Posts Tagged ‘Congress’

Tax goodies for investors

December 17, 2010

I’ve been holding my breath until Congress came to grips with not raising taxes – and I can exhale, now that “the Bush tax cuts” have been signed (once again) by a president. George W. Bush and Barack H. Obama – who’d have thought it?

Three cheers for compromise, bipartisanship and not shooting our economy in the foot as of Jan. 1. So here are the tax goodies that apply to investors:

  • The top tax rate on dividends remains at 15% through 2012, a boon to shareholders of companies with healthy yields. Investor relations people for utilities and other firms with attractive dividends should breathe a sigh of relief.
  • The top tax rate on long-term capital gains also remains at 15% for two years. So equity investors are encouraged to keep taking risks in pursuit of gains. And this helps public company shareholders and small business owners with gains in M&A transactions.
  • Some industries may profit from specific cuts – e.g., extensions of the R&D tax credits and incentives for businesses to buy capital goods.
  • Of course, the tax bill is also a stimulus bill. Retail spending and GDP should get a shot in the arm from keeping the Bush-era tax rates for all, AMT patch, extension of unemployment benefits and 2% cut in payroll taxes for 2011.

You can debate whether all this is good policy, either in the way it structures our income taxes or the way it affects near-term deficits. There is controversy. But I’m glad to see it resolved – in favor of keeping money in the hands of the people.

Of the tax-bill coverage I’ve seen, Forbes’ “Tax Dude” blogger Dean Zerbe has the best headline …

The Tax Bill: Santa Comes Early

… and by far the best illustration, showing “Obamaclaus.”

Merry Christmas to all, and to all a good night.

© 2010 Johnson Strategic Communications Inc.

Advertisements

Gridlock? Not the end of the world

November 2, 2010

Of the talking heads on the airwaves and op-ed pages, George Will is one of my favorites – for his insights and the way he offers opinions calmly, without shouting. I appreciate two things Will said on Sunday about the US midterm elections.

Regarding GOP gains in Congress possibly causing gridlock in Washington, which many pundits greatly fear, the conservative Will said on ABC’s “This Week”:

Gridlock is not an American problem – it’s an American achievement. The framers of our Constitution didn’t want an efficient government, they wanted a safe government. To which end, they filled it with slowing and blocking mechanisms: three branches of government, two houses of the legislative branch, a veto, veto override, supermajorities, judicial review. … When we have gridlock, the system is working. [Video here, Will about 5:30]

Asked about calls for more civility in politics, Will likewise gave a contrarian view:

Nothing wrong with that, until you begin to equate civility with the absence of partisanship, as though there’s something wrong with partisanship. We have two parties for a reason. We have different political sensibilities. People tend to cluster – we call them parties. And we have arguments – and that’s called politics. [Video here, Will at about 3:00]

For business issues like taxes and regulation, the new climate in Washington could be contentious. Partisan. Even polarized. The next two years could seem awful to those who wanted the Obama administration’s agenda to fly through. Some analysts like those in this AP story also worry about gridlock hurting the economy.

I think I’m with Will on this one. After all, businesses do not usually get more robust when the government is in activist mode. A unified Capitol Hill can mean businesses have to send more money to Washington, or must try to figure out more 2,000-page laws. So gridlock may be OK, if we can tune out the shouting.

That’s my two cents’ worth. What’s your opinion?

© 2010 Johnson Strategic Communications Inc.

Not on the agenda

November 2, 2010

At a breakfast meeting this morning of a few colleagues in the NIRI Kansas City chapter, topics ranged widely over investor relations how-tos, idiosyncracies of sell side relationships, and so on. One subject that didn’t come up:

The Election.

Maybe it tells you something. Either we’re all so sick of political ads, or politics itself – or we just want to focus on things we can control. Happy Election Day.

The American way

July 2, 2010

Going into Fourth of July weekend, a friend who has helped raise capital for privately owned businesses – and a couple of public companies – offered his theory about why capital isn’t flowing into enterprises that could reignite our economy.

There’s “plenty of money” sitting in private equity funds and other investors’ stashes, this serial CXO and strategic thinker suggests. But people with the wherewithal to fund growth companies, mostly, aren’t taking the plunge right now.

The reason is the way investors feel about Washington, he opines. Not the place, but the US government’s massive extension of its legislative and regulatory reach. Government is seeking to govern so much more: new rules to prevent the next bubble or flash crash or oil spill, new agencies, health care mandates, too-big-to-fail bailouts, tougher penalties, stronger stimulus … public-sector stimulus.

And higher taxes to pay for it all. Bush-era tax rates will yield to higher rates. Revenue enhancement is in vogue. We’re even looking at the value-added tax.

