CIO Scott Martin Interviewed on Fox Business News 3.16.21
Program: Cavuto Coast to Coast
Station: Fox Business News
DAVID ASMAN: President Biden reportedly planning the first major tax hike in almost thirty years. There was one under Obama. I guess they don’t consider that to be major, but the market doesn’t seem to be responding. Why not? Let’s bring in Scott Martin and Brian Wesbury. Scott, first to you. I think so far, the market is more happy about all of the ends of the lockdowns we just talked about. Even California is now ending a lot of its lockdowns. They’re more focused on that than they are the rising costs of doing business because of tax hikes. What do you think?
SCOTT MARTIN: Yeah, I agree, David. And let’s face it, some of the high, lets say, from some of the spending needs to wear off, too. But you’re right, I think eventually the market will come to grips with tax hikes. Now, maybe there’s one thing too going on, David, where maybe they think some of this stuff is just, say, pomp and circumstance and won’t get all the way through. But the reality is this. If you look at companies going forward-facing higher taxes, that’s definitely going to hurt jobs, but also maybe make companies more efficient, obviously drive up productivity, drive up revenue per employee. So there’s maybe some good things that could come of this. But by and large, when they set in, if they are draconian, as they seem, that could definitely impact stock price.
ASMAN: Now, Brian, I’m not too worried about the wealth tax, honestly, because I think that despite all the problems it could cause, it’s unconstitutional. It would go to the Supreme Court, take years to deal with and also Americans, It’s just un-American. People don’t want tax police digging up their backyard, looking for buried gold and and jewelry and pictures and so forth. So it’s just it’s just a nasty tax that I don’t think will pass the muster. But when I look at the fact that they’re thinking of paring back and I’m quoting from an article here, they’re thinking of paring back tax preferences for so-called pass-through businesses. Most businesses in America are passed
through businesses. There’s a lot of people who are small business owners who who pour their income back into their — they pay their profit in terms of income tax and they pour their money back in from their profits back into their business. They’re not millionaires, even though it may appear so on paper.
BRIAN WESBURY: Right. Right. I mean, this is absolutely correct. And I want to, you know, ditto Scott for what he said. Except for one thing, I do not believe tax hikes have any positive impact on the economy or productivity or job creation. None, zero, nada. And so then to go to this pass-through tax, you know, you either pay taxes at the business level or you pay them at the individual level. And so if there is pass-through income, individuals pay the tax. And so if you start, you tax it in both places, you’re now double taxing. And that really harms growth over time. One of the things that I think the market is looking at today is, look, we just spent one point nine trillion on top of about four trillion last year. We’re talking about spending two to four trillion more and hiking taxes. The tax hikes won’t go into effect until next year. The initial phase of borrowing on our credit card to spend actually boost economic growth and profits. So that helps the market. And so what we have is kind of a medium to long term problem, while in the short term, short term, we get to live with a sugar with the sugar high.
ASMAN: Let me let Scott back in here. Hold on a second. Because Scott, the fact is, it looks like this administration is thinking of making the same mistake made by the Obama-Biden administration, just when the the economy’s getting back on its feet. That’s when we get new taxes, new regulations. Of course, we’ve already had regulations in the energy field, but we could be suppressing take-off of the economy in twenty, twenty-two. We’ll see that initial phase this year because the whole all of the end of the lockdown is going to create a boom. But just as we’re getting back on our feet again, we could come down with the cost of doing business because of regs and taxes.
MARTIN: Yeah, it’s back to the “you didn’t build that days” from Obama. And that’s the scary thing, too. I think you have these small businesses that have actually made it through the government shutdown and the government force of closing them down because they knew better. And now these businesses that have made it through by the skin of their teeth, which is very, very small, by the way, they actually say now you’ve got to pay more because you actually made it. You know, you have to pay for all this malaise in this excess creation of spending that we’ve done, the American rescue plan that we didn’t need, that we needed, because the government shut everybody down, took away everybody’s liberty and told them what to do with their business, with their personal lives, because the government knew better. That’s the scary part. Brian’s right. He’s smarter than I am in the sense that you’re right, taxes are bad. Maybe it does make businesses more efficient in some way. But tax money, when the government says we know what to do with your money better than you do, that’s where I get worried and saying it’s tax money. It’s just a euphemism for them saying they’re gonna take it from ya.
ASMAN: There’s not a lot of skin on anybody’s teeth these days. That’s the bottom line. Brian, I wish we had more time, but we’ve run out, you guys are really terrific. Thanks very much for being here. Appreciate it.