The Pellucid Perspective - January 2018 - 5

GOLF INDUSTRY
FINANCE

Impact of tax cut, minimum wage increases
guesswork for golf
By Craig Kessler

www.PellucidCorp.com

known as debt, deficit and inflation.
When you're the Director of Governmental Affairs for one
of the nation's largest golf associations, everyone asks you to
predict how both experiments are going to turn out for the golf
industry. The wisdom of Yogi Berra applies here: Predictions
are a dangerous thing, especially about the future. But a little
speculation can't hurt.
With respect to the tax bill, again, the details are pretty
much a mystery waiting to be unwrapped. In the short run
wage earners should see a little extra cash in their pay checks,
and they should see some benefit from
the doubling of the standard deduction. Of course, that may not be the
case for those who itemize deductions,
particularly those who itemize them in
the nation's largest states like California, where more than 6 million taxpayers will lose an average of $8,000.00 in
state/local tax write offs. And it may
not be the case for those lines of business that have come to rely upon certain
entertainment deductions for a portion of their income, deductions that
were just scaled back by Congress. My
speculation as to the effect on the golf
industry? Perhaps a tad more liquidity
for the municipal and low cost daily fee
sectors, but a most definite chill on all
but the toniest of private clubs.
In the long run? Your guess is as
good as mine. If the enormous windfall provided by the 14%
lowering of the corporate tax rate in conjunction with the new
"pass-through" provisions result in massive reinvestment in new
plant, equipment, business activity, and jobs, I would imagine
the golf industry would get the same boost as would all businesses. The economy will grow at 3-4% annual rates and easily
absorb the debt created in the process. If leftward analysis of
the bill is correct and corporate America simply pockets the
bounty, the golf industry will suffer as debts and deficits mount
without the economic growth necessary to absorb them.
With respect to minimum wage increases, there is at least
some evidence to go by. Of course, the evidence is contradictory. Harry Truman famously noted the contradictory nature
of the "dismal science" known as economics when he opened a
press conference by announcing that he needed a "good onearmed economist," because all of his rendered an opinion followed by, "on the other hand."
In that spirit, on one hand there are peer reviewed studies
SOUTHERN CALIFORNIA GOLF ASSOCIATION

very New Year brings new laws. 2018 is bringing them
on steroids, particularly in two areas - wages and taxes,
where we are being treated to another round in the annual dance to address wage inequality through the organs of
the minimum wage and the first major restructuring of the federal tax system in 31 years.
Yes, there have been many minimum wage increases over
the course of the minimum wage's 80-year history, but most
of them have been reactive - efforts to restore some of the lost
value of the wage as the passage of time erodes its purchasing power. Today's effort is a multi-year,
multi-state affair designed to result in a
wage higher in inflation adjusted dollars
than the highest rate in any one of those
previous 80 years, which just happens to
have been 1968.
It's hardly a "blue" state phenomenon.
A number of states under full Republican
control (e.g., Ohio, Florida, Montana,
South Dakota, Arizona and Michigan)
raised their minimal wage January 1, perhaps by a lesser amount and upon a lower
base than the deep "blue" state where I
hang my hat (California), but they raised
them in many instances for a 3rd or 4th
consecutive year. Where red state legislatures failed to act, as in Oklahoma, the
people took control of the matter and
Kessler
passed initiatives to raise their minimum
wage, and generally by wide margins. It's
hardly just a statewide phenomenon; more cities (19) than states
(18) raised their minimum wage January 1.
Sure, there was that tax cut in the first administration of
George W. Bush, but that was a piker compared to the one Congress passed just before Christmas, an 1,100-page beast drafted
in record time without hearings, stakeholder input, or substantive amendments - in other words a mystery waiting to be unwrapped by the high paid tax lawyers, accountants, and estate
planners who command top dollar for parsing the bill's language
in a way that reduces tax burdens to their bare legal minima.
Both represent experiments - one to determine whether
raising the minimum wage to an 80-year high can raise the
wage floor without destroying the jobs of the law's intended beneficiaries and the other to determine whether lowering taxes against the backdrop of a 7-year expansionary cycle,
near zero interest rates, the lowest unemployment in 40 years,
and record corporate profits can stimulate the economy beyond those heights without exacerbating the trio of problems

The Pellucid PersPecTive

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