Nutter's Washington

Is Warren Buffet a Hypocrite? Whopper anyone?

 

I was having a discussion yesterday with an unabashed liberal, who is also a tax novice, about the possible tax inversion proposed by Burger King and the Canadian restaurant chain Tim Horton. I will not go into the mechanics of a tax inversion but it is essentially a mechanism to move the tax venue of a company to a more friendly tax jurisdiction to lower the overall corporate tax burden. It is also the tax topic dejure at the Treasury Department and in Congress.

Using such schemes to lower the taxes of a company I was told was unpatriotic and un-American. Big corporations have plenty of money and it is their obligation and duty to pay more. Furthermore, it is an ungrateful act as this great country provided the foundation to allow these companies to prosper. Good point on that one. The question was put to me; did I support this obvious form of shirking responsibility? Good question.

I relied; I thought it was an unfortunate result of a broken tax system that has not adapted to the new rules of international business.

 I made the following points:

• These big companies are no longer American but are international in scope and management;

• There is no constitutional duty to pay more taxes than required by law. Tax avoidance is a legal right, as opposed to tax evasion;

• The companies are in business. They work for their shareholders. It is their duty to maximize value, whether thought innovation, productivity, marketing, or paying less taxes;

• These companies pursue opportunities outside the U.S. because the American government at all level has created non-competitive environment through careless, over zealous regulation (although not all regulations are bad, of course)

• The worldwide system of taxation employed here is out of date and is incredibly complicated. Our marginal tax rates are also out of line with other countries.

None of my points made a difference. I got a repeat of the unpatriotic mantra and the point that more taxes are needed to spend on more social programs. (Which I think means more redistribution to those that do not pay taxes at all)  Neither one of us changed our opinion as usual.  

Then today, a gift from heaven. Hard to make this up. It is the kind of stuff I pray for, the kind of stuff that is so entertaining because it exposes the hypocritical nature of people.  

The deal between Burger King and Tim Horton was announced today. Help financing the transaction will be best-known tax raiser advocate of all—Mr. Warren Buffet and his company Berkshire Hathaway. They will buy $3 billion worth of preferred shares in the new company paying an annual dividend of about 9 percent, according to a version of a story I read. Nice, 9 percent is a good return given current low interest rates.

The deal frees up Burger King to move its domicile to Canada from Miami. I do not know what will be the eventual tax saving, but is bound to be significant once it is accomplished. And here is one more interesting fact, a Brazil-based investment firm controls Burger King and will retain majority control of the combined company. So much for American.

The decision of Mr. Buffet is based on business and I do not blame him for that. But, to embrace the inversion benefits in light of his tax raising posture is hypocritical. Mr. Buffett is an Obama favorite but the White House has targeted raising more taxes as a centerpiece of its policies and lately particularly inversions. However, I doubt the White House will diss their tax raising champion, a White House that named a tax-raising proposal (“the Buffett Rule”) after him.

My friend did not want to discuss this issue this morning. Did not want to be horrified Mr. Buffet could be un-American.

These trends to move companies out of the country and tax policies that lock out investment from reentering the economy are troublesome. I do not moan for these corporate giants. They are so big, they cannot be hurt. However, this trend will continue until the corporate tax system is completely revamped.

In the meantime, as I said, hard to make this stuff up but it is entertaining to see real hypocrites in action.

 

 

 

 

 

Romney would be the new Adlai Stevenson

I am writing an analysis for a client of the various aftermaths of the mid-term elections coming up on November 4^th. I look at polls, trends, the quality of the candidates, voting trends, local issues, fund raising, and read the opinions and research of the professionals, talking heads, pundits and assorted gurus. My mission is to give a strategy of what may happen in Congress depending on the election results. It is not all this simple but if Republicans control Congress, things will be much different than if the government remains divided. It will either happen or it will not.

However, besides the election results, the 2016 Presidential campaign starts in earnest-albeit unofficially and artificially- the day after the election. I was thinking about various candidates and eventually came across an article on Hillary Clinton. In essence, the author (a Democrat) was questioning the viability of Mrs. Clinton even though she has many devoted followers and supporters.

I then came across an article on Mitt Romney and how hard he was supporting Republicans all over the country, felt vindicated when compared with the performance of the President. Then the bomb came—Mitt Romney will run again and be the nominee heading the Republican 2016 ticket.  Tell me it is not so, not possible.

Mitt Romney is a very talented man, qualified to be President. Probably should have been elected President, particularly seeing the way the government operates or does not operate now. Much of what he said in the 2012 campaign has proven to be true, including the mal intentions of Russia.

