“The Marley’s were dead to begin with.” I love a great opening line and this one by Dickens has to be one of my favorites. In his classic story, Dickens introduces us to a man named Scrooge, a selfish old miser that no one likes and everyone fears. As the story progresses Scrooge learns a great deal about himself and what he sees he dislikes as much as everyone else does, and so he commits to change. Unfortunately, it isn’t always easy to change once others have formed an opinion of you. In one of the memorable scenes from the Muppet’s version of this story (our family favorite), a repentant Scrooge goes to Bob Crachit’s house to make amends. When Mrs. Cratchit, played brilliantly by Miss Piggy, answers the door, Scrooge declares, “Bob Cratchit, I am about to raise your salary.” Not hearing his words because she had already determined Scrooge was up to no good, Piggy angrily responds, “And I am about to raise you right off the pavement.” As Piggy curls her fist and winds up for a big swing at Scrooge she suddenly realizes his good intentions.
Our family watches this movie every Christmas Eve but this year we saw a bit of a precursor as congress passed a huge revamp of the tax code. Trump and house speaker Ryan both proudly declared that this bill, with its lower corporate tax rates would spur a huge economic boom while also lowering taxes for over 80% of Americans. In essence they promised to “raise the salary” of workers across the country. Maybe no one was listening because most media reports I saw reminded me of Miss Piggy in her doorway winding up for a strong left hook.
Time will tell where this all ends up because there are so many moving parts in our economy, but I would like to make a comment about this bill purely from an investor point of view. Ronald Reagan was fond of the quote, “If you want more of something, tax it less.” Well, businesses are about to be taxed less so we will find out if that saying is true. I am a small business owner. I understand very well what it means to balance budgets, meet payroll and pay taxes, through good times and bad. I have already told my staff of our plan to raise salaries as a result of this bill. In addition, we expect to be able to invest more in future growth with dollars that heretofore have gone to taxes. Multiply this by the 26 million other small businesses in America and add in the large corporations, and I have to believe investors (and workers) are going to enjoy the outcome.
The social implications of tax bills are for politicians to debate, and there are good people on both sides, but looking at the economic side of this one as it relates to investors, I am very optimistic that this congressional gift will not be a humbug.
Hi, I'm Dan. I'm a CFP® Professional.
Securities and advisory services offered through Commonwealth Financial Network®.
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