Grommit, I have a few more things to say to you about the issue of tax rates. First, your same argument could be applied to any company in the world...and no one is running around talking about the sky falling, or tax rates going up. The bottom line is the tax rate will stay the same for Visio in the forseeable future, as I confirmed with Visio last week.
But, you have got me thinking... As long as you mention it, let's discuss trends which might affect base corporate tax rates in the longer term. You claim that Visio's tax rate will go up without any analysis of the factors which might affect future tax rates. Right off the bat, I can name several trends which would suggest a trend towards the *lowering* of base corporate tax rates going forward.
1) The probable increase in Republican seats in government after the elections. Republicans favor low taxes on small business.
2) If there is fear of any type of slowdown whatsoever in the economy, tax rates might be cut.
3) The US is currently operating under a budget surplus for the first time in many years. There is room to cut taxes in key areas, such as that on high-tech companies which benefit the economy enormously.
Now, I have provided much more analysis on this subject than is warranted given the insignificance of the tax issue at this point. Nevertheless, upon reflection, it seems to me that if I look into my crystal ball I see *lower* tax rates.
...please re-fudge your numbers and projections using a tax rate of 20 percent. After all, if we are going to value companies based on speculation about future tax rates, we might as well NOT pull a tax rate number out of a hat like you have done. There is nothing wrong with what you do in your valuation model, but you need to make sure your figures are justified rather than based on random numbers, don't you think? |
