Ahern Advisory The "Fiscal Cliff"

(prHWY.com) January 22, 2013 - Phoenix, AZ -- During the last week, I received numerous telephone calls and emails about my "take" on the recent tax issues. My comment is, if you think the fight over taxes was messy, the worst is yet to come in Washington.

The good news, according to the American Trucking Association, is that the US economy didn't walk off the Cliff. However, as the ATA pointed out, the final law did not address federal spending issues, outside of postponing what I consider to be the inevitable, the raising of the debt ceiling.

Yes, Congress did extend the Bush-era tax cuts for most tax payers while raising the top tax bracket to 39.6% for individuals making $400K a year, and households earning $450K, annually; but the impact on capital gains and estate taxes will be immediately felt;

* The capital gains tax was raised to 23.8% from 15% - and the AMT will now adjust for inflation;

* The estate tax was increased to 40% and the exemption, (currently $5.2MM) will be indexed to inflation thereafter, and;

* The biodiesel tax incentives were extended through the year; and, yes, unemployment benefits were once again extended for another year.

According to The Kiplinger Report, they believe that the ugliest fight of the year will be the first and that is the raising of the debt ceiling in the first quarter. The present Administration wants to boost the debt ceiling with no strings attached, and the GOP wants to trim $1 of federal funding spending for every $1 in higher debt that is authorized.

Whatever the outcome is, it is definitely going to impact businesses and it is going to impact transportation. If you are thinking of selling yourbusiness, do it now, because I believe that;

* Taxes are going to continue to rise over the next decade, and;

* Capital gains, and/or estate taxes will continue to be modified; you cannot support spending without revenue.

Recently, $9.2 Billion was approved for allocation to the East Coast, and as we all know, the East Coast certainly needs the assistance. The catastrophe that occurred on the East Coast devastated many individuals and businesses who have no other source of hope, other than to receive federal funding.

The problem is, where is the money going to come from? The possibilities could be:

* Higher taxes on both a state and federal level, and;

* The debt ceiling will need to be adjusted upwards.

The point I am making, at some point in time expenses need to follow cash flow. If you run a business, and the business is not making money, you plan your expenses to your profits; if you want to stay in business. The problem the Government has and will always have, is it is so politically motivated, the real issues are never addressed, and that is, how do you balance the budget? Reduce spending and cut expenses.

The question becomes, how will this impact trucking? I believe it will impact trucking in several ways.

First of all, there is going to be fewer bucks for highways and other construction projects because federal spending cuts already on the books mean tough hits for some regions. For example, expect the loss of more jobs in Nevada, Arkansas, Illinois, Delaware, Pennsylvania and New York and in other parts of the country.

Less military spending will take a toll on the Southeastern and Deep South areas, such as Fayetteville, North Carolina: Columbia, SC: Columbus, GA and San Antonio, TX. According to statistics provided by the Kiplinger Report, it will be 2017 or later before state and local employment recovers from cuts made in recent years.

At 19.3 million, payroll counts are down 600K from 2008. For trucking companies or logistics companies that want to sell, that is good news because look for corporate merger and acquisition activity to increase this year. According to my analysis, there is in excess of $1.7 Trillion sitting in corporate savings and cheap financing available, as more firms are looking for highâ€yield ways to deploy their assets and perpetuate their growth. Also, private equity firms want to get back in the game, so you are likely to see more action. It doesn't mean you necessarily have to take advantage of those situations, but if a major portion of your retirement is in your business, you should give it very serious consideration.

When I respond to questions from my readers, please do not think I am trying to be negative, because I'm not; and please do not think I am trying to be unâ€American because I'm not. However, I do a substantial amount of research and my job is to provide my readers with accurate information so they can plan their business in any economic environment and be successful.

There are so many things you need to consider due to these economic uncertainties. Also, there are many things that you cannot control; so you need to prepare contingency plans. I have stated in article after article that planning is crucial.

1. You need a plan;

2. You need to constantly change the plan, and;

3. You have to do research.

Burying your head in the sand and thinking that things are going to get better if you just work hard, is not the way that trucking companies will succeed.

In the next several weeks, I will be reviewing the Healthcare Mandate, and how it will impact corporations all over the country. It is also going to impact employees. Also recognize that many states are struggling for survival; they are struggling for ways to reduce cost; they are struggling to recover from a recession, and now they are being faced with medical mandates.

It is important to understand that there are many things that you are not going to be able to change and complaining about them is not going to get you to where you need to be. That is why I continually stress that you need to continue to think outside of the box: anticipate the unexpected: plan for the best, but expect the worst and plan your expenses to your profits.

Does this mean that the United State's economy is going to collapse? No! But what it does mean is that we are still in for some very rough years and if we do not get through this next political struggle, it could put the US economy into a recession. There is some appetite for spending reduction, but there are so many issues that I wouldn't hold my breath for a strong year.

When planning for 2013, you should use history as an educational tool to plan your business, understanding any change in an economic or political environment could impact your business overnight.

I am constantly researching people that I admire because they had the foresight to predict problems before they occurred. Recently, I received an email from a friend of mine about Thomas Jefferson. You may say, how does Thomas Jefferson apply to trucking? Listen and you'll learn. As I read the email, the things that Thomas Jefferson predicted 200+ years ago, are happening in today's society.

For those of you who don't know your history, Thomas Jefferson was the author of the Declaration of Independence and the Statue of Virginia for Religious Freedom. He was the third President of the United States and he was the founder of the University of Virginia. As a public official, historian, philosopher and plantation owner, he served his country for over 5 decades.

What does this have to do with trucking? The answer is, you can learn from experience. The enclosed are some quotes that Thomas Jefferson made over 200 years ago.

"It is incumbent on every generation to pay its own debts as it goes. A principle which if acted on would save oneâ€half the wars of the world."

"I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them."

"My reading of history convinces me that most bad government results from too much government."

"The strongest reason for the people to retain the right to keep and bear arms is, as a last resort, to protect themselves against tyranny in government."

"To compel a man to subsidize with his taxes the propagation of ideas which he disbelieves and abhors is sinful and tyrannical."

"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property - until their children wake-up homeless on the continent their fathers conquered."

These are quotes taken from Thomas Jefferson who was heralded as one of the most respected Presidents of our country. My point, you can learn a lot if you open up your eyes and do research.

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