Tax Lessons...Again

A while back I discussed a small group of countries that seem to want (or don't seem to know any better) to crush their own stock markets. China had been hinting at it. Well, now they've come through and Chinese stocks took a beating today, down 6.8%. How many of these episodes do we have to see before we realize just how destructive and just what a bad idea it is to let the 2003 dividend and capital gains tax cuts expire?

Oh, and here is another story about the twists and contortions that businesses will go through in order to keep their hard earned dollars out of the taxman's hands. Given that Europe is lowering its corporate tax rates below US levels (see here), we'll see alot more of this. Just a few years back, US corporations repatriated billions of overseas profits to take advantage of a one-time low tax rate that was part of the 2003 tax cut legislation. Although the tax rate was low, 5% I believe, it created large tax receipts for the Treasury that would not have happened. Now that the opportunity is past, we see this type of transaction with IBM where the Treasury gets nothing. Simple, low, predictable tax levies bring more revenue than the beast of a tax code that the Great Sausage Factory has created.