Fifteen years ago, two of the very best legislators in the Senate, Sam Nunn and Pete Domenici introduced a fundamental tax reform idea called the USA Tax. Nunn and Domenici proposed the USA Tax as a replacement for the personal income tax and the corporate income tax. It remains the most far-reaching and creative tax reform idea in a generation. In a recent op-ed in The Washington Post, American Business Conference president John Endean revisits the USA Tax idea and explains why it remains a way to change the way we tax in order to promote economic growth, simplicity, and fairness. An online version of the op-ed can be viewed here.
As the Joint Select Committee on Deficit Reduction continues its deliberations, a number of budget hawks, including John Endean, the president of the American Business Conference, sent a letter to the Committee’s co-chairs, Representative Jeb Hensarling and Senator Patty Murray, urging a large-scale, multi-year debt stabilization package to deal with the nation’s severe fiscal challenges. The letter can be read here.
Steve Jobs’s passing is regrettable. Untimely death is always sad, perhaps especially so when the person is as capable and creative as was Mr. Jobs.
Yet surely the collective celebration of Mr. Jobs’s accomplishments is a bit over the top. For example, more than once in recent days we have heard that Mr. Jobs is our Leonardo da Vinci.
When the history of the last decade is written, the failure of the business community to take a stand against our perilous fiscal policies will occupy a prominent place. ABC has tried to fight this tide of indifference. Our CEOs have consistently worked for a more prudent tax and budget environment. One aspect of this is a recent letter to our political leaders, signed by leading experts including the president of ABC, calling for Congress to consider looking to the work of the Bowles-Simpson commission as a model for what to do going forward. That letter can be found here. Note that ABC is the only business organization that signed the letter. Why?
At present, there is a ten-day filing “window” between the time a shareholder, or group of shareholders, amasses a five percent position in a publicly-traded company and when it must disclose this fact to the Securities and Exchange Commission (SEC). This ten-day filing “window” is an anachronism that remains the most glaring inadequacy in the Commission’s entire disclosure regime. Read the rest of this entry »
A number of economists have signed this letter to the Obama Administration arguing that future U.S. bilateral trade and investment treaties “permit government to deploy capital controls without being subject to investor claims.” The economists allege that such “capital management techniques” are limited in current U.S. trade and investment treaties. Such limitations, they say, can encourage “asset bubbles,” particularly in developing nations.
In the view of ABC and other business groups, the economists’ misstate the degree to which current U.S. treaties limit the ability of signatories to adopt prudent currency controls. More important, we also believe that unrestricted capital controls and balance-of-payment restrictions (the two go hand-in-hand) are a danger to U.S. trade and job creation. We’ve been through this debate before. In the late 1970′s, a time of currency restrictions, we saw the rise of a hugely profitable business in counter-trade.
Traders loved the distortions caused by capital controls and would arbitrage them. Finally, some of the developing countries and command economies got smart and rid themselves of their capital and foreign exhange controls. The counter-trade business plunged, but trade flourished. Must we learn this lesson again?
UPDATE: Secretary of the Treasury’s reply to ABC’s president, John Endean in regard to the business letter can be viewed here: Geithner to Endean April 12, 2011.
There has been some progress in getting rid of the noxious 1099 reporting provison in the health care bill, a provision that promises to exert an enormous paperwork burden disproportionately hurtning small and midsize businesses.
I never watch the State of the Union speech because I find the show biz aspect of it distracting. But I did read the speech, carefully, and here are what seem to me to be the key points from an ABC perspective.
In a recent appearance on CNBC, Secretary of the Treasury Timothy Geithner said that the Obama Administration would support taxing long term capital gains and dividends at a top rate of twenty percent.
If Congress does nothing and the Bush tax cuts of earlier this decade expire on schedule, the long term capital gains rate will revert automatically to 20 percent at the end of the year (from the current 15 percent) while dividends would be taxed at income tax rates, perhaps as high as 39.5 percent by 2011 assuming the upper income Bush tax cuts are allowed to expire, which is a pretty safe bet.
Even this understates the case because of the recently enacted 3.8 percent Medicare tax on “unearned income” of so-called upper income taxpayers (above $250k) that will come into effect in 2013. Geithner did not include this in his remarks but in fact it means that, absent legislative action, by 2013 long term capital gains could be taxed at 23.8% and dividends above 40%. Read the rest of this entry »
Ever wonder why entrepreneurs feel so abandoned by Washington? Take a look, if you can find it, at Section 9006 of the new health care bill. This particular flat tire would pile an enormous paperwork burden on business – particularly smaller businesses – and it passed without a whisper of debate or communication with the business community. Standard operating procedure nowadays.
Section 9006 would make virtually all business-to-business transactions reportable to the IRS, resulting in a paperwork nightmare for the private sector. Every business would have to send a Form 1099 to every vendor to which the business had paid more than $600 a year. And before the 1099s can be sent out, a business would first have to send a Form W9 to those vendors in order to obtain their tax identification numbers.
This absurd paper chase is being sold as an effort to close the so-called “tax gap” – that is, underreporting of tax liabilities. The “tax gap” is real enough, but this mandate, if its meant to be a cure, is as bad as the disease.
Fortunately, there is an effort to repeal Section 9006 before it comes into effect in 2012. The effort is being led by Rep.Dan Lungren (R, CA). ABC’s letter of support to Mr. Lungren can be found here.