The Budget Deal That Isn't

The Budget Deal That Isn't

Monday, August 4th 1997

To be honest, most of America is not excited about this agreement. Sure, if you have some kids in college you'll get a whopping $500 tax credit and if you're just about to retire or die you'll either be able to sell your house and keep more of the money tax free, or your estate will pay fewer taxes. But who cares? You're either too old to enjoy it, or you're dead.

$500 a year for college? That's a laugh. Even the pokiest junior college charges about four times that much each semester. But then again, it does buy at least one Ralph Lauren blazer for your kid's frat rush parties.

The wealthier of us are celebrating the cuts in capital gains taxes -- and they were big. The problem is whether to sell now and lock in conforming profits or wait and see.

My guess is there will be a big sell-off the minute the President puts his John Hancock on that bill and the market will plummet 900-1800 points. Now don't panic, this is only based on my own sick impressions of American investors. And who am I? After all the market goes up when more people are unemployed, so it only stands to reason that cynical investors will sell when tax news is good.

Okay, really folks, the answer is plain. Who's gonna trust the Congress the leave the deep cuts in capital gains where it will be after the "deal" is signed? Better to grab our profits now in case they change their minds later.

Big business is really celebrating a little-discussed feature of the new tax bills which will allow many of them to get off with paying no income tax like they used to before that thing called the "alternative minimum tax." (AMT) The AMT forced businesses with huge write-offs to pay taxes anyway. The new "deal" will revert to the "old days" when big business got off Scot free.

And Dwayne Andreas is celebrating the continued tax breaks for ethanol that will account for almost every dime of profit for ADM - "Supermarket to the World of Congressional Campaign Committees." Of course it's cost him millions in political contributions over the years. But after all that's the American way. Anyway, I like ethanol - it smells good.

One last thought. Is it me, or have you also been hearing more and more about allowing us to invest part of our social security dollars in the stock market? A trial balloon or a done deal? You better figure that one in before you sell and take your profits now.

Just thought I'd alert ya.