Uncertainty in Washington, Windfall for Others

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The New York Times
Friday, December 14, 2012

Uncertainty in Washington, Windfall for Others

By FLOYD NORRIS

Let us pause to give credit where credit is due.

The so-called fiscal cliff, and Washington deadlock, dominate the news these days, but the reality is that Congress has accomplished a lot. Thanks to it, as well as to President Obama, action has been taken that will accomplish the following goals:

Provide immediate economic stimulus through the payment of billions of dollars to American individuals.

Significantly increase tax receipts in the current fiscal year, thus reducing the budget deficit, with much of the money coming from higher-income Americans who will voluntarily take steps to increase their 2012 income tax liability.

Bolster charitable giving substantially this year.

Demonstrate which companies rolling in cash have attained that status by keeping profits overseas, rather than bringing them home to reinvest.

Many of those accomplishments could be limited, however, if President Obama and House Speaker John A. Boehner accomplish what everyone says they want — a quick compromise to avoid the automatic tax increases and spending cuts set to begin Jan. 1 — and so reduce the uncertainty that is having such beneficial effects.

Each day that passes without a deal brings more companies declaring special dividends, and more high-flying stocks being sold off to capture capital gains that will be taxed at today’s low rates. Tax advisers for wealthy people who have some control over the timing of their income are advising them to take the income now, rather than to defer it to next year.

Among the companies that have declared special dividends in the last few weeks are HCA, once known as Hospital Corporation of America; Costco, the retailer; and a clothing company whose name neatly symbolizes the spirit of this holiday season: Guess Inc.

The guessing concerns the shape of tax law next year. I cannot recall a December with more uncertainty about the following year. The fact that the stock market is up this month, albeit only a little, should remind us that the cliché “investors hate uncertainty” is nonsense. There is always uncertainty, but sometimes there are reasons to think things will work out well.

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