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December 12, 2017 | Yet Another Reason Why the Tax Bill Stinks to High Heaven

Rick Ackerman

Rick Ackerman is the editor of Rick’s Picks, an online service geared to traders of stocks, options, index futures and commodities. His detailed trading strategies have appeared since the early 1990s in Black Box Forecasts, a newsletter he founded that originally was geared to professional option traders. Barron’s once labeled him an “intrepid trader” in a headline that alluded to his key role in solving a notorious pill-tampering case. He received a $200,000 reward when a conviction resulted, and the story was retold on TV’s FBI: The Untold Story. His professional background includes 12 years as a market maker in the pits of the Pacific Coast Exchange, three as an investigator with renowned San Francisco private eye Hal Lipset, seven as a reporter and newspaper editor, three as a columnist for the Sunday San Francisco Examiner, and two decades as a contributor to publications ranging from Barron’s to The Antiquarian Bookman to Fleet Street Letter and Utne Reader.

It’s just like Wall Street (and its mouthpiece, The Wall Street Journal) to get all lathered up over supposed tax reform that has little more going for it than the usual heap of manure we’ve come to expect from Congress.  I made this point recently in discussing some fine print in the tax bill that would retain the alternative minimum tax for corporations. It were as though the Magna Carta had kept a provision that shoplifters be drawn and quartered in the public square.  So what else is in the fine print?  Today we learned, for one, about a provision that would deny equity investors the ability to choose which shares they sell to reduce a position. Now, whatever they unload will be reckoned for tax purposes on a first-in, first-out basis — a process that is guaranteed to raise one’s tax bill if the stock has been rising. The change is likely to stimulate significant year-end selling ahead of the new law.

Business as Usual on the Hill

And here’s the kicker: If we needed further proof that we are represented solely by jackasses on Capitol Hill, it is this: The FIFO measure would raise a paltry $2.4 billion over the next ten years.  Notes the Journal, “Some money managers and analysts say there has been so little discussion of the [change] that investors may be surprised to learn that [it] could reduce — or even wipe out — what they would save from an income  tax reduction.”  In the meantime, the spectacle of the stock market climbing vertically in anticipation of all the wonderful things the tax bill supposedly will do for the economy would be a joke if it weren’t going to prove so costly for so many.  When Congress promises “tax cuts for the middle class,” we should skip the celebration and hold onto our wallets.

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December 12th, 2017

Posted In: Rick's Picks

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