But the worst part? “It’s the uncertainty” – not knowing what the rules of the game will be in one, two or three years. Washington is pressing its ongoing expansion of control in all areas of business – at a time when the economy is fragile.

So investing in a long-term way today means taking on risks of yet-unwritten mandates and so-far-incalculable costs from tomorrow’s “hope and change.”

Before long, this discussion begins to sound uniquely American: complaints from independent-minded business people against an overly ambitious government.

Which brings me around to one of my annual rituals: re-reading the Declaration of Independence around the Fourth of July. The words soar to rhetorical heights:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are life, liberty and the pursuit of happiness. That to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed.

It’s a reminder of why we’re here – in America. And, apropos of my lunchtime conversation about the uncertainties of government on steroids, this time my eye catches on another line, one of the founders’ grievances against King George III:

He has erected a multitude of new offices, and sent hither swarms of officers to harass our people, and eat out their substance.

No doubt some CEOs, CFOs and even investors feel a bit like that. We’re wondering how much this reform or that Act will eat out “our substance,” how ramped-up regulation will hinder access to credit and raise costs of capital, or what new taxes will come unbidden out of the Beltway.

Not suggesting a revolution – only that we need to give thought to capital formation, to investing and a climate that enhances confidence in the American system. We need investors to resume funding the small and mid-sized firms that, after all, must hire those unemployed workers and create real, sustainable growth.

The American way isn’t negotiated by politicians or codified in 2,000-page bills. It’s not put out for public comment in the Federal Register. Instead, it is thrashed out in the competitive, pressurized, sometimes Wild West openness of the market. The market-driven approach is what, once, put US business on top of the world.

Let’s keep in mind that the American way – still – is about freedom.

Have a great Fourth of July!

© 2010 Johnson Strategic Communications Inc.

Watching Washington

September 29, 2009

All eyes are on Washington this fall, as the country watches hope and change take hold through new laws and regulations. When NIRI President and CEO Jeff Morgan briefed a group of investor relations people and corporate lawyers in Kansas City on changes coming our way from DC, “scary” was a word that kept recurring.

Jeff Morgan 9-29-09“There are a lot of scary things happening in Washington, and some potentially good things happening in Washington,” Morgan said Tuesday evening at the NIRI Kansas City chapter meeting.

Motivated by the financial crisis, Morgan noted, politicians have turned from talk to action on regulatory issues that have been around for years. Rightly or wrongly, he added, politicians see only two causes for the financial crisis: corporate greed and lack of adequate regulation. So they are bent on fixing those problems.

Morgan said significant changes in the way corporations are governed are in the works in Congress and at the Securities and Exchange Commission (SEC):

  • “Say on pay” proxy votes and input from a federal “pay czar,” initially targeting financial companies that got bailouts, could be expanded by Congress to all public companies.
  • If say on pay spreads, institutional investors – many of whom lack the staff to examine every executive pay proposal – would outsource the research and perhaps the voting to RiskMetrics Group. RiskMetrics sells governance advice to companies, and chastises those who don’t measure up to its standards.
  • An SEC proxy access proposal to expand shareholders’ ability to nominate board members seems likely to take effect, and Congress could weigh in to expand the mandates. That would empower activist investors such as union pension funds to target companies for changes in governance.
  • An SEC change in Rule 452 to eliminate broker discretionary voting, starting January 2010, seems likely to disrupt voting of retail stockholders’ share.
  • Various proposals are kicking around Congress on board compensation committees, separating the CEO and chairman roles, requiring certification and training for directors, eliminating staggered boards and other issues.

What can companies do? Get senior management to reach out to Congress with the public-company viewpoint on proposals for federal intervention. Take pre-emptive action by implementing compensation and proxy access programs designed to enhance, rather than put a strangle hold on, good governance for companies.

Two good sources on legislative and regulatory changes are Jeff Morgan’s blog on NIRI.org and Broc Romanek’s blog at TheCorporateCounsel.net.

We’d better be watching Washington. Says Morgan: “Corporations are the lifeblood of America, and we’re doing things that are dangerous to those corporations.”

Bailout idea: Regulate Washington compensation

September 25, 2008

I’m all for taking action to add liquidity to markets that seize up – not to mention rescuing venerable financial firms if that’s the best way to keep the economy from going utterly in the tank for the rest of us.

But I’d like to offer an amendment, adding to the tweaks coming from Congress: How about a proviso that members of the Senate and House … as well as occupants of the White House, SEC and Federal Reserve chairmen, past or present … draw their pay or pensions in the form of mortgage-backed securities for the next few years ?

This might give the officials in Washington some incentive to deliver on that wishful thought, voiced by some, that taxpayers actually could come out ahead – rather than losing $700 billion – in the Treasury Department’s proposed big investment in illiquid assets.

(OK, this has nothing to do with investor relations. Good luck to all.)