As lawmakers struggle to agree on a plan to avert the series of tax increases looming next year, many investors are taking preemptive action to get out of harm’s way.
Americans are moving to sell investment homes, off-load stocks, expand charitable donations and establish tax-sheltering gifts before the end of the year. Financial advisers and accountants say people are trying to avoid the higher taxes that will take effect in 2013 if Washington does not avert the “fiscal cliff.”
For the most part, the people moving their assets are the wealthy, who have the most to lose even if a deal is struck. Ordinary Americans also are in line for higher income and payroll taxes and fewer deductions and tax credits if the nation goes over the fiscal cliff. But since most of their earnings come through wages, there is little they can do to minimize the impact. Also, the majority of investment income earned by middle-income people comes through tax-deferred vehicles such as individual retirement accounts and 401(k)s, making the possible changes in taxes on investment returns largely immaterial.
“You’re not going to refuse your paycheck because the taxes are higher,” said Roberton Williams, senior fellow at the nonpartisan Tax Policy Institute. “The people that can make adjustments, who can change the way their world works, are the wealthy.”
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