Saturday, November 9, 2013
Thursday, 07 Nov 2013 12:51 PM
Millionaires who avoid payroll taxes by claiming income as business profits are among those in Democrats’ sights as congressional budget negotiators seek a deal by next month.
Limiting the ability of some business owners to use the S-corporation structure would save $12 billion over the next 10 years, according to a list of tax breaks obtained by Bloomberg News that Democrats are considering for elimination.
That provision allowed Newt Gingrich and John Edwards to avoid payroll levies, according to tax returns the two filed during their 2012 and 2004 campaigns for the White House.
“It shouldn’t be difficult for Republicans to agree to put just a few of the most egregious, wasteful loopholes and special-interest carve-outs on the table,” Patty Murray, chairwoman of the Senate Budget Committee and the lead Democratic negotiator, said on Nov. 5.
The clash with Republicans over revenue stands in the way of the lawmakers reaching a deal by a Dec. 13 deadline. Democrats have long urged Republicans to agree to scrap at least some of the tax preferences, while Republicans argue that doing so would undermine efforts for a broader tax-code revision.
In addition to closing what Democrats call the “John Edwards/Newt Gingrich loophole,” the party’s list of options includes carried-interest treatment that allows hedge-fund managers and private-equity advisers to pay a 20 percent tax rate on their income instead of the nation’s top income rate of 39.6 percent. Ending that break would save more than $17 billion over a decade, according to the Democrats’ estimates.
Another lets U.S. companies deduct their expenses when they send their plants overseas, which Democrats say encourages offshoring of American jobs. It would raise $200 million. Ending preferences for corporate jets and subsidies for yachts and vacation homes, combined, would bring in another $19 billion.
While budget aides say the two sides are finding some areas of compromise on spending cuts, such as farm subsidies, Republicans say ending tax preferences could hurt efforts by House and Senate tax-writing committees trying to strike a broader deal to revamp the code.
Representative Paul Ryan, the lead Republican negotiator and chairman of the House Budget Committee, is arguing against including any tax measures as part of a deal to establish an annual budget and to replace some of the $1 trillion in automatic spending cuts now in effect that are disliked by both parties. The 29-member panel, which first met on Oct. 30, will hold its next public meeting on Nov. 13.
Lawmakers on both sides of the aisle have played down prospects for a broader agreement to slow the growth of the U.S. national debt, which is now at $17 trillion.
They are instead looking at a package of no more than $70 billion to $100 billion to replace the automatic spending cuts for a year or two. Given the more limited nature of such a deal, revenue has no place in it, say Republicans, who also say Democrats are recycling “loopholes” they’ve unsuccessfully sought to use as bargaining chips in past budget negotiations.
“All these proposals the Democrats are putting out there are things there might be some support for if it were in the context of tax reform,” said Senator John Thune of South Dakota. “It’s going to be very hard for Republicans to vote for tax code-related revenue” as part of a budget conference, said Thune, the Senate’s No. 3 Republican. “Every time you close a loophole you’re raising taxes on somebody.”
Democrats say there must be at least some revenue as part of even a smaller-scale deal to replace the automatic budget cuts, known as sequestration, Murray said in an interview.
“What I want to know from Republicans is which ones they are willing to put on the table to help solve this?” Murray, of Washington state, said, urging the other party to come up with its own options for wiping out tax breaks.
“Revenues need to be part of the picture,” said Senator Angus King, a Maine independent who caucuses with Democrats and sits on the panel.
Democrats say allowing U.S. companies to deduct their expenses when they send their plants overseas hurts American workers.
“When somebody gets a write-off from moving their plant overseas, that’s the kind of spending in the tax code we ought to stop,” said Senator Debbie Stabenow, a Michigan Democrat on the committee.
Preparing for a showdown over revenue, Democrats are mobilizing groups such as Nuns on the Bus, a Catholic advocacy group that organized a tour in 2012 to protest Ryan’s budget blueprint on moral and religious grounds because of its cuts to programs like food stamps that feed the poor and children.
“We are urging reasonable revenue,” said Sister Simone Campbell while visiting the Capitol on Nov. 5. “It is wrong to just think you can cut.”
