DISCLAIMER: THE FOLLOWING "Cost of Freedom Recap" CONTAINS STRONG OPINIONS WHICH ARE NOT A REFLECTION OF THE OPINIONS OF FOX NEWS AND SHOULD NOT BE RELIED UPON AS INVESTMENT ADVICE WHEN MAKING PERSONAL INVESTMENT DECISIONS. IT IS FOX NEWS' POLICY THAT CONTRIBUTORS DISCLOSE POSITIONS THEY HOLD IN STOCKS THEY DISCUSS, THOUGH POSITIONS MAY CHANGE. READERS OF "Cost of Freedom Recap" MUST TAKE RESPONSIBILITY FOR THEIR OWN INVESTMENT DECISIONS.
U.S. CORPORATE TAX RATE BECOMES HIGHEST IN THE WORLD APRIL 1
Gary B. Smith: We will soon be number one in unemployment, if this trend continues. If anyone says that higher corporate tax rates don't affect unemployment then they've never worked in business at all. Businesses are outsourcing. They are relocating to foreign countries. They're expanding even faster in foreign countries than they would over here. They are hiring less people because a higher corporate tax rate goes right to retained earnings. They have less money to hire people. If you don't believe it, just look at what's happening with the states. States that have lower tax rates are attracting business from other states with higher corporate tax rates. This issue has been studied. A few years ago, the bipartisan, joint committee on taxation said that the number one way to see increased growth in the economy is to lower the corporate tax rate. We're not doing that. We need to.
Tobin Smith: In 1984, Ireland had lost jobs for literally fifty or one hundred years. They took the corporate rate from 35 percent down to 15 percent. At the same time, Northern Ireland did not. For 24 years, they had an expansion in Ireland, twice the rate of Europe and three times the rate of Northern Ireland. We've seen it in real life, so if anyone is going to argue against real life I have to say, empirical evidence shows it makes a difference. If we lowered it to 15 percent in the states, the growth we would get would more than make up for whatever this "cut" was because you would get higher raises, you would get higher revenues and you would get higher income to the employees because they would be paid more.
Jonas Max Ferris: Across most of Europe there is a value-added tax. So, their governments take tax along the way by adding different levels of sales tax. We just add it on to the corporation. I don't think our system is bad. The problem is, other countries are lowering their rates and ours has been staying the same since the 1980s. So, you have to go along-you have no choice-or these companies will just fly around and move their earnings somewhere else. Google and other tech companies are running profits through Ireland and paying a 2 percent tax rate, so we don't have a lot of choice. I will say having higher taxes somewhere else in the pipeline isn't great for jobs either. We can't lower the rate to zero just because it's good for jobs and then raise the income tax higher-as high as other countries, because that's also bad for jobs.
David Mercer: I don't think much changes with the nominal rate going down. We are all in consensus that it's going to come down 25 percent, or 28 percent. That's the target. I think what we have to address the loopholes that are incentivizing industries, for instance the gas or the oil companies that don't need it with all time profits. We should be spurring on our manufacturing where we've seen job growth at 435,000 over the last couple of years.
John Tabacco: I'm a small business owner and you need to look at the loose money policies we've had in the U.S. over the last couple of years. You have to look at the deficits the states are facing. Small businesses are not only faced with a higher effective rate. They are faced with not even 39 percent if you factor in municipal taxes, toll hikes, fuel cost hikes, energy tax hikes. These are all going down to the small business. I think our effective rate is closer to 50 percent. Without some certainty that these corporate tax rates are going lower I think you have to look out for the unemployed because there are some big problems ahead for them.
NEW GOVERNMENT REGULATIONS FUELING FEARS OF HIGHER GAS PRICES
Gary B. Smith: The left likes to say it could be regulations, but it's probably not regulations as if this is some iffy, unstudied subject. The Department of Energy released a report in 2011 that said because of excess regulations 66 refiners had to shut down in the past twenty years. That's not a partisan group. The Obama administration has a regulation that fined a refinery $6.8 million because they didn't use a special additive. The additive was only available in laboratories. Instead of fixing the problem they upped the ante. If you think that regulations don't harm refineries and therefore increase oil prices, you're out of your mind.
