When you read this, Americans will know whether the nation went over the economic “fiscal cliff.” The “fiscal cliff” describes the unresolved financial and budget issues regarding taxes, spending, deficits and national entitlements going forward.
In other words, as of late December, no one in the U.S. is certain of their future finances. Everyone is asking the same questions, including “What will I keep from my earnings? What will my taxes be? How can I minimize them with allowable deductions”? The answers are unclear within every taxpaying household and business across the country.
My feature in the next issue of CI explores the American gaming industry in a post-election environment with a new Congress. We held the story since not one source could definitively answer how gaming will fare until after January 1.
While no one knows the outcome, few Americans have confidence. In fact, most foresee an unfavorable adjustment to a future business climate of new taxes and regulations. Because every American business owner and employee is also a potential casino customer, their discretionary leisure dollars are critical to gaming’s successes.
As the insecurity mounts, what will happen to future investments for millions of ordinary Americans? The Obama White House and the Democrats want to raise taxes on who they define as wealthy (over $250,000), including a 5% increase – from 15% to 20% on qualified dividends from domestic corporations.
American workers pay up to 35% – based on their salaries – on their original employment income. If they invest their net dollars in profitable stocks, these same corporations pay up to 35% in taxes before distributing any dividend interest to investors, who then pay another 15% rate on that net figure.
Spending has plunged the US into horrific debt. Democrats have offered little in spending cuts, believing taxes can defray some of the debt. Many Republicans will agree to more taxes by eliminating or limiting some tax deductions, but they have rejected tax rate changes. We’ve heard this script before.
I believe tax increases on voluntary investments could impact people’s willingness to invest in gaming stocks. Why risk capital to pay more taxes? Will investors pull back? If so, could that influence an organization’s expansion, buying, upgrading and renovating decisions? While larger companies have a financial margin, smaller casinos and suppliers often do not. Will they hire or fire more?
To protect themselves, both large and small companies are proactively working to beat Washington at its own game. Throughout December, hundreds of companies had advanced early 2013 stockholder dividends, plus bonuses and partnership commissions. Also, many advanced employee salaries to avoid other increased taxes scheduled to kick in on January 1.
Among these was the Las Vegas Sands Corp. (LVS). It declared a special dividend payout of about $2.3 billion, with $1.2 billion paid directly to LVS controlling shareholder and CEO Sheldon Adelson. A very public opponent of Barack Obama’s reelection, I’m not surprised Adelson would legally shelter himself and his shareholders. MGM Resorts International secured $5 billion for refinancing at a lower cost to eliminate their high-priced debt taken on at the peak of the financial crisis. Executives opted to accept possible economic penalties over uncertainty.
The nation is crying out for direction. I saw “Lincoln”, Steven Spielberg’s acclaimed new movie. Set in January 1865, its plot conveys President Abraham Lincoln’s conviction that passage of the US Constitution’s 13th Amendment would forever abolish slavery following the Civil War. In less than 30 days, Lincoln, involved every step of the way, supervised the “persuasion” of many House legislators to vote yes.
As a registered Independent with no party loyalty, I would be thrilled if the lawmakers would actually lead the way out of this potential “fiscal cliff” chaos.
Republican House Speaker John Boehner offers uninspired, technical explanations of why his party objects to tax increases. Democratic Senate Majority Leader Harry Reid never lets facts or evidence influence his commentary. Finally, President Obama needs to stop the perpetual campaigning, stay in Washington and lock everyone in a room to work something out. He must lead like Lincoln.