ERICOPOLY

The article doesn't clearly explain why lawmakers would resist such a ban. ;D The political intelligence industry comprises hundreds of lobbyists, former congressional aides and others who scour Washington for market-moving tips about pending government activities that could affect stock prices. These political intelligence purveyors are paid by hedge funds and other Wall Street firms to gather information about pending changes in public policy the investors can use to make trades. A study by the nonpartisan Integrity Research Associates said the global market for policy research and political intelligence services is about $400 million a year and growing.

$19.86 -- April 15, 2010. What a crazy stock market.

Banning Congress from trading on insider information. Passed the Senate 96-3. Now it needs to pass the House. Found this quote funny: The focus of one of the Journal stories, Rep. Spencer Bachus (R., Ala.), became an unlikely champion. He helped revive the bill with a high-profile hearing in the House Financial Services Committee, which he chairs, and used the opportunity to press more senior Republican leaders for a vote on the House floor. Republican leaders initially balked, scolding Mr. Bachus in an angry meeting in December. http://online.wsj.com/article/SB10001424052970203711104577199113513037068.html?mod=WSJ_article_LatestHeadlines

Zuckerberg can become a trillionaire by age 65 if he grows his estimated $28.4b stake by 10% per annum

I wonder though if you were to open a spa in New York or Los Angeles, how much would customers pay to bathe in a bathtub full of cash?

One thing I have learned: If a stock goes from $14 down to $5, and then back up to $7, it is "overbought". Then someone who rhymes with "ass" shorts it. We'll see how he does.

In my own words I feel like corporations should pay for their external costs. It's wrong to tax the dividends twice. This is why I support the idea of bringing a dividend franking system to the US. The current tax system encourages the corporation to make uneconomic (on the whole) yet tax-efficient decisions so as to meet the criteria for various corporate tax breaks. The dividend franking system would discourage some of this as it only pushes up the personal income tax to be paid on the dividend. They could instead make the best (most economic) decision at the corporate level (thus paying more corporate tax in doing so) and get granted the franking credits when paid out in a dividend (thus a low personal tax rate if any tax due at all). I'm also an advocate on not taxing nominal capital gains, but rather only taxing "real" capital gains. Well, I feel that payroll taxes are part of their external costs. Part of the external costs of being a corporate citizen in a civil society.

FERGUSON: Well, certainly Japan is a terrible warning to the United States, that you can get into an awful equilibrium of very, very low growth and an inexorably growing debt mountain. And that is not where the U.S. wants to go. There are various forces in [the United States'] favor. It's socially not Japan. It's demographically not Japan. And I sense also that the Fed is very determined not to be the Bank of Japan. Ben Bernanke's most recent comments and actions tell you that they are going to do whatever they can to avoid the deflation or zero inflation story. The U.K. is actually ahead here. If the game is to quietly give bondholders negative returns without awakening public fears of inflation, the U.K. is doing pretty well. We clearly are more likely in the U.S. to go down the U.K. route than the Japan route.

Another thing to consider, for what it's worth, is that in the event of an emergency, my understanding is that 911 cannot tell where you are from a mobile phone or computer based phone. With a landline, on the other hand, in the event of an emergency all you would need to do is call 911 and let the phone drop (if you couldn't speak for example). They are supposed to immediately dispatch help even if no one is on the other end. I've had Vonage VOIP for a few years now -- it's registered to my address so in a 911 situation our address is identified. That's not a concern for us. The concern we have is that when our cable internet service is down we can't call to complain. We live near some hills on an island just across the water from near Seattle -- our cell phones only work at our house when our internet is working (we have one of those internet based AT&T cell phone repeaters). We are otherwise out of cell phone range (although sometimes it works from the corner of the property). So our cell phones are also of no use to us when the internet goes down. We can send up smoke signals though.

Then it still benefits the corporation. Society as a whole is a human resources mine from the corporation's perspective. A mine operator bears the cost of extracting the valuable nuggets all the same as the cost of extracting the worthless rock. You can't pay only for the costs of extracting the nuggets. I disagree with your analogy. I think it misrepresents the corporations view and neglects the employee's view. Employment is where one entity (a company) agrees to pay another entity (the employee) for services rendered. They agree on a price for those services. Either is open to ending the deal based on the agreement. I also think your analogy (logic) is dangerous in that it opens the door to the corporation being liable to the employee for an indefinite amount of time. That may not have been your intent but that is how some would interpret the analogy. The point is that Microsoft hires the people who have graduated with an education. These are the gold nuggets. There is an expensive system in place the bubbles this gold up to the surface where Microsoft can just bend over and pick it up. I view the corporation as bearing responsibility for funding the expensive system. Do you not? Don't want to shock you but corporations are not responsible for funding education in practice. Education is largely local/state funded via property, sales and personal/business income taxes. Thus if the costs of education are your rationale for the existence of federal corporate taxes it fails logically. I appreciate the need to feed you little tidbits that you can win. It's the entire system cost that matters. There's a whole support network that the federal government pays for. Transportation, defense, entitlements... etc... you can't take them all out and still have a functioning human resources mine. You can't just keep the lights turned on in the mine -- you need to keep the support beams maintained otherwise the mine will collapse. Of course, when the corporation only pays for the nuggets they can always just find their gold in a different mine. So prevention of collapse is not really the responsibility of the corporation. Thus, the development centers in India, China, etc... This happens to some degree regardless, but some of this isn't just a shift to lower cost labor pools -- some of it is rather that they can't find enough of the skilled talent here! Missing for example is the people from the ghetto who have the talent but will not make it through the system. Bernanke is trying to boost consumption, but we don't have a consumption problem. We just don't produce many of the goods that we consume. Bringing income and payroll taxes off of the individual and onto the corporation makes the domestic labor more cost competitive (more domestic production of the goods that we consume).

