By John Ballard
My time is limited this morning due to an early assignment, but these two items caught my eye from the Twitter feed.
?The Obama-GOP Deal: A Tax Hike for the Working Poor
Why would the working poor pay more? Because the proposal would replace this year�s Making Work Pay (MWP) credit with a temporary reduction in the Social Security payroll tax from 6.2 percent to 4.2 percent. That�s a good deal for high earners, who got nothing from MWP (thanks to an income phaseout), but a bad deal for those making $20,000 or less.The math works this way: The MWP credit gave as much as $400 to each single worker and up to $800 to couples. If you�re single and earned at least $6,452 (and less than $75,000) in 2010, you got $400. Married couples with earnings over $12,903 (and less than $150,000) got $800.
But you won�t get $400 from the payroll tax cut until your earnings reach $20,000; earnings have to be twice that high to yield the $800 that MWP gave to couples. So single taxpayers who earn less than $20,000 and married couples earning less than $40,000 will pay more in taxes under the payroll tax cut than under MWP (see graph). Like everyone else, those folks will keep their Bush-era tax cuts and everything else that would continue from 2010 into 2011. But because no other provisions would cut their 2011 taxes relative to 2010, those taxpayers are unequivocally worse off under the compromise in 2011 than under the tax law we have this year.
By contrast, the rich would get much better treatment from the swap of MWP for the payroll tax cut. If you�re single and earn more than $106,800 (the maximum earnings subject to Social Security tax in 2011), you�d pay $2,136 less in payroll taxes. Since you got nothing from MWP�it phased out for high earners�your net gain would be the full payroll tax savings. A couple in which both spouses earn more than the payroll tax cap would get double that much�$4,272.
The source is dated December 8. Further explanation and graph as well.
I have not researched to know if this wrinkle was corrected in the final draft of the measure or remains yet another burr in the saddle on the working poor.
?Using Cash Piles to Buy Shares in yesterday's Wall Street Journal online.
This short column describes one of the many smoke and mirrors techniques that companies routinely use to make themselves appear more profitable than is operationally accurate.
$92 billion: How much companies spent on their own shares in the third quarter of 2010.U.S. companies are finally finding a use for some of the nearly $2 trillion in cash sitting on their balance sheets. In the three months ended September, they spent a seasonally adjusted $92 billion on share buybacks, up 71% from the previous quarter and the highest level since the beginning of 2008, according to the Federal Reserve.
Buybacks can be a good signal, suggesting that company executives believe their stock is worth more than what the market is offering. In this case, though, the buybacks more likely reflect companies� solution to a dilemma: How to keep boosting earnings per share at a time when earnings aren�t likely to rise as fast as they have been.
Fuller explanation at the source.
This is better than lies, damn lies and statistics. It's hard facts, transparantly available to any investor, but one of the many devices in the toolboxes of brokers and client issuers of stock to slip a little magic past investors who carelessly allow others to manage their assets. Most investors scan a few numbers (like EPS) and move on to something else.
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