"Seven of the eight candidates running in the June primary in the 1st Congressional District participated in Monday evening's forum in the Chico City Council chambers. . .
One question the candidates were asked was if they believed in 'human-caused climate change.'
Reed said he did and that virtually all the science shows there's no doubt about it.
Cheadle said he thought to some degree humans had caused global warming.
LaMalfa, Aanestad and Arrowsmith all said they didn't believe in it.
"Rep. Wally Herger’s Jan. 10 announcement that he would not seek re-election to Congress, where he’s served since 1978, has resulted in eight candidates filing to run for what is now, following redistricting, the 1st District seat.Seven of those candidates took part in a question-and-answer forum on Monday (May 7) in the Chico City Council chambers hosted by the League of Women Voters. . . .
The question, 'Do you believe there’s such a thing as human-caused climate change?' elicited a range of responses. . . .
Reed was the only on who said he believes in climate change: 'I started out as an electrical engineer, so that gives me great respect for science and scientists,' he said. 'This is not even a controversial issue anymore. The top scientists have concluded that global warming is man-made.'"
I keep hearing the same story about the wealthy paying most of the taxes and how it is a misrepresentation to say that there is an unfair tax burden on the middle class.
It is true that wealthy people like Mitt Romney pay millions of dollars more in taxes than the average middle class taxpayer, but he is paying income taxes at a 15 percent rate when a single hard working taxpayer is paying at a rate of at least 25 percent on money earned above $34,500. The problem is that stock market income, dividends and capital gains are taxed at a flat 15 percent no matter how much income is received, while people working for a living are taxed with a progressive rate that tops out at 35 percent. Over 13,000 people for the year 2009 reported at least $10 million in income on their tax returns. Most of that income was from investments and was taxed at 15 percent. Yes, 15 percent of $10 million is more dollars than 25 percent of $50,000, but is that fair?
To be fair we must also look at the payroll tax that pays for Social Security and Medicare. Of the total revenue the U.S. Government receives, 41 percent comes from individual income taxes and 40 percent from the payroll tax. The payroll tax, which is matched by the employer, normally is 7.65 percent of an employee’s pay check (FICA) up to $110,000 in a single year. Once an employee earns $110,000, no further FICA deductions are taken from the pay check; this limit is known as the cap. There is no payroll tax on investment income. Of total revenue received by our government, nearly an equal amount comes from the payroll tax as the individual income tax, but the wealthy pay a disproportionately small part of the payroll tax, a tax that falls mostly on the hard working middle class.
Using dollars to argue the wealthy 1 percent are being treated fairly in our tax system distorts the overall picture. A single working person earning more than $34,500 is paying at least 10 percent more in income taxes and 7.65 percent in payroll taxes than the 1 percent who are living off their investment income.
2/12/2012 San Francisco Chronicle by Leland H. Faust We should tax capital gains at higher rate (This article is used with permission of the author but is not an endorsement.)
Who wouldn't want the kind of tax treatment that presidential hopeful Mitt Romney received? His tax returns show that as a former partner at Bain Capital, a major private equity firm, he saved about $1.4 million in taxes in 2010 alone, thanks to a commonly used tax break.
Like other managers of private equity firms and hedge funds, Romney got part of his compensation as a share of profits. Because these managers are not paid this until profits are earned and because they do not invest their own money, the term "carried interest" is used to describe what they own. A carried interest held for more than one year is taxed as long-term capital gains (at a rate of 15 percent) rather than as ordinary income (at a rate of 35 percent for top earners).
The long-term capital gains rate is intended to encourage investment. But these managers are not investors risking their own capital to get their carried interest. They simply provide services.
Supporters of the 15 percent rate for carried interests claim the managers do take risks. In reality, they risk nothing except their time, and for that they routinely receive handsome, sometimes extravagant, annual management fees.
How bad can it get? Public filings of the Carlyle Group, another huge private equity firm, revealed that the three founders recently made $414 million from their carried interests. This income, too, was subject to tax at the 15 percent capital gains rate, thereby providing a windfall of $83 million in lower federal income taxes.
Think of it this way: Waiters are paid a base salary and receive tips for good service. Private equity and hedge fund managers are paid a management fee and receive a carried interest for good service (profits). Why in one case is the reward for good service taxed as ordinary income and in the other as capital gains? The fact that the carried interest gets paid later should not magically transform its tax character. No matter what spin the private equity managers try to put on this issue, carried interests are, pure and simple, a form of compensation for services.
