Youngest Investors Weigh Taxing Issues

Taxes look to be a major issue in the 2012 Presidential campaign. In the wake of the economic downturn and the seemingly glacial pace of the recovery, Mass Affluent investors with a net worth between $100,000 and $1 million (not including primary residence) are increasingly concerned about tax increases. Seventy percent said tax increases are a key concern, a 20 percent increase over last year, according to our research.

Taxes may be a bugaboo to young investors ages 40 and under, who have witnessed or been personally impacted by the worst economic crisis since the Great Depression. Nearly three-quarters (just over 73 percent) of these investors with $500,000 or more of investible assets are most concerned about federal income taxes.

Across age groups, the 40-and-under crowd is more likely to be concerned about the state income tax (just over 12 percent vs. nearly 9 percent of individuals between 41-50, and just over 8 percent of those ages 51-60). They were less likely to be concerned about the capital gains tax, due in part “to being less experienced and less wealthy investors, and thus not appreciating the impact that the capital gains tax can have on their overall tax bill,” observed Tom Wynn, Director of Affluent Research for the Spectrem Group. 

When asked what they feel would be the most equitable in terms of federal and state taxes, investors under 40 were most likely of all age groups to recommend a tax system by which those relying on government services pay a greater share of taxes (just over a quarter vs. just over 19 percent of those ages 41-50 and 17 percent of those ages 51-60). They are also most likely to be in favor of new and additional tax incentives to promote things that best meet the needs of the overall population.

They are the least likely to be in favor of the much-debated flat tax by which everyone pays the same rate, a further indication that the youngest investors think a tax system based on services used is the most fair.