Paul L. Caron

Tuesday, February 12, 2008

Betting on Tax Rates

For those still smarting over their lost Super Bowl bets on the New England Patriots, Jason Ruspini has announced the first prediction market in tax rates:

Contracts will forecast the highest marginal single-filer federal tax rates for 2009, 2010 & 2011. I expect trade to be concentrated in the 2011 contracts, as Bush's 2001 tax cuts are scheduled to expire that year, reverting the rate in question from 35% to 39.6%, while the lower bracket rates each increase by 3%. While it is less likely, Congress may also alter the Bush tax cuts for tax years before 2011, but such changes would probably impact 2011 as well.

If reasonable liquidity can be sustained in these markets, I hope that contracts will be added to predict corporate taxes, and other factors that contribute to individual effective tax rates, like the Alternative Minimum Tax and the social security cap.

Here is a snapshot of the market on 2011 tax rates as of 6:15 a.m. EST [click on chart to enlarge]:


(Hat Tip: Joe Kristan & Tyler Cowen.)

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Tracked on Feb 12, 2008 7:01:08 AM


Tax elimination is my favorite type of tax planning because it permanently reduces taxes. A lot of tax planning is focused on just temporarily reducing taxes, this means you pay less tax today but will pay more in the future. In other words, the tax is just being deferred. Tax deferral has its place in a tax strategy but first I like to look for ways to eliminate tax and create permanent tax savings.

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Posted by: gwenstefni | Nov 29, 2008 3:50:38 PM

Ive never really thought about betting on tax rates but i must say it looks very interesting. i might have to look into it. do you know where im able to bet on tax rates? will i be able to at most top online bookmakers?

Posted by: betting systems | Apr 18, 2008 4:41:43 AM