Thursday, May 27, 2010

Real tax burdens

Via the Tax Prof Blog, the Tax Foundation reports upon projected tax burdens under "pre-Bush," "Bush" and "Obama" tax regimes.  My question: Why isn't "pre-Bush" called "Clinton"?

Note in particular the effective tax rates at various income levels.  The "tax cuts for the rich" don't look nearly so dramatic as many politicians have made them sound. Married couple, two earners, no kids, $500,000 of income. Effective income tax rates:  Clinton, 26.0%, Bush, 24.8%, Obama, 26.1%. 

In fact, the Bush tax cuts for the middle class look rather more dramatic.  Married, one earner, two kids, $50,000 of income. Clinton, 5.7%, Bush, 1.4%, Obama, 0.6%.  That's four percentage points, nearly a 75% reduction, from the Bush tax cuts for this family.

Note that the table does not include the new Medicare taxes on high incomes.

What’s More Important Than Investment Performance?

Tax planning. "If you can save on taxes, that almost means more than any amount of investment performance…." See Barclays Wealth sees scramble on U.S. tax burden.

Speaking of Barclays, see also Wealthy clients looking for plans they can trust:
A report from Barclays Wealth this week found that nearly half of U.S. high-net-worth investors are reviewing their portfolios more than they were before the recession, and nearly a quarter are now spending more than five hours a week actively investing their money.

Wednesday, May 26, 2010

Beautiful, Beautiful Tax Havens

Taxes are almost certainly rising next year, on both sides of the Atlantic. In aid of wealth managers and their clients, the U.K.'s Telegraph offers this alluring slide show of tax havens.

Shown below, the Channel Islands, where there is no capital gains tax, inheritance tax, gift tax, estate duty, purchase tax (VAT) or wealth tax. Beautiful!

Tuesday, May 25, 2010

The Nesting Instinct in Trust Advertising

Does an empty nest symbolize last year's investment opportunities to you? It did for Fiduciary Trust Company's copy writer six decades ago:

Later in the 1950's, Chase Manhattan famously focused on what really mattered: not the nest but the nest egg! This example appeared in The New Yorker just fifty years ago.

Times haven't changed much, have they? High on the list of today's wealth-management prospects are empty nesters and people who can afford to mess around with horses.

Monday, May 24, 2010

ABC on Estate Planning

See Estate Planning 101: Inheritance Nightmares Cost Money, Love and the accompanying video clip from ABC News. Which is more painful for family members, taxes or hurt feelings?

Friday, May 21, 2010

When the Financial World Shrank

In 1958 BOAC launched transatlantic jet airliner service. Banks and other businesses started thinking globally. Among the enthusiasts was Irving Trust. The Irving called attention to its global banking aspirations with a series of colorful ads, including this one from just fifty years ago.

Picture similar traditional costumes on children of the world. Disney did, and the result opened in the Pepsi pavilion at the 1964 World's Fair: "It's a small world after all, it's a small world after all . . ."

In today's global village, businesses large and small routinely operate internationally. Yet the financial side of global life remains inefficient, cumbersome and expensive.

How come a credit card issuer considers it business as usual to charge me an extra three percent if I'm rash enough to charge something in pounds or pesos?

How come the Euro Bloc can't seem to keep its act together?

Shouldn't we be able to do better in the 21st century?

Wednesday, May 19, 2010


Senator Jon Kyl thought he had a deal for  an inflation-indexed $5 million estate tax exemption and a 35% tax rate.  After he made the announcement, the Democratic caucus fought back.  Here's today's news, reported by Tax Notes, from Finance Committee Chairman Baucus:

"There's no agreement on the estate tax on either the substance or process. None whatsoever," Baucus told reporters. 

Tuesday, May 18, 2010

One State's Estate-Tax Quandary

If a state seeks to attract wealthy retirees by repealing the rule against perpetuities, should it now risk repelling them by levying an estate tax?

What about the state's old "sponge" estate tax, designed to soak up the dollars available back when the federal estate tax offered a credit for state taxes paid? Repeal it, or wait to see if the sponge starts working again? That old federal estate tax could return on January 1.

Here three estate planning attorneys discuss such questions as they apply to New Hampshire. Other states presumably face similar quandaries.

Monday, May 17, 2010

A very inconvenient truth

Tax rates don't seem to matter. The tax base doesn't seem to matter. In the modern age, federal receipts don't go higher 20%, writes David Ranson in today's Wall Street Journal. He makes a good case for not taking too seriously the CBO's forecasting for the revenue consequences of tax rate and rule changes.

On the other hand, I expect that some of these changes could the prices of stocks and bonds.

I may need a new approach to headlines

In Taylor Momsen Did Not Write This Headline David Carr discusses the modern evolution of headlines, driven by the imperatives of search engine optimization.

But I am less interested in hits for the sake of  hits, more in getting something valuable from web discourse.  How does that get measured?

Thursday, May 13, 2010

Fraud Alert


What will Internet con artists think of next? Investment News reports a fraud alert concerning an SEC soundalike calling itself, among other names, the U.S. Securities Administration.

What happens when a home-buyer tax credit expires?

Mortgage applications fall almost 10%, and prices weaken.

We should not be surprised by this development.

Wednesday, May 12, 2010

A Bad News, Good News Tax Bill?