I must admit that I have personally enjoyed the same tax break. All quite legal. Was I happy to save 20 percent in taxes? You bet. Was there any economic or social justification for this windfall? None whatsoever. Should Congress change the law to end this favored tax treatment and raise needed revenue? Absolutely. Here's why.
1. Inequity Wealthy managers may pay federal tax at a rate lower than that of their own secretaries. A secretary earning $50,000 per year also pays $725 into Medicare. Hedge fund managers making more than $2 billion a year from carried interests pay nothing into Medicare.
2. Less confidence in tax system We have long fostered a progressive tax code, that is, the idea that those who make more can afford to pay more. Is it fair then for the wealthy - Romney or the Carlyle Group - to pay at a lower rate? Capital gains taxation at lower rates makes sense for those (including managers) who risk their capital. In private equity deals, however, only the investors are at risk. The managers have no skin in the game for their carried interests and should not be treated as if they do.
3. Political deals In 2007, the U.S. House of Representatives passed a bill to fix this problem. Senate Democrats, led by Sen. Chuck Schumer of New York, came to the rescue of the hedge fund and private equity managers and killed the bill. He protected his wealthy constituents on Wall Street at the expense of those on Main Street. Good news. Schumer apparently now sees his error and accepts the need to eliminate this tax break.
4. No social good Our tax code often creates incentives to encourage desired activity. There are deductions for teachers, benefits to encourage research, and breaks for oil exploration. We don't need a special break for carried interests to encourage capital formation or to keep the talent. Does anyone believe the partners in Carlyle would have sat on their hands if they could keep only $268 million after taxes instead of $351 million? If those guys need more incentive, they should ask for a raise, not a handout from taxpayers.
5. Substantial lost tax revenue In 2009 and 2010, the top 25 highest-paid hedge fund managers collectively earned about $25 billion annually. If only half of their compensation were taxed at 15 percent, then the loss in federal tax revenues would be about $2.5 billion per year. And that's from just 25 lucky winners. Then add in what's lost on their Medicare contributions, about $750 million per year. It is not a stretch to conclude that the cost of lost income and Medicare taxes from all private equity and hedge fund managers could easily exceed $10 billion each year.
Republican or Democrat, rich or poor, all Americans should be outraged that the wealthiest among us get such a needless tax break.
Thanks to Romney and the Carlyle Group for illustrating so clearly that taxing income from carried interests as capital gains is indeed a "capital crime."
Leland H. Faust is a Harvard-trained tax lawyer who for 30 years was certified as a tax specialist by the State Bar of California.
As luck would have it — and entirely by accident — we shared a table with Jim Reed and his wife Carol at breakfast this morning at the Nevada County Democratic Women’s Club meeting at the Trolley Junction restaurant in Nevada City. Jim was there to address the meeting, as part of his campaign to represent the newly re-mapped 1st Congressional District.
First impressions are often quite telling, and our first impression of Jim and Carol was of two proud parents of a grown daughter whose fiancé had recently proposed to her in Paris! They were so excited, as if nothing was more important to them today than this beautiful family matter. These are two people after our own hearts, whose priorities are much like our own. We shared some stories of our grown children, before getting down to matters of state... 12/29/2011 San Francisco Chronicle by Leland H. Faust Wall Street is a raw deal for the 100 percent (This article is used with permission of the author but is not an endorsement.)
"The stunning reality is that five years into the financial meltdown, it's business as usual on Wall Street - outlandish rewards for insiders with downside for almost everyone else. Occupy Wall Street protesters are right - something is wrong - but they're not sure what. Here's what I say: A rigged game affects not just the 99 percent, but everyone, and with global repercussions.
I recently had a chance to explain these problems on "Street Soldiers," a radio program devoted to keeping inner-city residents "alive and free." It's not the usual forum for an independent investment adviser who has managed more than $1.5 billion in assets for clients from the 1 percent. The radio show host wanted his listeners to hear from a Wall Street "soldier" who had broken ranks to publicly challenge his industry's out-of-control practices. Maybe I could explain what is wrong on Wall Street and why CEOs get eight-figure bonuses while hardworking Americans lose their homes and jobs.Make no mistake - as I told the listeners - I'm a hard-core capitalist. But capitalism has been hijacked, and I'm infuriated. For capitalism to work, people who assume risk should reap the rewards of success, but they also must suffer when losses occur.
