Archive for December 10th, 2009

Oh my god, am I becoming a populist? … I'm ok on raising a tax.

December 10, 2009

The punch lines: 

(1) “The House raises taxes on carried interest”

(2) Obama says “we’re proposing a complete elimination of capital gains taxes on small business investment” for one year.

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Ken’s Take:

(1) Oh, those poor private equity guys.  The taxation of so-called carried interest is complicated, but reduces down to the fact that private equity firms have enjoyed a massive tax break for years.  Whether that tax break has fueled innovation and growth or simply lined the pockets of the equitists is subject to debate. My view: more the latter than the former.  So, I say: go get ’em.

(2) From a personal standpoint, I favor low or no capital gains taxation.  Why not?  I have some horses in that race.

But, for the life of me, I can’t figure out how a 1-year suspension of small business capital gains taxes helps small businesses and promotes hiring. 

What appreciated assets is a typical small business going to sell in the next 12 months that would qualify for a gain?  Except for small financial firms that hold and trade securities and family farms that are passing down generationally,  I can’t figure out how small businesses benefit from this move.

Does seem that — if we have any appreciated assets — we should all become small businesses and sell them in 2010.

If somebody can explain this to me, please hit the reply button … I must be missing something.

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Excerpted from WSJ: Zero to 35 in 24 Hours, Dec.10, 2009 

On Tuesday, Mr. Obama announced that “we’re proposing a complete elimination of capital gains taxes on small business investment” for one year.

On Wednesday, the House voted to change the capital gains rate for venture capitalists, private equity fund managers and managers of real-estate and oil-and-gas partnerships. But rather than eliminating the tax, the House more than doubled it, moving the tax rate to 35% from 15% by reclassifying such gains as ordinary income.

The new 35% rate applies to what is known as “carried interest,” which is income that only materializes if fund managers wisely invest the fund’s capital and only after other investors in the fund have benefited. Venture and private equity fund managers already pay normal income taxes on their regular salary derived from management fees. The carried interest, no sure thing, represents a capital gain on a successful investment and has therefore been taxed that way.

Some argue that partnerships should be taxed just like other corporations before money is distributed to partners. We think that’s a reasonable argument in the context of lowering the 35% U.S. corporate tax rate to something remotely competitive in the world economy. By itself, this tax increase is simply a drag on investment and job growth.

Mr. Obama now has a chance to respond with similar speed and show his commitment to lower capital-gains taxes on start-up investments. A Statement of Administration Policy condemning the House bill would discourage the Senate from making a similar mistake.

Full article: 
http://online.wsj.com/article/SB10001424052748704240504574586274278223030.html?mod=djemEditorialPage

Posted in Taxes | Leave a Comment »

Oh my god, am I becoming a populist? … I’m ok on raising a tax.

December 10, 2009

The punch lines: 

(1) “The House raises taxes on carried interest”

(2) Obama says “we’re proposing a complete elimination of capital gains taxes on small business investment” for one year.

* * * * *

Ken’s Take:

(1) Oh, those poor private equity guys.  The taxation of so-called carried interest is complicated, but reduces down to the fact that private equity firms have enjoyed a massive tax break for years.  Whether that tax break has fueled innovation and growth or simply lined the pockets of the equitists is subject to debate. My view: more the latter than the former.  So, I say: go get ’em.

(2) From a personal standpoint, I favor low or no capital gains taxation.  Why not?  I have some horses in that race.

But, for the life of me, I can’t figure out how a 1-year suspension of small business capital gains taxes helps small businesses and promotes hiring. 

What appreciated assets is a typical small business going to sell in the next 12 months that would qualify for a gain?  Except for small financial firms that hold and trade securities and family farms that are passing down generationally,  I can’t figure out how small businesses benefit from this move.

Does seem that — if we have any appreciated assets — we should all become small businesses and sell them in 2010.

If somebody can explain this to me, please hit the reply button … I must be missing something.

* * * * *

Excerpted from WSJ: Zero to 35 in 24 Hours, Dec.10, 2009 

On Tuesday, Mr. Obama announced that “we’re proposing a complete elimination of capital gains taxes on small business investment” for one year.

On Wednesday, the House voted to change the capital gains rate for venture capitalists, private equity fund managers and managers of real-estate and oil-and-gas partnerships. But rather than eliminating the tax, the House more than doubled it, moving the tax rate to 35% from 15% by reclassifying such gains as ordinary income.

The new 35% rate applies to what is known as “carried interest,” which is income that only materializes if fund managers wisely invest the fund’s capital and only after other investors in the fund have benefited. Venture and private equity fund managers already pay normal income taxes on their regular salary derived from management fees. The carried interest, no sure thing, represents a capital gain on a successful investment and has therefore been taxed that way.

Some argue that partnerships should be taxed just like other corporations before money is distributed to partners. We think that’s a reasonable argument in the context of lowering the 35% U.S. corporate tax rate to something remotely competitive in the world economy. By itself, this tax increase is simply a drag on investment and job growth.

Mr. Obama now has a chance to respond with similar speed and show his commitment to lower capital-gains taxes on start-up investments. A Statement of Administration Policy condemning the House bill would discourage the Senate from making a similar mistake.

