Fiscal Cliff and Goodwill

Companies have started planning their moves as soon as the news of increased tax rates spread in the market like a forest fire. People who had previously invested in shares that paid good dividends such as large beverage companies and McDonald's are selling their stocks as they feel they wouldn't be of any benefit same time next year. John Moorin a medical equipment company owner near Indianapolis claims that he sold $650,000 worth of shares of high-dividend paying companies mentioned above. According to him he won't benefit from these shares at all after the tax increase.

With Obama getting elected for second time it is nearly sure that tax rise will be in congress any time now to serve his health care program. After the 15% limit set by George W. Bush during his term as president. Obama explains this step as he claims that now even big entrepreneurs are paying lower taxes compared to average workers.

Companies like Wynn resorts Limited owned by Casino Magnate Steve Wynn have started planning for the increase. Wynn who has supposedly been an open critic of high tax rates has planned a special dividend rollout anytime now, worth a whopping $750 million. This previously used to be the amount of four dividend roll-outs. But this seems to be a well-planned step as the company is supposed to save around $20 million if the roll out was made after the tax increase. The plan actually should work as the holders will also benefit from the payout. Question also remains if the tax increase will benefit or negatively will affect the shareholders. Even if seems that premature dividend is dodging the tax increase.

"It's a foregone conclusion the rates are going up; It's just a matter of the rise %", Said Todd Lowenstein, a money manager with High Mark Capital Management Inc. based in Los Angeles. According to him the increase in taxes is sure and maybe somewhere near 39% (normal tax rate). So, it is a good time for companies to payout their shareholders a bit of amount that won't be wasted in any case and will definitely create goodwill for the company.

Standard & Poor also went to the down street after sensing the possible tax increase and has fell 5% in the last week itself. Only, it was Friday when President Obama and a few other significant Republican Leaders showed some signs of relief that the market recovered a bit.

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The Fiscal Cliff Budget BS Baffles Bureaucrats and Emboldens the Blob of Bureaucracy

Well, from a CEO perspective, what's going on in Washington DC is beyond belief. What I find amazing is that public companies must put forth all of their accounting documents or they get fined by the SEC. They must be timely, and the forms must be filled out and filed on time. If not there are actually criminal penalties, and the CFO might go to jail. That's how public companies work, and I would submit to you that the shareholders of the United States of America are the people. After all we are a nation "for the people and by the people," and therefore we should hold our representatives in this great Republic accountable.

Interestingly enough, the Constitution states that the legislative branch must pass a budget each and every year. They are not to be afforded excuses for not doing so. In fact there is no excuse, and this has gone on far too long. Further, our government is spending over $1 trillion more than it takes in, but the Obama Administration asserts that we must provide more stimulus to get the economy going. Unfortunately, all the stimulus they've been doing, hasn't been working, and yet, the Obama Administration says it needs more stimulus - why to buy more votes?

We keep hitting our debt limit, going beyond it, failing to provide an adequate budget, and then requesting more money from ourselves. The voters keep voting for left-leaning socialist type leadership that obviously does not know how to balance a checkbook, or even care to. Now, here we are at another so-called "fiscal cliff" which is nothing more than a self-created problem which was pushed forward as our government "kicked the can down the road" until after the election. Why didn't they wait until after the election? So they can get themselves reelected, even though they hadn't done their job.

The Wall Street Journal had an interesting article on November 29, 2012 titled "GOP Rejects Cliff Offer From Obama," by Janet Hook and Corey Boles which stated; " GOP Rejects Cliff Offer From Obama

"President Barack Obama made an opening bid in budget talks with Republicans that calls for a $1.6 trillion tax increase, a $50 billion economic-stimulus program and new power to raise the federal debt limit without congressional approval, a broad set of demands Republicans viewed as a step back in talks to avoid looming tax increases and spending cuts."

Many people say that this was merely President Obama's hardline negotiation style, that he was disciplined, and is an expert negotiator. Actually, President Obama is the President of the United States of America, and therefore such political extortion tactics, and attempts to move constitutional power from the legislative branch to the executive branch due to a self-created crisis is a real problem.

In other countries that have done this, socialist dictator type leaders have risen to power, and eventually run their economies into the ground. We don't need that here, we need not become another Venezuela, Argentina, Spain, Portugal, Italy, or Greece. You see my point yet? Please consider all this and think on it.

Lance Winslow has launched a new provocative series of eBooks on Economics. Lance Winslow is a retired Founder of a Nationwide Franchise Chain, and now runs the Online Think Tank; http://www.worldthinktank.net/

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