SS While I loathe the uber-rich as much as the next peon, let's get a few things straight: (a) The wealthy are not stealing from you; (b) 100% of all wealth is either consumed or invested over time, creating a job for you; (c) rising income inequality is not associated with declining living standards (actually the opposite is true); and (d) as technology eliminates more blue collar jobs, the income gap will continue to grow. Yeppers.
Sunday at 10:25pm
SS "From 1986 until 2006, the total income tax share for the top 1 percent of income earners has consistently risen, from 25.75 percent in 1986 to 39.89 percent in 2006."
Sunday at 10:33pm
Edward Yang - I never met a poor person that offered me a job. As my business has qualified me to be in the top 5% of income earners, all I know is that based on the amount of taxes that I've paid this year, those 50% of Americans who don't pay income tax owe me a big thank you for subsidizing them.
Sunday at 10:41pm
SS - Don't hold your breath, Ed! But as a public servant whose salary is garnered from the sweat of your brow: Thank-you!
Sunday at 10:46pm
DC - Corp America is hording the most cash in history now yet they were before the meltdown too. They just wont spend while they send mfg' abroad. (not sending it over there now but they are not bringing it back) Tax Co's with foreign subsidiaries and tax the shit out of interest earned by co's with x amount in cash. Offer huge tax credits for mfg here and reinvestment into ur co. This will create job growth either way and offset the tech shift. While the rich are always smart enough to figure out how to win, their spending of the $ doesn't mean shit. It's Corporations that need to spend. Before you dispute, google and see how much cash these companies have. These companies need to be forced to spend. We have well over a decade trend showing they won't. Bama is not the reason either. They weren't spending before him! Taxing the rich isnt the answer! Taxing corps with x amount over y in earnings and/or foreign subs and mfg is. IMO
Monday at 5:09am
KK Dave - corporations do have a lot of cash on hand, but they also have loads of debt. In fact, the debt to cash ratio is not any better today than it was in the past. Most companies have taken on more debt at the lower rates in anticipation of rising rates. There are some companies that are loaded with cash such as Microsoft, Berkshire, Apple, JNJ, and Coke, but the historical cash percentage is in line with historical standards - http://www.ritholtz.com/blog/2010/12/looking-into-2011-everyone-is-bullish-on-stocks/
You are right corporate taxes need to be modified. We are punishing smaller US based companies at the expense of the big multi-nationals. Create a lower, flat rate for all profits so GE and MSFT is taxed the same as a small C corp. We will then see more money move in the US and not get parked as cash overseas. Plus, smaller companies will have more capital to invest, which will be spent here in the US.
Monday at 6:36am · Like
DC - companies had socked away $1.84 trillion in cash and other liquid assets as of the end of March, up 26% from a year earlier and the largest-ever increase in records going back to 1952. Cash made up about 7% of all company assets, including factories and financial investments, the highest level since 1963.
As the two charts below note, cash has been increasing on an absolute dollar basis (first chart) and also as a percentage of a company's debt level (second chart). For S&P 500 companies, debt has grown by 5.6% over the past two years whicle cash has grown by 42.6%. See link.... cash has steadily gone up every year since 2000 http://seekingalpha.com/article/210907-corporate-cash-levels-still-growing
Monday at 5:27pm
Edward Yang @DC, there's a good reason for all that cash: uncertainty. Companies do not like to hold onto that much cash as a rule of thumb, but neither are they going to begin hiring with all the regulatory uncertainty out there (Obamacare, EPA, etc.).
Monday at 8:00pm
DC @Edward, cash hording trends have been rising for well over a decade. They were rising during Bush while we were shutting factories sand outsourcing overseas. So companies didn't even spend the extra cash they made by cutting/outsourcing jobs. They rose during Bama. The big spike in hording is because of fear that was a result of the meltdown. The trend is up y/y. It's not uncertainty as there have been plenty of quite times. They just need incentives to spend. Buying a business for 40c on a dollar with a guaranteed 25% Y/Y ROIC isn't gonna happen with all this money out there. I say, force them to spend or we take it. I've worked on wall street for 15 years and I've never seen so many companies with cash that won't spend.
