A Box For Everything

27 07 2015

Chappaqua, New York

Me, four days ago:

But I think the better explanation is our increasing deification of the stock market, our increasing investments in it, which creates a business climate in the relationship between corporate boards of directors and the corporations’ most prominent singular managerial employees, the CEO, being mindful of the outsized control that mutual funds have on the composition of boards of directors because they quasi-own so much of the stock.  The goal is as much profit as possible over the short term; a CEO who engineers such policies will get paid very well, one who doesn’t is out the door.  As it is, since the average Fortune 500 CEO tenure is not even five years, it’s not like any one CEO really cares about what happens when s/he is no longer CEO, and like I said, CEOs are high level managerial employees, nothing more.  To net it all out, the high end American corporate world is driven by temporary players who are just looking to catch while catch can, they’re out the door and replaced by more people looking to catch while catch can.

MMcA has a piece at Bloomy today about HRC calling for a reverse stair stepped capital gains tax system; Ross Perot first proposed this in 1992.  I think it’s a good idea, but MMcA has a more elegant explanation than mine above on why it won’t do much good by itself:

On the margin, it’s probably going to affect investment if you raise capital gains taxes by a lot — and nonetheless, this is not going to do much to shift the incentives toward longer-term thinking at companies. That’s because Clinton seems to fundamentally misunderstand the reason that public companies are so focused on short-term results that impact their stock price, rather than longer-term growth. To the extent that you think this phenomenon is real, and a problem, the issue is not that American investors, for reasons known only to themselves, have developed the attention spans of gnats. Instead, I’d argue that the problem is the massive shift toward institutional management of equity assets.

Here’s SEC Commissioner Luis Aguilar on this phenomenon in 2013: “The proportion of U.S. public equities managed by institutions has risen steadily over the past six decades, from about 7 or 8 percent of market capitalization in 1950, to about 67 percent in 2010.” Stocks used to be the province of affluent people who might hold them for decades — and might well take it into their head to show up at your shareholder meeting and delicately inquire why the chief executive officer is getting paid so much when quarterly results look pretty dismal. Now they’re the province of everyone — and everyone is in the hands of professional managers who don’t care how much the CEO is getting paid, would rather sell and buy something else than chivy the board into doing its job, and need to deliver price appreciation pretty regularly, lest their Morningstar profile become tarnished, or the regulators start asking the company to increase contributions.

Add to that the fact that you can now log in every day to see exactly how your 401(k) is doing, and you can see how short-termism might come to dominate executive offices.

Unless the short term reverse stair stepped time bracket has an extremely confiscatory rate, it won’t make this any better, and I even have my doubts that it would get much better even if the rate was 99.9%.  Being an NRx, I can diagnose the fundamental problem is the same kind of democratization in the business world as democratization of government has negatively affected the quality of the public policy formation and enforcement process.  Just as I think hereditary monarchy is generally the least problematic of types of governments, with some qualifications, hereditary monarchy is my beaux ideal of a business management paradigm.  Either as a privately held business handed down from generation to generation, or as publicly traded corporations where one person must hold a simple majority of the stock expects to will it to a blood heir.  Even then, there might be a necessity for some non-hereditary non-family publicly traded corporations to exist, but in the dark enlightenment, the king must hold them in close and permanent check.

Let me ask you this, St. Louisan:  Did you like Anheuser-Busch better when it was essentially a hereditary monarchy, or as a pure publicly traded corporation?

 

 





God In Lieu of Mammon

29 06 2015

New York City

Ready to hate me?

I agree.

Watch how militant Christian conservatives (“the religious right”) can really get when their churches no longer fear losing the 501(c).





Gringo’s Dough

2 06 2015

Las Cruces, New Mexico

Fake documents, fake identities, fake Federal income tax refund checks.

If this wasn’t so close to Mexico, my wicked racial profiling trick would be pointing right at Africanus Bellcurvius.

Remember, current New Mexico Governor Susana Martinez, who is seriously talked about as Republican nominee running mate material, was once DA of this county.





Inverted Logic

22 09 2014

Toronto

PJB’s latest tries to bring a little bit of reason to this Democrat manufactured election year hoopla over corporate inversions, manufactured by the same people who helped bring you NAFTA and GATT.

Really, it’s not that complicated.  Let me walk you through it.

