In the monthly forecast prepared by Alan Beaulieu, he touched on how the current political environment will affect business in the United States as well as what the future of the most recent tax overhaul will have on wholesalers/distributors.
Eastern European Tensions? Don’t Sweat It
Alan notes that the recent tensions in the Ukraine and Russia should have little effect on the economic forecast of the United States. This is due to the fact that the United States is large enough to absorb the small economic disruption from this region. Alan also noted the region is expected to continue to export their major commodities to the European region due to their dependence on the income from these sales.
Negative Impacts of Proposed Tax Reforms
Alan briefly wrote about the most recent tax reform proposal that was submitted by David Camp, the Chairman of the House Ways and Means Committee. Although optimistic about the possibilities of a bipartisan bill at the onset, these ideas quickly faded. Alan noted that the proposal included new legislation that would be devastating for the business community in the United States, and most notably the wholesale distribution industry. This was due to several factors, which included the fact that the effective tax rate would jump to approximately 42% for a significant number of high-income earners, due to the phasing out of many deductions. Alan quoted the Brookings Institute, which stated that this group of Americans could expect to pay about 60% of their income in taxes. Secondly, changes to the taxation of pass-through entities, where a portion of business income would be subject to the payroll taxes, would put an additional tax burden on many distributors. For these reasons he believes that this reform bill will be essentially dead on arrival, and does not expect for the two parties to come together and produce relevant lasting legislation.
On the economic side of things, Alan pointed to a few strong indicators that the wholesale/distribution industry should continue to see positive returns through 2015. It appears that the middle of 2015 is when Alan is expecting some shake-up in the economy, with new order plateauing in the middle of 2015 and signs of rising interest rates around this same time as well.