Politics, Debts & Taxes
Research for Online Investors

by John Dalt

9/19/11

President Obama had a press conference this morning to unveil his proposal to pay for the “jobs plan” he released last week.  Key to the “balanced approach” the president presented was the “Buffett tax” to raise taxes on “millionaires and billionaires” so they would pay their “fair share.”  I have placed the key words that test well with focus groups in quotes for you.

The president’s ten-year $3.6 trillion proposal is to raise taxes, cut Medicare and Medicaid reimbursements by $248 billion and count $1.1 trillion of military savings as Iraq and Afghanistan wind down and $1.2 trillion of discretionary spending for the “Super Committee” to identify.  The Medicare and Medicaid cuts would include a reduction in payments to states and shortened exclusivity for drug makers with a demand for lower prices for government drug payments.

Warren Buffett believes he should pay taxes at the same rate as his secretary, but the president’s proposal won’t accomplish that. The average investor relies on dividend income (unearned income) and the president seeks to raise taxes on earned income.  A retired wealthy investor with dividend stocks will continue to pay lower taxes than taxpayers who have earned income.  The president wants to raise $1.5 trillion through new taxes on high income earners, “corporate jet owners” and “big oil and gas companies.”

The congress could raise the tax level on dividends for investors by eliminating the double taxation that exists now.  Make dividend payments deductable for corporations as it should be.  Dividends are an expense to the company, and represent a share of the profits.  They should not be taxed twice.

The National Assoc. of Home Builders released their Builder Sentiment index this morning.  It was down from last month’s reading of 15 to 14.  Home Builders are bullish if the index is over 50.  The index has been below 50 every month since 2006.  Last year, new home sales fell to their lowest level in nearly fifty years.

Greece is against the Wall

The market is down today as the problems in Greece reach a boiling point.  German regional elections this weekend paint a bleak picture for the eurozone’s leading economy continuing to go along with more rescues.  Angela Merkel’s coalition lost the sixth election this year.  The Free Democratic Party (junior collation partners) won just 1.8% of the vote.  Opposing parties are pressing to allow Greece to default and be removed from the eurozone.  Germany’s parliament is scheduled to vote on increasing the European Financial Stability Fund (EFSF) on September 29.

Greek government officials held an emergency tele-conference call with the IMF, ECB and the European Commission after our lunch today. It may still be going when our markets close.  Before the call, Amandeu Altafaj Tardio a spokesman for the European Commission said, “We expect the Greek authorities to explain, in particular, how they intend to close the fiscal gaps in 2011 and 2012 and how they plan to proceed with the structural reforms and privatizations."

The lenders are pressing the government to live up to their agreements from June to receive another tranche of eight billion euros before the country runs out of money.  Last week, the government said they would run out of money in October.

Lenders want the government to fire another 20,000 state employees, cut salaries and pensions, increase the present heating oil tax, shutting down or privatizing some state operations, and cutting health spending.

Greek Finance Minister Evangelos Venizelos said his country “would not allow itself to be scapegoated by eurozone policymakers, who had failed to deal with the region’s debt woes. If we want to stabilise the situation, if we want to avert default, if we want to remain in the core of the eurozone, if we want the country to stop being blackmailed and humiliated - because no citizen should have to put up with humiliation of their country - we have to make three large strategic decisions as part of our national strategy."

Quote:
"Under the current structure and with the current membership, the euro does not work. Either the current structure will have to change, or the current membership will have to change."---Stephane Deo, Paul Donovan, and Larry Hatheway of Swiss banking giant UBS

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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