Why the Jobs Bill Will Send Even More Jobs Abroad

There has been much controversy whether corporations pay too little or too much taxes. Stalling anyone from solving this issue is the monstrous and complicated tax code corporate and government lawyers must decipher in order to arrive at a simple answer. Over the years, U.S. tax code, written by numerous Congressional lawyers, was developed to provide numerous loopholes for U.S. corporations.

It is true the U.S. has the highest corporate tax rate of any other major industrial nation. Having said that, I must add that Wall Street Journal tax analysts have estimated that corporate America only pays an average tax rate of 20 percent. At least one corporation, General Electric, paid no taxes on the several billion dollars it made last year. Many corporations pay less than 20 percent when they send jobs and relocate company headquarters abroad in low or non-corporate taxed nations.

The history of corporate taxation shows that corporations taxed to the extent that it negatively affects their profits has a tendency to force them abroad, costing Americans jobs and the government billions of dollars in lost tax revenue. President Obama's plan to raise taxes on the rich (corporations) in order to fund his $460 billion jobs bill will only serve to send more and more companies (thus, jobs) abroad. When you consider the loss those jobs sent abroad will represent to the U.S. economy, the $460 billion price tag on Obama's jobs bill will pale in comparison to the real cost.

U.S. infrastructure is in dire need of an overhaul, but soaking the rich is no way to pay for it. A better solution is to finance it through municipal tax free bonds guaranteed by the U.S. government. This would save the cost of setting up another government agency designed to oversee the overhaul of our nation's infrastructure. The cost of just that is estimated to run over $100 billion. Another worry is that government agencies such as these do not die as soon as their purpose is served and are no longer needed. Instead, they live on to become another useless, bloodsucking government bureaucracy. Adversely, safe tax-free munis would allow the average investor to profit from Obama's jobs plan.

With the exception of China, India, Russia and, more recently the E.U., all central banks have been selling off more gold over the past decade than they have been buying. Therefore, it is difficult for anyone to put a price on gold. European central banks, according to the Financial Times, have become net buyers of gold for the first time in more than two decades. A Wall Street Journal article "Is Gold Cheap? Who Knows? But Gold Mining Stocks Are" by Jason Sweig quoted John C. Bogle, founder of the Vanguard funds, as saying, "Gold has no internal rate of return. As a result, there isn't any reliable way to tell what it is worth." Barrick and Newmont are trading around 14 times earnings. Compare this to S&P 500's average P/E of 14.5 times earnings.

The industry-wide price average for gold shares is 18 times earnings. This is quite low for gold stocks when you compare their price gains to those of physical gold. One reason for this disparity is gold is being bought by three central banks. These banks have not been buying gold mining shares. Analysts expect the CEOs of gold mining companies will soon become more optimistic for gold's future. Instead of selling forward to guarantee current prices, they will take profits and put them into stock dividends and reward their stockholders. This sounds possible given the current state of money globally. We should buy gold mining shares on all major dips.

Sincerely,
Kenneth Coleman