After the Easter recess, ultra-liberal Los Angeles congressman Henry Waxman will attempt to slam American companies that are trying to obey SEC disclosure laws by properly accounting for the repeal of an important prescription-drug tax credit. What’s new in this bad story? It’s the announcement of Waxman’s Star Chamber hearing that will subpoena internal documents from leading American companies like AT&T, Verizon, Caterpillar, Deere, 3M, and Valero.
According to post-Enron accounting rules, thousands of American companies are required by law to immediately declare these non-cash charges. The American Benefits Council estimates up to $14 billion in corporate profits could be lost. So in other words, Waxman is in effect declaring war on bookkeeping.
The real trouble here is that by removing the tax benefit, these very same companies may reduce or even eliminate retiree drug benefits, and then thrust them on We the Hapless Taxpayer through a big cost-shift to Medicare. Instead of blaming business, Mr. Waxman should blame himself and Obamacare.
All this leads me to my second point: Our entitlement system is going bankrupt, and taxing rich people won’t solve it.
I hope you all read the Wall Street Journal op-ed by my old friend Alan Reynolds: “The Rich Can’t Pay for Obamacare.” According to Mr. Reynolds, $1.2 trillion of estimated tax hikes on investors and successful earners “won’t work. It never works.”
These folks will avoid, defer, bring forward income, or simply not invest or take risks. Ending incentive rewards will reduce the revenue yield from these taxes by inhibiting economic growth.
You want to raise revenues? Broaden the whole tax base by getting rid of unnecessary credits and deductions. And reduce tax rates across-the-board for a true supply-side, Laffer-curve, flat-tax reform.
Successful investors are responsible for more than 40 percent of income taxes and 80 percent of capital gains. So get ready for a boycott or strike against capital if these high-tax policies are not repealed over the next two elections.
While I welcome recent improvement in the consumer-confidence report and the Case-Shiller home-price index, the fact remains that if left-liberal Washington continues its tax attack on the great Americans who are most likely to save, invest, and create new businesses, we will experience a disappointing, sub-par, long-term economic outlook.
The stock market continues to rise on the basis of strong corporate profits and ultra-easy Fed money. I continue to ride this short-term cyclical-recovery wave, as I have for about a year. But there are big storm clouds out there. And all investors must keep their eyes open.
Maybe a tea-party political revolt will save us from Europeanism. But that’s a question for another day. Keep your eyes open out there.