If you're unconvinced, let's revisit the latest debacle - the implosion of yet another Wall Street darling, MF Global. The fallout of its bad bets on European bonds is hitting home hard, even in rural America, where many of its agricultural customers work. As the eighth-largest bankruptcy filing in U.S. history, MF Global represents just about everything that is wrong on Wall Street.
1. The cult of a Wall Street superstar: In 2010, Jon Corzine, the former chairman of Goldman Sachs and former governor of New Jersey, became CEO of MF Global. His goal was to transform the little-known futures broker into a powerhouse investment bank. It took him only 19 months to blow up an institution that dates back to 1793.
2. Gambling disguised as investing: Speculation ruled, once Corzine got going. MF was not after long-term returns but an immediate killing. In the midst of the euro crisis, it made an astonishing $6.3 billion bet on European bonds. But the bonds declined, putting the company's very existence on the line and taking down its customers too.
3. The bail-me-out syndrome: MF's management must have thought there was no way it could lose because surely the Europeans would bail out the weaker countries so they wouldn't default on the bonds. Imagine MF's shock when the huge bailouts didn't materialize.
4. Enormous conflicts of interest: The Commodity Futures Trading Commission, chaired by a former Corzine colleague at Goldman Sachs, was supposed to ensure that MF kept customer funds segregated from the firm's own investments. But apparently, the commission didn't act when signs of trouble first appeared or start enforcing restrictions until $1.2 billion had vanished from customer accounts.
5. Leverage on a grand scale: Some investment banks scaled back their borrowing after the financial meltdown, but not MF Global. It continued leveraged investments at pre-2008 levels - reportedly at a rate of 40 to 1. Excessive borrowing allowed management to go for the big score, but proved fatal when the markets moved against MF's bets, requiring more collateral.
6. Failure of regulators and the reform law: Where was the oversight by the Securities and Exchange Commission, the CFTC and FINRA, the largest independent regulator of security firms? Reforms such as the Sarbanes-Oxley and Dodd-Frank protection laws had no effect.
7. Misappropriation of client funds: Investigators want to know how MF tapped clients' segregated accounts for $1.2 billion to cover its financial losses. After it declared bankruptcy, 33,000 clients found their accounts frozen. How would you like that in today's volatile markets? Shouldn't someone do jail time instead of getting a slap-on-the-wrist fine?
8. Worthless rating agencies: Post-meltdown, it's the same old game - investment firms hire rating agencies to rate their own debt. In August, MF was rated a good investment. Within 60 days, the firm declared bankruptcy.
9. Golden parachutes soaring high: Corzine didn't risk much of his money on MF stock, but he received lots of stock options. Later, after taking home compensation of $14.25 million in 2010, he voluntarily declined his $12 million golden parachute. Why is he entitled to anything extra for leadership that resulted directly in bankruptcy?
10. Breakdown of morality: Even if something is legal, that doesn't mean it is right. MF's management crossed the line for their own potential gain - putting personal interest ahead of protecting shareholders and customers.
Wall Street will keep sucking huge sums out of our economy and putting 100 percent of us at risk unless the rules change. Stiff jail time if you cheat or steal. Whopping personal fines paid by wrongdoers, not their corporations. Fireproof walls that protect customers from a firm's risky bets. Most important, we must stop gambling and start investing again to build valuable companies. Unless we take back Wall Street and restore true capitalism, we're living with a time bomb. The next crisis will make 2008 look like a warm-up.
Imagine how big the Occupy camps will be if that happens."
Leland H. Faust, a principal with CSI Capital Management, is a San Francisco investment adviser.
"2011 was the year of the dysfunctional Congress. Just keeping the government running was a partisan battle with each side more interested in scoring points than accomplishing anything. Congress did less in 2011 that any year in memory. But at least the hated "earmark," funding for some congressman's pet project attached to a legislative bill that had nothing to do with it, was eliminated.Then as the year ended, Republican members of the House decided to revive the earmark. Both parties agreed that the country needed to have the payroll-tax holiday extended, unemployment benefits extended and the scheduled reduction in fees Medicare pays doctors delayed. As expected the parties fought over how to pay for it.
