Tags: tax | reform | markets | investors

Markets, Investors Will Never Recover Stability Without Real Tax Reform

Markets, Investors Will Never Recover Stability Without Real Tax Reform

By    |   Monday, 23 May 2016 09:44 AM


I saw this headline recently: “Volatility is creeping higher.”

The S&P 500 is back in the red after some slight recovery in the past couple of months. 
Investor sentiment on various measures is not at the panic levels they experienced a year ago. But the markets are struggling.

There is plenty of news smacking investors in the face every day which the experts, pundits, and financial gurus tell us explains why the markets are gyrating at the moment.

Some days it’s China.  Others it’s oil.  The hot flavor most recently has been the anticipation of the Federal Reserve raising its rate a minuscule 0.25%.

This explanation is little more than the cognitive bias known as focalism or anchoring. 

Whatever the headline is, that topic becomes the excuse flavor of the day. Then the bandwagon effect takes over.

The world has always been a raucous and precarious place.  That is normal in the competitive marketplace in which companies operate.

However, what makes a company worthy of investment is its productivity and profit.

Investors realize that are no corporate earnings growth.  Corporate profits have declined on a year-over-year basis for four consecutive quarters. 

Despite the excuses hyped by Wall Street and its media supplicants, there is a more fundamental cause which constantly plagues the investment world.

What’s the single biggest and unremitting influence affecting all corporate productivity and profits?

I think it is tax.

It impacts every business, every day. While each company has its culture, taxation crosses all lines of business. 

And tax costs big time.

While other costs are controllable, tax is not. 

In fact, it is the worst kind of uncontrollable—it’s politically driven. 

There is no way for any corporation to plan even a year in advance since Congress regularly changes the law as needed to win elections.

And the Treasury, for other political reasons, is non-stop in issuing enormously complex regulations and rulings which may apply prospectively or even retrospectively.  Sometimes Treasury creates whole new tax systems.

Yes, Congress promises to reform the tax system. That’s just political theater.

The truth is that the income tax system can never be reformed. It must be repealed and replaced. My preference is with a consumption tax.

Until then, the financial markets have no hope of achieving stability.

Denis Kleinfeld is known as a strategic tax and wealth protection lawyer, widely published author and creative teacher. To read more of his articles, CLICK HERE NOW.

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Kleinfeld
The truth is that the income tax system can never be reformed. It must be repealed and replaced. My preference is with a consumption tax.
tax, reform, markets, investors
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2016-44-23
Monday, 23 May 2016 09:44 AM
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