April 18, 2024

Bucks Blog: The Tax Code and the Very Rich

Almost anyone who receives a paycheck will pay higher taxes this year. But as Paul Sullivan writes in his Wealth Matters column this week, the very wealthiest Americans — those worth hundreds of millions or more — usually don’t get paychecks. These people, generally partners in private equity firms or hedge fund managers, earn much of their money as a share of their funds’ earnings. And those earnings are taxed at a lower rate than ordinary income.

So while tax economists say the tax code may now be the most progressive in a generation, the richest of the rich often have the most options for deferring taxes or sheltering some of their income.

Have you figured out yet how you will be affected by new tax rules? And what changes would you have made to the tax code?

Article source: http://bucks.blogs.nytimes.com/2013/01/11/the-tax-code-and-the-very-rich/?partner=rss&emc=rss

Off the Shelf: ‘Ajax Dilemma’ Looks at Fundamental Fairness

As such, the timing is excellent for “The Ajax Dilemma: Justice, Fairness and Rewards” (Oxford, $19.95, 251 pages), by Paul Woodruff. By exploring an ancient Greek myth, the author speaks to an issue that is particularly relevant today but also eternal in its elements. How do you distribute rewards to individuals, he asks, without damaging the larger community?

Mr. Woodruff, a philosophy professor at the University of Texas, Austin, uses the myth of the Greek warriors Ajax and Odysseus to show how issues of justice can set off societal conflict. The Ajax quandary arises after Achilles is slain in battle, and his armor is to be given to the army’s most valuable soldier. Ajax and Odysseus compete for it.

Ajax, a courageous, loyal and hard-working warrior, demands the armor on the grounds that he has saved the lives of many comrades on the battlefield. Odysseus is innovative and articulate but not completely trustworthy; his values seem to fluctuate to suit his interests. He claims the prize as a strategist who can outthink the enemy.

The men square off in a speaking contest in front of King Agamemnon and a panel of army jurors. It is, Mr. Woodruff writes, a conflict we all recognize — that of “loyalty and brawn versus brains and trickery.” Ajax loses and his anger explodes, damaging his position in the army and destroying his life, family and reputation.

The author argues that this myth revolves around the issue of rewards, which “mark the difference between winners and losers.” He adds: “Rewards are public recognition for contributions made. They express the values of a community.” But which, he asks, do we value more: “Cleverness or hard work? Strength or intelligence? Loyalty or inventiveness?”

We see the significance of all this today. “In industry, bankers and fund managers have carried off the prizes,” Mr. Woodruff says, “while most of us are Ajaxes, team players who work hard at our various tasks and are loyal to the communities in which we live.” We grow angry, he says, when rewards go to those “who do not live by our values.” Justice, we believe, has failed.

Or has it? The book successfully looks at rewards and justice — from the perspectives of all players in the Ajax quandary — while remaining firmly anchored in both morals and pragmatism.

For example, Mr. Woodruff argues that there were good reasons to award the armor to Odysseus. Indeed, Odysseus would soon prove himself a strategist with the idea of filling a huge horse with Greek soldiers to get into the enemy city of Troy.

Slowly, carefully, Mr. Woodruff builds a case for Odysseus. But this does not mean, the author argues, that justice was well served by the king. Agamemnon failed by not creating mutual respect between himself and his soldiers and not honoring the unique contributions of those like Ajax. Instead, the king ruled with a heavy, at times almost tyrannical hand, breeding suspicion and seething anger among his men. When Ajax is denied the armor — in a contest he sees as favoring the eloquent Odysseus — the loyal soldier’s rage explodes, and tragedy results.

Mr. Woodruff uses this part of the story to point out that justice is much broader than a legal function and much messier than a set of rules or large principles. Whether in the boardroom, Congressional chamber or family kitchen, justice “must resolve a conflict in a way that leaves the community whole.” And that does not happen here.

He says that by deciding against Ajax, the jurors — with the king’s assent — effectively destroy not only Ajax’s motivation, but also the morale and engagement of the other troops, virtually all of whom see themselves as loyal.

Article source: http://feeds.nytimes.com/click.phdo?i=f51356f5858d17afa7e7587c87c21e57

Floyd Norris: CIVETS, BRICs and JUUGs

Source: Bloomberg

Investors loved BRICs. Will they be equally fond of CIVETS?

In late 2003, Goldman Sachs coined the term BRIC, standing for Brazil, Russia, India and China. They were to be the great new economies and places to invest.

Now I see that HSBC is proudly announcing “the first CIVETS fund.”

CIVETS stands for Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa. The term is variously credited to the Economist and to HSBC. One factor in choosing the countries is that they have young, growing populations, something the developed world lacks.

Maybe it should be called the ITS fund, with a CEV adjunct. Indonesia, Turkey and South Africa will each get a quarter of the money, based on initial plans. Colombia will get 16 percent, Egypt, 7.5 percent and Vietnam just 1.5 percent. (It sort of makes you wonder if Vietnam was added to provide a needed letter.)

The fund managers plan to give themselves maximum discretion. They may, or may not, decide to put up to a quarter of the money in stocks from “non-CIVETS nations which have similarly attractive demographics, such as Mexico, Nigeria, Philippines, Thailand, Malaysia and Saudi Arabia.”

How, you may wonder, have those baskets done? And how have they fared against what I will call the JUUG markets (Japan, United States, United Kingdom and Germany)?

Using the CIVETS weights in the news release, and weighting each of the others equally among the four countries, the above chart shows the results for two periods. The first is from the end of 2003, when the BRIC term was spreading, to the end of 2007, the year stock markets peaked. The second is from the end of 2007 through today. In each case, one leading market average was used for each country. The figures are calculated in dollars and come from Bloomberg.
[Read more…]

Article source: http://feeds.nytimes.com/click.phdo?i=2440b5ed9853d45ab431223b6aedb8c0