July 9th, 2010
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 »
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July 2nd, 2010
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.
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March 12th, 2010
Congress is currently considering whether to incorporate into financial reform legislation a variety of corporate governance changes. One such change under consideration involves directing the Securities and Exchange Commission to formulate rules allowing broader access to issuer proxies with the intention of permitting dissident shareholders to nominate alternative candidates for corporate boards. ABC has already filed a comment letter to the SEC on this matter. We also address the issue –and our skepticism about Congress enacting corporate governance “reforms” — in this letter to Senator Michael Crapo of the Senate Banking Committee.
Tags: Proxy, SEC
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March 4th, 2010
Earlier this week, at Brookings, House Majority Leader Steny Hoyer gave a notable speech on our looming national debt and the need to take bipartisan action on spending and taxes to address this growing problem. The talk was notable for its lack of partisan rancor — always welcome — and, in particular, for Leader Hoyer’s willingness to tackle some politically charged issues such as middle class entitlements. Along with the important work Republican Congressman Paul Ryan is doing on budget reform, Mr. Hoyer’s efforts are welcome and ought to be of particular interest to the business community — a community that has been notably silent in recent years on fiscal issues. His Brookings talk can be found here.
Tags: Budget, Taxes
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March 2nd, 2010
The American Business Conference (ABC) continues to press the need for policies to encourage individual shareholders to take a more active role in the governance of the corporations whose stock they own. One way for that to happen is through the implementation of client directed voting (CDV). This article, published in the Harvard Law School’s Forum on Corporate Governance and Financial Regulation and written by Frank Zarb, Jr., a Washington securities attorney, and ABC’s president, John Endean, makes the case for CDV yet again.
Tags: Proxy, SEC
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March 1st, 2010
What should a company contemplating opening an office in Washington consider as part of its decision-making process? It is a hot issue given the rapid expansion of the federal government into every aspect of business affairs.
Recently, ABC’s president, John Endean, gave a talk at Wharton about effective business representation in Washington. A summary of his remarks were published in Directors and Boards and can be found here.
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November 5th, 2009
Does Canadian labor policy have anything to teach the United States as Congress moves toward consideration of card check legislation? In an article in Forbes.com, ABC president John Endean looks at the use of card check in Canada. The Forbes.com piece can be accessed here.
An expanded version of this essay has been published by the Manhattan Institute. That longer version is available here.
Tags: card check
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September 16th, 2009
This useful editorial from USA Today summarizes the case for gerrymandering reform.
The cliche is true: politicians increasingly choose their voters rather than the other way around, via clever redistricting made possible by sophisticated demographic software. This is why, if you look at an outline map of various Congressional districts, you will see so many that are oddly shaped because they have been drawn to capture voters from one party at the expense of voters in the other. It is why, also, so few seats in the House of Representatives are truly competitive, a disgraceful situation that flies directly in the face of the intentions of the Founding Fathers.
Democrats and Republicans collude in gerrymandering, with both parties making sure they have their share of safe districts.
Of course this is an old story: after all, Elbridge Gerry, for whom the practice of dodgy districting was named, was a signer of the Constitution and James Madison’s vice president. But that it is an old story does not make it any less egregious.
It may be too much to hope that real reform will attend the national redistricting that will follow the 2010 census. But the matter deserves greater attention and public discussion, perhaps with an eye to enacting reform legislation with the goal of changing the redistricting process in 2020. It would be worth the wait.
Tags: Politics
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September 15th, 2009
U.S. District Court Judge Jed Rakoff has rejected in the strongest possible terms a proposed settlement between the Securities and Exchange Commission (SEC) and the Bank of America over BofA’s alleged failure to disclose $3.6 billion of bonuses paid to Merrill Lynch employees shortly before BofA acquired Merrill. The settlement amounted to a $33 million fine to be paid by BofA.
Judge Rakoff’s decision to throw out the settlement agreement was based on an elementary sense of fairness. In his view, shareholders, having been obliged to pay the Merrill bonuses, were now being asked to pay the fine as well. Judge Rakoff quite properly interpreted the settlement as a evidence of a “cynical” relationship between the Commission and BofA management, whereby the Commission would claim a much-needed enforcement trophy, BofA would avoid further investigation, and the check would be picked up by the shareholders.
Judge Rakoff’s opinion points up the problem that few others in this age of good corporate governance tackle: namely that the cost of many feel-good reforms is inevitably borne by the shareholders for whom so many corporate governance experts and regulators cry crocodile tears.
Perhaps we can begin now to think about corporate governance reform as something other than a free good and evaluate proposals in that light. After that, maybe we can advance to another related matter: that people, not corporations, pay taxes and that efforts to stick it to corporations inevitably result in the costs being borne by individuals.
Tags: SEC, Taxes
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September 3rd, 2009
The Securities and Exchange Commission has proposed to change the federal proxy rules so as to require a public company under certain circumstances to include in its proxy materials a shareholder’s or group of shareholders’ nominees for director. This “proxy access” rule has been a kind of holy grail for large institutional investors, particularly union pension funds, as well as, more quietly, for certain hedge funds. It is virtually certain that the Commission will adopt some version of its proposal.
ABC opposes the SEC’s proxy access proposal and our comment letter explaining our pespective can be found here.
Tags: SEC
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