The thing is, I believe that if the person paying the costs of the entire system (not just the gold nuggets) also has the most political influence (as the corporations do), then we are most likely to get social justice. In other words, the person footing the bill may try to get more gold nuggets wrung out of the system -- perhaps some proactive outreach programs to attract some of the capable and bright children from the ghetto that you describe. Alternatively, if we allow the corporations to only pay for the gold and not for the whole system, then we will not get such change.

My last post makes it clear that I do not miss that point.

Then it still benefits the corporation. Society as a whole is a human resources mine from the corporation's perspective. A mine operator bears the cost of extracting the valuable nuggets all the same as the cost of extracting the worthless rock. You can't pay only for the costs of extracting the nuggets. I disagree with your analogy. I think it misrepresents the corporations view and neglects the employee's view. Employment is where one entity (a company) agrees to pay another entity (the employee) for services rendered. They agree on a price for those services. Either is open to ending the deal based on the agreement. I also think your analogy (logic) is dangerous in that it opens the door to the corporation being liable to the employee for an indefinite amount of time. That may not have been your intent but that is how some would interpret the analogy. The point is that Microsoft hires the people who have graduated with an education. These are the gold nuggets. There is an expensive system in place the bubbles this gold up to the surface where Microsoft can just bend over and pick it up. I view the corporation as bearing responsibility for funding the expensive system. Do you not? I believe you could instead advocate for a Soviet style system where the future Olympians are selected at a very young age. Thus Microsoft could test the young children and individually pay for the education (and social safety net) of only those children. However, those children would then be required to work for Microsoft and have no freedom of choice over their careers. Thus our system may be expensive but it gets the gold nuggets -- and they are probably purer gold given the enormous experiences that shape them along their way (rather than just being farmed under a Soviet style Olympic system). EDIT: Ironically though, I'm probably the "communist" here :D

Then it still benefits the corporation. Society as a whole is a human resources mine from the corporation's perspective. A mine operator bears the cost of extracting the valuable nuggets all the same as the cost of extracting the worthless rock. You can't pay only for the costs of extracting the nuggets. I disagree with your analogy. I think it misrepresents the corporations view and neglects the employee's view. Employment is where one entity (a company) agrees to pay another entity (the employee) for services rendered. They agree on a price for those services. Either is open to ending the deal based on the agreement. I also think your analogy (logic) is dangerous in that it opens the door to the corporation being liable to the employee for an indefinite amount of time. That may not have been your intent but that is how some would interpret the analogy. The point is that Microsoft hires the people who have graduated with an education. These are the gold nuggets. There is an expensive system in place the bubbles this gold up to the surface where Microsoft can just bend over and pick it up. I view the corporation as bearing responsibility for funding the expensive system. Do you not?

Then it still benefits the corporation. Society as a whole is a human resources mine from the corporation's perspective. A mine operator bears the cost of extracting the valuable nuggets all the same as the cost of extracting the worthless rock. You can't pay only for the costs of extracting the nuggets.

That's what the Australians concluded after they tried it out. Then they switched to just using 50% of the income tax rate (to acknowledge that some of the gains are just inflation and not really gains). However I think in today's world of computers "web services" it's not really that difficult to administer. If you E-File you could just submit your numbers for nominal cost basis, and then the IRS's own computer could then adjust the cost basis numbers for you to their real component. You could then review the numbers and if you agree with them submit your tax return. There is no more room for cheating than there is under today's system. The CPI-U is computed every month. Your online brokerage for example could easily show you an additional column for "adjusted cost basis". The IRS server just publishes a web service -- you call the web service from your online application passing it three parameters: 1) nominal cost basis 2) date of purchase 3) date of sale The web service then returns a single result (the adjusted cost basis). Your online tax worksheet could be configured to call the web service. Really slick.

Here is the biggest one: The entitlement programs take the burden of pension costs away from the corporations. Also: Unemployment benefits relieve the corporation of the burden of employing workers while demand is slack.