Monday at 8:17pm
DC @KK i was referring to pretty much any publicly traded company as they've all been able to generate lots of cash or tap the equity markets for it. Either way, they hord. Yes the small non-public entrepreneur suffers at the expense of the companies that can access wall street. it's primarily the public companies that shed the jobs or outsources anyway. How else can you keep eps rising at 20% y/y when your revs are only rising by 7%?
Monday at 8:21pm
Edward Yang @DC, yikes you'd make a good Third World dictator. No one has the power to force a private company to do anything, and if they choose to horde cash at near zero return on investment, that is their prerogative. By the way, a company doesn't exist to employ people. A company exists to make a profit.
Monday at 8:23pm
KK @DC: I would still like to see the chart excluding the handful of companies I previously mentioned. When you yank MSFT, JNJ, Berkshire, AAPL, and a couple other tech bellweathers the cash levels aren't egregious.
Even if they are, Edward seems to hit the point that companies only spend the money when they feel they can get a decent ROIC. They might fear legislative actions that could dampen their balance sheet. Or, maybe they fear another downturn with our ponzi finance system so they want liquidity as it will get them through the next mess.
Or maybe the cash will allow them to get the high priced hookers at the next company function. I don't know. I just don't feel good about forcing companies to spend the money or we take it. Sounds like China's banking system where the banks are told to lend without regard for the validity of the project.
Monday at 8:39pm
DC Incentivize is a better word vs force. But your wrong. No company should be allowed to move assets offshore, send its manufacturing overseas, cut jobs and hord cash. @ KK there are so so many companies out there with tens and hundreds of mil in cash. I just looked at 1/2 the companies I used to follow when I was an Institutional salesman. I also looked at companies that Sean used to write research on, and they are all still hording cash. If you want, go through the Balto SUn listed local companies and tally it up. To incentivize, you merely offer large tax credits to spend, create mfg, bring assets back. Of course you don't have to do anything if that's your prerogative @Edward, but you will pay more in taxes. Of course you have to find a way to levy only those that are doing what I said above and not hit the small companies who don;t. If these companies were spending in the last decade, we probably wouldn't have had the melt down as our economy would have expanded on an increase in mfg not leverage and air. Ooops we couldn't because China does it for us. With the $ dieing, our plants will slowly start to fire back up.
Yesterday at 5:10am
KK @DC - I agree that incentives need to be created. The biggest way to do this is through tax policy. Get the companies to bring back the money sitting overseas. It is hard to justify it though when health care costs, unions, labor, regulations are worse here than many emerging countries.
Another interesting conundrum is Bernanke is essentially telling companies that if they hire and the job market improves then, and only then, will he raise rates. So if a company hires/spends overseas and unemployment remains high here in the US, the company can get access to cheap capital.
Yesterday at 7:19am
Edward Yang @DC, no offense but I find your theory of economics both selective and dictatorial. Again, neither you or I or anyone has the right to tell a company what to do or how to do it. Further, I find it laughable that you think all that was needed to prevent the recent meltdown was companies not hoarding cash. You do realize the housing bubble was the biggest cause of the recession, right? The bubble was caused by artificially low rates pushed by Greenspan and continued by Bernake. Also caused by a meddling govt forcing banks to take on otherwise unqualified borrowers. Manufacturings decline has also been hastened by unions who has accelerated the need for companies to offshore to survive. Just look at the southern states which are thriving with right to work and car companies building plants there. For your brand of economics I suggest you try Venezuela. I mean, nationalization has worked out great there hasn't it? Oops...
Yesterday at 7:28am
SS I love it: three free market guys arguing about the best way to do a free market! If only America at-large were having this conversation, instead of how much more job creating risk capital to redistribute.
Just so you guys have a proper introduction: I went to the CG Academy with KK. I went to B-school with Ed. And DC was the best institutional sales I-banker I ever worked with.