Republicans say they already voted for a tax increase, citing a law passed in January that let the top income tax rate rise to 39.6 percent. They also say the revenue collected from ending tax preferences is needed to help pay for lowering income tax rates for everyone as part of a broader tax overhaul.
“They’re pushing every little approach they can” to raise taxes, said Orrin Hatch, a Utah Republican and the top Republican on the tax-writing Senate Finance Committee.
“They would like to snooker Republicans into just doing one part of tax reform. We can’t do that because you’re going to need all parts to come up with something that works.”
With an estimated $1 trillion in such revenue at stake, Murray and other Democrats say it isn’t a credible position. “I don’t buy it,” she said.
There is some truth to both arguments, said Roberton Williams, a tax fellow at the Tax Policy Center in Washington. “It’s a matter of degree rather than black and white,” said Williams, a former Congressional Budget Office staff expert.
“If you get rid of some of the loopholes there will be less available to buy down tax rates. But will there still be a lot left? Yes,” he said. “But you’re taking away some of the easiest ones they can agree on.”
During the 2012 presidential campaign Gingrich, a Republican and former House speaker, released a tax return that showed income of about $3 million from an S corporation, Gingrich Productions, according to Tax Notes. He paid himself a salary of about $450,000, with the remainder treated as S corporation net income to him that wasn’t subject to payroll taxes. That cost the government $73,950 in employment taxes, Tax Notes said.
Edwards, who ran for the Democratic vice presidential nomination in 2004, disclosed that his S corporation paid him an annual salary of about $360,000, with more than $5 million per year that escaped payroll taxes.
“Some wealthy business owners knowingly mischaracterize their income as business profits instead of salary to avoid Medicare and Social Security payroll taxes,” the Democrats’ list of options says.
Gingrich didn’t respond to messages left on his phone asking for comment. Edwards also couldn’t be reached through his former campaign scheduler, Matthew Nelson.
© Copyright 2013 Bloomberg News. All rights reserved.
McKinsey: A Fifth of World's Biggest Banks May Shrink or Merge
Wednesday, 06 Nov 2013 08:04 PM
One-fifth of the world’s biggest banks may be broken up or sold as part of a “radical course correction” to boost shareholder returns, according to McKinsey & Co..
The number of global universal banks may drop to fewer than 10 from about 25 as they narrow their focus on products or regions, the consulting firm said in an annual review of the industry released Thursday. Ninety global lenders are generating higher returns by following one of five distinct strategies described by McKinsey, according to the report.
“It’s not as if it can’t be done,” Fritz Nauck, a director at the consulting firm and a co-author of the report, said in an interview yesterday. “It’s about how do the other banks get there or how does this consolidation start to bring the overall industry up in terms of performance.”
Global banks’ return on equity climbed to 8.6 percent in 2012 from 7.9 percent a year earlier, still below the 10 percent to 12 percent average cost of equity, a measure of the minimum return required by shareholders, McKinsey said in the report.
U.S. banks earned an average return of 8 percent last year and European lenders earned 2 percent, excluding those in the most indebted nations such as Spain and Greece, according to the report titled “Breakaway: How Leading Banks Outperform Through Differentiation.”
Higher capital requirements, slow economic growth and increasing demands by national regulators that have reduced international capital flows and trade have put pressure on banks’ performance, according to the report. New rules such as the supplementary leverage ratio and the emergence of online competitors are also threats, McKinsey said.
The 90 banks that outperformed earned a 15 percent return on equity, or ROE, and their share prices traded at an average of two times book value, twice the price-to-book value of the rest of the 500 banks the consulting firm reviewed.
The five strategies that McKinsey outlined were universal banking, “investment specialists” that have scale in wealth management or payments processing, lenders that offer superior service and can charge a premium, being a leader in a rapidly growing market, and a “back-to-basics” model that features fewer products and lower costs.
More companies will need to pursue the “back-to-basics” strategy by limiting the industries they serve and dropping marginal consumer products such as student and boat lending, Nauck said. U.S. banks such as Comerica Inc. and M&T Bank Corp. have succeeded with lower margins by cutting costs and maintaining a “no surprises” balance sheet, the report said.