If tax legislation goes as planned, couples making more than $250,000 a year will see their income taxes rise when other Bush tax cuts are extended. Senate Finance Chairman Max Baucus (D-Mont.) has in idea for making that income tax hike more palatable, The Hill's On Your Money reports. The extender bill will include a new, gentler federal estate tax. Thus, upper-income taxpayers will no longer face the risk of having their estates chewed up by the harsh old estate tax now scheduled for 2011.

How happy will this make upper-income taxpayers? Outbreaks of dancing in the street seem unlikely.

Tuesday, May 11, 2010

Michael Crichton‘s Last Best Seller?

At Christie's the Jasper Johns "Flag" painting from the estate of author Michael Crichton sold for $28.6 million. That's a record auction price for a work by Johns.

Related post: Michael Crichton's Art Collection.

Estate taxes on TV

TaxProf blog has links and comment.

I did not see the episode of Law and Order, but I'll see if I can punch it up on Hulu tonight.

Saturday, May 08, 2010

Estate Tax: Pay Now, Die Later?

Somebody in Congress thinks people should have the option of prepaying their estate tax, according to this post from The Hill's On the Money blog. See also the comment on the "goofy proposal."

Not completely goofy, perhaps. Some well-heeled folks actually are prepaying income tax on their IRAs, via conversions to Roth IRAs.

So far, Congress seems in no hurry to reinstate the estate tax in any form. Meanwhile, thanks to carry-over basis for computing capital gain, the death tax lives for the heir who must sell assets.

Thursday, May 06, 2010

“Complexities?” Bad! “Simple and Secure?” Good!

My favorite blog begins its May 5, 1931 post with the WSJ obituary of George F. Baker, "dean of U.S. bankers," dead at 91.

George Fisher Baker started his financial career at age 16, served in the Union army, co-founded one of the forerunners of Citibank at age 23, and advised the Lincoln administration on banking matters. He ultimately became twice (or was it ten times?) as rich as J.P. Morgan, depending on who was counting.

If Mr. Baker had been around in recent years, it seems safe to say he would not have been a synthetic-CDO type of banker. The WSJ observes:
It is not without meaning that one of the largest and strongest of the world's banking institutions was the creation of a man who cared so little for complexities and so much for what was simple and secure.
Been to a game at Columbia's Baker Field? That's this Baker. Admired Dartmouth's Baker Memorial Library? Ditto. He also was largely responsible for funding a business school at Harvard. Read a 1924 Time write-up of Baker here.

For his daughter's wedding, Baker ordered a 1929 LaBaron Pierce Arrow
with an especially high roof, to accommodate his top hat.
Photo via Wikipedia

A Classic Ad from 1985

Inflation was down and the stock market was up a quarter-century ago. That probably explains Morgan's braggadocious reference to investment results in the ad below.

Note what was then a cutting-edge innovation: no logo, just the bank name in plain type matched to the headline. Wasn't even the bank name, actually. You had to read to the last paragraph of the body copy for that: Morgan Guaranty Trust Company.

Wednesday, May 05, 2010

Continuing Education

Thanks to numerous universities and centralized access points such as iTunes U., it's easy to continue your education for free.

Seek better understanding of the financial markets? Try the lectures offered by Yale's Robert J. Shiller.

Need to market private banking or wealth management in the Far East? Gain familiarity with Chinese and Japanese mindsets with the help of M.I.T.'s acclaimed Visualizing Cultures.

Monday, May 03, 2010

New date for federal estate tax reform: June

Last December, when the federal estate tax was about to expire, legislative leaders promised to restore it retroactively, promptly after the first of the year.  To me, that meant February at the latest.  Boy, was I wrong.

Today, according to Dow Jones, the Senate Majority Leader says he expects the estate tax to be discussed in the House Ways and Means Committee in June.  So, best case scenario, they might revise the federal estate tax by the August recess.  The longer they wait, the more indefensible a retroactive change becomes.  Not that the Congresspeople actually care about that.

Estate tax reform will be folded into the decisions on what to do about the Bush tax cuts as they expire at year end.  This will probably not be pretty.

Old Conventional Wisdom:  Congress will never the estate tax expire, not even for a single year.

New Conventional Wisdom:  Get ready for the $1 million federal estate tax exempt amount in 2011.  And the 55% top rates (60% for those in the bubble).

Trust industry is booming

So reports Scott Martin, at The Trust Advisor Blog.  Fee income is up for departments of all sizes, with some experiencing growth in the 20% to 25% range.  Referrals and existing clients bringing more of their assets to the trust department get the credit.

Can You Create a Halo?

While Jim Gust was keyboarding the post below, Apple was selling its one millionth iPad!

And that's not the best news for Apple. Buyers of iPhones and such are coming back to buy Macs, thanks to Apple's famous halo effect. They must be telling their brothers and their sisters and their cousins and their aunts to buy Macs as well. In Apple's last quarter, sales of Macs rose 33 percent. Sales of desktops (the kind nobody was supposed to be buying anymore) rose about 40 percent!

Halos are rare in the financial-services sector. More common, unfortunately, is the bad-odor effect. After a megabank repeatedly smacks Jane Q. Public with exorbitant late fees, obscene overdraft fees, etc., she may survive and even prosper. But when Jane does, I bet she won't hold her nose and turn to that megabank for help with investments or estate planning.

Smaller trust companies and advisory firms stand a better chance of creating a halo. Can you figure out a way to offer services meeting the standard set by Apple's Steve Jobs, "insanely great"? If you can, your clients will not only give you more of their wealth to manage, they'll also refer you to their brothers and their sisters and their uncles and their aunts.