Annuity Tax

The Obama administration wants to impose a tax of 2.9% on income from annuities for individuals earning more than $200,000 and families earning more than $250,000. The purpose of the tax is to fund Medicare.

Every person who owns an annuity, regardless of income, should express their concern over this money grab. If they get away with this, watch for them to then tax life insurance death benefits. Here is yet another example of this administration’s policy of spend and tax!

The American Council of Life Insurers (ACLI), a life insurance trade group, is expressing its concern over this proposal. The ACLI recently sent a letter to Treasury Secretary Tim Geithner stating such a tax would hurt American’s ability to save for retirement.

Frank Keating, ACLI president, urged Mr. Geithner to reevaluate this proposal that will increase taxes on an important retirement security tool.

Revenue generated from this tax would fund the Medicare Hospital Insurance trust fund included in the Patient Protection and Affordable Care Act, more popularly known as “Obamacare”.

How illogical is this tax!! Our “leaders” in Washington should be devising ways to assist Americans in their retirement planning, not taking away a tool that has been used by millions for many years. In an age of disappearing pensions and decimated 401(k) accounts, you would think those geniuses in Washington would come up with something to help not hinder us in our retirement planning. This is yet another clear example of this Administration’s socialist approach to solving the country’s problems. Take from one group and re-distribute. That is not what America is about!

“Currently, Americans face unprecedented difficulties securing their retirement income in an environment that has shifted longevity, savings and other retirement risks onto the individual,” Keating said in the letter. “In such a landscape, policy-makers should not create a disincentive for annuity products that help Americans address these risks.”

The immediate gains to the federal budget from this tax will result in huge losses. These taxes, as the ACLI points out, will have the unintended effect of discouraging people from using these tools to plan for their financial futures. If people who struggle to save a few dollars each month stop using these investment vehicles, then a far bigger problem, and much larger taxes, will await Congress and all of us down the road.

As an alternative, Mr. Keating wants Congress to create tax incentives for people preparing for retirement, which would encourage them to use tools like annuities to develop lifetime income streams.

Amen to that!

Start-Ups

It is common at college graduation time to ask the newly minted degree holder what he/she plans to do after graduation; meaning do you have a job? Too many recent grads just cannot find a job even remotely related to their field of study. We owe our young people better and the solution is not that complicated although it appears to generate little discussion in Washington.

In his excellent op-ed piece, Thomas Friedman says we need three things: start-ups, start-ups and more start-ups. However, good jobs do not come from government. They come from risk takers starting businesses. A business that makes people’s lives healthier, more productive, more comfortable or more entertained, with services and products that can be sold around the world has just got to be successful.

The bottom line is you cannot be for jobs and against business. And herein lies the rub. This administration has just not been focused on job creation. As pointed out by Leon Hardt in the New York Times, Mr. Obama, Harry Reid and Nancy Pelosi have done less than they could have. And what is their excuse? They have been busy with other things like creating legislation for health care and financial services reform.

Now, I am not against health care and financial services reform, but everything in due time. The first priority of the President as he took office was to resurrect the economy and that means job creation. The stock market will not grow and home sales will not return to robust levels until more people are employed.

Mr. Obama has not wrapped his arms around teachers, fire-fighters and other workers facing layoffs and dared Republicans to oppose him, just as he did with financial regulation. He has not pushed for tax cuts which could also put Republicans on the defensive. So now the Democrats find themselves in the unenviable position of heading into mid-term elections with the unemployment rate near 10%!

Instead of pushing for short term stimulus and tax cuts we are getting long term spending and tax increases.

As a result, relations today between Mr. Obama and the people, especially businesses, the people who make and sell “stuff” are particularly strained. I wonder how many business owners who voted for the president would vote for him again.

To be fair, Mr. Obama has never received credit for stabilizing the economy with virtually no help from Republicans but we do not like having our taxes increased to pay for some one else’s health care.

The main problem, again, is this administration’s lack of leadership. Their efforts at job growth do not appear to be well coordinated, a top priority or championed by knowledgeable leaders. As Mr. Friedman points out, “this administration is heavily staffed by academics, lawyers and political types. There is no senior person who has run a large company or built and sold globally a new innovative product. And that partly explains why this administration has been mostly interested in pushing taxes, social spending and regulation – not pushing trade expansion, competitiveness and new company formation. Innovation and competitiveness do not seem to float Obama’s boat.”

America is going to pay a heavy price for this if things do not change.

But what could that change look like?

Two prominent individuals have suggested the following:

Curtis Carlson, chief executive of SRI International, the Silicon Valley-based innovation specialists, says he would begin by creating a cabinet position exclusively for promoting innovation and competitiveness to ensure that America remains “the world’s new company formation leader.” He advocates lower taxes for start-ups, reducing costly regulation and expanding tax breaks for research. He says ‘we need to unleash millions of entrepreneurs.”

Another expert, Robert Litan, vice president of research and policy at the Kauffman Foundation, says he would staple a green card to the diploma of every foreign student who graduates from an American university and push for a new entrepreneur’s visa because the current one requires $1 million of capital that few foreign entrepreneurs have. It would grant temporary residence to any foreigner who comes here to establish a company and permanent residency if that company generates a certain level of new full-time jobs. He also suggests cutting the capital gains tax for any profit-making venture start-up from 15% to 1%. Now that is an incentive! He opines we should “encourage our best minds to be successful starting new companies rather than going to Wall Street and betting against existing companies.”

