Hey America, did you hear that sound?
You know, the all-too-familiar sound of politicians planning to pick your pockets while telling you that they’re doing it all for you.
Last night, the country was “treated” to some very toxic tariff and tax talk by the two candidates vying for the position of most-powerful human on the planet. I say toxic, because both promulgate falsehoods when it comes to economics, and both want you to believe that what they want to do isn’t what they are actually going to do.
Let’s start with Vice President Kamala Harris, as her position on taxes is a bit more straightforward to understand in terms of its tried-and-true toxicity. Harris says she wants to raise the corporate income tax rate from the current 21 percent to a more perniciously high 28 percent. Her justification for this is to “ensure the wealthiest Americans and the largest corporations pay their fair share.”
Aside from the cliché abuse she’s guilty of via the bromide “pay their fair share,” Harris’s proposed increase of the corporate tax would represent a big hit to non-wealthy Americans, who also happen to be corporate employees, consumers and investors.
Here’s how the non-partisan think tank the Tax Foundation assess the Harris proposed corporate tax hike consequences:
“A higher corporate tax rate would raise revenue; however, any revenue would come at a high price of lost economic output, investment and wage growth. For example, under a 28 percent corporate rate… we estimate that for every $1 of higher revenue on a conventional basis, GDP would fall by $1.84.”
Here is a news flash for Harris and anyone who thinks higher taxes are good for America:
They result in a net-negative for the economy.
Now, as for former President Donald Trump, he is also proposing higher taxes, he’s just shrouding them in the deceptive cloak he calls tariffs.
During the debate, Trump doubled down on the tariff pledge, threatening “substantial” new tariffs on other countries and claiming, “I took in billions and billions of dollars, as you know, from China.”
No, Mr. Trump, I don’t know that.
Yes, you “took in” billions of dollars from the tariffs, but it wasn’t from China — it was from American companies, the actual entities that pay the tariffs.
Here, once and for all, I want to make clear how tariffs work, because there is a grotesque misunderstanding about this issue that keeps being falsely promulgated by the Trump camp. And apparently, many people either do not know the truth, or they’ve just chosen to go along with the Trump spin on this issue.
Tariffs are paid by U.S. companies. Full stop.
In fact, there has never been a single penny sent from China to the U.S. Treasury as a result of a tariff on U.S. imports.
When a tariff is placed on imported goods from China (or anywhere else) into the U.S., that tariff is paid by U.S.-registered firms directly to the U.S. Customs agency.
Perhaps a better term to use, which is much more clarifying and much-less subject to Orwellian language manipulation, is to call a tariff what it actually is — an import tax on U.S. companies.
Of course, U.S. companies don’t just treat import taxes as a static cost of doing business. Instead, like all forms of tax increases, these companies usually pass the costs on to their customers by raising their prices. Higher prices mean higher inflation, and higher inflation means more constrained and more restricted economic activity. And then there is the damage to investors, as these higher import taxes pressure corporate profits, and that throttles earnings per share growth, which hamstrings share prices.
Finally, I must relate to you a personal anecdote regarding this subject, one that captured a lot of kudos from fellow members of the investment community. A few months ago, I attended an investor event at Mr. Trump’s Mar-a-Lago resort in Palm Beach, Florida. I wrote about this event in The Deep Woods, which you can read more about here.
At dinner that night, our group heard a speech from one of the architects of the Trump import tax, U.S. Trade Representative Robert Lighthizer. Lighthizer spoke for about 30 minutes, and most of his talk was aimed at dispelling what he called the “free-market myth” that tariffs hurt the economy. After citing some rather unconvincing examples, I became disenchanted, which impelled me to act during the Q&A period.
It was then that I was handed the microphone, and asked Mr. Lighthizer the following question, which, of course, I already knew the answer to:
“Can you please clear something up for me: Who, exactly, pays these tariffs? Is it the Chinese government, or is it the American company who has to write a check to the U.S. Customs agency?”
Like any nimble politician, Lighthizer saw the dangerous waters he was about to wade into with my direct inquiry. So, rather than give me a direct answer, he pivoted and started talking about how tariffs don’t cause inflation and that this was one of the myths floating around the free-market worldview.
After dinner, and much to my delight, I was approached by multiple colleagues who congratulated me on my direct question. You see, these are sophisticated, and in many cases free-market, libertarian-leaning investors, writers and businessmen who also know that tariffs are a form of taxation, and that they are not good for America.
If former President Trump wants to regain office, I think he should consider doubling down on taxes by offering more of what he did in his signature achievement, The Tax Cuts and Jobs Act, which was a significant overhaul of the tax code that he signed into law in 2018. That very good piece of legislation included some of the biggest changes to the tax code in some three decades. We need more policies like this, and fewer import taxes.
