The stock market has been booming. It has been backed by a strong V-shaped recovery in profits, profit margins and corporate revenues. Profits are the mother’s milk of stocks and the lifeblood of the economy.
Of course, profits tend to be a dirty word in Washington.
‘Biden World’ wants to tax profits to death. They want to hike the corporate tax at 21% domestic minimum, a global 15% G-7, G-20 tax that will hit mainly American companies.
They want to raise, capital gains tax, the estate tax, the individual tax, and Lord knows what else they will propose. The 21% domestic tax is a newbie as the original proposal was 15% and it’s a tax on book profits, not IRS taxable profits.
This means no deductions or credits such as immediate expensing or research and development—both of which are so important to productivity, jobs, wages and growth.
The political odds that ‘Biden World’ will get its way is falling, but we are going to have an intense debate for the second half of the year. Fortunately, a growing number of states are much smarter than Washington. They are cutting taxes which is a great thing for growth.