“Compensation must be structured to attract people who are suited to delivering the bank’s basic products — fewer rocket scientists and more people who want to sell mortgages and current accounts in a fair and friendly manner,” McKinsey said in the report.
McKinsey alumni have gone on to senior banking jobs. They include Peter Wuffli, who was replaced as UBS AG’s chief executive officer in July 2007 as credit losses began eroding profit; Johnny Cameron, who ran Royal Bank of Scotland Plc’s investment bank until October 2008; Stephen Green, former CEO and chairman of HSBC Holdings Plc; Peter Sands, CEO of Standard Chartered Plc; and Morgan Stanley Chairman and CEO James Gorman.
The industry may also improve returns through takeovers and mergers, as many of the 190 banks that have an ROE below their cost of equity and are trading below book value may look to sell themselves, Nauck said. He cited the consolidation that occurred after the savings-and-loan crisis of the 1980s when the number of lenders fell by half over the next 20 years.
“I don’t think we need to get quite that number, but there will be a stronger industry for clients, customers, banks, regulators, for all constituents if the weaker banks can be absorbed and managed better by stronger banks,” he said.
© Copyright 2013 Bloomberg News. All rights reserved.
Ted Cruz Bill Offers $5M Reward for Benghazi Info
Friday, 08 Nov 2013 02:59 PM
By Lisa Barron
The Texas Republican proposed on Thursday that the secretary of state offer rewards to anyone with information under the Rewards for Justice Program, reports The Hill.
Cruz criticized the White House for not using the program to seek out who was responsible for the assault in Libya that killed Ambassador Chris Stevens and three other Americans, noting that since it was established in 1984, $125 million has been given to more than 80 people.
"The State Department's Rewards for Justice Program exists to help the U.S. identify and apprehend its enemies, but the Obama administration has not used it to pursue the terrorists who attacked our personnel in Benghazi," Cruz said in a written statement.
"This legislation enables the Secretary of State to offer a substantial reward for information leading to the apprehension and prosecution of the suspects who have been identified."
Another Republican, Rep. Devin Nunes of California, also said on Thursday that it is time to learn the truth about what happened in Benghazi.
"We know what the senior people have said but we don't know what the people who were on the ground are going to say and we need to get those answers," he told CNN.
In a letter to House Speaker John Boehner on Wednesday, Nunes said if questions remain unanswered or "if some answers differ substantially from the established narrative and timeline of the attack, then it would be warranted to take new measures to complete the investigation and synthesize the information obtained by the Intelligence Committees and other committees investigating the Benghazi attack."
Richard Perle: Obama 'Not Prepared' to Stop Iran Nuclear Program
Friday, 08 Nov 2013 05:11 PM
By Bill Hoffmann
"President [Barack] Obama is not prepared to take any action to stop the Iranian nuclear program," Perle told "The Steve Malzberg Show" on Newsmax TV.
"So one way to avoid taking action is to reach an agreement and claim it solves the problem — whether it solves it or not."
Story continues below video.
"If you define the problem correctly, it is ending the Iranian nuclear weapons program and an agreement that fails to do that may satisfy the president's requirement for an excuse to do nothing, but it isn't going to solve the problem."
It is doubtful that Iran can be trusted in any kind of deal with the United States despite the ongoing, intensive negotiations between the two countries in Geneva, Perle believes.
"There are many issues between Iran and the civilized world and Iran and the United States of which their nuclear weapons ambitions are only one," he said.
"There's the Iranian involvement in terrorism. They are the No. 1 sponsor of terrorism around the world. Just look at Hezbollah, for example. So we have a lot of issues with Iran."
Israeli Prime Minister Benjamin Netanyahu said Friday that he "utterly rejects" the impending agreement, calling it a "bad deal." And he reiterated that Israel will do everything it needs to do to defend itself.
Israel believes Iran is trying to develop a nuclear weapon, and says international pressure should be stepped up, not eased, in order to force Iran to dismantle its nuclear program. Netanyahu has repeatedly threatened to attack Iran, unilaterally if necessary, if he concludes that diplomatic pressure on Iran has failed.
"I understand the Iranians are walking around very satisfied in Geneva as well they should because they got everything and paid nothing," Netanyahu told reporters, according to The Associated Press.
