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    • Yes, Republican Leaders Are Pushing For New Tax Increases

      Whether you are a Republican or a Democrat, conservative or liberal, you will want to be aware of what I write about below. The “Establishment” Republican leaders are quietly pushing for a huge tax increase that has yet to get much attention in the mainstream media.

      This new tax increase is called the “Border Adjustment Tax” (BAT). In essence, the BAT would impose a 20% tariff on all imports to the US.  If enacted, it will mean significantly higher prices for imports and anything made in America that includes imported goods.

      You probably haven’t heard about this trade-killing tax since its main proponents, House Speaker Paul Ryan and House Ways and Means Committee Chairman Kevin Brady (both Republicans), have done their best to keep this effort quiet.

      The good news is that if enough Republicans oppose Ryan, Brady and their backers, this anti-trade tax will not see the light of day. Like I said, whether you are a liberal or conservative, you need to know about this since it could mean a big cost-of-living price increase for all of us.

      Sadly, the BAT is not the only bad tax being promoted by Republicans. Another group of Republicans is lobbying President Trump for a new “carbon tax” in exchange for a “significant” rollback in EPA regulations. The GOP promoters of this new tax claim it will help the economy and benefit working-class Americans. A closer look finds it will do neither and is another very bad idea. I’ll fill you in below.

    • President Proposes $4 Trillion Budget & New Tax Increases

      Most every year about this time, I criticize the sitting President of the United States for submitting an ever-larger federal budget that almost always includes a big deficit which adds to our massive national debt. I have criticized every president for this going all the way back to Ronald Reagan who also ran budget deficits, especially in his second term. Yes, I even criticized “The Gipper” who sparked my initial interest in politics way back in 1976.

      Given my long history of speaking out on this issue, I see no reason to make an exception today. On Monday, President Barack Obama submitted the largest proposed federal budget in history to Congress. In the past, most presidents who were shellacked in the mid-term elections tended to compromise in order to work with the opposition in Congress. Not this president!

      The president’s proposed federal budget for fiscal year 2016 is a whopping $3.99 trillion which would increase spending for government agencies by a whopping 7% and includes numerous onerous tax increases to pay for most of it. Yet even with the tax increases, the FY2016 deficit is projected to be $474 billion.

      The reality is that this is all simply political theatre. The president knows he won’t get nearly all of the new spending increases and taxes on the wealthy and corporations he proposes, what with a Republican-controlled Congress. But he does throw a very large bone to his liberal political base, while making the Republicans look like the “Party of No.” 

      In any event, I’ll briefly summarize the president’s latest record-large budget proposal today, and you can make of it what you will. But before we go there, let’s take a look at last week’s disappointing 4Q GDP report and what transpired at the Fed’s first policy meeting of 2015.

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    • How High US Corporate Tax Rates Hurt the Economy

      The US corporate tax rate is the highest among developed nations at 35% at the federal level. Tack on state and local taxes, which can add 5-7%, and US corporations are looking at a 40%-42% income tax burden. But the US takes it even another step further, unlike any other country in the developed world.

      Uncle Sam demands that American companies with offshore operations pay US taxes on all income earned abroad – if those profits are repatriated to the US – even though taxes have already been paid to the countries where the income was actually generated. Think of it as double taxation on profits.

      No wonder then that more and more US corporations with offshore operations are keeping those profits outside the US in order to avoid this double taxation. It is estimated that up to $2 trillion of those foreign profits are parked outside the US. That is a ton of money which, if brought home, could result in lots of new projects that could create many new jobs.

      With an obligation to their shareholders to maximize profits, large US corporations are increasingly taking additional steps to minimize taxes owed to the Treasury in a process that has been coined “tax inversion” as I will explain below. This involves US firms moving their corporate headquarters overseas to countries where the tax burden is lower.

      Today, we’ll explore how the extraordinarily high US corporate tax rate hurts the economy and why more and more large American corporations are moving their headquarters offshore. And we’ll look at why the Obama administration is trying to stop it – when all it would take to fix it is the US lowering its tax burden to a more reasonable level. But no, Obama wants to raise corporate taxes even more. This should make for an interesting E-letter.

      But before we get into that discussion, let’s take a quick look at last Friday’s third and final report on 2Q Gross Domestic Product.

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    • Fed to End QE, Obama’s Tax & Spend Budget

      Today I tackle several topics, each of which could take up an entire E-Letter. But these topics are very important, and I want to address them today. The first is the minutes from the March 19-20 Fed Open Market Committee meeting that were released last Wednesday. Those minutes definitively confirm that the Fed is ready to chart an end to quantitative easing.

      The second topic is President Obama’s proposed federal budget for fiscal 2014 that was also released last Wednesday. The Obama administration claims that the latest budget proposal will cut the federal deficit by almost $1.2 trillion over the next 10 years. It will not. Furthermore, his new budget proposal would raise taxes and fees by over $1.1 trillion over the next decade. And that’s just for starters.

