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Obama Is Not The Champion Of The American People

Posted by: : Paul EbelingPosted on: February 3, 2015 Obama Is Not The Champion Of The American People

Obama Is Not The Champion Of The American People

$GE, $GM, $F, $MSFT, $PG

Obama and the progressive Democrats are posing as champions of needed public investments and fairness.

US President Barack Hussein Obama and the Democrats wants new taxes on the overseas earnings of American businesses. Putting that in effect would kill jobs and punish retired Americans.

Yes,  the tax code permit some corporations to pay low taxes, but most pay a heavy burden. The estimated effective US corporate tax rate is about 27%, and well above the 20% imposed by other industrialized countries.

The United States is almost all alone by taxing the overseas profits of its multinationals when those monies are repatriated. This has encouraged US firms to invest nearly $2.1-T of their earnings abroad, instead of bringing some of that money home to create jobs in America.

Now, Mr. Obama wants an immediate 14% tax levy on those assets to raise about $500-B and to impose a 19% tax on future earnings to finance infrastructure investments.

Much of the $2.1-T in non-repatriated corporate overseas profits is not parked in foreign bank accounts. Instead, it is already invested by firms like GE (NYSE:GE) and Procter and Gamble (NYSE:PG) in countries where cost considerations, trade barriers and government-managed exchange rates require American companies to produce locally to sell in those markets.

Those investments cannot be easily liquidated to pay Mr. Obama’s $500-B in new taxes.

If that tax legislation would ever pass (not likely)  CEOs would siphon off cash needed for new projects here in the United States, and the new levies would severely damage the finances of major US companies like General Motors (NYSE:GM), and Microsoft (NASDAQ:MSFT) .

All this would curtail R&D and new product rollouts needed to maintain the jobs Americans already have, not to mention destroying prospects for adding millions of new jobs.

Local politicians love infrastructure spending, and remember members of Congress are elected by local constituencies, because it permits them to throw big contracts to construction and engineering companies and labor unions that provide dollars and foot soldiers for their campaigns.

Getting more dollars for roads, bridges and rail without increasing the 0.184/gal federal gasoline tax would appeal to members on both sides of the aisle, but it would not solve the basic problems.

Americans, and particularly Millennials, are moving back to city centers, but the government by bending to powerful construction and homebuilder lobbies, state and local governments channel too much of the federal infrastructure subsidies they receive into new roads to ever more distant suburbs, instead of addressing urban needs.

The “prevailing wage” provision of the Davis-Bacon Act generally requires excessively-high union wages and cumbersome work rules on federally assisted projects. That greatly increases costs, reduces the number of projects funded and stifles growth and jobs creation.

A pro-growth GOP Congress should redirect federal money toward rebuilding crumbling urban streets, and overburdened transit systems, and sink Davis-Bacon. After all, organized labor now represents only about 7% of the private labor force, and fairness requires unionized workers not enjoy privileged access to public projects at the expense of others citizens.

Of course, Mr. Obama, and the good Democrats, wants none of that and by funding infrastructure by taxing corporate money they claim is “parked” overseas, make it sound like taxing the rich for the greater good, not so.

S&P 500 companies represent about 80% of publicly traded companies and earn about 50% their profits abroad.

Imposing US taxes on top of the foreign taxes they already pay will push down dividends and stock prices for companies like GE, Ford (NYSE:F) and Procter & Gamble. Those are well represented in many Americans’ retirement portfolios, and the president’s proposal would thereby impose a ‘stealth tax’ on the elderly.

The federal gasoline tax was last raised in Y 1993, and adjusting it in line with inflation to finance the federal contribution to infrastructure investment may be the fairest way to go, after all drivers should pay for the roads and transit projects that relieve highway congestion.

Instead, the Mr. Obama wants to tax Grandpa and Grandma to subsidize the AFL-CIO. Take heart, it will not happen with the GOP Congress.

You should all read the Obama Budget, it is really a political document, not a budget at all. Here it is:

Stay tuned…


Paul Ebeling


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Paul Ebeling

Pattern Recognition Analyst, equities, commodities, forex
Paul Ebeling is best known for his work as writer and publisher of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly-regarded, weekly financial market letter, where he enjoys an international audience among opinion makers, business leaders, and respected organizations. Something of a pioneer in online stock market and commodities discussion and analysis, Ebeling has been online since 1994. He has studied and worked in the global financial and stock markets since 1984.

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