Research & Insights
Income Taxes: The Stock Market’s Bipartisan Blind Spot
Abstract:
Thesis: Conventional economic theory suggests a correlative relationship between personal income taxes and stock market performance. Following this theory, expenditure is dependent upon income level, meaning that an increase in income will increase expenditure and vice versa. As we enter the thick of election season, political bloggers and pundits have had a field day with this premise, suggesting, in essence, that an increase in tax rates lowers stock market returns by crimping stockholders’ ability to invest. Based on history, should we be concerned that a likely tax rate hike in 2009 will force a further plunge in the stock market?