StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between

"Certainty" Is Nothing But Spin

08 Aug 2010
Posted by Stan Collender

The more you hear about the business community being worried about the future because it is "uncertain" about federal income taxes, the more you realize that it actually is the one pushing for increased uncertainty.

There already is absolute certainty about the tax cuts enacted in the early 2000s: Under existing law they expire at midnight December 31, 2010.  Do nothing and we can all be absolutely certain that rates will go up.  Somehow, however, that certainty is being defined as creating uncertainty.

By contrast, the changes to the existing law the business community is saying are so important to economic growth will require new legislation and, especially these days, the legislative process is about as unpredictable as you can get.  So pushing for the three changes the business community says are so important to the economic recovery -- keeping the current rate on upper income individuals and the existing rates on capital gains and dividends -- has nothing to do with certainty and everything to do with lowering taxes compared to what they would be under current law.

The most certainty would be provided not just if there were no changes at all, but also if there were no discussion about whether there should be any changes.  You can't demand certainty and change at the same time.  When you do that, the only thing that's really certain is that certainty is not what you're seeking.


I'm glad someone addressed this

I am sick and tired of hearing about how uncertainty is keeping businesses/banks from lending money, hiring, etc., so I was glad to see someone who understands these things better than I take it on. But they scream 'uncertainty' about everything, from finance reform to workplace regulations. Can you also address this blanket accusation of 'uncertainty' and how valid it is?


clearly the expiration of the Bush tax cuts qualify as "certainty".

However: How about the proposal that keeps reappearing on tax deferral on foreign earnings? How about any implicit taxes from cap and trade (whatever form it takes)? What will be the next revelation from a 2,000 page healthcare bill, or an equally large financial reform bill (the specific regulations from which will be written by regulators over the next 12 months or so)? What about card check--- will a lame duck congress pass it?

While you may argue that things like cap and trade, or card check aren't politically possible -- the health care bill process has shown that the Democratic leadership in both chambers is willing to push their priorities across the finish line even in the face of resistance in its own party and nationally. One can't assume those proposals are simply dead.

From a macro view, given the size of the deficit even after the Bush tax cuts (assuming all) are reversed, there is an assumption that further taxes will be necessary. Many on the left are calling for additional tax increases. What will they be?

I think you take an overly simplistic view of the environment businesses are currently facing.

Regulatory, union uncertainty

Regulatory, union uncertainty (i.e., the makeup and rulings of a more union friendly NLRB), huge deficits that will almost certainly be paid for with even more large tax increases, take your pick, I'm hearing all these from people who actually make the hiring decisions in the private sector.


Much broader a topic than taxes, this is a "regime uncertainty" claim. The Washington Post took it seriously enough to mention it in an editorial a couple of months ago, noting a host of new statutes and pending regulations. Are more such changes coming? If so, maybe wait and see makes sense to a CEO.

It's akin to the work of Robert Higgs, regarding FDR's hostility towards business and business leaders, frightening them to inaction, Higgs claims, prolonging the Great Depression. I believe that Harry Dean Best used diary entries and private correspondence from that era to make similar assertions.

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