The newer members of the House of Representatives would only agree, however, if an earmark was added to the bill funding a pipeline to bring oil from Canada to the Gulf Coast refineries. They knew that Democrats would not agree to this earmark because of environmental concerns, but the question has to be asked why they were willing to sacrifice their only shining accomplishment and use an earmark to make a political point.
Finally, the Senate reached a bipartisan agreement to extend these benefits for two months to provide enough time to figure it out. The House grudgingly went along after adding a provision requiring the Obama administration to determine within the two months whether it would support the pipeline or not. The stage is set to fight this out again in February.
It is important for us in the western United States who are concerned with our underperforming economy to know that if the pipeline through the middle of the U.S. is not built, it will be built instead through Canada to the West Coast so that the oil can be refined in existing U.S. refineries in Washington and California. These refineries are better suited for refining the heavy crude from Canada than the refineries along the Gulf Coast. The shift to the West Coast is something that will be good for our local economy in the long run."
Plumas County News
Democratic candidate for District 1, Jim Reed, was welcomed to Quincy by the Plumas County Democratic Central Committee on October 20th when he spoke to the group at their monthly meeting.
Reed, of course, emphasized jobs and the economy. He probed the crowd about the local unemployment rate, which he said was similar to the rest of District 1, in that across the Northern California mountain areait is higher than the national average, not just now, but for a long time previously. He discussed several ways to change that, noting that better funding for education and infrastructure are good places to start, as they represent long-term investments that benefit the economy both now and in the future.
He also suggested that reducing regulations that protect the environment in the interest of promoting economic development should be thoughtfully considered, so that future impacts are taken into account. “There needs to be a balance,” Reed asserted.
The congressional hopeful used his professional knowledge of tax law to describe the wealth disparity in our country. He spoke about current capital gains tax rules and the cap on payroll taxes as being disproportionately advantageous to the wealthy. He also shared his perspective on healthcare, immigration, outsourcing jobs, campaign finance reform, and how to preserve Social Security for future generations.
Regarding the notion of legislators making pledges to do or not do certain things once elected,such as GOP legislators pledging to never raise taxes, Reed observed that doing so really puts a representative in a box, unable to consider a variety of options when a particular piece of legislation comes up for discussion.
As an example, he mentioned that closing unfair tax loopholes is deemed a worthy goal by both sides, yet some GOP legislators consider doing so the equivalent of a tax increase, something they've pledged not to do.
“I’ve made only one pledge and that’s to not make any pledges,” he explained.
Reed has a BA in Electrical Engineering from Cal Berkeley, a law degree from San Francisco Law School, and a Masters in Taxation from Golden Gate University.
A third-generation Northern Californian, he has a law practice based in Fall River Mills, and is a rancher as well. His family also conducts an informal animal rescue operation, currently caring for rescued llamas, goats, and cats.
As a result of redistricting, Tom McClintock will no longer represent Plumas County. Reed is seeking to unseat 25-year incumbent Wally Herger, whose new district will now include Plumas County.
In Reed's first run for Congress in 2010, he earned 43% of the vote. His positions can be reviewed at www.jimreed2012.com.
"Some 150 people spent part of Wednesday night enjoying food, drinks, music and politics at "An Evening with Democrats" inside the Atrium at the Market Street Promenade in downtown Redding.
The yearly event is a fundraiser for the Shasta County Democratic Central Committee, said Frank Treadway, committee member. . .
Jim Reed, a Democratic candidate challenging Wally Herger, R-Chico, for a U.S. congressional seat, was the night's headline speaker.
While Reed, who lost to Herger last year, has been in campaign mode for about a month now, he also took some time Wednesday night to talk about issues, one of which was his stance of taxes.
"Over the last 25 years the tax burden has shifted from investors to the working man," Reed said before his speech.
Reed has said his key campaign points include closing corporate tax loopholes that give tax breaks for sending jobs overseas. He's also said he supports raising the capital gains tax for the wealthy, who he says receive a "huge tax break" merely for living off the interest of their investments.
Reed's also focused on saving Social Security, which has been under fire recently from right-wing Republicans.
"It's not really in deep trouble like people would have you believe," he said. . . .
