Congress Nears Agreement on Payroll Tax: Will They Succeed?

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(Written by Rebecca Lipman. Short data sourced from Yahoo! Finance.)

Negotiations for the payroll tax extension mark the third near-shut down for the US government this year, but Congress’ new-found optimism may save us one more time.

A failure to extend the cuts, which expires at the end of the year, would raise taxes from 4.2% to 6.2% for middle-class workers.

Oddly, members of Congress are pretty much in agreement about extending the tax cuts, but the parties remain at odds about the the bill’s extras and how it will be funded.

Tax Extensions – Points of Debate

To pass the tax cuts bill, Republicans want spending cuts, increased Medicare premiums, and an oil pipeline, and do not want to pay for the payroll tax by using a surcharge on incomes over $1 million.

On Wednesday, Senate Democrats agreed to drop their demand for a surtax on income exceeding $1 million if Republicans abandon efforts to expedite approval of TransCanada Corp.’s Keystone XL oil pipeline.

Furthermore, “Democrats have resisted some of the Republican proposals to cover the cost, including pay freezes for civilian federal workers and a requirement that high-income Medicare recipients pay a greater share of their premiums,” notes Bloomberg.

“We want to get a bill and we want to pass a payroll tax,” said Senator Charles Schumer of New York, who helped organize the Democratic message in support of a surtax on millionaires. “We believe a millionaires tax is the best way to do it. We’re open to other suggestions.” 

“We are confident and optimistic we’ll be able to resolve bills on a bipartisan basis,” adds McConnell, a Kentucky Republican. He thinks both sides can resolve remaining issues in a few days.

Spending Bill

To keep things interesting, there are only two days left until a temporary funding measure expires and the government is forced to shut down major services run by the departments of defense, education, health and labor. (via Reuters)

“Republicans introduced a $915 billion spending bill in the U.S. House of Representatives on Thursday in an attempt to force Democrats to finalize legislation that would keep the U.S. government operating beyond the weekend,” reports Reuters. The house will vote on the spending bill on Friday.

Investing Ideas

Both of these bills, spending and tax cuts, will have a significant impact to Americans’ wallets. Lower taxes keep more money in the hands of consumers, and the spending bill can ultimately affect the number of government jobs (and salaries) there are.

Fewer jobs and more taxes means less consumer spending.

Let’s suppose Congress passes both of these bills to the benefit of consumers. There would be more money to spend and consumer goods companies will sell more goods.

So what consumer goods are expected to benefit? For ideas we created a list of consumer goods stocks and screened them for bullish short trends. This means short sellers are feeling less pessimistic about these names.

Do you think these names have more upside than downside?

Analyze These Ideas (Tools Will Open In A New Window)

1. Access a thorough description of all companies mentioned
2. Compare analyst ratings for all stocks mentioned below
3. Visualize annual returns for all stocks mentioned

1. Diamond Foods, Inc. (DMND): Engages in processing, marketing, and distributing snack products, as well as culinary, in-shell, and ingredient nuts. Market cap of $618.93M. Shares shorted have decreased from 12.13M to 11.23M month-over-month, a change representing 4.62% of the company's 19.47M share float.

2. SodaStream International Ltd. (SODA): Engages in the development, manufacture, and marketing of home beverage carbonation systems and related products. Market cap of $4.36B. Shares shorted have decreased from 7.48M to 7.07M month-over-month, a change representing 2.75% of the company's 14.92M share float.

3. Pitney Bowes Inc. (PBI): Provides mail processing equipment and integrated mail solutions worldwide. Market cap of $330.65M. Shares shorted have decreased from 34.92M to 30.51M month-over-month, a change representing 2.21% of the company's 199.11M share float.

4. Lear Corp. (LEA): Engages in the design and manufacture of automotive seat systems and related components for automobiles and light trucks. Market cap of $2.81B. Shares shorted have decreased from 3.49M to 1.73M month-over-month, a change representing 1.72% of the company's 102.25M share float.

5. STR Holdings, Inc. (STRI): Engages in the manufacture and sale of encapsulants to the solar module industry. Market cap of $5.66B. Shares shorted have decreased from 7.03M to 6.50M month-over-month, a change representing 1.55% of the company's 34.22M share float.

6. Smart Balance, Inc (SMBL): Distributes various food products in the United States and internationally. Market cap of $12.03B. Shares shorted have decreased from 3.55M to 3.06M month-over-month, a change representing 1.0% of the company's 48.84M share float.

7. Sturm, Ruger & Co. Inc. (RGR): Engages in the design, manufacture, and sale of firearms in the United States. Market cap of $621.28M. Shares shorted have decreased from 1.77M to 1.60M month-over-month, a change representing 0.97% of the company's 17.45M share float.

8. International Paper Co. (IP): Operates as a paper and packaging company with operations in North America, Europe, Latin America, Russia, Asia, and north Africa. Market cap of $3.64B. Shares shorted have decreased from 18.49M to 14.92M month-over-month, a change representing 0.82% of the company's 433.47M share float.

9. Newell Rubbermaid Inc. (NWL): Designs, manufactures, sources, packages, and distributes consumer and commercial products. Market cap of $310.75M. Shares shorted have decreased from 7.39M to 5.20M month-over-month, a change representing 0.76% of the company's 288.65M share float.

10. Ball Corporation (BLL): Ball Corporation, together with its subsidiaries, supplies metal packaging to the beverage, food, and household products industries worldwide. Market cap of $614.81M. Shares shorted have decreased from 5.09M to 3.96M month-over-month, a change representing 0.71% of the company's 159.64M share float. 



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , Taxes


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