The problem is Mitt Romney is the modern day Adlai Stevenson. Romney is a very capable man but not going to win. Stevenson was Governor of Illinois when he received the 1952 Democratic Party's nomination for President even though he had not campaigned in the primaries. Stevenson was defeated in a landslide by the Republican former war leader Dwight Eisenhower. Stevenson was again the Democratic presidential nominee against Eisenhower, and this is the important part he was defeated in an even bigger landslide in 1956. I fear Romney equal Stevenson. There is, of course, the example of Richard Nixon being defeated for President in 1960 and then two years later for Governor of California only to be elected President in 1968 but Romney is no Nixon, thank goodness and political dynamics have changed.

The political process will winnow lots of Republicans out. There are a number of highly qualified people who will contemplate running for President. I hope one is not Mr. Romney. Like the Democrats with Mrs. Clinton, the Republicans need to do something different and not choose Adlai Stevenson redox.

 

Washington in August: Nothing but Problems

 

Congress is gone for another 3 weeks or so. The President is on “ vacation” as if it matters at all. So, in a certain respect the country is safe for a while. Safe in a sense that no bad laws can be considered, voted on or in the case of the U.S. Senate never voted on. In a way, the noise level is down, it is almost quiet in town. Traffic greatly diminished, an easy commute. I love Washington in August.

It does not mean any problems are being solved or managed. There is a linty of foreign issues, tinderboxes, wars, killings, and flash points.. Hard to even remember all of them— Obama’s and Secretary Of State Clinton Libya fiasco, the red line joke in Syria, the ill advised total pull out in Iraq leading to chaos, Afghanistan, and unabated nuclear weapon development in Iran. Let’s not forget, Gaza, Kurdistan, ISIL terrorists, Crimea annexation, Ukraine separatist, oh and yeah, the jet liner being shot down. Big consequences paid by Russia supporting that, I think 6 more people were denied visas to Disneyland as our reprisal.  

On the home front, more or less of the same. Ten of thousands new illegals have streamed over the border. Whoa, what to do? A killing and subsequent riots in Missouri, a real tragic and symbolic mess. Now, there is a tragedy to exploit.

Federal government still borrowing, deficit still growing. Did I see the Social Security disability fund will be broke next year? Is anyone surprised at that? Let’s not forget the outrageous conduct of the IRS and the bungling and deception of the Veterans’ Administration. Oh yeah, guess what? Health insurance premiums are going up under the Affordable Care Act. I am confused, weren’t we all going to save money?  

Mid-term elections are going to happen in about 75 days. Democrats are scared, saddled with the Obama unpopularity, incompetence albatross around their neck. I am not sure the protection of Senate Majority Leader Harry Reid (D-NV) preventing Democrats from voting on most anything will save the 8 or so endangered colleagues that comprised his majority. Republicans are not really offering practical solutions but then again seem to be in better shape nationally. It will be interesting. The country seems bewildered, frustrated and angry.

One thing is for sure; it looks like the 2016 Presidential campaign is under way. I am already tired on seeing, reading and hearing about about Hillary Clinton. More on her later.  

Congress Leaves Town: Why Come Back At All?

Congress limped out of town on Friday. Largely due to the intransience of Senate Majority Harry Reid (D-NV), not much was accomplished in the first eight months of this year. In fact, Senator Reid has made into an art form not allowing any kind of democracy to work. Legislative process, forget it. I find the tactic both dangerous and distasteful. He is shameless and does the country of great disservice.

In any event, The House and Senate are scheduled to be out of session for a five-week August recess, returning Sept. 8. I am not sure how August got 5 weeks but then again it is Washington. One thing is also certain is the country cannot be damaged any further with Congress gone except the President is still on the loose but not doing much constructive. The relevance of Mr. Obama continues to track his dismal performance.  

After coming back from the “recess” and I do not say vacation because our elected officials do work hard, but neither chamber is expected to hang around long before recessing for the November elections.

Not to be accused of any thing that could be viewed as responsible, Senate Majority Leader Reid already has indicated the Senate has an adjournment target date of September 23, or in session for a total of about two weeks. Cannot even make it to October.

The House is not any better with a target adjournment date is Sept. 19. Well, why not leave, nothing really to do? The Senate almost never takes up House passed bills. The House has passed 7 appropriations bills; the Senate has not even had a vote on one, nary a single floor vote. None, I mean what are those guys doing?

About the only thing left for this pitiful Congress is to reach an agreement to fund the government beyond the end of the fiscal year on September 30th.  Call it a day and then let the country vote.