At first glance, there seemed to be some good tax news for businesses coming out of Massachusetts. The state certainly could use it.
For example, on the “Small Business Survival Index 2007,” which ranks the states according to their public policy climates for entrepreneurship, Massachusetts ranked a pathetic 44th. Among the state’s many negatives is a 9.5 percent corporate income tax rate, which is one of the highest in the nation.
The Boston Globe reported today (January 17) that Governor Deval Patrick is going to propose a cut in the corporate tax rate. Unfortunately, it would be a rather modest cut – to 8.3 percent – buy, hey, anything is better than nothing, right?
Well, there’s more to the story. The Globe reported that this would be part of an effort “to tighten what [the Governor] calls corporate tax loopholes.” The article went on: “The compromise may not be enough to win over business leaders. While the corporate tax codes would be tightened in January 2009, Patrick wants to delay his corporate tax rate reduction until 2010, and it would be phased in over three years. Closing what the governor describes as loopholes would generate $297 million in the next fiscal year and $490 million a year after that. But that would be offset by about $210 million a year in lost revenue, once the tax rate reductions for businesses took full effect. The net increase in new taxes for the state would be $280 million.”
The corporate tax relief phase in would drop the rate to 9.1 percent in 2010, 8.7 percent in 2011, and to 8.3 percent in 2012.
Well, so much for clear, substantive tax relief.
Although, some legislators might be on the right track. The newspaper reported that “other lawmakers have urged deeper corporate rate cuts, to as low as 5.3 percent, the same as the state's personal income tax.”
Now that would be a positive tax cut.
Thursday, January 17, 2008
Wednesday, January 16, 2008
Bush, Saudi Arabia, Oil and the Economy
During his trip to the Middle East, President Bush on Tuesday (January 15) tried to get Saudi Arabia to open the oil spigot some more.
The Washington Times reported:
"I would like for them to realize that high energy prices affect the economies of consuming nations," Mr. Bush said earlier in the day of the Saudis. "If these economies weaken, those economies will eventually be buying fewer barrels of oil."
Saudi Arabia is one of five founding members of the 14-nation Organization of Petroleum Exporting Countries (OPEC). The price of oil hit $100 a barrel last week, raising concerns that the cost of importing 20 million barrels a day in the U.S. may add to the likelihood of a recession. Yesterday, oil fell $2.30 to $91.90 a barrel.
Speaking to reporters at the Saudi Royal Palace guesthouse, Mr. Bush said that "there’s not a lot of excess capacity in the market place" and that "demand has outstripped supply."
Mr. Bush’s statements drew a quick response from Oil Minister Ali al-Naimi. "Some people mistakenly think that the U.S.-Saudi petroleum equation is determined by how much oil the United States imports from Saudi Arabia," Mr. al-Naimi said, during a press conference at the hotel housing the White House press corps. "In fact, these are purely commercial transactions and are a function of market fundamentals rather than policy directives," the minister said. "We will raise production when the market justifies it. This is our policy."
He defended the withholding of about 2 million barrels a day for the building of an emergency oil reserve. When asked about the impact of a possible U.S. recession, Mr. al-Naimi said, "No one will look with pleasure on a recession in the U.S." Asked whether gas prices would ever dip below $2 a gallon for U.S. drivers again, Mr. al-Naimi said, "If I knew the answer to that question, I would be in Las Vegas rather than here."
This exchange illustrates a key problem with the oil market, that is, government control. When referencing OPEC, we are talking about government-controlled oil. Political leaders are deciding levels of oil production. Unfortunately, even in oil producing nations, politicians – elected or unelected – are not so hot at gauging markets. President Bush can push and cajole, but the reality is that OPEC nations will produce oil at a level meant to maximize their revenues. As President Bush correctly warned, the risk at current prices – or perhaps higher future prices – is that these energy costs will aid in slowing economies, and perhaps even pushing them into recession.
That, in fact, is what’s happening in the U.S. right now. High energy prices – while far from the full tale – is part of the economic story. But, of course, it’s not all OPEC’s fault. U.S. policymakers must take blame as well. For example, the weak dollar has naturally pushed up the price of oil, while governmental restrictions on U.S. energy exploration, development and production must be lifted.
In addition, it must be recognized that part of the oil price premium is still tied to political uncertainties, including war and terrorism, in the Middle East.
Energy markets are not analogous to gambling in Las Vegas. Instead, they should be about government getting out of the way, and letting consumers and producers respond to price and profit signals in the marketplace.
The Washington Times reported:
"I would like for them to realize that high energy prices affect the economies of consuming nations," Mr. Bush said earlier in the day of the Saudis. "If these economies weaken, those economies will eventually be buying fewer barrels of oil."
Saudi Arabia is one of five founding members of the 14-nation Organization of Petroleum Exporting Countries (OPEC). The price of oil hit $100 a barrel last week, raising concerns that the cost of importing 20 million barrels a day in the U.S. may add to the likelihood of a recession. Yesterday, oil fell $2.30 to $91.90 a barrel.
Speaking to reporters at the Saudi Royal Palace guesthouse, Mr. Bush said that "there’s not a lot of excess capacity in the market place" and that "demand has outstripped supply."
Mr. Bush’s statements drew a quick response from Oil Minister Ali al-Naimi. "Some people mistakenly think that the U.S.-Saudi petroleum equation is determined by how much oil the United States imports from Saudi Arabia," Mr. al-Naimi said, during a press conference at the hotel housing the White House press corps. "In fact, these are purely commercial transactions and are a function of market fundamentals rather than policy directives," the minister said. "We will raise production when the market justifies it. This is our policy."
He defended the withholding of about 2 million barrels a day for the building of an emergency oil reserve. When asked about the impact of a possible U.S. recession, Mr. al-Naimi said, "No one will look with pleasure on a recession in the U.S." Asked whether gas prices would ever dip below $2 a gallon for U.S. drivers again, Mr. al-Naimi said, "If I knew the answer to that question, I would be in Las Vegas rather than here."
This exchange illustrates a key problem with the oil market, that is, government control. When referencing OPEC, we are talking about government-controlled oil. Political leaders are deciding levels of oil production. Unfortunately, even in oil producing nations, politicians – elected or unelected – are not so hot at gauging markets. President Bush can push and cajole, but the reality is that OPEC nations will produce oil at a level meant to maximize their revenues. As President Bush correctly warned, the risk at current prices – or perhaps higher future prices – is that these energy costs will aid in slowing economies, and perhaps even pushing them into recession.
That, in fact, is what’s happening in the U.S. right now. High energy prices – while far from the full tale – is part of the economic story. But, of course, it’s not all OPEC’s fault. U.S. policymakers must take blame as well. For example, the weak dollar has naturally pushed up the price of oil, while governmental restrictions on U.S. energy exploration, development and production must be lifted.
In addition, it must be recognized that part of the oil price premium is still tied to political uncertainties, including war and terrorism, in the Middle East.
Energy markets are not analogous to gambling in Las Vegas. Instead, they should be about government getting out of the way, and letting consumers and producers respond to price and profit signals in the marketplace.
Monday, January 14, 2008
Credit Crunch and Small Business
SBE Council member Victoria Braden, President & CEO, Braden Benefits Strategies, Inc. was featured in this recently posted U.S. News article, which looks at the “credit crunch” and small business. Do you have a similar story to share about access to credit? Or, have you not experienced such “tightening” in the market. Please share your story or comments with BusinessTrends to help SBE Council fully analyze the impact of credit readjustment on the small business and entrepreneurial sector.
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