60% of Americans say taxes are too high
Economic Discontent and Stock Market returns
According to a recent poll by Gallup, a staggering 60% of Americans believe that the federal income tax rate is too high—the highest percentage recorded in 23 years.
We have been here before.
Going back to 1956, there have been 13 times when Americans have been at or above 60% in the “too high taxes category”.
For most investors, taxes are their biggest expense.
What does this mean for the stock market?
When 60% or more of Americans perceive taxes as "Too High", there is a 62% chance that the total annual return for the Dow Jones Industrial Average Index is negative.
This is a relatively small historic sample, but I do think there are a couple of key takeaways:
Economic Sentiment: A high percentage of Americans believing that taxes are too high could indicate a general sentiment of economic discontent. This is the compounding silent effect of inflation and slowing economic growth. When investors feel overburdened by taxes, they may be less likely to invest, or take risks, which can dampen economic activity. By extension, this can have an indirect impact on stock market returns.
Consumer Spending: Higher taxes or the perception of them can decrease disposable income. Consumer spending makes up 68% of total GDP and a reduction in spending due to perceived high taxes can lead to weaker economic growth and potentially negative stock market returns.
Policy Uncertainty: The stock market is influenced not just by hard economic data but also by investor psychology. Taxes are only perceived to be high, when the government is not providing a level of acceptable service to the population. The perception of high taxes and political uncertainty in Congress can have downstream effects. Uncertainty around tax policy can lead to volatility in the stock market as investors grapple with potential future scenarios.
While these are just general ideas, I believe it's always a good idea to speak with a tax professional or financial planner to understand the best ways to optimize your financial situation given your unique circumstances. Remember, with smart planning, you can take steps to reduce your taxable income and keep more of your hard-earned money.
Final Word
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This is not investment advice. Do your own due diligence. I make no representation, warranty or undertaking, express or implied, as to the accuracy, reliability, completeness, or reasonableness of the information contained in this report. Any assumptions, opinions and estimates expressed in this report constitute my judgment as of the date thereof and is subject to change without notice. Any projections contained in the report are based on a number of assumptions as to market conditions. There is no guarantee that projected outcomes will be achieved.
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