"They wanted relief of sanctions after years of grueling sanctions — they got that. They paid nothing because they are not reducing in any way their nuclear enrichment capability. So Iran got the deal of the century and the international community got a bad deal," Netanyahu said.
"This is a very bad deal and Israel utterly rejects it. Israel is not obliged by this agreement and Israel will do everything it needs to do to defend itself and defend the security of its people," he said.
Perle said Netanyahu is right to question the deal.
"I expect that the Israeli prime minister is looking at one question and that is, does this stop the Iranian program or not? And I'm afraid the answer is, it doesn't. So he's looking at the right question. He's raising the right issue," said Perle, a former assistant Secretary of Defense.
"Interim agreements in situations like this are always hazardous. The hope is always that it will last for a little while bridging a permanent agreement that does meet one's needs, and the need here is to stop the Iranian program. But it rarely works out that way. So I would have to agree that this is a very doubtful deal from the point of view of all of us who are endangered by an Iranian nuclear weapon, and it's not just Israelis, it's the whole world, really."
Secretary of State John Kerry was in Geneva along with European officials to meet with Iran's Foreign Minister Mohammad Javad Zarif as hopes of reaching an initial agreementreached a "critical stage."
Perle said if Iran becomes a nuclear weapon state, "it will do even more of the dangerous and provocative destabilizing things it's been doing in the region and around the world."
Information from The Associated Press was used in this story.
© 2013 Newsmax. All rights reserved.
US Not An Honest Broker With Israel. An Agreement With Palestinians Will Be Forced On Them. It Will Backfire On US.
Kerry: US Sees Jewish Judea and Samaria as 'Illegitimate'Tova Dvorin and Ari Soffer - Israel National News, November 11th, 2013
Iran Will Get A Free Pass On Nuke Plants. Once Again The World Ignores The Facts and Will Pay In The Long Run.
How Iran is winning the war of wordsEmily B. Landau - haaretz.com, November 6th, 2013
Our Know-Nothing President
November 1, 2013 by Chip Wood
Is it really possible that the President of the United States knows as little about what his Administration is doing as his defenders claim? That no one tells him anything about what’s going on until he reads it in the papers?
Consider all of the scandals that have taken place since Barack Obama moved into the White House: Operation Fast and Furious; the murder of our ambassador and three other Americans in Benghazi, Libya; the Internal Revenue Service harassment of Tea Party and other patriotic groups; National Security Agency spying on foreign leaders, as well as millions of Americans; the incredibly botched implementation of Obamacare… The list goes on and on.
We’re supposed to believe that Obama remained in blissful ignorance about all of them until the media reports started. When that happened, he was just as surprised and upset as the rest of us.
The latest “I didn’t know anything about it” scandal is the revelation that the NSA has been monitoring the private conversations of some 35 world leaders. Apparently, the bugging operation has been going on for years. Yet we’re supposed to believe that no one told the President about it until a couple of months ago.
Sure, that sounds credible, doesn’t it? Turns out, we’re tapping the cellphone of German Chancellor Angela Merkel, among others; yet no one in the chain of command thinks that maybe, just maybe, Obama should be told about it.
Senator Dianne Feinstein (D-Calif.), chairman of the Senate Intelligence Committee, followed the party line when she said: “It is my understanding that President Obama was not aware Chancellor Merkel’s communications were being collected since 2002. That is a big problem.”
It certainly is. Of all the sorry excuses that have been offered for this Presidential ignorance, my favorite is the one from anonymous officials who said that “the NSA has so many eavesdropping operations under way that it wouldn’t have been practical to brief him on all of them.”
If you were in charge, how would you like to have that pathetic excuse laid in front of you? Do you think that maybe some heads would roll? That’s what would happen in the real world — but not in this Administration, where the watchword is to protect the President at all costs. And always, but always, blame somebody else when anything goes wrong.
The latest example of this came on Wednesday, when Health and Human Services Secretary Kathleen Sebelius, the woman in charge of implementing Obamacare, trudged up Capitol Hill to explain why things have gone so disastrously wrong in the launch of the President’s pet program — and to promise that they will get better very soon.