Yesterday at 9:56am
Edward Yang I didn't realize confiscating private wealth or dictating to private companies how to spend their money was "free market" ;)
Yesterday at 10:02am · Like
DC @Edward, I worked for brokerage firms that wrapped and sold CDO's that created the bubble. I blame wall street over greenspan's policy. I knew it was going to be ugly before you even knew it was coming. I formed a company to buy distressed real estate prior in 2006 when you probably started your company. Let's see I started a company to buy distress real estate as the market was beginning to collapse and you started a public relations firm for publicly traded companies prior to an equity meltdown. Now that's laughable. Rates alone were not merely the cause. If companies were spending over the last decade then the economy would have expanded on substance not spending by consumers that were leveraging up due to artificially rising stock or house prices. Meanwhile their real income was falling for well over 10 years. The public sector pays more now-scary. 15 years on wall street treated me very well. I now own a company that does millions in sales and by the end of next year I will have well over 200 employees. I am a republican and I am 100% sure you are. I am not a tea bagger but I'd guess you are. I believe the politics and corporate structure for the last 10 years has not worked under neither president. I don't harp on the past. I look for solutions for the future. The rules on the field need to change. Either you spend through reinvestment and upgrades which create jobs and drive tax revs or you raise taxes to get there. Raising taxes alone is a mistake yet corps won't spend. So those that do get rewarded and those that don;t get a slightly higher tax rate than the lowest tax rate in history where we are now.
17 hours ago
SS You guys be nice!
16 hours ago
Edward Yang @DC, first of all your personal attacks are unbecoming. Why would you laugh that I went out and started a company? Yes, I left a cushy 6 figure job to pursue entrepreneurship. You may find it funny but I've doubled revenues every year for the past 3 years after a tough start, and I put food on my table for my wife and kid. Now THAT'S the American dream. I thrived during the worse economy of 30 years, and not from working the system as you have. So please, laugh away.
You admit Wall St was the problem, yet you profited handsomely from it. So I'd try to avoid taking the moral high ground if I were you. I'm glad you made a killing during 15 years on Wall St., bravo for you!
Finally I'm not sure what brand of a Republican you are, but if it looks like a RINO, and smells like a RINO.....
Conservativism by definition does NOT include your suggestions of state confiscation of wealth, nor does it include state direction of what a private company can or cannot do. I wouldn't appreciate the Feds tell me how to run my business, nor do I suspect would you.
I too look for solutions to the future, but unlike you my solutions don't include a desire for the govt to confiscate private wealth.
So maybe you should come out of the closet and just admit that you're a David Brooks/New York Times type left-leaning Republican in name.
15 hours ago
DC Come on @ED ... read ur comments prior to mine.. I believe it was you who launched the personal attacks. That said, you continue to insinuate that I am talking about confiscating public wealth when i never said that. Let me ask you this, in history every time there was a tax increase, which has been the american way, is that confiscating public wealth??? Because all I said is tax credits vs higher taxes! You've only been in biz since taxes have fallen every year. Well, wake up, taxes are going up to get us out of this hole we are in as a country. I am not saying it will work but lowering taxes like we have for the last 2 decades will not work again. So it can come out of your pocket directly or your small company directly or change the playing field for large cash rich companies with foreign subsidiaries. That's your choice of whats coming. And yes, compared to you and the rest of the tea party I must lean left but I stay open minded. No party is right on every issue! What makes parties pointless is people like you that simply go with everything their party favors. Think for yourself. You'll go further in life. That said, I'm proud to be a RINO. By the way, you keep complaining about everything and how this and that won't work. How about enlightening us on what you think will work!
14 hours ago
Edward Yang @DC, this is your quote " I say, force them to spend or we take it."
I'm assuming "we take it" means confiscation. And I never insinuated that you wanted to confiscate PUBLIC wealth, I said repeatedly PRIVATE wealth.
Another clue that you're a RINO, you think that increased revenue/taxation is the only answer without looking at the other side of the equation: spending.
Since 2008 we've been jacking up the federal budget by close to $1 trillion a year, and what did we get for it? Now Republicans are trying to cut a measly $100 billion and Democrats are screaming bloody murder. From George W to Obama our spending has been growing at an unsustainable rate. No amount of taxation is going to close that gap.
Solutions?
-cut spending, cut spending, cut spending. Roll it back to 2006 levels at the very least.
-close tax loopholes for corporations while at the same time cutting the corporate tax rate so companies like Google have less incentive to play the offshore shell games and end up only paying 2.8% taxes.
