Short Term Government Surplus and Deficits - Watch Out - The Four Fold Path to Fiscal Peace
In recent years, the president and congressional leaders have threatened tax hikes continuously. At the end of 2012, most speculated that dividend and capital gains taxes would skyrocket. While new health care taxes will hit business owners and retirees hard, the dividend and capital gains tax hikes were stopped by the Congress at the last minute. These tax hikes plus the ObamaCare taxes could have increased the cost of selling a company by more than 50%.
With that being said, the government now has a short-term influx of tax payments. It is speculated that the higher tax revenue receipts were generated from the last minute tax-avoidance sales. For example, companies such as Current TV were probably sold at the last minute in December 2012 to avoid major spikes in capital gains taxes.
In the meantime, the S & P 500 companies are still doing 40-50 percent of their business offshore. These US companies doing business offshore are reinvesting much of their profits outside of the US to target the global customers which represent over 90 percent of the world's buyers outside of the USA.
The point of this article is that the government should not get to excited about a one-time mass influx of capital gains and income taxes for 2012. These temporary flows of tax payments are because people are trying to avoid taxes and not necessarily because the domestic economy is doing better.
And don't forget, every 5-6 years, retirees and now baby boomers are "GOING TO CASH" particularly when the stock market is reaching new highs. Not only is it a strategy, but licensed professionals are required to advise retirees about their time horizon and suitability as they get older. This means that retirees with savings must sell some stocks or capital assets to generate income. Moreover, the global investor follows value too and will move out of the USA when things get into technical bubble range for the DOW and S&P.
In the end, there are many US companies citizens that are still carrying forward major losses over the last 3 years along with many working families that are under water with their house value.
In closing, the only way to solve the fiscal problems would be to use the 4FP "Four Fold Path". 1) Grow the Economy and Tax Payments 2) Create a Fair Tax System which Incentivizes Productivity 3) Reduce Spending, Corruption and Waste 4) Augment Global Investment into Your Country Though a Fair Regulatory and Tax System.
Lawyer and Counselor George Mentz, JD, MBA, CILS, CWM is a world recognized management consulting commentator and award winning professor who has authored several revolutionary books. Prof. Mentz, an international attorney, has been a keynote speaker globally in Asia, Arabia, USA, Mexico, Switzerland, and in the West Indies. Mentz can be contacted for speaking engagements at www.gmentz.comor www.managementconsultant.us *No counseling, tax investment or legal advice provided herein. Please consult with a licensed professional in your jurisdiction before making any important career, financial or legal decision. All rights reserved by George Mentz, Esq.