American Shareholders Association

ASA Releases Joint Letter on Union "Shareholder Terrorism"

ASA today, along with sixteen other free market organizations, released a letter calling on the Department of Labor to stop unions from engaging in terrorist tactics at company shareholder meetings.  Here's a snippett:

Unions often invest in businesses using their general funds, empowering them to introduce shareholder resolutions.  To gain support for these resolutions, they routinely exercise influence over a much larger pool of shares held in their pension funds.  Most pension funds delegate proxy voting authority to investment managers.

News Roundup: Oil and Cap Gains

A couple of good reads I wanted to recommend this morning, both from the new-look Washington Times:

• Richard Rahn has a good article "speculating" on the price of oil a decade from now
• Thomas Sowell analyzes why Obama's plan to hike the capital gains tax is a bad idea

Person Thomas Sowell

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Happy Birthday, Social Security: Thanks for Nothing

Today is the 72nd birthday of Social Security.  For shareholders, it's a bittersweet day.  While we're happy that our older relatives are getting taken care of, we resent paying into a system which will likely leave us with pennies on the dollar. 

Imagine paying 12.4% of your wages and self-employment income (up to about $100,000 of such income) into a system that won't be there for you when you retire.  Imagine the opportunity cost of what could be done with that $12,400 or so in annual contributions.  That's like doubling your 401(k) savings.

So, happy birthday, Social Security.  But do you have to eat our lunch with your cake?

Obama "Clarifies" Tax Hike on Shareholders

I'll give the Obama people credit for honesty.  They've come out with specifics on their shareholder tax hike.  Austin Goolsbee and Jason Furman have an op-ed in the WSJ.  The Obama campaign website has a new section.  Here are the details:

• The top capital gains rate will rise from 15% to 20%
• The top dividends rate will rise from 15% to 20%
• The corporate income tax rate will remain unchanged at 35%
• The ordinary income tax rate will rise from 35% to 39.6%
• The small business tax rate will rise from 37.9% to a minimum of 44.5% and a  maximum of 54.9%--they're still not clear on this point
• Private equity partners will see their capital gains and dividends taxed as ordinary income--that 39.6% rate

Letter to the Editor of the Washington Post on Obama and Small Business Taxes

Wearing my ATR hat, I got a letter to the editor printed in the Washington Post today.  Here's the link and the content:

Howard Kurtz wrote an analysis ["McCain Paints Obama as a Tax Hound," Aug. 9] that dismissed claims, made in a campaign ad for Sen. John McCain, that Sen. Barack Obama would raise taxes on small business.

According to the latest Internal Revenue Service data, $706 billion of pass-through business income was reported in 2006. Of this, two-thirds was earned in households making more than $250,000 -- households on which Obama has said he will raise taxes.

If raising the tax rate on two-thirds of small-business income isn't a tax hike on small business, what is?

The tax rate on two-thirds of small-business income would skyrocket under the Obama plan. The current tax rate on this income is 37.9 percent. The Obama plan, thanks to uncapping the Social Security tax base, would shoot this small-business rate all the way up to a Carter-level 54.9 percent.

RYAN ELLIS

Tax Policy Director
Americans for Tax Reform

Government Spent $100 Billion More Than It Stole in July

You might have seen the latest budget deficit numbers which show a $100 billion budget deficit in July.  The most interesting snippet of the story is the following, though:

Year-to-date outlays were $2.47 trillion, up 8% over the same period, and revenues were $2.09 trillion, 1% lower...

So revenues are basically flat (down one percent, which is pretty darned impressive given the economic environment).  The problem isn't there.  The problem is that the government continues to spend at a rate well in excess of inflation, population growth, wages, GDP--whatever.

It's the spending, stupid.

Are Corporations (and Their Shareholders) Paying Enough Taxes?