Full article: 
http://online.wsj.com/article/SB10001424052748704240504574586274278223030.html?mod=djemEditorialPage

Posted in Taxes | Leave a Comment »

Just consider it tough love …

December 10, 2009

Anti-ObamaCare groups have started running ads in swing states (Louisiana, Arkansas, Maine) targeted at healthy young adults who currently choose to self-insure for healthcare — that is, they realize that healthcare insurance is — for them — way most costly than just “paying retail” for the limited healthcare services they use.

Under ObamaCare, all of these folks will be “mandated” (i.e. forced) to buy health insurance.  If the insurance costs more than 12% of their earnings, then they get taxpayer subsidies to close the gap. 

The ads hit the point that these young healthies will — in effect — be subsidizing the folks whose healthcare expenses exceed their premiums.

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Click arrow to watch

 

Posted in Health Care / Medical Insurance | Leave a Comment »

UK banker’s face 50% added tax on big bonuses … and, I’m cheering.

December 10, 2009

I’m becoming a populist on this issue.  You just shouldn’t be able to keep lotto winnings when other taxpayers pay for your ticket. These nitwits have no conscience.

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Excerpted from WSJ: Banks’ Bonuses Hit by 50% Levy in U.K., Dec. 10, 2009  

The U.K. slapped banks with a 50% tax on some bonuses they pay to individuals, in perhaps the most aggressive move yet by a government to rein in banking compensation after the financial crisis.

The tax  is an effort by the ruling Labour Party to address public anger over bank bonus pay ahead of next year’s general election.

The U.K. bonus tax will be paid by banks on discretionary individual bonuses that exceed £25,000 ($41,000).

For instance, if a bank pays an individual a bonus of £30,000, it would pay a 50% tax on the £5,000 portion over the threshold.

The individual’s income tax wouldn’t be affected.

The government says the driving idea behind the tax is to end the banking industry’s culture of compensating risk-takers and to push down bonuses so that banks retain more capital and step up lending.

Treasury chief Alistair Darling said “If they insist on paying substantial rewards, I am determined to claw money back for the taxpayer,” he said.

But the new tax applies only to discretionary and not contractual bonuses. Banks will avoid the charge, then, for payments to any banker whose bonuses are guaranteed by contract. Banks operating in the U.K. plan to pay about $6 billion in bonuses this year, about $1 billion of which is discretionary, as opposed to bonuses guaranteed to bankers by contract.

In addition to the new tax on pay, bankers will be hit by an increase on income tax. Those who earn above £150,000 are already set to see their tax rate rise to 50% from 40% in April.

“Sending out a message that the U.K. does not welcome high earners will be music to the ears of rival global financial centers.”

Full article:
http://online.wsj.com/article_email/SB126035896213083357-lMyQjAxMDI5NjAwOTMwNTk4Wj.html

Posted in Financial Crisis | Leave a Comment »

Remember when Howard Stern was hot?

December 10, 2009

TakeAway:  In AMS, we discussed XM-Sirius’s strategy.  Now, it looks like XM Sirius is shifting its focus from growth to profitability … even if it means “trading down” its on air personalities.  Adios, Howard ?

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Excerpted from WSJ, “Howard Stern Rethinks Radio Gig,” By Sarah McBride, December 9 2009

Sirius XM Radio recently succeeded in reversing a troublesome decline in its subscribers. Now it is facing a possible decline in its star wattage.

“I don’t think I’m going to be re-signing,” said Howard Stern … 

At the time Stern signed, it appeared to be money well spent. Sirius trailed erstwhile rival XM, which then had four times the number of customers. Hiring Mr. Stern instantly put Sirius in the public eye and helped bring the company millions of subscribers …

But Sirius doesn’t need Mr. Stern in the way it did five years ago.

Its brand is established—in no small part thanks to Mr. Stern’s rocket-fueled on-air persona—and its one-time competitor, XM, is now merged into Sirius.

Sirius has other star performers—including its latest addition, comedian Rosie O’Donnell—who draw fewer subscribers than Mr. Stern but also help establish buzz. As of Sept. 30, the combined companies have 18.5 million subscribers, up slightly from the prior quarter but down from a high of 19 million at the end of 2007.

While Sirius likely would lose some subscribers if Mr. Stern left, over the past year XM has placed more of an emphasis on achieving operating profitability than on growth. And Mr. Stern’s compensation represents a significant expense …

Moreover, Sirius’s stock price, which was trading at $3.67 the day Mr. Stern signed, has fallen sharply since then, to around 60 cents. The decline means signing Mr. Stern at a similar rate of compensation would dilute shareholders’ stakes, cut into cash, or both …

And Mr. Stern doesn’t need Sirius as much as before, either. Five years ago, his formula of bawdy, envelope-pushing entertainment ran against the prevailing national zeitgeist, as public indignation over indecency ran high. Moving off regulated airwaves seemed like Mr. Stern’s best option.

Now, Mr. Stern likely could land a spot back on traditional airwaves. He is a proven ratings winner whose advertisers largely stuck with him throughout his difficulties, and some radio company would find a way to put him back on the air …

Edit by TJS

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Full Article
http://online.wsj.com/article/SB20001424052748704825504574584022873284710.html#mod=todays_us_section_b

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Posted in Media | 1 Comment »