Berkshire Hathaway Inc. (BRK.B), Bank of America Corp (BAC), Wells Fargo & Co (WFC): Why the Richest Americans Could Be Set Up for Disaster

Home prices may be going up at the moment, but if no one is purchasing homes or refinancing existing homes, banks and the housing sector could be in trouble fairly quickly no matter how tightly the homebuilding industry controls its inventory.

The taxman will cometh
In 2012, the United States’ wealthiest individuals enjoyed numerous tax breaks. Beginning this year and moving forward, they won’t have nearly the same luxury.

Obamacare, for instance, adds extra taxation on upper-income earners to help pay for the upcoming Medicaid expansion that will bring insurance to some 16 million currently uninsured individuals over the next decade. This will be accomplished by a 3.8% tax on investment and dividend income for individuals who earn more than $200,000 in adjusted-gross income in a year (or married couples with more than $250,000 in AGI). There is also a 0.9% health-care tax on upper income earners.

Other tax-code changes that have been employed include a higher tax on dividends for upper-income earners (20% as opposed to 15%), and a sizable bump in personal income tax for the nation’s wealthiest individuals to as high as 39.6%! Higher taxes are bound to take a bite out of these individuals’ pocketbooks.

It could happen again
During the recession, the top 1% saw their incomes plunge by 36%, while the remaining 99% saw their incomes dip by just 12%. The difference has been that, since the recession, the top 1% have seen their incomes rise by 31%, compared with a paltry 1% gain for the remaining 99%! It’s quite possible that the rich could be again on the precipice of a major decline in income. Obviously it would take all of the factors I’ve mentioned for this to happen, but the ideas I propose aren’t as far-fetched as you might surmise. With their wealth concentrated in the U.S. stock market and in real estate, it wouldn’t take a huge decline to have a big impact on the pocketbooks of the United States’ wealthiest individuals.

The article Why the Richest Americans Could Be Set Up for Disaster originally appeared on Fool.com and is written by Sean Williams.

Fool contributor Sean Williams owns shares of Bank of America, but has no material interest in any other companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. The Motley Fool owns shares of, and recommends, Bank of America, Berkshire Hathaway, Facebook, and Wells Fargo.

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