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AAA  Nov. 15, 2012
A taxing December
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Taxes on capital gains will rise Jan. 1 unless Congress makes a change.

Investors will pay up to 23.8 percent on profits made from holding stock for more than a year, up from 15 percent. The base rate will rise to 20 percent for most people, and high earners will pay an additional 3.8 percent to pay for the federal health care overhaul.

December is historically the best month for stocks, but the coming tax increase means this one may not be. Some investors who have notched big gains on a stock will sell before Dec. 31 to take advantage of the lower rate.

The last two times capital gains taxes were raised by a similar amount, stocks fell the month before the change.

In 1987, the top rate rose 8 percentage points to 28 percent. The Standard & Poor's 500 index fell 2.8 percent in December 1986. In 1969, Congress raised the top rate 9 percentage points over the following three years. In December 1969, the S&P fell 1.9 percent.

Individual investors with adjusted gross income of $200,000 per year, or couples with $250,000, will pay the 23.8 percent rate. Credit Suisse says those investors own about a third of the U.S. stock market.

Associated Press
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