Obama's Tax Cut: A 'Mustard Seed' of Hope for Investors

As far as events go, the proposed $300 billion tax cut by President Elect Obama is just the sort of news that market participants like to see when looking forward for clues of a turnaround.

It would represent about 40% of the estimated $775 billion dollar economic stimulus plan intended by the Obama camp. The tax plan would be targeted towards both individuals and businesses and likely to garner support from both sides of the aisle, i.e. Republicans and Democrats.

The financial crisis still has more distance to travel before it comes to an end, but this announcement is a mustard seed (as Larry Kudlow is fond of saying) of hope for investors, regardless of their philosophical economic orientation.

Stay Hillbent and we will keep you posted on the Market Direction…

Disclosures: Hillbent.com, Inc. or its affiliates may own positions in the equities mentioned in our reports. We do not receive any compensation from any of the companies covered in our reports.

Comments

[User 268734:]

Pretty shallow post, on two grounds:

1. Whether a tax cut will in fact deliver much of a stimulus at all depends upon the extent to which money not handed to the IRS instead circulates around the economy. Under normal circumstances a fairly significant multiplier effect could be anticipated - but it hardly needs saying that these are not normal circumstances.

2. Even if a tax cut does provide significant stimulus, its effect is unlikely to be any longer-lasting than earlier government handouts. It does nothing to address the fundamental cause of our current mess: a thoroughly broken economic model built on successive asset price bubbles, binge-borrowing (by households and governments), and overconsumption.

Of course, the 'mustard-seed brigade' don't care about any of this - they just want your money.

Jan 05 10:56 AM

[jackooo:]

Nothint like cash to spend NOW!!
Tax cuts are a late joke. 1/4 the economy is under the table so the tax cuts do not effect 1/4 the populatuon.

Jan 05 01:20 PM

[Socialism c...:]

Just why the opposition to letting taxpayers have some of their OWN money back? The bailout to the banks hasn't worked -- they have hoarded the funds! Duh -- who'd a thunk that would happen? Cut the d@mn government at the knees -- its an intrusive, overgrown behemoth!! Abolish the IRS and the income tax. Go to the sales tax...and WE then decide if and when we pay, without going to jail for wanting to keep what is OURS!! Time to start thinking like Americans again. Go back and read what the Founders said about confiscatory taxation!!! Our tax code is not only crippling our economy, but it is enabling the overgrown, abusive government!!

Jan 05 04:34 PM

[kevinm:]

Tax cuts are far preferable to spending increases, because people operating in free markets are far more efficient in putting money to productive use than governments.

HOWEVER, the Obama 'tax cuts' are really not tax cuts, but welfare, as they put income caps on the 'tax cuts'-- meaning the upper end actually shoulder MORE of the tax burden--and the lower earners receive 'refunds' of money they never paid--socialist redistribution or welfare.

True tax cuts would be great. That would involve letting everyone participate and cutting MARGINAL tax rates PERMANENTLY. Somehow, I do not think that is what Obama and the dems have in mind.

Jan 05 11:06 PM