主题：1/4/2009 Market View -- 宁子

Obama courts republicans with tax cuts, but you need to stimulate investment and harder work.

The 40% or $300B in tax cuts sure was welcome news, but looking into what is offered at first is not that encouraging in terms of historically significant economic stimulus, i.e. the kind that creates investment in the US in new technologies and companies.

There are rebates for taxes paid in the past. So you get some money in your pocket in terms of your payroll tax getting cut. That provides some consumption boost as it gives more money each paycheck, but it is not the kind of 'buy this equipment or service and you get a tax credit' incentive that we call the 'use it or lose it' tax incentive that prompts you to spend the money by investing in capital goods. What happens with a lot of this money during hard times is that it is saved when the idea is to get it into the economy in ways that will require more production and new ideas to come to market. Thus the historical success of the 'you get it if you spend it' approach. From the early drafts, this will get the lion's share of the tax cuts.

There is $100B going toward business tax cuts, including some accelerated depreciation, but as we have noted before, there is already a generous Section 169 expensing provision that at last memory check was either $125K or $150K. That is a pretty big chunk of change for the mom and pop small businesses already, and adding some accelerated depreciation is not going to make cash strapped very small businesses spend more than the $150K they can already expense up front.

There are also some credits if you hire employees. There may be something there if you need the employee, but if you don't, it is a big, big expense to bring on a new hire for a modest tax credit. In addition, some smart people who have looked at the plan say the small businesses get a tax cut but then the owners' marginal tax rates increase, making it a net wash. How much stimulus is provided if your net benefit is zero? You need to get something if you act and miss out if you don't. That is what gets businesses and individuals to take action and spend and invest in areas that spur economic growth. People are smart; if they get a benefit for acting, they will act. If it is a shell game and they get something here but lose the same amount there, they will sit pat.

Thus far this plan remains disappointing even with tax cuts thrown in. The thing is, many republicans campaign as if any tax cut is a good tax cut and thus they may jump on it like a starving dog on a mouse or they have to explain why they don't like these tax cuts versus others. It can be done, but there has not been a good explanation since Ronald Reagan as to what tax cuts work and what tax cuts do relatively little.