Foster Group

Tax mitigation, and thus wealth enhancement, is a primary concern of the affluent.  The infinite uncertainty of pending tax law does nothing to ease this strife.  Two particular pieces of legislation being hotly debated center on the payroll tax deduction and so-called "millionaires' tax."  As 2011 came to a close, Congress implemented a temporary extension (through February) of the reduction in employee contributions to Social Security, maintaining a 4.2% rate vs. the original 6.2%.  One of the many proposals floating around to fund this cut beyond February is a surcharge on incomes above $1 million, championed by several Democratic senators.  While this idea faces an uphill battle from Republicans, the temporary extension is being justified on Uncle Sam's balance sheet via an increase in mortgage lending fees.  Moral of the story:  Tax policy will remain an enigma as usual, and our lawmakers will most certainly begin throwing punches once back in Washington later this month.

Political maneuvering will drive the ultimate fate of both items, especially in light of this being an election year.  While these pieces of tax legislation serve only as a snippet of the Congressionally-supported and IRS-enforced complexities we are faced with as investors, it serves as a good reminder to worry about what you can control . . . saving as much as possible, remaining diversified, avoiding debt, and using your American right to speak with your vote in next November’s elections.