Stock Turbulence, Higher Taxes Could Lead To Lower Luxury Spending

The last few weeks have been a turbulent time for the stock markets. Volatility in shares has raised fears of another period of economic slowdown. The luxury sector has been especially worried, as the prospect of wealthy buyers cutting down on luxury spending becomes a very real possibility.

Will The Wealthy Stop Spending?

Many analysts are asking whether the stock market turbulence will persuade super rich buyers to curb their spending habits. Some feel that the trend of strong sales recorded in June and July is likely to continue. This is the optimistic take on the matter – that a few weeks of stock market uncertainty should not dent current spending trends.

Worries about luxury spending in the United States are offset by high profits in Asia, particularly in China. Many luxury brands are no longer too worried by a changed atmosphere in the United States, or even in Europe. They are far more interested in the rapidly growing emerging markets of the east. Worldwide sales are of bigger moment than what is happening in the United States, as far as the luxury market is concerned.

Moreover, there is a perception that super rich buyers are not affected by ups and downs in the stock market and the economy. Some analysts see this as a good thing, because the super rich will continue to spend even if other sections of the population struggle with their finances.

Tax The Rich

However, these optimistic predictions could be affected if the United States government decides to increase taxation rates on the super rich. Warren Buffet in his op-ed in The New York Times on Monday also suggested that the government should tax the super rich more. Buffet has taken this stance in the past, so it should not come as a surprise.

Buffet himself is worth $45 million, and he feels that the wealthy citizens of the United States should not get the “extraordinary tax breaks” that they have become used to. He puts it brilliantly by saying, “These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species.”

Spotted owls or not, Buffet is in favor of raising taxes on affluent people who make over $1 million a year. He feels that the tax rates should be increased further in the case of people making $10 million and more.

Buffet is not alone in suggesting this tactic to help the United States economy stage a quicker recovery. The likes of Nancy Pelosi have already submitted a similar plan. The Democrats would particularly be pleased by Buffet’s support of higher tax for the wealthy classes.

Erica Payne of the Patriotic Millionaires admitted that many millionaires earn “lazy money”, that is capital gains and dividends. Although this may be true in many cases, others who have slogged for their millions could object.

Will It Help?

If these higher taxation rates come to pass, the luxury sector has cause to be worried. Could higher taxes indicate that wealthy luxury buyers will spend less in the luxury market? This is a fear that will loom large on the minds of luxury industry professionals.

Via: The Wall Street Journal

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