In her testimony before the House Energy and Commerce Committee, Sebelius said that she was “as frustrated and angry as anyone” about the problems that have occurred since the launch of Obamacare on Oct. 1.
At one point, she even denied that the Healthcare.gov website had actually crashed, saying it just runs a lot slower than it should. Hah! In a piece of cosmic irony, the website crashed again, just as she was delivering this whopper. When it did, CNN broadcast a split screen, showing Sebelius on the right half and the crash error message from the website (“The system is down at the moment”) on the left-hand side of the screen.
Potential enrollees aren’t the only ones who can’t get the information they need from the Obamacare website. Turns out that neither can the HHS Secretary. When asked how many people had actually managed to navigate through the website to the end and actually purchase one of the government-mandated health plans, Sibelius said that the numbers weren’t available yet. Check back next month.
Is it that the total number of enrollments can’t be tabulated or that they won’t be released, since they are so embarrassingly low?
Still, Sebelius promised her skeptical inquisitors that everything would be hunky-dory by the end of November, when the website will finally be working properly. In the meantime, she proclaimed, “Hold me accountable for the debacle. I’m responsible.”
Does that mean she’ll do the honorable thing and tender her resignation to the President? Not on your life. Or at least, not yet. If the promised re-launch of the website comes on Dec. 1, as seems likely, I don’t think the White House will bear with her much longer. By sometime in January, I suspect you can color Sebelius gone.
Meanwhile, CNN reports that the Administration is putting pressure on insurance companies not to say anything critical of Obamacare. “What’s going on,” reporter Andrew Griffin told Anderson Cooper, “is [a] behind-the-scenes attempt by the White House to at least keep insurers from publicly criticizing what is happening under this Affordable Care Act rollout. Basically, if you speak out, if you are quoted, you’re going to get a call from the White House, pressure to be quiet.”
Bob Laszewski, a consultant for several insurance companies, says he’s getting calls from executives he knows, asking him to speak out on their behalf. He told CNN: “The White House is exerting massive pressure on the industry, including the trade associations, to keep quiet.”
Now it turns out that the insurance companies — and the Obama Administration — have known for years that millions of Americans would lose their health insurance once Obamacare went into effect, despite all of the claims to the contrary.
Regulations written by the Department of Health and Human Services in July 2010 estimated that “40 to 67 percent” of policyholders would not be able to keep their health insurance once the Affordable Care Act went into effect. Now there are estimates that the actual figure may be as high as 80 percent. So somewhere between 8 million and 14 million Americans will lose the health insurance they presently have.
Of course, Obama promised the American people exactly the opposite. Back in June 2009 he said, “[W]e will keep this promise to the American people: If you like your doctor, you will be able to keep your doctor. Period. If you like your healthcare plan, you will be able to keep your healthcare plan. Period.”
And he’s repeated that promise countless times since then. In fact, as of yesterday, the official White House website still claimed, “If you like your plan, you can keep it and you don’t have to change a thing due to the healthcare law.”
Of course, we now know that this isn’t true. Millions of people are learning that they won’t be able to keep their present policy, no matter how much they might like it. But the Obama Administration continues to spread this falsehood.
This helps explain why Obama’s popularity is plummeting faster than a safe falling from a window. The latest Wall Street Journal/NBC News poll says that the President’s job-approval rating has fallen to an all-time low. According to the poll, a majority of Americans — 51 percent — now disapprove of the job he is doing. Only 42 percent say they still approve of his performance. That’s down from 53 percent at the end of last year.
In the same poll, just 29 percent said that their representative deserved to be re-elected to Congress. More than twice as many, some 63 percent, said it was time to give a new person a chance.
The disdain was bipartisan, by the way, with two Republican leaders — House Speaker John Boehner and Senate Minority Leader Mitch McConnell — joining Senate Majority Leader Harry Reid in getting their highest negative ratings ever.
Oh, and get this: Half of those polled don’t believe that an accord will be reached by the Jan. 15 deadline on a plan to fund the government. They say another Federal shutdown is likely.
Will all of this disdain and distrust result in votes to actually reduce the size, power and cost of our central government? It would be wonderful if that were the case. But I wouldn’t count on it.
Until next time, keep some powder dry.