An American-based corporation is subject to the higher than world average corporate income tax rates on the gross income that it generates from its American business.  It’s also subject to both the American corporate income tax rate and the relevant country’s corporate income tax rate on its business done outside the USA.

For our Yankee government to try to tax business that takes place outside the USA is like you setting the kids’ bedtimes for your neighbor’s household.

So to avoid this arrogant double taxation, firms are engaging in a tactic known as inversion.  Large American firm buys smaller foreign firm, and the headquarters of the new combined firm is wherever outside the USA this smaller firm was based before the buyout.  It now means that Uncle Sam can’t touch this firm’s outside-the-USA business income with the relatively high American corporate tax rates.  It does NOT mean that the new firm’s American operations aren’t subject to those American tax rates, because they are.

Take for example the Burger King inversion.  Before then inversion, BK’s American income was subject to American tax rates, but its non-American income in, e.g. the UK, was subject to both USA and UK corporate taxes, repeat for every other country where there are Burger Kings.  What happened in the inversion is that Miami-based Burger King purchased Toronto-based Tim Horton’s, and the new combined Burger King Tim Horton’s (BKTH) will be based in Toronto.  Which means that BKTH operations in the USA are subject to USA taxes, (and as you know, Tim Horton’s is going to open up a slew of stores in America, including one I told you about yesterday, the first one in St. Louis will be in Maplewood), but BKTH operations outside the USA are only subject to the relevant country’s tax rates and not also the American tax rate.

Therefore, this talk about possibly “repatriating” profits is a misnomer, because the profits were on income generated outside the USA all along.  To the extent that they could be theoretically “repatriated,” its only in the sense that the arrogant Yankee government thinks that all income in all countries of American-based firms is subject to American tax rates.

So what’s the solution?  Ideally, the Yankee government should quit thinking it owns the whole world.  Short of that, the best solution is an international convention harmonizing corporate income tax rates, especially the top marginal rate.

The one big difference, though, is that businesses are taxed not on every dollar of cash they take in as revenue, as individuals are, but they are only taxed on their gross income, that is, revenue minus expenses, though not every item of business spending is a legally defined business expense according to the IRS.

 





Economic Man

6 08 2014

Amurrika

This sounded good, until I got to the details.

The pesky detail is that Alter thinks that “loyalty to America” means nothing more than paying taxes to the Leviathan based in Washington, D.C.   Which means that the modern left’s version of “nationalism” is nothing more than the same kind of economism and bean-counting that cosmo-conservatives and cosmo-libertarians have given us for a very long time.

Pat Buchanan once leveled the same sort of criticism at the same kind of people, only PJB thinks of nationalism in more proper terms, blood and soil nationalism, or pretty close to it.

If it were up to me, every CEO of every larger publicly traded corporation in the country would recite a pledge of allegiance to the white race every morning before the start of business.





“You Mean I Actually Have to Pay All the Taxes I Voted For?”

4 06 2014

Austin

You got it, dear.

This is right up there with “those filthy rednecks down South in trailer parks.”





Tax Act

5 05 2014

Jefferson City

The “severe” tax cut bill that Jay Nixon vetoed today?

It would have cut the top income tax rate down from 6% to 5.5% starting in 2017.  Remember that that rate starts at $9,000 a year, so that would have applied to a lot of people.

There’s another thing.  Missouri’s income tax brackets, which were in six increments a thousand bucks apiece and a percent apiece starting at $1,000 a year and topping off at $6,000 a year, (until it was changed a few years ago to have nine brackets of a thousand apiece and a half percent apiece topping out at $9,000 a year), were implemented when Missouri first started its income tax, when $1,000 a year of income wasn’t just chump change.  What I wish they’d do before anything else is gradually widen out the brackets to reflect for the dollar inflation that has happened since 1931.  If, for example, we indexed the brackets to inflation back in 1931, and still had six brackets, the brackets today would be $15,000 apiece, meaning that 6% wouldn’t start until $90,000.

Or just cut the crap and make 6% the flat rate.

UPDATE

Usually, attempts to override the Governor’s veto on major legislation is usually held back until the September special session.  But the Senate late yesterday and the House just a short time ago today have already overridden the veto.  I was hearing yesterday that the legislature would move quickly on an override, but I thought that was more bluster than reality.








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