Some smart money is apparently betting that even with expected Republican gains in next week's election, there won't be enough votes to win extension of the Bush tax cuts for upper income taxpayers over a potential Obama veto. Writes Encima Global's David Malpass, who is both smart and plugged-in: "though not in the press yet, major New York brokerages have begun plans to pay bonuses in December rather than the normal January cycle in order to beat the tax hike. "
One of the reasons tax increases often don't produce the revenue that the static analysis models say they will is because of "income shifting." Particularly at higher levels (just ask Ralph Lauren), taxpayers have some discretion over the timing of when they realize income.
If Republicans take over the House and gain in the Senate yet higher income taxpayers are still hit with big tax increases, I wouldn't be surprised to see some of the anger over the tax increases and their effect on the economy directed at Speaker Boehner, especially if he goes for some kind of compromise that cuts rates for those earning less than $250,000 a year but increases taxes on higher income earners. This is all speculative at this point, and maybe President Obama will see the election results and go along with extending all of the Bush tax cuts for one or two years. But at least the bonus guys on Wall Street aren't planning to take any chances on that, according to Mr. Malpass.