My only objection is that during periods when inflation is very high this gets illogical (we should in theory only be taxing real income). The CPI-U is already available -- we could be fair and tax people (regular income rates) only on REAL capital gains. To demonstrate how stupid it is to tax people on inflationary gains, the principal adjustment from TIPS is fully taxed (under present law) as regular income. So if there is a 100% inflation rate you wind up losing 17.5% of your real principle value -- the yield on the TIPS isn't high enough to reimburse you for this. Wouldn't be opposed to that. This would of course imply that you could take a $5 tax-loss if you sell a stock today for $10 per share that you purchased for $10 per share ten years ago (if the inflation-adjusted cost basis is $15). That's very fair.

My only objection is that during periods when inflation is very high this gets illogical (we should in theory only be taxing real income). The CPI-U is already available -- we could be fair and tax people (regular income rates) only on REAL capital gains. To demonstrate how stupid it is to tax people on inflationary gains, the principal adjustment from TIPS is fully taxed (under present law) as regular income. So if there is a 100% inflation rate you wind up losing 17.5% of your real principle value -- the yield on the TIPS isn't high enough to reimburse you for this.

I pointed out earlier though that under a dividend franking system we could give US corporations the ability to pay tax-advantaged dividends out of after-tax income (so the individual doesn't pay tax twice on the dividend). The individual would then only pay tax if his personal tax rate were higher than the corporate tax rate. I find it surprising that I've never heard this kind of system discussed anywhere in the US media. Scenario A: A corporation that pays no tax will be one where the owners need to pay up to the highest marginal income tax on any dividend. Scenario B: A corporation like Berkshire that is a good corporate tax citizen (pays up to 35% marginal rate) will be able to distribute tax-advantaged dividends that are not taxed twice (individual only pays tax if the personal income tax bracket is higher than the tax rate paid by the corporation). Pretty straightforward solution to this long running argument. Perhaps the players aren't actually looking for a solution? The Republicans likely want a 0% individual tax rate, even if the corporations also paid nothing. The Democrats likely want to tax the dividends twice if they can.

The article also pointed out that mobility is greater in Australia vs the US. However we spend more per student on education than does Australia. Our tax policies are (I believe) more punitive on wealth accumulation (inheritance tax for example). So what is going to improve mobility in the US -- does tax policy really have much to do with it? It is sort of assumed to be so, but we have Australia to show that maybe that's not the case.

Isn't the rejoinder here that if you do what you're talking about (and you're not LUK, who never seems to pay tax), your "look through" earnings get taxed thrice? JNJ pre-tax income gets reduced by corporate tax rate. Dividends to insurance sub get taxed, though not at full 35% rate. Finally, to personally realize the benefits from the JNJ income, which in theory should be reflected in stock price appreciation, you must sell some stock and pay another 15% on the appreciation associated with the JNJ income. Or am I wrong here? You are right that there is extra tax if Berkshire pays a dividend or if you sell some stock. However if you live on the income from the tax-free munis and treat Berkshire as a family wealth asset (to be passed to heirs) then there is no second tax (step up in basis when you die). Wealthy families can benefit greatly from this terrific tax shelter that Warren runs for them. Ok, agreed. I hope to benefit from that tax shelter someday. Not happening anytime soon, though. Buffett ought to shift his personal portfolio to 100% muni bonds and then give Debbie a raise to $100,001. He would then have roughly 1% in bonds, 99% in equities, and pay no personal income taxes whatsoever except for his $100,000 Berkshire salary. Then he can claim that Debbie pays more tax than him on an absolute basis.

He is following the example of past tycoons -- Andrew Carnegie pushed for the inheritance tax, for example. JP Morgan stepped up in a big way to temper the financial crisis of 1907 -- this time around, it's Buffett injecting large sums into financial institutions and making big media appearances to instill market confidence: "Buy American, I am", for example. I guess with all that time on his hands he is reading his history -- how to be a text book tycoon of change.

Isn't the rejoinder here that if you do what you're talking about (and you're not LUK, who never seems to pay tax), your "look through" earnings get taxed thrice? JNJ pre-tax income gets reduced by corporate tax rate. Dividends to insurance sub get taxed, though not at full 35% rate. Finally, to personally realize the benefits from the JNJ income, which in theory should be reflected in stock price appreciation, you must sell some stock and pay another 15% on the appreciation associated with the JNJ income. Or am I wrong here? You are right that there is extra tax if Berkshire pays a dividend or if you sell some stock. However if you live on the income from the tax-free munis and treat Berkshire as a family wealth asset (to be passed to heirs) then there is no second tax (step up in basis when you die). Wealthy families can benefit greatly from this terrific tax shelter that Warren runs for them.

There should be less economic divide once the boomers have substantially died off. Wealth is skewed towards the 50+ demographic. Aging boomers have made the headline inequality worse. As they die things will get better in terms of the rich vs poor.