Who pays the 3.8% investment tax?

10:30 AM investment, pay, tax No Comments

Business Week | By Tony Nitti, Forbes

Hint: It isn't you. The bulk of the burden of a new tax on net investment income falls squarely on the top 0.1 percent of Americans. But they also reap an exclusive tax benefit.

As I have covered in nauseating detail, the 2013 tax year adds a new wrinkle -- some taxpayers will pay an additional 3.8 percent surtax on the lesser of:

1. the taxpayer's "net investment income," or

2. the excess of the taxpayer's "modified adjusted gross income" (this will be equivalent to adjusted gross income in most cases), over $250,000 if married filing jointly, $125,000 if married filing separately, or $200,000 for all other taxpayers.

In (very) general terms, "net investment income" includes income from interest, dividends, rents, royalties, passive activities and gain from the sale of most properties.

The new tax, which is imposed and governed by Section 1411, is expected to raise $123 billion between 2013 and 2019. But who's going to foot the bill?

The quick answer is obviously "the wealthy," as the tax generally only applies to taxpayers with adjusted gross income in excess of $200,000, which immediately limits its application to roughly 2 percent of the population.

And while yes, the "wealthy" will be on the hook, it is the uber-wealthy who will pay more than half of the $123 billion price tag.

According to this study performed by the venerable eggheads at the Tax Policy Center, while the wealthiest 1 percent will bear 88 percent of the total tax burden, the average increase in tax for the richest 1 percent will be only $23,000.

(Immediately ducks to avoid onslaught of pointy objects thrown by people dressed like the Monopoly guy.)

The richest 10 percent of the richest 1 percent -- or the richest 0.1 percent, if you're into decimals -- however, will pay a whopping 52.5 percent of the total cost of the new tax, with an estimated per-taxpayer annual addition of $131,000.

Before you decry the new tax as patently unfair due to its narrow focus, keep one thing in mind. There are still preferential tax rates afforded long-term capital gains and qualified dividends. These rates are currently at a maximum of 23.8 percent, which while less favorable than 2012's top rate of 15 percent, is still a far cry from the top ordinary rate of approximately 44.6 percent.

And according to a separate study performed by the TPC, this rate arbitrage will amount to a $542 billion dollar tax benefit over the period 2013-2017, an amount that is four times larger than the tax increase caused by the new net investment income tax.

And just like the net investment income tax, the beneficial rates applied to long-term capital gains and qualified dividends are not the concern of the unwashed masses; in fact, during 2011, the top 0.1 percent recognized 75 percent of all capital gains.

It would follow then, that the richest 1 percent receives nearly all the benefit of this $542 billion tax benefit. This math is supported by the TPC, which finds that taxpayers with income in excess of $500,000 enjoy 85 percent of the $542 billion tax benefit resulting from lower rates on certain investment income, while those earning less than $100,000 only receive 1.4 percent of the benefit.

So in summary, the wealthiest taxpayers in America will be footing over 88 percent of the $123 billion price tag of the new net investment income tax, but they also will be benefitting from 85 percent of the $542 billion tax savings resulting from the preferential rates afforded these types of income.

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Iran: The next investment frontier?

2:30 PM frontier, investment, Iran No Comments

| By Matt Clinch, CNBC.com

A slow thawing of diplomatic relations could eventually open the door to foreign investment.

Companies should start planning for Iran, analysts say, as the slow thawing of diplomatic relations with the country could open the door to foreign investment.

The Middle Eastern country, which has been on the receiving end of strict sanctions since its revolution in 1979, has been in political transition this year. Following presidential elections in June, hardliner Mahmoud Ahmadinejad was replaced by Hassan Rouhani who has since embarked on a series of charm offensives around the world – including a phone call last month with U.S. President Barack Obama.

Matthew Spivack, practice leader at emerging market advisory firm Frontier Strategy Group told CNBC that investors now need to start working a contingency plan for when, and if, sanctions are rolled back.

"Iran is not just about oil," he said. "FMCG (fast moving consumer goods) and healthcare companies prioritize Iran, because of very attractive demographics."

