Will Tax Increases on the Wealthy Send Gold Plunging?
But a new Washington Post poll could throw cold water on those gold bugs. The poll suggests that the most popular way to close the federal budget deficit is to raise taxes on America’s top earners. Are Republicans who are proposing a $4.5 trillion in new tax cuts for the top 2% willing to buck those polls? If not, President Obama could see his plan for tax increases enacted and the resulting path to a balanced budget would take a bite out of the gold bugs.
The poll, based on 1,001 telephone interviews conducted between April 14 and 17, finds widespread support for President Obama's call to raise tax rates on family income over $250,000. According to the poll, 72% support his proposed tax increases while 54% strongly back his approach. My interpretation of the results is that the further away from that $250,000 income level, the higher the support for the tax increase -- 91% of Democrats like the idea, 68% of independents do, and 54% of Republicans support it. The only less-than-majority "strong support" for the idea comes from those making more than $100,000.
If America returned the top tax rate to where it was under Bill Clinton, substantial economic progress might ensue. After all, Clinton presided over an economy that created 22.2 million jobs when the tax rate on those top earners was 39.6%, rather than the Bush-Obama era 35% that cost the U.S. Treasury $1.3 trillion and left 13.5 million out of work with incomes declining by 8.1% between 2000 and 2009. If you added $600 billion in corporate tax revenue that would follow from closing loopholes that enable companies like General Electric (GE) to avoid paying the 35% tax rate on companies' record $1.68 trillion in 2010 profits, we could make substantial progress towards balancing the budget.
These gains towards fiscal stability would go a long way to strengthening the market's confidence in the dollar and have a correspondingly disastrous effect on the price of gold. America faces a choice of doing what the majority of its citizens want -- to reduce the deficit through tax increases on less than 5% of its population -- corporations and the wealthiest 2% -- or, as Paul Ryan (R-Wisc.) proposes, to give those top 2% $4.5 trillion in new tax cuts while gutting Medicare and Medicaid.
The Ryan approach would further enrich that minority while pumping up gold. The more popular Obama approach would strengthen the dollar and slash gold prices. If you think Ryan's approach will prevail, buy gold -- here's a list of gold ETFs that will prosper from that approach.
Otherwise, consider selling gold short.