Tuesday, August 27, 2013

The Philanthropreneurs

Could  profit-making entities do better than charities to serve some areas of the public good? Bruce Bartlett touches upon the question in his second discussion of the charitable deduction. (Jim Gust linked to the first installment here.)

Philanthropreneurs have made news lately. Jeff Bezos has bought The Washington Post, Red Sox owner Paul Henry has agreed to nurture The Boston Globe, and hedge-fund tycoon John A. Paulson has rescued the venerable Steinway piano company. Their common goal: preservation and enhancement of organizations that contribute more to society than they are likely to earn in profits.

A pioneer philanthropreneur was Paul Newmen. A generation ago he began to market a commercial version of his home-made salad dressing, pledging to give away all profits. Now vastly expanded, Newman's Own has generated hundreds of millions of dollars for charity.

Say, there's an idea . . . . What if Jeff Bezos sold digital WP subscriptions to Amazon customers with the promise that once the subscriber base reached a certain level, all profits earned would be plowed into additional good works?

Sunday, August 25, 2013

Muriel Siebert: “It Was 1,365 Men and Me”

Muriel Siebert, a Determined Trailblazer for Women on Wall Street, Dies at 80

J. D. Salinger 2.0?

More stories about the Glass family, and the Caulfields, and World War II? Oh my!

According the the creator of a upcoming documentary film and companion book on J. D. Salinger, the reclusive writer authorized the posthumous publication of never-seen short stories, a World War II novel and a volume devoted to Hindu philosophy. The NY Times reports that the first new Salinger book is supposed to appear in 2015.

Were Salinger's alleged instructions reflected in the values listed for his unpublished works on his federal estate tax return? Has the IRS OK'd these values? Stay tuned.

Thursday, August 22, 2013

Brooke Astor's Son Released From Jail

Imprisoned in June, Anthony Marshall has been granted medical parole. According to The Daily News, the Manhattan District Attorney's office is not amused.

50 Wealthiest Members of Congress

Looking for wealth to manage? Try Capitol Hill. Some members of Congress have made big money, others have inherited big money, still others married big money. The Hill lists the top 50.

Wednesday, August 21, 2013

IRS: Michael Jackson Was Really Rich

It figures: The IRS wants a lot more federal estate tax from Michael Jackson's estate, leading to a fight in tax court. Contested valuations involve, among other estate assets, a Bentley and Jackson's "image and likeness."

Neither the estate's nor the IRS's valuation of the estate is reported, but Jackson's post-mortem earning power has proved strong. His estate took in $170 million in 2011 and $145 million in 2012. No living singer did as well.

Tuesday, August 20, 2013

Charitable deduction, pro and con

Bruce Bartlett lays out the arguments.

Personally, as I've state many times, I believe that the charitable deduction and tax-exempt statuses of all kinds have to be eliminated.  They are grossly unfair.

Monday, August 12, 2013

Burnishing the Image of Wealth Managers, 1963

Fifty years ago, stockbrokers didn't always get much respect. "My broker?" you can almost hear Mad Men's Roger Sterling ask, "You mean the guy who churns my account to pay for his yacht?"

Merrill Lynch promoted a classier image. The wire house wanted its registered reps to be seen as gentlemen and scholars.

Brooks Brothers suits provided the gent look. Weekly columns in newspapers and The New Yorker created a scholarly aura. This one calls on an English clergyman from a couple of centuries ago to endorse the notion that a little greed is good.
Buy-side wealth managers (a term unused if not unknown in 1963) at bank trust divisions had their own image problems: Stuffy. Dull as ditch water. Not really with it.

To promote the feeling that trust officers were regular fellows, the copywriters for Chase Manhattan's nest egg ads adopted an unbankerly informality. What bank today would describe its trust staff as "eagle-eyed and rock steady?"

Serendipitously, this ad fits nicely with the current meteor showers we're enjoying.

Saturday, August 10, 2013

Living Like a Millionaire, on $30,000

The campaign by fast-food workers for higher pay, like $15 an hour, leads to a striking comparison.

Assuming full-time employment (perhaps a stretch in the case of fast-food jobs) $15 an hour produces an annual income of about $30,000.

Using Tiger 21's rule of thumb, a millionaire – that is, someone with investable assets of $1 million – should spend no more than 3% a year. Result: an annual income of $30,000.

Related posts
Millionaires Aren’t What They Used To Be

Thursday, August 08, 2013

Two Tax Breaks Too Big to Cancel

We'd all like a simpler, fairer federal income tax. We all cherish our tax breaks. Stalemate!

Guess tax reform will have to wait a while.

In the meantime, Bruce Bartlett has launched a helpful series of Economix posts, explaining how the major "tax expenditures" came to be.

Employer-provided health insurance is the most generous federal income tax break by far. Did you know the exclusion dates back to 1918? Health insurance was a rarity back then because medical expenses (no antibiotics, no artificial joints, no stenting procedures like that performed on George W. Bush) were low. Besides, few Americans needed tax breaks. In 1940 only about 3 percent of the population paid income tax.

During WWII employers started offering health insurance as a way to get around wage controls. When high tax rates persisted after the war, the popularity of the exclusion solidified.

Eliminating the tax break for health insurance, Bartlett points out, would save more than enough to pay all the interest on our National Debt.  Don't hold your breath.

Mortgage interest deduction. The deduction for interest paid on home mortgages has no redeeming virtues. Without it, say economists, the net cost of acquiring a home would remain about the same. The deduction itself is something of a fluke – the sole survivor from times gone by, when interest on all personal borrowing was deductible as the equivalent of a business expense.

One argument for preserving the deduction only for mortgage interest was that Americans weren't saving enough. By buying a home and paying off the mortgage, they would have less expense and more security in retirement. But even if the deduction mildly encourages home buyership, it surely discourages outright ownership. With the rampant use of tax-favored home-equity loans and refinancings, goodbye equity buildup! And in too many cases, goodbye retirement security.

The clean slate approach to tax reform sounds good in theory. In practice all tax expenditures can claim to "help grow the economy, make the tax code fairer, or effectively promote other important policy objectives."

Here's a better approach: Eliminate all tax breaks for some taxpayers unless it can be shown that the result is not unfair to other taxpayers.

Monday, August 05, 2013

Wall Street's Fungal Creep

Heidi Moore's tirade against the push to advertise hedge funds may be a bit over the top, but she does have a way with words:
For most people in the US, Wall Street is not an everyday concept. It's more like a haunted Victorian mansion on the edge of town where your 401(k) retirement plan lives: it takes a long time to understand how to get there and you're pretty sure something's not right about it, but you're too scared to get close enough to check. ***
As you might expect, that's an illusion. Wall Street is in your backyard … in your schools and roads … in your bank account, charging you fees on your checking account ;…[and] in your driveway, where your car sleeps as you pay off your auto loan – a debt that has already been sliced and diced and sold to a trader at a bank somewhere. ***As a result, Wall Street is not so much like a haunted Victorian mansion as a quiet, creeping fungus right where you live: it grows fast and takes root everywhere, silently.
Moore may be right about the targeting of seven-figure 401(k) balances. Still, Wall Street already markets 10,000 mutual funds and a thousand or more exchange-traded funds. The 8,000 or so hedge funds, most of which underperform the S&P, will have plenty of competition.

One quibble: Contrary to Moore's assumption, the U.S. has nowhere near nine million millionaires. We have about nine million millionaire households. The number of individuals with investable assets of $1 million or more is closer to three million.