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Special Advertising Section personal exemptions and limitations on their itemized deductions; this will efectively add another one percent or so to their tax rates, putting the top marginal federal tax rate at about 45 percent for high-income earners above these thresholds. Te agreement also fnally presents a solution to an ongoing issue, the alternative minimum tax (AMT), by raising the exemption to a more appropriate level and then indexing that exemption to infation. Congress had been patching the exemption every year to fx this issue, and the new agreement should eliminate this annual patching. It also changes the estate tax rules, now allowing for a $5 million per person exemption indexed to infation and sets a tax rate of 40 percent afer the exemption. Otherwise, this would have reverted to a $1 million exemption with a rate of 55 percent above that threshold. Other extensions or changes of note: • će extension for two years for seniors over the age of 70 ½ to donate tax free to qualifed charities directly from IRAs; • Extension of certain unemployment benefts; However, the most important change may be the end to the temporary 2% percent reduction in the amount paid in payroll taxes. Tis hits every taxpayer through higher taxes starting on January 1st. We also note the legislation temporarily — for two months — stops the sequestration budget cuts, maybe the most important part of the legislation to reduce the size of our budget defcit. We hope this does not indicate the government will not take on the hard business of cutting spending. As far as the economic impact from these changes, we really see little impact. Te largest impact will be from the higher payroll tax payment. As the rich tend to spend less of their disposable income, the impact of the higher taxes on this cohort of taxpayers will likely be muted, in our view. In fact, we believe the largest impact will likely be to lower the amount of investment capital available to businesses, innovators, etc., as they will have less disposable income available to put into investments. Te higher taxes on investment due to the Obamacare tax and higher capital gains and dividend rates are expected to have a negative impact here. From a market perspective, the impact of these tax changes will also likely be limited, although in our opinion will be slightly negative. As noted above, the higher tax rates on investment and subsequent lower capital available would be expected to be a negative for stocks. However, we believe this negativity will be more than ofset by the certainty this legislation provides to investors. Given the likelihood of higher interest rates and a potential decline in bond prices that these rate increases will engender, we anticipate the lower capital availability is more likely to hit bonds than stocks. Add that investors are sharply underweight on stocks versus bonds and we remain of the opinion that stocks will do well in 2013 despite the headwinds noted above from the tax law changes — so we fnd equity investment attractive. • A two-year extension for certain business R&D; deductions; • Tax credits for hiring; • An extension on an ability to convert non-Roth IRA balances into a Roth account and pay ordinary income taxes on such conversions. 2.13 LOUISVILLE MAGAZINE 5 3