      But before we go there, I want to touch on new data which confirms that US economic growth in the current recovery has been the weakest EVER, since 1930 when such data was first recorded – even worse than after the Great Depression. The recent Great Recession officially ended in the 2Q of 2009 – true enough. But growth since then has been the slowest on record.

      That’s a lot to cover in one letter, so let’s get started.

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    • The US Bond Bubble Continues to Mushroom

      It was very tempting today to focus entirely on the “fiscal cliff” especially now that it is very clear that President Obama is more than willing to take us over it. Treasury Secretary Geithner made it clear to congressional leaders last week that the president will insist on his proposals for dealing with the fiscal cliff, which include $1.6 trillion in tax increases, very little in spending cuts (that may never happen) and the permanent end of the debt ceiling.

      Yet talk about the fiscal cliff is everywhere in the media 24/7. So rather than repeat what you probably already know, let’s revisit a topic that should be near and dear to almost everyone who reads my E-Letters. That would be the bond market bubble. If we do go over the fiscal cliff, that could be bearish for bonds. Fortunately, I have an “alternative” that has the potential to make money if the bond bubble bursts.

      Keep in mind that JPMorgan Chase estimates that a mere 1% rise in long-term interest rates will result in up to a 20% loss of value in long-dated bonds, including Treasury bonds. This is a topic that should be on every investor’s mind.

    • Obama Tax Increase to Slash 700,000+ Jobs

      We begin by looking at last Friday’s unemployment report for July. The government reported that the economy created 163,000 new jobs in July, which was a big increase over the last three disappointing months. Yet the report also bumped the national unemployment rate from 8.2% in June to 8.3% in July. We will look into the details of the report as we go along.

      President Obama continues to push for a tax increase on families making over $250,000 starting on January 1. The debate for months has centered on whether or not this tax increase will result in widespread job losses. Well, a new study from the accounting firm Ernst & Young has answered that question definitively – at least 700,000 jobs will be lost if Obama gets his way.

      Finally, a little-known law passed back in 1988 requires companies with 100 employees or more to give at least 60-days notice to their workers if they know in advance that an event is coming that could lead to widespread layoffs. We all know about the so-called “fiscal cliff” that is coming on January 1 if Congress doesn’t do something to stop it.

      So the question is, will we see mass layoff notifications just days before the presidential election? The Obama administration is doing everything it can to avoid this, but the law is clear. I'll explain what's at stake as we go along today.

    • Social Security - The Most Neglected Crisis

      The recent release of the Social Securities Trustees report was filled with bad news about the program's future, but was largely ignored by the mainstream press. Has the American public become so used to bad news about Social Security that they ignore the ever-worsening scenario? If that's the case, they do so at their own peril.

      In this week's E-Letter, I'm going to review the findings of the Social Securities Trustees regarding assets of the various entitlement Trust Funds and how long they are expected to last. We'll see how the weak economic recovery and high unemployment are continuing to negatively affect payroll tax revenues, and what that may mean for the future.

      I'll then discuss the various schools of thought in relation to the future of Social Security and end up with a laundry list of possible solutions. Since each alternative is unpopular with some segment of the population, we may find that we are now beyond the point where a political solution is even possible.

    • Is The US Headed For A Fiscal Cliff in 2013?

      Under current law, all of the Bush tax cuts expire at the end of this year - for everyone. President Obama wants to keep the Bush tax cuts in place for everyone except those individuals making over $200,000 and joint filers making over $250,000 a year. Either way, Congress must pass a new law before the end of the year. So it looks very likely that income tax rates are going up either way; it just depends upon whom. This will not be good for the economy next year.

      Meanwhile, the Budget Control Act of 2011 mandates that there must be automatic, across-the-board federal spending cuts of $1.2 trillion over 10 years beginning on January 15 of next year. While I'm all for cutting out-of-control federal spending, doing so will act as a drag on the economy. The question is, how much will the combination of higher taxes and reduced federal spending negatively affect the economy? Some sources I quote today believe that it could throw us into a new recession next year.

      Following that discussion, we look into the likelihood that the US will again hit the debt ceiling before the end of the year. You no doubt remember the partisan political battle in Washington over the debt ceiling last summer. Now it looks like we may face another showdown, this time right around the November elections. Won't that be fun!!

      We end today's discussion with some thoughts on President Obama's call for a minimum income tax of 30% on all those making over $1 million a year, also known as the "Buffett Rule." If this law goes into effect, it won't raise a lot of money for the government in the big picture, and it will almost certainly cost jobs. The President knows this but wants the tax hike anyway, because he says it's "fair." What else is new?

      This is a lot to cover in one E-Letter, so let's jump right in.

