As noted earlier, I think the Republicans are going to fold and give the president everything he wants: higher taxes on the wealthy, higher taxes on dividends and interest, higher payroll taxes, and eventually they will fold on the as well. Their cover will be extending, probably temporarily, the Bush tax cuts for everyone else.

Having said all of that, and knowing that making political predictions is a highly risky business, I thought Doug Kass’ comments are highly relevant:

Worries [that] the United States will careen over the and herald in economic and stock-market carnage are just noises and distractions that should be ignored…

Even if a deal isn’t reached or compromise is delayed, taxes on investment income in real terms won’t be widespread since a good deal of investors’ money remains in tax-deferred accounts in the first place.

Those who hold taxable holdings won’t sell and be subject to capital gains and other taxes…

Doug Kass has been kicking around the investment business for years and has built quite a reputation for himself and for his company, Seabreeze Partners. He is often interviewed because of his style and insight.

He thinks the brouhaha over the is just a show for the rubes: “I would bet that 50 to 75 percent of people who own in this country don’t even know that tax rates are rising.” And because so much of the money is held inside tax-exempt plans like IRAs, 401(k)s, and other pension plans:

I think the impact [on the stock market] will be less than 1 percent, so effectively no impact at all. I don’t believe that either the tax or the are the cliffs that we should be fretting about…

Less than 1 percent means that the impact of a rise in dividend and capital gains taxes are simply noise.

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