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People Scramble in Advance of Expected Tax Hikes

1 min readBy: William Ahern

When people know that taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. increases are imminent, they often change their financial arrangements, especially the timing of large payments, sales or investments. We are already seeing that in the sports world as agents consider the advantage of acting before an Obama tax hike takes effect. Here's the AP story.

Those sports agents are worried about wage tax rates going up, but historically the biggest changes occur in capital gains. In normal times, an impending capital gains taxA capital gains tax is levied on the profit made from selling an asset and is often in addition to corporate income taxes, frequently resulting in double taxation. These taxes create a bias against saving, leading to a lower level of national income by encouraging present consumption over investment. hike (Obama pledges to raise the rate from 15 to 20 percent) would cause many people to sell appreciated assets before the tax kicks in. It remains to be seen, though, if the tumbling market has taken that option off the table for many investors.