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Policy Watch

Capital Gains Policy as Job Creator

President Obama has proposed raising the capital gains tax rate to generate billions in new revenues for the federal government. However, according to data included in the administration’s own budget, if implemented this tax increase would—at best—offset the tax revenue from other sources lost because of reduced total income, output, and jobs in the economy.

Many economists suggest that the proposed capital gains tax will be a drag on the economy primarily because it raises the cost that businesses incur to raise new capital; and by most accounts, less capital translates into fewer jobs and lower productivity.

The thought process: A higher tax rate means a higher cost of capital, which means less capital employed, which means less output and less income. Further, less earned income means less tax revenue to the federal government – potentially reducing federal tax receipts.

Consider a counter action: cutting the capital gains tax; this action would likely increase total revenues through a response by both businesses and individuals of more investment, more hiring, and more income.  And yes - all of this has the potential net result of the government receiving more tax income.

“Computer Trading Worries Grow with build-out of New Data Center” - ARS Technica;

“Policy Makers Seek to Calm Markets” – New York Times;

“Once Considered Unthinkable, U.S. Sales Tax Gets Fresh Look” – The Washington Post;

“U.S. Eyes Deeper Trade Ties with Latin America” – REUTERS;

Industry Updates

CHIEF EXECUTIVE: “Fixing Big Finance”

FORBES: “Hey Apple, Adobe’s Got Your Flash Right Here!”

BUSINESSWEEK: “The U.S. Trade Gap Won’t Go Away”

WALL STREET JOURNAL:  “New U.S. Push to Regulate Internet Access”

In The Spotlight...

Feature: Process Improvement – Think Logistics Audit

Analyzing and auditing the supply chain offers every organization the opportunity to identify and recognize each department, discipline and respective relationship. By understanding these relationships and managing them effectively, the corporate enterprise immediately gains an excellent resource.  This resource can become an entirely new and highly energized source of profit enhancement, and it can result in increased customer satisfaction.

One such potential resource can often be found in the transportation component of companies’ day-to-day activity.  Since the deregulation of the transportation industry, change has been the only constant. Carriers such as UPS, FedEx, DHL and the United States Postal Services (USPS) have made significant changes in their services and pricing strategies. Monitoring these changes is difficult at best, and many companies will undoubtedly miss substantial freight savings.

It is certainly prudent to conduct an audit  that may improve your logistics program and reduce your overall transportation costs.

Cost controls, cost reduction and cost recovery are critical to every business. Controlling costs is essential to surviving in a very competitive business environment. A company must constantly strive to drive costs out of their processes, particularly in today’s flat world.

Contributor:  Shawn Shaw; President – Global Transportation Management Solutions

Monthly Outlook

May 2010

 May flowers…?  Perhaps the “bloom” is off the rose, so to speak.  The market is under an interesting day-to-day watch – the panic (mistake?) on the 6th may be the first inkling of a sell-off; the European financial picture is not as clear as it once seemed (UK elections leave that market in further limbo); financial regulation is looking like yet another political football rather than an actual policy-turner; and between oil spills and the flooding of country music icons in Nashville, it seems flowers don’t stand a chance!

But alas – Spring has Sprung, which means the Dog Days of Summer are not too far behind.  The summer often finds market turmoil and policy drama taking a little vacation, much like the people who drive these things.

This month the outlook is:  Scattered Thunderstorms.  A little bit of good, mixed with a little bit of not-so-good – with wide coverage…from the U.S. heartland, to the column-lined roads of Athens.

With uncertainty and limited predictability, fast-forming STORMS will come in & out of the picture.  With job growth still in doubt, consumers will be opening their wallets but only for a slightly expanded ‘needs’ list.  We are likely to see a deluge of political banter as we approach a summer break – watch out for sudden microbursts!  May also ushers in Tornado Season, and there is sure to be enough swirling data to startle even Dorothy.  

May 2010 will be a little topsy-turvy and will likely set the tone for the balance of the year; a tone of new-normal.  Recommendation:  Keep all of your weather gear handy.

"The three great essentials to achieve anything worthwhile are, first, hard work; second, stick-to-itiveness; third, common sense." - Thomas Edison