The great Benjamin Franklin once famously wrote, “In this world nothing is certain but death and taxes.” Well, today I’m going to invoke poetic license and modify Franklin’s famous quote by saying, “In 2013, nothing is certain but death and tax increases.”
As you probably know just by looking at your paycheck, there’s been a 2% increase in the Social Security payroll tax. That might not be a major hit to your wealth, but if you take that 2% from everyone’s pay out of the economy, you’re talking about a whole lot of dollars funneled into government’s pocket that no longer are available to be spent on goods and services that consumers choose for themselves.
Of course, the payroll tax isn’t the only increasing tax on Americans. The last-minute deal to avert the fiscal cliff showed us that bipartisan solutions on economic policy means more money out of the pockets of the most productive among us. For example, individuals making more than $400,000 or couples earning more than $450,000 will now pay higher federal taxes. Then there are the tax increases associated with the implementation of ObamaCare, which by some estimates will remove well over $100 billion from the economy.
Stocks most vulnerable
The country now faces automatic spending cuts tied to the so-called sequestration. And while I think forced spending cuts actually are good for the economy, I suspect that the “solution” to this problem is going to be increased revenue, i.e. higher taxes, in order to resolve the impasse and achieve what President Obama has consistently called a “balanced approach” to deficit reduction.
The bottom line here is that taxes are going up, and when taxes go up it hits stocks most sensitive to consumer spending. For investors, this means that consumer discretionary stocks are the ones most vulnerable to a smackdown from higher taxes.
So, which consumer discretionary stocks are most at risk from higher taxes? Here are five stocks that, if you own or if you’re thinking about owning, stand to suffer the wrath of an out-of-control federal leviathan.