By Rick Glaze
You’ve read about capital spending and what it means to the economy in this column before. As companies generate more profit and grow their businesses, they put that profit to work building plants and additional facilities, adding technology for more efficiency and hiring more employees. Each of these activities puts more people to work who then pay more income taxes. Further, they buy more stuff and pay sales tax, which puts more people to work who pay more taxes.
Every few weeks I tell you a similar story. But I have an excuse this time. The news about corporate profits is good. With more than 80 percent of the companies in the S&P 500 reporting, first quarter earnings are up 16.8 percent, according to Kudlow & Co. Meanwhile capital spending has averaged 11.5 percent since mid-2003.
The corporate tax cuts Congress passed a few years ago effectively reduced the cost of capital for business expansion and should be given a lot of credit for this robust growth and subsequent record tax revenue. So why does one of the candidates for governor of California insist he will raise taxes on corporations so they can pay “their fair share?” I guess he doesn’t understand how things really work.
The Celebrity Forum Speakers Series ended its robust season with three-time Pulitzer Prize-winning author and for New York Times foreign affairs columnist, Thomas L. Friedman. Friedman said that globalization has changed everything. For instance, there are no American jobs anymore, just jobs. Many tasks can be performed anywhere by anyone. This is sobering news.
The communities of Los Altos and Mountain View have an opportunity for investors. It is a different kind of investment, one that can benefit the community for years. Partners for New Generations is a local high school mentoring program that has been active for 10 years. PNG has local adult volunteers mentoring 120 high school students this school year. At-risk young people need positive and supportive help to make it to the next step in growing up. The dividends for the community and individual lives is so large it is hardly measurable.
Investments made to this non-profit organization will last many lifetimes. To help, call the Los Altos Community Foundation at 949-5908. Ask for Bob Adams.
Rick Glaze is the president of Glaze Capital Management Inc. of Los Altos and a registered representative offering securities through First Allied Securities Inc. For more information, visit Rick@Glazecapital.com.