-move towards a flat consumption tax vs income tax. It makes no sense to punish productive producers with ever higher taxes while 50% of Americans not only do not pay any income tax but most get a "refund". When 1% pay 40% of federal income, you have a big problem; voters in the 50% who don't pay any taxes will continue to vote on increasing taxes on the "rich" because hey, no skin off their nose. A flat consumption tax could have the added benefit of doing away with the need for the IRS, saving tens of billions.
-repeal Obamacare, no more meddling from the EPA, no threats of more regulations and red tape. Businesses will start to hire and spend. In California where I live, they have a crazy $800 LLC annual fee PLUS a percentage for every $ over a certain threshold. This is in addition to state income tax. Talk about a disincentive for entrepreneurship.
-Lessen the power of unions; companies will set up shop and build things here without the threat of overly high wages and benefit packages that eventually led to the fall of steel, automotive and airline companies. There are articles out that talk about how companies are starting to build things here in the US vs China.
By the way, the Tea Party stands for smaller govt, less spending and more personal accountability. Which one of those 3 do you disagree with?
13 hours ago
DC @Ed if I said take it, i meant tax it. I told you that i am more towards the middle as opposed to the far right as you are. Your beliefs are totally what the far right side of the party say as well as the tea baggers. I believe in some of the positions by the dems and some by the reps. Thats why i feel now is the best time for a 3rd party. All the rep/tea baggers talk about is smaller gov yet when ever they are in office ethere is not loss of jobs just job shuffling. I do believe in less spending and smaller gov but that alone wont solve the issues. I am in the top top top 1% and my tax is on a scale basis- nobody pays 40% total. I have many tax legal shelters and I pay about 19% combined. Most americans pay less tax but avg hh income is 44k/yr and they pay healthcare costs of 10-14k/yr for a family. We have the highest poverty rate in all the developed countries. which is why something needs to be done with h/c but NOT what is on the table now. getting rid of it altogether is just stupid. unions suck but are slowly dissolving but not fast enough. We have so many empty factories in this country (not because of the unions) that will ramp again as the dollar is decimate deliberately to f*ck the chinese. I have 8 LLC's and i pay $300 each. Its the cost of doing business if you don;t want to be sued. Why dont; you avoid the $800 and establish a c corp? - because u want to avoid taking it in the arse personally. Worth the $800 or you can go by a 10m umbrella insurance policy for $5k? Ok, so we agree on a lot and disagree on some. Bottom line we need to face reality and that is higher taxes ARE coming so we need to figure out the past way to pass it on and in a way that will be least disruptive to the economy. Fed Healthcare IS coming so we need to figure out how it can work best while costing us the least. Flat tax will never happen and it won't work unless you want our poverty level to go even higher. F everybody and protect those who figured out how to make money is not the answer. You need low income employees as do I. l agree on everything you stated the tea party stands for EXCEPT what you left out is lower taxes which is what they emphasize the most. Btw, our personal and corporate tax rates are the lowest in history AND some studies have shown that the economy expanded at a faster rate when there was a slight uptick in taxes!!!!!!!!
about an hour ago
Edward Yang @DC No amount of higher taxes is going to close the budget gap especially if you add in the exploding entitlement obligations that we're on the hook for in the long term.
There's also no reason why we can't roll back spending to 2006 levels. Nothing has changed fundamentally that requires the govt to spend $1 trillion extra a year.
I, along with others, wouldn't mind the "shared sacrifice" of paying more taxes if it weren't so blatantly obvious that our dollars are wasted on stupid programs or just pure inefficiency. So let the citizen keep what they earned, and let them decide where to spend the money.
Our official corporate tax rate is still one of the highest in the developed world, especially if you factor in state taxes (about 40% blended).
By the way, if you're such a big proponent of higher taxes, I suggest you discard your tax shelters and pay that extra 21% that you proudly claim you avoided paying.
Or is it, "do as I say and not as I do"?
That's the one thing I've noticed with all those who call for higher taxes; they're never the ones to take the lead. In fact, there's also nothing stopping you from writing a check to the IRS to pay more than you owe.
