QUOTE OF THE DAY
WSJ: On the 100th Birthday, Many Unhappy Tax Returns
A century ago, on Feb. 3, 1913, the 16th Amendment to the Constitution authorizing a federal income tax was ratified. But the amendment's adoption was more an accident than an act of political will, and tinkering with the Constitution was not even required for the federal government to tax Americans' earnings.
The country's first income tax was implemented to raise money during the Civil War. The tax was repealed in 1872 because the revenues were no longer needed. The idea was resurrected in 1894 as a populist measure to tax the rich when William Jennings Bryan successfully championed passage of a 2% income tax on annual income over $4,000. The rich denounced it as communistic and predicted that many would flee the country rather than pay the tax.
They didn't have to flee. The following year, a tax case reached the Supreme Court, which ruled that an income tax on wages, professions and trades would be constitutional. But the court determined that the tax's application to rental income amounted to a tax on real property, violating the Constitution's "direct tax" clause. For that reason, the income tax was declared unconstitutional.
Americans for Tax Reform: 100 Years of the Income Tax
Sunday, Feb. 3 marks the 100th anniversary of the ratification of the 16th Amendment, which enabled the establishment of the U.S. federal income tax.
The century-long history of the income tax has been marked by more and more taxpayers paying higher and higher amounts of tax.
Forbes: An Unlikely Super Bowl Ad For the 100th Birthday Of Our Income Tax
What is viewed by 100 million Americans, and costs $133,000 a second to play? Yes, it is one of this weekend’s Super Bowl ads. During the first Super Bowl in 1967, a television ad cost only $42,000 to broadcast. Today, a sneak preview on YouTube of your game-changing brand can help spike your public message to over nine million views.
This weekend, at least two national things will celebrate their 100th birthday: Grand Central Terminal and our national income tax. Most things that survive a centennial warrant some kind of tribute, like the one CBS has given Grand Central Station for now serving 82 million guests. A 100-year anniversary for an iconic building can connect us as Americans, much like the naming celebration of a baby Clydesdale might. Arriving into Grand Central Station reminds us that, just like many who came before us, we all deserve to have somewhere great to go.
Not so, I presume, with America’s national income tax. There’s no celebration of that anniversary. Zilch. Nada. Nothing. No saints are likely to come marching in for a parade that celebrates the “privilege” of taking valuable resources from production and turning them into massive government growth. Automatic withholding resulted in a surge in federal revenues, and spending spiraled out of control. There are many reasons why Americans choose to ignore the reality of how our income tax is collected: we think we have say in the matter, we possess a tendency to avoid dwelling on financial pain, and we hang onto the idea that overpayment of taxes throughout the year is really just “forced savings.”
Before the first Super Bowl aired in the 1960s, some Americans might have considered it a privilege to contribute to an income tax, similar to propaganda spun by Walt Disney during World War II. Our daily work lives were a lot less mobile then than now. Today, a young professional’s career may shift locations and change focus seven to nine times over his or her lifetime. Today, public attitudes also are likely to be much more cynical regarding what taxes are actually doing for our communities.
Bloomberg: Retirement Savings Accounts Draw U.S. Consumer Bureau Attention
The U.S. Consumer Financial Protection Bureau is weighing whether it should take on a role in helping Americans manage the $19.4 trillion they have put into retirement savings, a move that would be the agency’s first foray into consumer investments.
“That’s one of the things we’ve been exploring and are interested in in terms of whether and what authority we have,” bureau director Richard Cordray said in an interview. He didn’t provide additional details.
The bureau’s core concern is that many Americans, notably those from the retiring Baby Boom generation, may fall prey to financial scams, according to three people briefed on the CFPB’s deliberations who asked not to be named because the matter is still under discussion.
