President promises more tax hikes
That's right. On the eve of the pathetically rotten "fiscal cliff" deal, President Obama has promised to reform the tax code "so that wealthy individuals, the largest corporations, can't take advantage of loopholes and deductions that aren't available to the rest of America."
So, we have one deal struck that raises taxes on the rich modestly, I'd say. But, we are still left with unbalances in our debt and deficit quandry that "remain uncomfortably large."
In point of fact, this last minute arrangement late on New Year's Eve is a most terrible beginning. It avoids the damnable sequester of the DOD budget, and potential chaos. But, there has been no progress on the deficit at all-- and great uncertainty remains. As Obama admitted there is still no long term plan for tax reform or the absolutely necessary spending cuts we require.
As Greg Mankiw, the chairman of Harvard University's Economics Department, put it bluntly today in his blog; "The deal appears to offer no entitlement reform, no tax reform, and higher marginal tax rates." Nailing the shame of the arrangement, Mankiw hammers the White House by stating "It is hard to imagine a deal that would be less responsive to the ideas of the bipartisan policy council," the Simpson- Bowles group whose recommendations were never taken up in the campaign with any fervor.
What caught my cynical, skeptical eye was Obama's rather pointed offer "to reduce our government's Medicare bills by finding new ways to reduce the cost of health care in this country." Get that? I read that to mean the President will agree to no paring back of the burgeoning costs of Medicare profferings-- but will only dream about "finding new ways to reduce the cost of health." This is what he calls a "balanced" approach to reducing our debt and our deficit. "I'm willing to do more, but it's going to have to be balanced," he promised.
Back to the punch line. I'm not making this up. "The deal we are about to strike will raise taxes on the rich. But, the fiscal imbalances we face remain unsatisfactorily large. So, I will ask for more tax increases on the rich later," Obama promised.
So, the way I see it, the estimated combined revenues from raising the tax on incomes above $400,000 to 39.6%, the hike in capital gains and dividend income to 20% on incomes above $400,000, and the cap on deductions plus the small estate tax on on amounts greater than $10 million to 40% from 35%-- won't provide a sufficient pay off for Uncle Sam. Without even a meaningful step toward reducing entitlements, Obama is predicting more tax increases on the wealthy.
I wouldn't think it's going to be a pleasant week in the stock market, except for high-dividend payers, like the utilities. John Dobosz, editor and stock picker of Forbes Dividend Stock Daily, likes American Electric Power (AEP), yield, 4.50%, and Hawaiian Electric (HE), yield 5%. Matt Schifrin, Forbes' indomitable investment editor, has publicly recommended Pennsylvania Power & Light, PPL, now yielding 5.1%.