    • On the Economy, Tax Rates & Millionaires

      We touch several bases today. We begin by looking at some recent economic reports which are encouraging. We also preview this Friday's very important first report on 4Q GDP. The pre-report consensus is for a number in the 3-4% range (annual rate), following only 1.8% in the 3Q. Following that discussion, I will bring you the latest estimates from the Blue Chip Economic Indicators, a monthly survey of 50 leading economists and forecasters.

      From economics, we shift gears and take a look at income tax policies. I will attempt to explain how some wealthy Americans (think Warren Buffet, Mitt Romney, etc.) can legally pay a lower tax rate than rank-and-file Americans who earn "ordinary" (W-2) income. I will also explain the difference between the "marginal" tax rate and the "effective" tax rate. The two rates are significantly different, yet the media often refer both in the same breath without making the distinction.

      Next we look at a recent poll of over 500 millionaires. Believe it or not, 71% said they believe the "rich" should pay higher taxes. But in the same survey, 49% said that the higher tax rate should NOT apply to them but only to super-rich types like Warren Buffett. There are several other interesting insights from this poll of millionaires which I will point out.

    • The Optimists’ Case for the Economy

      Over the past few months, I have presented a lot of information discussing why this economic recovery is so weak. As noted last week, new data confirms that this recovery is the weakest since WWII, if not of all time. Yet despite all the recent disappointing data, there are still some prominent economic optimists out there, including The Bank Credit Analyst. These forecasters still believe that the so-called "soft patch" during the first half of this year was the worst of it, and that growth will be better in the second half of this year. I will summarize this more optimistic outlook below.

      Before we get to that, I will review the latest economic reports. There were actually a few bright spots of late, but they were definitely overshadowed by last Friday's very disappointing unemployment report. We end up today by revisiting the debt ceiling debate. Republicans, Democrats and President Obama remain stalemated as this is written. Obama is insisting on $1 trillion in tax increases in return for cutting spending. Republicans are so far holding firm on no tax increases. The government runs out of money just three weeks from today on August 2.

      I am still somewhat optimistic that a debt ceiling agreement will be accomplished before the August 2 deadline for default, but both sides have their heels dug in as this is written. Whatever happens, the next three weeks will be very interesting, and the investment markets could go ballistic if a deal is not reached.

    • Debt Ceiling Battle: Tax Hikes or Spending Cuts?

      On Monday, May 16, the US government officially exceeded the national debt ceiling of $14.3 trillion. Nothing much happened, of course, because Treasury Secretary Geithner had already announced that the Treasury Department could implement various emergency measures to fund the government and avoid default until around August 2.

      Since most Americans have no idea what these emergency measures are, I thought it might be interesting to briefly discuss them. Basically these emergency measures include robbing cash from various government trust and pension funds to keep the US from defaulting on its debts and day-to-day obligations. You may be surprised at the many ways Treasury Secretary Geithner has to keep the government running until the debt ceiling is raised.

      On the subject of raising the debt ceiling, the battle lines have clearly been drawn among Republicans and Democrats, including President Obama. Republicans vow that there must be at least $2 trillion in spending cuts in order to raise the debt ceiling from $14.3 trillion to $16.5 trillion. Democrats, on the other hand, want to raise taxes on the “rich” and on the five largest oil companies.A huge fight lies ahead between now and August 2.

      Finally, both houses of Congress are quietly planning to vote on a straight-up bill to raise the debt ceiling without any spending cuts and without any tax increases. Both houses expect the "clean" debt ceiling vote to fail unanimously with no "yes" votes on either side. They all want to tell their constituents back home that they voted "no" on raising the debt ceiling. In their minds, this will pave the way politically for both sides to compromise. How dumb do they think we are?

      Before getting into the debt ceiling saga, let's first turn to the latest economic reports which continue to show that the recovery is slowing down.

    • Will Obama Tax the Middle Class? YES!

      Despite all of the rhetoric coming from Washington, the middle class should be gearing up for a major tax increase to fund Obama's vision of American entitlement. How do I know this? Because the "rich" that President Obama talks so much about simply don't have incomes large enough to fund all of the future deficits, even if you had marginal tax rates of 100%!

      That's why many liberal studies switch from talking about income to talking about wealth, since this results in a larger number. However, as we all know, income taxes are based on income, not wealth, so any evaluation of tax revenues in relation to wealth is at best misleading and at worst, a deliberate lie.

      This week, I'm going to review the latest available income tax information to see exactly who is paying income tax and who isn't. I'll then show you how that "soaking the rich" simply wouldn't result in enough money to materially affect our mounting deficits and national debt. I'll finish by talking about Standard & Poor's recent shocking announcement about the US debt rating, and the likelihood of anyone actually getting the message in Washington. It's not a pretty story, but it's one you definitely need to know about.