The retirement savings business in the U.S. is dominated by a group of companies that handle record-keeping and management of investments in tax-advantaged vehicles like 401(k) plans and individual retirement accounts. The group includes Fidelity Investments, JPMorgan Chase & Co. (JPM), Charles Schwab Corp. (SCHW) and T. Rowe Price Group Inc. (TROW) Americans held $19.4 trillion in retirement assets as of Sept. 30, 2012, according to the Investment Company Institute, an industry association; about $3.5 trillion of that was in 401(k) plans.
MarketWatch: No-money-down mortgages are back
It’s 100% financing—the same strategy that pushed many homeowners into foreclosure during the housing bust. Banks say these loans are safer: They’re almost exclusively being offered to clients with sizable assets, and they often require two forms of collateral—the house and a portion of the client’s investment portfolio in lieu of a traditional cash down payment.
In most cases, borrowers end up with one loan and one monthly payment. Depending on the lender and the borrower, roughly 60% to 80% of the loan can be pegged to the home’s value while the remaining 20% to 40% can be secured by investments. On a $2 million primary residence, for instance, the borrower could get a $2 million loan, which would require a pledge of assets in an investment portfolio to cover what could have been, say, a $500,000 down payment. The pledged assets can remain fully invested, earning returns as normal, without disrupting the client’s investment goals.
While these affluent clients may be flush with cash, this strategy allows them to get into a home without tying up funds or making withdrawals from interest-earning accounts. And given the market’s gains combined with low borrowing rates in recent years, some banks say clients are pursuing 100% financing as an arbitrage play—where the return on their investments is bigger than the rate they pay on the loan, which can be as low as 2.5%. Some institutions offer only adjustable rates with these loans, which could become more expensive if rates rise. In most cases, the investment account must be held by the same institution that’s providing the loan
These loans also provide tax benefits. Since borrowers don’t have to liquidate their investment portfolios to get financing, they can avoid the capital-gains tax. And in some cases, they can still tap into the mortgage-interest deduction. (Borrowers can usually deduct interest payments on up to $1 million of mortgage debt.)
WSJ: America's Baby Bust
For more than three decades, Chinese women have been subjected to their country's brutal one-child policy. Those who try to have more children have been subjected to fines and forced abortions. Their houses have been razed and their husbands fired from their jobs. As a result, Chinese women have a fertility rate of 1.54. Here in America, white, college-educated women—a good proxy for the middle class—have a fertility rate of 1.6. America has its very own one-child policy. And we have chosen it for ourselves.
Forget the debt ceiling. Forget the fiscal cliff, the sequestration cliff and the entitlement cliff. Those are all just symptoms. What America really faces is a demographic cliff: The root cause of most of our problems is our declining fertility rate.
The fertility rate is the number of children an average woman bears over the course of her life. The replacement rate is 2.1. If the average woman has more children than that, population grows. Fewer, and it contracts. Today, America's total fertility rate is 1.93, according to the latest figures from the Centers for Disease Control and Prevention; it hasn't been above the replacement rate in a sustained way since the early 1970s.
The nation's falling fertility rate underlies many of our most difficult problems. Once a country's fertility rate falls consistently below replacement, its age profile begins to shift. You get more old people than young people. And eventually, as the bloated cohort of old people dies off, population begins to contract. This dual problem—a population that is disproportionately old and shrinking overall—has enormous economic, political and cultural consequences.
Businessweek: Most Viral Super Bowl Ads of All Time
On Super Bowl Sundays past, million-dollar commercials might only be viewed a single time, but with the rise of YouTube, advertisers and creative agencies are crafting spots with their viral potential in mind. From space opera and seductive candies to heartfelt patriotism and puppies, the most viral Super Bowl ads of all time are likely playing on any given Sunday.
One of the first truly viral ads, Apple's "1984" ad, directed by Ridley Scott, has since been hailed as the greatest Super Bowl spot of all time.
Check out our "Laugh, Think, Do" Index to rate Super Bowl ads like a pro. Click here to download.
CARTOON OF THE DAY