For investors increasingly concerned that President Joe Biden will hike taxes on investment profits, CNBC’s Jim Cramer on Tuesday offered a strategy to avoid the potentially higher tax targeted at the rich.
“If you’re concerned about Biden’s plan to levy taxes on capital gains but not dividend income, that’s no reason to sell everything,” said the Mad Money host. “It’s a reason to buy dividend stocks.”
Biden could propose the change that would end the tax-privileged status of capital gains for millionaires as early as this week. As reported, the proposal includes an increase in the tax from 20% to 39.6%. For the richest taxpayers, the tax rate could reach 43.4%.
“If the capital gains rate increases to 39.6% and the dividend rate stays at 20%, dividend stocks become much more attractive immediately,” said Cramer.
“Biden’s plan would create a world where every dollar of dividend income is worth $ 1.32 in capital gains,” he added. “As long as many wealthy investors are concerned about this tax hike, expect investors looking to pay lower taxes to start switching to dividend stocks.”
Cramer endorsed the following 10 “best story” high-yield stocks:
Disclosure: Cramer’s charitable foundation owns shares in Crown Castle.
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