Preferential tax treatment of fee income is a very bad idea. Imagine for a moment if real estate agents were able to convince Congress that they, too, should receive similar tax treatment of their fee based income. Pretty soon, every fee based business would want the same break. The ensuing chaos and likely damage to our fiscal health would be enormous. The capital gains tax was intended to reward investors for their risk in making long term capital investments. The carried interest giveaway only benefits fund managers.
If three guys own a small business and one of them decides he wants to cash out and sell his shares, and the remaining two owners offer to buy him out, should they be taxed for purchasing his shares? It makes no economic sense, but I suppose my first mistake was my illogical assumption that politicians would legislate tax laws that make economic sense.
Oh please -- if 10b-18s were all about removing excess shares from the market because of less need for the capital, you'd have a point. Buybacks are tax-avoidance -- artificially inflating 'share value' by messing with the denominator. If corporations want to take capital off the table so they aren't taxed (at far lower rates than individuals, even though they are now treated as 'individuals' by C-United), then they can do it the old-fashioned way and issue/increase dividends. One of the wage disparity disconnects occurred immediately after 10b-18s became a corporate wet dream after Reagan in the 80s. Friedman's postulation that the only stakeholder that matters is the 'owner' and McKinsey whispered in every BOD and C-suiter on how to 'optimize' profits to their own benefit. Add in unfettered buybacks - no company is going to bother with wage increases, or increases in R&D, or infrastructure -- just squeeze a company for the precious sake of the shareholder alone. There are other stakeholders: the employees, the customers, the vendors, the community. Buybacks don't make a company healthier, don't improve ANY of the other stakeholders (with what should be obvious positive returns to said company) -- it's a sham sold to brighten Wall Street alone.
I'm so glad to have this. I tried to forward your latest WSJ essay to a couple partisan friends who need to consider the great moderate word for framing policy discussions: trade-offs. They were paywall blocked. Now they can read it.
I finished your latest book, Ways & Means, a few weeks ago. I'm grateful for its lessons on our historical route to modern government and finance. I similarly enjoyed your Fed Reserve history.
I like to think I may be your longest standing fan. I corresponded a couple times with you back when you wrote you "Intrinsic Value" WSJ column more than twenty years ago. Your books and essays have made a real impact on me. Many thanks! Keep it coming--
Preferential tax treatment of fee income is a very bad idea. Imagine for a moment if real estate agents were able to convince Congress that they, too, should receive similar tax treatment of their fee based income. Pretty soon, every fee based business would want the same break. The ensuing chaos and likely damage to our fiscal health would be enormous. The capital gains tax was intended to reward investors for their risk in making long term capital investments. The carried interest giveaway only benefits fund managers.
Well said Mr. Lowenstein, couldn't agree more!
If three guys own a small business and one of them decides he wants to cash out and sell his shares, and the remaining two owners offer to buy him out, should they be taxed for purchasing his shares? It makes no economic sense, but I suppose my first mistake was my illogical assumption that politicians would legislate tax laws that make economic sense.
Oh please -- if 10b-18s were all about removing excess shares from the market because of less need for the capital, you'd have a point. Buybacks are tax-avoidance -- artificially inflating 'share value' by messing with the denominator. If corporations want to take capital off the table so they aren't taxed (at far lower rates than individuals, even though they are now treated as 'individuals' by C-United), then they can do it the old-fashioned way and issue/increase dividends. One of the wage disparity disconnects occurred immediately after 10b-18s became a corporate wet dream after Reagan in the 80s. Friedman's postulation that the only stakeholder that matters is the 'owner' and McKinsey whispered in every BOD and C-suiter on how to 'optimize' profits to their own benefit. Add in unfettered buybacks - no company is going to bother with wage increases, or increases in R&D, or infrastructure -- just squeeze a company for the precious sake of the shareholder alone. There are other stakeholders: the employees, the customers, the vendors, the community. Buybacks don't make a company healthier, don't improve ANY of the other stakeholders (with what should be obvious positive returns to said company) -- it's a sham sold to brighten Wall Street alone.
I'm so glad to have this. I tried to forward your latest WSJ essay to a couple partisan friends who need to consider the great moderate word for framing policy discussions: trade-offs. They were paywall blocked. Now they can read it.
I finished your latest book, Ways & Means, a few weeks ago. I'm grateful for its lessons on our historical route to modern government and finance. I similarly enjoyed your Fed Reserve history.
I like to think I may be your longest standing fan. I corresponded a couple times with you back when you wrote you "Intrinsic Value" WSJ column more than twenty years ago. Your books and essays have made a real impact on me. Many thanks! Keep it coming--
Roger: adding insult to injury didn’t Congress exempt the buy-backs tax on buybacks to immunize stock options?