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May 4, 2009

Stocks markets up, Obama vows to catch tax cheats

POLITICS - There are increasing signs the American recession may end sooner than expected. For starters the Toronto Stock Exchange charged ahead again today, extending a rally that has propelled Canada's main index up 30% in less than two months and it is just one of many stock markets that have been doing better over the last 3 months suggesting the global economy is stabilizing and Obama's (and Canada's) stimulus package is working.

Today alone Toronto's S&P/TSX composite index surged 373.41 points to 9,870.37. It was the biggest one-day gain so far in 2009. Most of the gains have been in the last 2 months, with the TSX up over 2300 points since early March.

In the United States the Dow Jones industrial average gained 214.33 points today to 8,426.74 while the Nasdaq composite index climbed 44.36 to 1,763.56.

Construction spending is the USA is finally up and home sales are up again too. Commodity stocks are up, but so is oil prices (to $54.47 USD per barrel). These are all positive signs that the recession (which many economists have avoided calling a depression) may be on the rebound finally.

OBAMA PLANS TO CLOSE TAX LOOPHOLES

How do you pay for a stimulus package without raising taxes? Well, you can start by catching tax cheats who have been storing their ill-gotten cash in offshore bank accounts.

For years now greedy tax cheats in the United Statess have been storing their profits overseas in offshore bank accounts. Sometimes the money is the result of criminal activity or corporate corruption, which is also something that needs to be addressed.

President Barack Obama vowed today to "detect and pursue" American tax evaders and go after their offshore tax shelters. The Obama administration will begin by overhauling the U.S. tax code, so that existing laws that make it possible to "pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, New York."

After all, why should corporate bad-boys get a tax break for making jobs overseas. Wouldn't it make more sense to give them a tax break for making jobs in North America?

President Obama said he wants to prevent U.S. companies from deferring tax payments by keeping profits in foreign countries rather than recording them at home and called for more transparency in bank accounts that Americans hold in notorious tax havens like the Cayman Islands.

"If financial institutions won't cooperate with us, we will assume that they are sheltering money in tax havens and act accordingly," Obama said.

This was also one of Obama's campaign promises and he hammered on this issue repeatedly during his long campaign for the White House. Tracking down these tax cheats could result in an extra $210 billion over 10 years and "make it easier" for companies to create jobs at home. Over a decade, $210 billion would make a welcome dent in a federal deficit expected to swell to $1.2 trillion in 2010 due to the new stimulus package.

Under the new plan, companies would no longer be able to write off domestic expenses for generating profits abroad. The goal is to reduce the incentive for U.S. companies to base all or part of their manufacturing operations in other countries.

Treasury Secretary Timothy Geithner called the new move "common-sense changes designed to restore balance to our tax code."

"Nobody likes paying taxes, particularly in times of economic stress," Obama said. "But most Americans meet their responsibilities because they understand that it's an obligation of citizenship, necessary to pay the costs of our common defence and our mutual well-being."

The current tax code, he said, makes it too easy for "a small number of individuals and companies to abuse overseas tax havens to avoid paying any taxes at all."

The government is hiring nearly 800 new IRS agents to enforce the U.S. tax code and catch tax cheats.

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