No Cliff Diving

September 11, 2012

It would be easy to panic here. But after 40 years serving clients, we have uncovered few
bounds on the ability of politicians to reverse previous positions where their constituent's
interest is involved and pressure is applied.
-Frank James, founder, James Investment Research
-David James, senior vice president, James Investment Research
-R. Brian Culpepper, first vice president, James Investment Research

Travelers to Mexico are often treated to entertainment; a young diver displays his or her
skills by diving off a high cliff into the ocean. The media has sounded the alarm for early
2013 when a different type of cliff diving may occur. That is when a number of taxes, presently abated, are scheduled to increase coinciding with curtailed government spending. According to FED Chairman Bernanke, ".there's going to be a massive fiscal cliff of large spending cuts and tax increases."

What would the end of the "Bush Tax Cuts" look like? Significant changes will take place.
The top tax rate on income will rise from 35% to 39.6%. Dividends and capital gain will
also be impacted. Top earners will find their dividends taxed at a confiscatory 39.6% rate,
up from 15%.

The new health care law, popularly known as "ObamaCare", adds another layer of new
taxes. For those making over $250,000 there is a new 3.8% Medicare surtax on investment
income. This will be coupled with an additional 0.9% tax on earned income.

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