Finally, he would impose a carbon tax and balance that with a reduction in the payroll tax and corporate taxes. As he says, “let’s tax what we do not want and encourage what we do.” Makes sense to me.

Too bad we are not hearing any of this from Washington

On Presidential Leadership

In watching the media coverage of the Gulf oil spill and the president’s reaction to it, I find it interesting how many times the commentator/reporter has discussed the president’s leadership, or lack thereof, depending on your perspective. Most of the overtone has been negative, criticizing the president for lack of dynamic, forceful leadership. One pundit even criticized him for lacking passion and approaching the problem as a lawyer instead of as a leader.

I simply ask “Why is everyone looking for Mr. Obama to display leadership”? You may find my question to be strange as all right thinking people would expect the president to display leadership in any crisis. Please understand the context in which I pose this question.

An expectation of anything, in this case presidential leadership, assumes the person in question has had prior experience with situations that called for the skill needed to deal with the situation in question. Is this true of Mr. Obama? Does he have the necessary skills to deal with this crisis? I do not know. You be the judge.

But let me provide the following “food for thought”.

General Colin Powell defines leadership as the art of accomplishing more than the science of management says is possible. There is a powerful message hidden in this statement. In my opinion, the operative words are “accomplishing more”.

Very few of us accomplish much on our own. We accomplish tasks by motivating and leading people to the desired outcome. It has been my experience that the American culture places too much emphasis on management. My life experience taught me early on that people do not want to be managed; they want to be led….. by someone whose vision they can embrace.

Managers manage things, leaders lead people. This is a huge distinction.

Is the president “managing” or “leading”?

Does Mr. Obama have anything in his life experience that would lead us to believe he can provide the leadership so necessary as president? Has he ever:

Run a business?
Met a payroll?
Hired anyone?
Created a vision that others wanted to follow and then executed that vision?
Had responsibility for the welfare of a group?
Surrounded himself with people that will tell him what he needs to hear, not what he wants to hear?
Confronted the people who need to be confronted?
Been the chief executive of anything?

Are we expecting more of him as a leader than he is equipped to deliver?

Again, you be the judge.

Remember one thing: The skills required to become president are not necessarily the skills required to be president!

More on the Oil Spill

In the New York Times Week In Review section of June 6, Matt Bai wrote an excellent article titled “Obama and the Chaos Perception”. The main theme of the article is that it is usually not one crisis but a series of crises that pose a threat and can diminish a presidency . All presidents had to deal with chaos in their time in office. Jimmy Carter had inflation, gas shortages and the Iran hostage crisis. George W. Bush had to face the issues of no WMD in Iraq, a sluggish economy and Hurricane Katrina.

Most presidents are faced with events that cause chaos. In addition to the oil spill, Mr. Obama must contend with a consistently weak economy, unacceptable unemployment levels and collapsing foreign economies. There is a sense that there are too many dangers at once. People are asking “what is this president doing to control the chaos”? Events appear to be spiraling beyond his reach.

We expect a president to use his power to rein in the chaos but we do not see this happening with Mr. Obama. He was elected on a promise to reform government but seems incapable of mastering the apparatus.

After 18 months in office he still presents himself as an intellectual critic of the government. However, we all see him as the embodiment of the government. The transition is over and he is the chief bureaucrat, accountable for the government’s failures whether that is fair or not!

During his news conference last week, Mr. Obama displayed a huge disconnect when he repeatedly referred to what the federal government is doing about the oil spill. We want to know what you are doing Mr. President. You are not a detached observer to this crisis. You are an integral part of the solution, or you should be.

We no longer care that you share our outrage. We want you to stop the leak!

On the Gulf of Mexico oil spill….

So, here we are 45+ days and counting and still oil is gushing into the Gulf with no end in sight. Government and BP just cannot seem to come up with a solution while thousands of people are being adversely affected. Jobs, a way of life, personal financial security are all at risk.

What should we expect from our leaders in Washington, well just about anything but what we are hearing and seeing.

Recently, I saw an interview of Vice-President Joe Biden. He said, and I paraphrase, “what most people do not realize is how well President Obama has responded to this crisis. The day after the accident, the President assembled his team in the oval office and marshaled all of the federal government’s resources. There are hundreds if not thousands of government employees working on this”.

Well, I have news for the VP, if you haven’t noticed the oil is still gushing from that hole in the ground, nothing has been fixed and lives and livelihoods continue to be at risk. What the politicians in Washington do not seem to understand is that activity means nothing, the only thing that matters is RESULTS! Do you get that Mr. Vice-President??

We do not care about activity, we care about RESULTS. John Wooden, the late, great former men’s basketball coach at UCLA said Never confuse activity with achievement.

Unfortunately, our “leaders” in Washington do not seem to understand this basic concept. Activity means nothing if the objective is not attained.

So, will someone please show me a leader who understands this time honored truth, Results, not activity, are the Final Judge!!