Closing Corporate Tax Loopholes Is Easier Said Than Done

Oct 15, 2011, 7:00 am EDT

Herman Cain’s surprising surge in the race for the GOP nomination this week can be at least partially attributed to the appeal of his 9-9-9 tax plan. Although he is short on specifics, the basic idea is to eliminate all special deductions and move to a flat corporate rate of 9%. Clearly, this former CEO has tapped into something widely appealing.

Democrats and Republicans do not appear to agree on anything in this caustic political season. However, both parties have supported the general idea of simplifying the corporate tax code to lower the rate.

On paper, U.S. corporations pay a very high rate of taxes as compared to their counterparts overseas. However, given the wide array of credits, deductions and subsidies (i.e. “loopholes”), many companies actually pay a low rate — or no tax at all. Creating a more simple and fair tax code seems commonsensical. But the details of such an endeavor probably are insurmountable. Read 

Derivatives – The $600 Trillion Time Bomb Set to Explode

Oct 14, 2011, 11:05 am EDT

Do you want to know the real reason banks aren’t lending and the PIIGS have control of the barnyard in Europe?

It’s because risk in the $600 trillion derivatives market isn’t evening out. To the contrary, it’s growing increasingly concentrated among a select few banks, especially here in the United States.

In 2009, five banks held 80% of derivatives in America. Now, just four banks hold a staggering 95.9% of U.S. derivatives, according to a recent report from the Office of the Currency Comptroller. Read 

9 Ways ‘Occupy Wall Street’ Completely Misses the Point

Oct 11, 2011, 8:34 am EDT
9 Ways ‘Occupy Wall Street’ Completely Misses the Point

The “Occupy Wall Street” movement is kicking up a lot of dust, and that cloud is growing. The protest apparently has spread to the nation’s capital, and to communities as far south as Florida and as far west as Oregon.

Americans are understandably frustrated with fat-cat CEOs and stagnant unemployment numbers, and they have decided to make their voices heard. But this Occupy Wall Street movement should seriously look at itself and ask what exactly it’s protesting — and to what end. Aside from taking shots at convenient targets and typical villains, these protests don’t seem to have much purpose.

That is not to say these folks don’t have a right to be angry. They should be. This also is not to say that Americans should sit back complacently while the economy continues to drift along listlessly. We should all push for change, and have a right to be heard. Read 

Why the Doc Fix Will Be the Next Casualty of the ‘Do-Nothing’ Congress

Oct 10, 2011, 7:00 am EDT

There is a looming bill of $300 billion over 10 years facing the American health care system. It is not paid for — not by people making a meager $250,000 or even a respectable $1 million. It will not be paid by snapping our fingers and repealing “ObamaCare.” The $1.2 trillion spending cut agreement this summer did not address it. If we pay the bill, it will be part of the deficit, no doubt about it. I refer, of course, to what is known as the “doc fix.”

Under current law, Medicare providers (i.e. doctors, nurses and hospitals who care for people over the age of 65) will see a cut of 29.5% in their reimbursement rate (read: a pay cut) on Jan. 1, 2012. A bit of (admittedly dull) background is in order:

Congress is charged with setting the reimbursement rate for Medicare providers. In the 1990s, a formula was agreed upon by President Bill Clinton and Congress that soon proved to be wrong — and actually cut provider payments significantly. No one wanted doctors to experience a sudden financial shock and be incentivized to close their doors to new Medicare patients. So, Congress routinely began to pass what’s known as the doc fix, which prevents massive cuts to providers. Read 

‘Rich’ Is a Difficult Definition to Pin Down

Oct 5, 2011, 3:52 pm EDT

We all knew that President Barack Obama would have trouble passing the American Jobs Act. But the political drama has taken an interesting turn. Apparently some Senate Democrats have balked at Obama’s strategy to pay for the legislation by raising taxes on households making more than $250,000 per year.

Senate Majority Leader Harry Reid, D-Nev., apparently is drumming up a plan to pay for the jobs bill with a 5% surtax on incomes of more than $1 million per year. Democratic senators from high-income states (i.e. New York, New Jersey and California) have privately objected that the $250,000 income threshold is much too low and would affect too many households in their states. While Reid’s plan has no chance of being written into law, it does underscore the increased salience of class politics. (“Class warfare” just seems a little to extreme to me.)

Do these senators have a point? Yes and no. Of course, the cost of living varies widely among different regions and cities. For example, a $250,000-per-year salary in Birmingham, Ala., translates to $595,814 per year in Manhattan. Read 

Germany Making Greece an Example to Euro Zone Nations

Oct 4, 2011, 2:19 pm EDT

So far, 2011 has unfolded like a crash course in ancient history. First, the Mubarak Dynasty in Egypt fell, then the civilization of Greece collapsed. Now, the Huns from Germany threaten the Roman Empire.

Most analysts already have priced a collapse of Greek sovereign debt into the price of the euro and European stocks. But Greece is a relatively small economy. Italy is a different story. European banks are loaded with Italian debt, so European stock markets will remain very sensitive to the fate of Italy.

The good news is that, last week, German Chancellor Angela Merkel’s ruling coalition overwhelmingly voted in favor of a bill to boost the European Financial Stability Facility, effectively forestalling the sovereign debt crisis for now. At home, German aid to Greece is not politically popular, but the whole idea behind the creation of the euro in the 1990s came from Germany, which placed severe budget constraints on member nations. That means Germany will continue to help those countries that pledge austerity and discipline. Read 

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