Tehran's stock exchange lists 339 companies on its website with a combined market capitalization of $104.21 billion. The country has the second largest population in the Middle East and North Africa region, according to the World Bank, with 77 million people -- three times the regional average. It has the fourth biggest oil reserves in the world, according to the U.S. Energy Information Administration, and the second biggest natural gas reserves -- second only to Russia.

Spivack expects Iran's public sector to attract a lot of foreign investment interest in the long term. One area ripe for Iranian government contracts would be the country's energy sector. If sanctions are lifted and Iran can start selling its oil and gas on the open market – at the moment it mainly deals with China and India – the country's energy infrastructure will need upgrading.

Sven Richter, head of frontier markets at Renaissance Asset Managers is another portfolio manager looking closely at the country. On the Tehran stock exchange the basic metals and banks are the latest sectors that are en vogue, he said, followed by telecoms.

"The stock market has the possibility of attracting attention as it's relatively large and liquid and could be an interesting part of a Frontier fund," he told CNBC.

"P/E (price-to-earnings) valuations ranging between 7 times and 11 times for many of these companies look attractive."

Even business leaders are looking closer at the country. Martin Sorrell, CEO of WPP -- the world's largest advertising company by revenue - included Iran in a list of frontier markets that the company was considering, adding that the "political noises" coming from the country were positive.

In recent months, Iran has held constructive talks with the United Nations about its controversial nuclear program. Iran and the U.S. also engaged in high-profile talks in September with President Obama speaking to Rouhani by telephone -- the first direct dialogue between the two counties for over three decades.

Last week, The New York Times reported that Hossein Naqavi Hosseini, the deputy head of the national security and foreign policy committee, has said Iran has cut the production of enriched uranium by up to 20 percent, a move closer to one of the key demands world powers have asked of it.

Downside risks

Spivack said that these are positive developments but he is cautioning his clients to manage expectations regarding the possibility of a diplomatic breakthrough.

"Even if a deal is reached, decades of an uncoordinated international sanctions policy would be difficult to roll back," he said.

Richter warned that while political upheaval in the country could lead to a thawing of relations, the constitution of the country still sets out that large industries should be government-owned. Another risk would be any reversal of the promising diplomatic work undertaken by Rouhani further down the road, he said.

Currency factors also pose a problem, with sanctions causing wild fluctuations in the value of the Iranian rial. In September 2012, data from Persian-language currency tracking website Mazanex showed the rial plunged to record lows against the dollar, according to Reuters, with the then President Ahmadinejad declaring that Iran was fighting an economic war. A weak currency makes imports more expensive and affects anything denominated in rials including wages, shares, houses, pensions and gold. Business can also find it hard to value its services with a fluctuating currency and set prices for its goods.

Nomura's Senior Political Analyst Alastair Newton told CNBC that potential investors need to be just as mindful of sanctions today as they were before the Iranian election.

"A presidential phone conversation alone hardly constitutes 'a thaw' after 34 years of non-communication," he said.

"If negotiations go well over the next several weeks (sanctions) may be eased. But of over 30 separate packages of U.S. sanctions only eight are controlled by the administration: Persuading Congress to ease sanctions will likely not be straightforward unless Iran were to give up its nuclear program altogether."

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NYC can bend Bank ' potty parity ' investment law

10:30 AM investment, parity, potty No Comments

Isolde Raftery, NBC News - 2 days

In a rare move gutgehie?en New York City Buildings Department add an investment bank to break request of the city of potty parity Act and a men's bath & urinals to its trading floors.

Japanese firm Nomura, gearing up move in worldwide Plaza in the city's Midtown area, asked other men permission, bathroom for its fourth floor, the main trading floor to build, expected to be about 550 dealers House. Trade is a male-dominated profession.

The Bank asked existing bathrooms in the three upper floors urinals to trade.

Nomura spokesman Jonathan Hodgkinson request said - which was first reported by the New York post--was approved by the city, presented according to which in March 2012. He would not say why the company asked for the exemption or how many women and men on the work. The post reported that the gender breakdown is 75 percent men, 25 percent women.

In a prepared statement Hodgkinson wrote: "Nomura believes to provide equal employment opportunities and run a working environment in which our staff can, and do, at best."

Steve Solomon, a spokesman of George comfort & sons, which owns the worldwide Plaza, said, that built the baths have been. "Life is satisfied tenants," he said. "they go to the bathroom with a smile."