Tax cuts versus tax hikes. That’s the binary choice we should be facing in this election. Instead, we face a Hobson’s choice of Trump’s import tax hikes versus Harris’s corporate tax hikes.
In either case, America loses.
Now, because I’m all about America winning, I can’t just leave you on that downbeat note.
That’s why, today, I am thrilled to be able to tell you about my newest project, one that is designed to make Americans prosperous regardless of who wins this presidential election, or any election, for that matter.
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The Cat and the Horror (2024)
There was a cat sleeping on my porch
She didn’t know what I had witnessed
The lacerated skyline of metropolis
A bleeding out of her twin sons
Flying lancets piercing steel hulls
Black smoke seasoning the azure sky
As the falling man descends to the concrete
Incendiary ideas born in Bronze
To please a prophet on a white horse
Hatred of the good for being the good
Crumbles a once-proud icon
Falling ash blankets District streets
A macabre concoction of concrete, bone, blood
Fury rises in the giant’s heart
Rage and revenge burn white
Country targeted, let there be fight
Two decades later, let there be flight
There is a cat sleeping on my porch
While the world remembers
— Jim Woods
***
Today, we mark the 23rd anniversary of the attacks on Sept. 11, 2001.
For me, the passing of more than two decades hasn’t been enough to fade the scars.
For me, those scars will never be allowed to fade.
Etched on my personal black box recorder are the memories I had circa 1999, when I checked in at the World Trade Center lobby to report to work for my first day at Morgan Stanley. The firm’s training program for new advisers/traders took place in those Twin Towers, and in the weeks that followed, I spent many an afternoon high atop the Manhattan skyline, learning the business inside the iconic monument erected to celebrate capitalism, Western achievement and the wealth of nations.
Their boldness, their glaring simplicity, their twin-brother-like stance and their defiance of the rest of the New York City skyline were all part of the reason the World Trade Center was targeted for destruction by forces whose primary directive is death to the infidel.
On that day, when the blue skies were pierced by the stiletto insertion of commercial jets into the towers, I watched the events unravel from some 2,500 miles west. A condo nestled at the foot of the Hollywood Hills hardly seemed congruent to the billowing smoke oozing out of the structural siblings.
The only connection in my mind was… my mind.
A mind having been there just a couple of years earlier, wondering what it would be like to actually be there in that moment.
Wondering if I would have been incinerated along with the roughly 2,600 other souls that were extinguished that day.
Wondering if I would have acted heroically the way so many did.
Wondering if I would have succumbed to the cowardice that so often accompanies paralytic fear.
I would like to think I could have been a hero. I need to think I would have been a hero.
Fortunately, I didn’t have to find out.
Instead, from afar, from the safety of Hollywood, I watched. All day, all night, I watched. Compelled by the horror; compelled by the enormity. Thinking to myself, “Will this be the world from here on?”
Would the world be plunged into war? At that moment, I wanted war. I wanted vengeance. I wanted to pound those responsible, and the philosophy that animated these acts into a pulp.
I still want to.
I want to stoke the burn of that day. I want to remember the collapse of icons.
I want to keep calling out the life-hating, celebratory death cult of ideas that is radical Islam, and I want to rejoice in its defeat.
The scars of history must never be allowed to heal, and no salve of time should be permitted to mask the day America would be altered forever.
Note: For the full immersion experience, I invite you to listen to a special audio essay of “The Cat and the Horror.”
Be Yourself
“Be yourself; everyone else is already taken.”
–Oscar Wilde
“This seat is taken, sir.” That’s what someone rather abruptly told me this weekend when I attended a packed screening of the film, “Reagan.” I highly recommend this film, because it favorably portrays a man with conviction, determination, grit, charm, wit, charisma, integrity, intelligence –you know, all of the things we want in a president, but that somehow keep managing to elude us.
The more important point here, however, is that what I was told about the seat being taken reminded me of one of my favorite quotes from the sublime Oscar Wilde about being yourself. You see, there is only one you. And though we all share a common biological ancestry as humans, we are all different in our own way.
So, embrace that difference. Be who you want to be. And I don’t mean that as a platitude. I mean that literally in the form of your deepest opinions, thoughts and actions. And whatever that is, be proud of it. After all, there is only one you, so flaunt it! And besides, everyone else is already taken.
Wisdom about money, investing and life can be found anywhere. If you have a good quote that you’d like me to share with your fellow readers, send it to me, along with any comments, questions and suggestions you have about my newsletters, seminars or anything else. Click here to ask Jim.
