Kerry's Tax Plans Find Favour Amongst Some Investors

by Mike Godfrey, Tax-News.com, Washington

07 April 2004

Democratic presidential candidate John Kerry’s proposals to roll back some of President Bush’s tax cuts may be favored by investors in government bonds, but Wall Street financiers are likely to back the Bush campaign’s ticket of aggressive tax cuts.

“The Kerry manifesto would be more bond friendly,” noted a money manager at Pacific Investment Management Co., the world's largest bond investor with $100 billion in its funds, according to Bloomberg News.

In theory, Kerry’s plan would lead to more government revenue and reduce the mounting budget deficit.

However, according to calculations conducted by Bloomberg, neither candidate’s plan will reduce the deficit in the near future. In fact, Kerry’s plan is likely to deepen it by at least $130 billion after four years. Meanwhile, Bush’s proposal to extend tax relief will deepen the deficit by $77.2 trillion through 2009.

The Wall Street banking fraternity is likely to come down firmly on the side of the Bush campaign in the debate, as evidenced by reports of substantial contributions to the President's re-election campaign.

According to the Bush campaign, the chief executives of Goldman Sachs, Merrill Lynch, Credit Suisse, Bear Stearns and Morgan Staley have all raised at least $100,000 for the re-election of George W. Bush.

“There is a very strong relationship of tax relief to investment incentives, investment in industry, and investment in job creation," Rick Fuscone, a former Merrill Lynch chief operating officer, explained to Bloomberg.

“Kerry's policies have not been well articulated to begin with. What has been articulated has not rung true with us,” he added.

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