Nomura, which North American employees has grown to 2.316 900 in 2009, plans to move in this summer.

New York City approved their bathroom equal treatment Act in 2005, requiring new buildings to install bathroom "Lights" in the relationship about 2: 1 in favor of the women. Proponents say that women need more toilets than men, because they last longer and have more bad-like needs than men. The law also applies to building features such as the worldwide Plaza.

But it contains an exception for places where the gender imbalance, such as spas, women's dormitories is pronounced, and men's prisons, where potty parity would be unnecessary.

A spokesman for the City Buildings Department said the Department will receive more information about the request but has released the document on Wednesday.

Bathroom equality advocates criticized Nomura for applying for the exemption - and New York for granting it.

Robert Brubaker, program manager for the American Association restroom, not-for profit, advocates for the availability of toilets, said that he was never a company request the exemption will be heard. Goldman Sachs, another investment bank, which moved recently an exemption for the bathroom-equal treatment Act not requested, a spokeswoman said.

"By their past, their best candidates in the future women can be independent," said Brubaker.

George Washington University Law School Professor John Banzhaf, the up itself as "father of potty parity," said he views add that urinals as a sexist move that sends a negative message to women employees. "they say: 'we discriminated against, in the past so now you have to further us.'"

Banzhaf said that he the city decision Nomura granting an exception can contest.

"If these guys with him can get away, there is no reason why others is not the same," he said.

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Berlusconi investment arm must pay$ 797 million.

5:34 AM Berlusconi, investment, million No Comments

MILAN - premier Silvio Berlusconi family investment company was ordered Saturday, immediately numbers €560 ($797) million - a devastating total and a major setback for market leader in Italy - to a rival media group on corruption in the purchase of the Mondadori Publishing House

The appellate court reduced Milan during a 2009 judgment against Fininvest, maintaining the losses of € 750 million.

The civilian damage award stems from a case in which three Berlusconi associates were sentenced by the damage of a judge, a judgment in favor of the 1990's into industrial Carlo de Benedetti in the struggle for control of Mondadori.

Said de Benedetti company, confirmed the judgment, which in 1991 was "Corruption... organized on behalf of and in the interest of Fininvest" behind its loss by Mondadori.

Berlusconi's daughter Marina Berlusconi, the Fininvest chairs, said that the "completely unfair judgment" was part of a campaign against her father.

"The verdict represents the umpteenth scandalous incident of violent aggression for years against my father, by all means and on all fronts, entrepreneurial and economic, including gone to" Marina Berlusconi said in a statement.

You complained that the price was value twice Fininvest's share of Mondadori, the capital and said lawyers strategy for an appeal at the Supreme Court of the country have already worked.

Berlusconi has been this week, as he introduced a measure in Italy's austerity budget, which would have the Fininvest payment allows delay up to the final appeal. Berlusconi hastily pulled the measure under political pressure opposition, but also allies claims not known was, that the measure in the package was buried.

Despite movement leader in Italy said later there was nothing to stop him by reintroducing the measure in Parliament after the ruling. "Then, no one can keep it a standard only for Fininvest," said Berlusconi.

The first opinion agreed Fininvest made a bank offer guarantee of rival, to avoid immediate payment. Appellate body ruling implies an immediate cash transaction.

Marina Berlusconi remained defiant.

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"We not a euro should pay", she said.

The battle for control of Mondadori was an important turning point for Berlusconi's media empire, control of such influential publications as the weekly political magazine "Panorama" by de Benedetti, who abzuringen the Rome daily newspaper "La Repubblica", Berlusconi's fiercest critics.

While the award in fact the Fininvest 50.41% share of Mondadori, € 306 million on Friday closing prices, dwarf analysts you don't expect to cover financial ruin on the Berlusconi family family brings great media empire, the separately held broadcasting group Mediaset.

"If you look at the Fininvest balance sheet, there is no economic threat to Fininvest," said LUISS law professor Roberto Pardolesi. "I think it is unlikely that Berlusconi suffer political damage, because the worst part of the history, corruption was already digested." "This is the conclusion on the story of a kind."

