Fiscal Cliff

Some they might have held for 10 years or more.

Wealthier Americans and those who have significant savings and investments will typically place their money in a number of different types of investments. Retirement plans usually account for a substantial amount of investment, with decreasing amounts of money invested in mutual funds, individual stocks, bonds, cash and life insurance. The balance of investment in different forms can vary a great deal, however, and many Americans have a lot of money invested in other types of non-financial assets, particularly in property. This is reflected in the fact that the average homeowner has a net worth of 171,700 dollars, much of which is invested in their property, while the average renter has a net worth of about 4800 dollars.

The more volatile the returns are, the more distorted the numbers will be so this is an extreme example but even a small difference in returns can have a huge impact. For example, according to this web site, the average annual return of the S&P 500 (including dividends) was about 9.6% from 1992-2011. However, the compounded annualized return (what you actually earned once volatility was factored in) was about 7.8%. That might not seem like a big difference but $10k a year over 20 years at a 9.6% return is about $600k. At a 7.8% return, it’s a little over $480k. That’s almost a $120k difference. Over a longer time period, the gap would only continue to grow.

The median household net worth, which is the value of assets minus debt, dropped from $129,582 to $93,150 over the same 10-year period, according to Pew, which analyzed U.S. data along with its own survey of nearly 1,300 adults who consider themselves middle class.

In the current negotiations with Congress over deficits and the debt, Mr. Obama said he would take a serious look at how to “reform our entitlements” because “health care costs continue to be the biggest driver of our deficits.” Unless Mr. Obama and Congress reach some agreement, tax increases and budget reductions will take effect automatically on Jan. 1.

“Everyone is looking for this magic bullet that shows you how to raise revenue without raising rates or cut entitlement programs without cutting benefits. Guess what? There is no magic bullet. Everything will be hard,” says Pete Davis, an advisor to Wall Street money managers and former economist for the Joint Committee on Taxation and the Senate Budget Committee.
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Also, you're talking about a "tax bite" that's going to increase by 5% next year. How do you know that stock values will not increase by that amount - or more?