening right now in the overall markets and you know what your intuition is dead on. When you go back and look at the times right before people are starting to pay their taxes markets just never do well. People wait and then they have to literally go in and start selling stocks to get that money to pay their tax bill. So your intuitions dead on and you know I don’t know how anybody can really positively say that this is a good idea to get the economy going. In fact Obama often times has said we get this economy going it’s the last thing we need to do is tax people. But then why do we have the policies in place that we do today?
Neil: You know I think it is going to be news to a lot of folks in 2013 when they sell their house and they find that there is going to be a 3.8% charge on those profits to pay for Medicare. I can see some folks saying what?
Ed: Well you know when anybody goes to sell a house and I’ve have a lot of clients that look to buy houses and sell houses they’re always negotiating do I drop it 1%, 2%? Well now they have to factor in basically 4% more not going to the realtor but going to the Medicare, umm you know the new law that’s come out. I mean six percent bothers me when
Neil: And most of them were already underwater to begin with so so so,
Ed: That’s right Yup.
Neil: That’s just to get ahead of that.
Ed: Yeah. Now it’s not on all the proceeds, there’s a lot of trickery and it’s…
Neil: Understood. 200,000 or above, right
Ed: Right and it’s not very transparent but as soon as you say hey by the way, pay your realtor 6% and then give 4% to President Obama for his uh policies ya know now you’re out 10% based on what you thought you were going to be taking in. That is not a very positive uh thing and it’s not going to help the economy I’ll tell you that.
Neil: Um with all of those tax hikes likely to take effect now obviously they will try to take as many as they can off the table Republicans might, umm, but were going to have a delay at the very least right? Were going to be dealing with these probably mamby pamby six month extensions if, that but it won’t be resolved the markets a blur uncertainty, what is it going to look like?
Ed: Well your your gonna have… ya know you have to look at each one individually. The one that really drives me crazy is this dividend uh tax going away. I mean theirs a lot of hard working people umm but at the same people a lot of people who are retired live off of dividend income. I mean interest rates are so low right now so you’ve have a lot of people who are calling up you know literally ya know I talk to all the time and saying I want to find some good dividend paying stocks. Well now people have to understand that they are now going to be taxed at their income rate and that’s going to be in some cases 39.5% plus Neil another 2% which is for phase out for some of these itemized deductions. So your dividend tax is going to go from 15% to possibly 40% and that is going to hurt the income for a lot of people.
Neil: Alright Ed, thank you, I think.
Ed: Absolutely
Neil: Always good seeing you. Meanwhile union leaders are today teaming up with the Democratic national committee to push for tax hikes at least on the rich, while touting private sector job growth, you heard me right private sector job growth. The former GOP Presidential candidate Mike Huckabee sees’s some irony in all of this, Governor.
Mike: Well it is pretty amazing that we are talking about increasing taxes at a time when uh we really need some things that will get the job market going and what Ed was saying is so very powerful. And uh you hear people say with Mitt Romney’s not paying enough taxes cus he’s basically making it off of capital gains. He will be come January he’ll see a tax increase as will a lot of other Americans. He probably can afford it. There are a lot of retired teachers and retired firemen who are living off investment income who cannot.
Ed Butowsky Explains Confusion in the Investment Industry
To help recover from the Great Depression, the United States passed the Glass-Steagall Act, separating the capabilities of banks, brokerage firms, and insurance companies. When this act was repealed in 1999, it allowed all financial institutions to replicate each other’s business models. As a result, mass confusion occurred in the marketplace and people did not know where to go for their investment needs. Additionally, it became evident that the lack of training and education in this field was unacceptable.
While stocks, bonds, mutual funds, and other financial products are the “nuts and bolts” of a portfolio, how they are combined to “build” a portfolio is the key to efficient investing. Although financial institutions sell these products, their advisors typically lack sophisticated training on properly implementing them to build an efficient portfolio. Successful investing is all about risk management, and advisors cannot properly construct a portfolio unless they understand the correlations among each underlying asset.