Yet the award at a time as the premier comes through a series of electoral defeats has weakened in recent weeks. Not only lose its candidates has several key policies in referendums - including a law, the partial Berlusconi vice versa control of the major Italian cities in municipal elections, including his native Milan, but voters and other top officials concealed from persecution.

Berlusconi has dozens of court cases in Milan, faced most of them in connection with its operations. He has always denied wrongdoing, and in the final verdict has been either acquitted or seen deleted the Statute of limitations.

Four cases proceedings are paid and used his influence in Milan, including the sensational study according to the Premier for sex with a minor teen then, to cover it up. The study will be continued later in this month.

Berlusconi lawyer Niccolo Ghedini, who was not involved in the Mondadori case, was confident that Italy's highest court to reverse the sentence would.

"Milan appeals court has pass a judgment against all logic," said Ghedini.

Copyright 2011 associated press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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Report calls for US-China to embrace investment

9:58 AM calls, embrace, investment, Report, USChina No Comments

WASHINGTON-zig billions of dollars in Chinese investment could flood in the United States over the next ten years, create a variety of American jobs officials not succumb to a political backlash and throw barriers, according to a report published on Wednesday.

The study forecast that some $1 trillion to $2 trillion in new greenfield investments or mergers and acquisitions around the world would unleash Chinese companies by the year 2020.

That would be a four-, eight - area to China's current outward investment of around $230 billion, according to the report for the Asia Society, the Kissinger Institute on China and the United States, and Woodrow Wilson International Center for scholars done.

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"If only 5 percent of China's expected outflows of the United States over the next ten years, the numbers be enormous", said the report authors, economists Daniel Rosen and Thilo Hanemann.

The next wave may be even more political heartburn as the early 1980s, as the Japanese company began making significant investments in the United States.

But U.S. policymakers should "open doors" Chinese investment and the potentially huge job-creating benefits through the U.S. system for the review of foreign investment from political interference, roses and Hanemann, said shielding.

"Japan's first investment in the United States almost as controversial in the 1980s as China's, but in the following years, Japanese US partners employ 1 trillion dollars in America and today almost 700,000 Americans have been made," she said.

Report, published in the talks at the highest level between the United States and Chinese officials in Washington next week, Congress and the White House calls, send a clear cross-party message that Chinese investment is welcome in the United States.

China is already the largest foreign buyer of US government debt with investments of more than $1.1 trillion as early 2011. But U.S. statistics showed that only $2.3 billion in the Chinese investments in companies with offices in the United States end of 2009, direct the report said.

This is about 0.1 percent of the $2.3 trillion in total foreign direct investment or FDI, in the United States.

The share of China's most is less than many smaller countries such as Saudi Arabia, Republic Korea, Brazil, Mexico, India, and in the shade provided by the largest foreign investors in Britain, the United States, Germany, Japan, the report said.

Chinese investment in the United States is already but increase, rise by more than $5 billion in 2010 and support of more than 10,000 American jobs, according to the report.

US companies have about 50 billion USD investment volume in China compared to the low level of Chinese investment here.

Many Chinese companies are caused by some previous high-profile raids, like Chinese oil company CNOOC's, in the year 2005 to acquire Unocal unsuccessful attempts investments in the United States as a result of the political outcry.

Much of that has to do with a false suspicion held by many US officials that "apply because China has so many State-owned enterprises, market forces and do not necessarily reflect profit motives in this country", said Rosen and Hanemann.

"Therefore they suggest that if a Chinese company's to America coming, rather must make it to a specific political purpose than simply money." This conclusion is wrong and if we need to maximize US interests, such misunderstandings will be corrected, "said."

The United States, through its inter-agency Committee on foreign investment in the United States, should carefully review continue to individual Chinese investment offers for potential national security concerns.

But Washington "Not the mutual game should play" by linking approval of Chinese investment to China open your market to more US companies, the report said.

"The United States capital from China, regardless of Beijing's State welcome the planners should have to say about foreign investment in China," according to the report.

"Since 30 years China more grown by broader, FDI, regardless of overseas his door open openness." The United States should do the same, or risk Chinese companies are power plants in Ontario instead of Michigan or Juarez instead of El Paso, "according to the report."

Copyright 2011 Thomson Reuters.

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