On Monday, we had the annual running of the Boston Marathon. Patriots’ Day in Boston. At 3:50PM two bombs went off near the finish line. Three people were killed, including one 8 year old child. Over 130 were injured, some having limbs torn from their bodies. As of now, no one has taken responsibility and no suspects have been apprehended. It is being treated as an act of terror by the FBI. Once again we come together as Americans to mourn the loss of innocent American lives. The president vows those responsible will be brought to justice and I trust that he will make sure it is done….hopefully very soon.
The Dow dropped 260+ points on Monday and gold closed at around $1360/troy ounce. Pretty big drops for both. Market futures are up this morning (Tuesday) and it looks like the markets will enjoy a healthy open to the upside.
From this week’s MSCI North American Manufacturing Advocacy News
A review of the president’s fiscal 2014 budget which was released last week:
“The budget calls for $20 trillion in spending over the next 5 years ($3.77 trillion for fiscal year 2014) and $580 billion in tax increases over the next 10 years. The budget would also make permanent the R&D, energy efficiency and renewable energy tax credits; increase small business expensing; and add a credit for small businesses which have added new workers or raised existing workers’ wages. However, these tax cuts are far outweighed by the proposed tax increases.
MSCI highlights the following tax hikes which could affect the metals services industry:
- End last in-first out, or LIFO. The president’s budget would repeal LIFO in January 1, 2014, but it is still a retroactive tax increase. According to the US Treasury, “Taxpayers that currently use the LIFO method would be required to change their method of inventory accounting, resulting in the inclusion in income of prior years’ LIFO inventory reserves (the amount of income deferred under the LIFO method).”
- Cap on itemized deductions. This provision would cap at 28%the amount of deductions that higher income earners can take. This proposal, which would apply to individuals who earn more than $183,250 annually and families that earn more than $223,050, would raise taxes by more than $500 billion over the next decade.
- Estate tax increase. The law signed earlier this year set the estate tax rate at 40%. That change was to be permanent but in his budget President Obama proposes to raise the top rate to 45%. The president would also reduce the standard deduction for the tax. (My opinion: the estate tax should be repealed-period. A man and/or woman work all their lives, pay taxes on their income to the Federal government, state and local governments, pay Federal tax on fuel, on tobacco, on alcohol. Pay state taxes on food, on all other purchases and are taxed in ways I can’t even advise you of. How much of what you earn do you really pay in taxes? 60%? 70%? More? I’m just guessing but cumulatively, it’s a big number. We would all be surprised were it to be calculated. So, now comes the president saying in effect: Your reward for all those years of hard work and dedication, creating an estate for your heirs? The government wants 40% of what you have accumulated-and even that’s not enough for them. That is rude behavior, totally uncalled for.)
- Retirement account provisions. The president’s budget would cap the total amount taxpayers can save in IRA’s and 401(k) s at $3million total for all their accounts. The president would also require all non-spouse retirement account beneficiaries distribute money within 5 years. Additionally, the budget would require all businesses with 10 or more employees provide their employees payroll deduction IRA’s. Finally, the budget would eliminate 404(k) provision in the tax code, which allows C corporations to deduct the value of dividends paid on employee stock ownership plans (ESOPs) stock passed through to employees in cash.
- Buffett rule. Taxpayers who have adjusted gross incomes higher than $1 million annually would have to pay an average tax rate of 30%
- Change in inflation calculation. The president’s budget proposes to change the way the federal budget considers inflation. The proposal is likely to reduce the inflation calculation and, as a result since tax rates are indexed for inflation, would push taxpayers into higher brackets at a quicker pace.
- Energy taxes. The budget would eliminate tax deductions and credits for oil and gas production.”
In my opinion, the budget proposal has little chance of approval. The president doesn’t get it. The American people want the tax code reformed. To be clear, I am speaking of hard working American citizens and businesses who pay their fair share of taxes, not those who are working the system to their advantage; these Americans want LESS government intrusion in their lives, they want LOWER tax rates on themselves and their businesses, they want the government to STOP spending money it doesn’t have, to find and STOP the waste of taxpayer money, they want a STRONG military, with overpowering capabilities and technologies.
So much for the budget it took four and a half years to produce.
Some economic news this week
The National Federation of Independent Business’s (NFIB) index of small business owners outlooks fell from February to March (the index had risen each of the previous three months). According to the survey, more than ¾ of owners believe business conditions will remain stagnant or get worse over the next 6 months. Top concerns were taxes and government regulations.
Meanwhile, the Manufacturers Alliance for Productivity and Innovation (MAPI) quarterly survey on the Business Outlook increased for the first quarter over the fourth quarter of 2012. Both quarters indicated the sector was expanding.
The World Trade Organization (WTO) reduced its estimate for world trade growth in 2013-for the second time, blaming European weakness for the downgrade.
According to the US Labor Dept. the nation’s employers had the highest number of jobs waiting to be filled in five years. (My opinion: Many don’t want to work; they receive enough stuff in entitlements to stay comfortably at home. Marvelous.) Manufacturers had 259,000 open jobs in March.
The Federal Reserve Bank of Chicago announced last week its Midwest Manufacturing Index increased from January to February. Its industrial production index also edged up in February from January.
The Conference Board Leading Economic Index was released on 4/18 and the index declined 0.1 percent in March following increases in December, January and February. The indicator still points to growth, albeit slow.
Says Ken Goldstein, economist at the Conference Board:
data for March reflect an economy that has lost some steam. In addition to headwinds from government spending cuts, the private sector economy may struggle to maintain its momentum. The biggest challenge remains weak demand due to nervous consumer sentiment and slow income growth.”
As of this writing the perpetrators of the bombings in Boston this week have been identified as naturalized American citizens from Chechnya. They are brothers. They have been living the American lifestyle for many years now (I have heard 1 year, I have heard 10 years). Last night they murdered a security officer on the campus of MIT. The older of the two brothers was killed and an enormous manhunt is currently on for the younger brother. It would be nice to catch him alive as there are many unanswered questions. I think it is unlikely, they are (were) radical Muslims and though cowards, he may have enough sand to put a bullet in his own head.
Boston is under lockdown, nothing is moving. The citizens of Boston have been told to stay inside as the guy is considered armed and dangerous. What if no citizens had guns with which to protect themselves and their neighbors? This is but one reason why the Second Amendment to the US Constitution needs to be preserved and followed as written by the Founding Fathers.
God Bless America