Tobin Smith: I heard people from Chicago complaining about their gas prices. I pointed out to them that in Chicago they've come up with their own, special blend of gasoline that only one refinery in the world can make. That's why they're paying $.25 a gallon more than anyone else. That's with regulations.
Jonas Max Ferris: There are regulations out there that play a role in higher gas prices-a lot of the fuel-blend regulations where they have different mixes with ethanol. There are regulations that lower the price of gas where they make cars with higher fuel efficiency standards. These have all been around for a long time and are playing a role in the current gas situation. The banks want to trade oil futures, essentially however they want to and they're saying they can't because of this new Volker rule. That's going to make oil prices go higher at the pump? That's ridiculous. They paid for that research. I don't know of any oil companies that are saying it's going to do that. I don't know of any mechanisms that would lead to that.
David Mercer: The factors contributing to this all is supply and demand. China and India are exceeding increasing demand. Political instability in the Middle East is adding to it. It has nothing to do with the regulations.
John Tabacco: We need to get somebody out there talking about a public policy that's going to reign in an overactive EPA. Right now we can't build a pipeline. We haven't had a new refinery brought online to the United States of America since 1976-that's almost 40 years we haven't been able to up our capacity to refine oil here. Now we're talking about changing the trading regulations so banks can't go in and trade stocks. We don't have an issue with banks. We don't have an issue with government being out of the private sector. What we have an issue with is the government being too involved in overspending money and hurting the private sector. Obama keeps talking over and over again about upping our domestic production. It's all been done on private land. If people are scared right now seeing $4 gas they should wait until the end of the summer and I think it will be $6.
WALMART SLASHING FOOD PRICES AS INFLATION HITS CONSUMERS
Gary B. Smith: This is how the free market works. This is not just a victory for Walmart. It's a victory for capitalism. In the early 1980's we had just come off two straight years of inflation-well over 10 percent. Costco was started in 1983. That's what happens with the free market and capitalism. Opportunities unveil themselves. We have a lot of opportunities. Walmart is taking advantage of it. Good for them.
Tobin Smith: The United States government has come up with a way of trying to measure inflation and it's just not right. Walmart gets a real reaction everyday from millions of customers. They are doing the right thing here. I wish they would take this money and reduce our gas prices because we'd get more pop out of it. But, there's no question that they see the front-line consumer and the front-line, Walmart consumer is hurting because their sales are down.
Jonas Max Ferris: Many companies have done a great job about being efficient since the last bout of inflation in the 1970's of sourcing stuff to countries where stuff is cheap or controlling their own energy use. That cost has gone way down over the years. These companies can actually not pass on these prices to the consumers much, which would cause the inflation to go up. We've seen the price of gas double and yet, UPS shipping hasn't. Airline travel hasn't doubled. Walmart prices haven't doubled. Food costs have gone up, but they haven't doubled their prices. They've done an amazing job being efficient and absorbing all this price pressure.
David Mercer: Instead of Walmart gouging their customers and making more on margin, they want to keep them in their store. It's good marketing, business sense and marketing position. It's not a sign that inflation is upon us because I can guarantee you that Walmart would definitely factor that into the pricing and would increase prices along with inflation. Instead they are doing the opposite because it makes good business sense.
John Tabacco: Despite what the Bureau of Labor and Statistics is telling us and what Ben Bernanke and his cronies are telling us, Walmart is now telling us there is inflation out there. We have an inflation problem. The good thing about Walmart is they produce most of their goods over in China and Mexico. They ship a whole bunch of their jobs overseas. The jobs they have here in the U.S. will not take union workers. The fox is in the hen house. They can take a little hit and subsidize grocery prices because that's going to bring more people into their stores and buy more of their retail goods, which they get cheaper.
PREDICTIONS
Gary B. Smith: Blackberry (RIMM) has 30 percent by January
Tobin Smith: Molson Coors Brewing Company (TAP) up 20 percent by December
Jonas Max Ferris: Dicks Sporting Goods (DKS) up 25 percent in one year
John Tabacco: Visa (V) up 20 percent by the end of the summer
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