You might have heard about the GAO study that came out yesterday which said that 23% of large U.S. corporations paid no income tax from 2001 to today.  A few thoughts on this:

• Many of these companies were paying foreign income tax on foreign operations.  It's unfair to expect a U.S. company to pay income tax to two countries on the same income.  We should adopt what the rest of the world does and move to territoriality
• According to the GAO study, the lion's share of the deductions against corporate profits were not any accounting trickery, but bread-and-butter items like wages, interest, and other ordinary and necessary business expenses.  Does anyone propose denying corporations the ability to deduct regular expenses of running their businesses?  How about the fact that wage earners, corporate bond owners, and other businesses face a concomitant tax liability on the other side of this corporate tax deduction?
• The latest CBO data shows that corporations paid $370 billion in income tax in 2007.  This doesn't count the hundreds of billions of dollars in payroll tax and excise tax.  To put that number in perspective, total tax revenues were that level back in the Carter Administration.  I think corporations (and their shareholders) are doing their part (especially when one considers the double taxation of capital gains and dividends)

Democrat Platform Tax Plank: What It Says, and What It Means

The Democrats have leaked their draft tax plank.  Tax Prof Blog has it up.  Here's some relevant portions:

For families making more than $250,000, we’ll ask them to give back a portion of the Bush tax cuts to invest in health care and other key priorities

Translation: If you make more than $250,000, your top marginal tax rate will rise to 36% or 39.6%.  Your capital gains rate will rise from 15% to 20% (or 28%).  Your dividends rate will rise from 15% to 39.6%

We recognize that Social Security is not in crisis and we should do everything we can to strengthen this vital program, including asking those making over $250,000 to pay a bit more

Translation: If you make more than $250,000, your top marginal tax rate on wage and self employment income will rise to 51.3% or 54.9%, depending on your bracket.  You're probably paying 35.9% or 37.9% today, so good luck with that.

Another "Tax More, Get Less": Chicago is All Wet

Roth CPA has a good story on how Chicagoans are no longer buying bottled water at the same levels as before.  Is this a newfound love for tap water?  People addicted to Diet Coke?

Nope--it's taxes. 

Maybe hometown boy Obama ought to think about this when he's considering hiking the capital gains tax to 28% and the dividends tax to 40%.

The Laffer Curve Even Comes in Menthol

Maryland this year doubled its cigarette tax from $1 to $2 a pack.  So tax revenues doubled as people sheepishly ignored incentives, right?

If you said, "wrong," you must have half a brain.

In fact, cigarette sales are down 25% in Maryland.  Hmm...if you change tax rates, people change behavior.  They might seek out other jurisdictions.  They may even stop producing the activity that generates the tax.

If some of that sounds familiar, it should be--it's called the Laffer Curve.

Obama Campaign: More Regs Good for Shareholders?

Austin Goolsbee of the Obama campaign said yesterday that new regulations (and, therefore, more costs that reduce capital for shareholders) are actually good for Wall Street.  If you believe that, you also might believe that Obama's 28% capital gains rate and 40% dividends rate will be great for your portfolio.

HSA Covered Lives to Double in 2008

According to a new study by Information Strategies, Inc., the number of HSA covered lives will double from 6 million in January 2008 to 12 million in January 2009.

That would represent a market penetration of about 7% (the market being defined as under-65 private health insurance enrollment).  Put another way, by January of next year 1 out of 14 people in America with private health insurance coverage will have an HSA.

Comparison data from January 2008 can be found at AHIP.

401(k) Auto Enrollment Doubles, Is Now in 43% of Plans

Some interesting nuggets from the latest Deloitte 401(k) survey:

• Seven in ten plans have at least a 70% participation rate
• Auto-enrollment is now in over four in ten plans--double the prior year
• Six in ten plans offer lifecycle funds, and among plans with default investments, 70% have lifecycle plans as their default investment
• Nearly four in ten plans have an auto-escalation feature
• About one-quarter of plans have a Roth deferrral option

In short, the Pension Protection Act is doing its job.  As auto-enrollment becomes the norm, plan participation rates should approach 90% or so.

Jack Kemp on McCain vs. Obama on Taxes

You've read it before, but it bears repeating (this time by Jack Kemp):

• If you would like the capital gains tax rate to rise from 15% to 28%
• If you would like the dividends tax rate to rise from 15% to 40%
• If you would like the small business tax rate to rise from 38% to 55%
• If you would like the death tax rate to rise from 0% to 55%

Then you should definitely vote for Obama.