This was one of the worst weeks for China on the world stage in a while

China's President Xi Jinping rubs his eyes
Chinese President Xi Jinping rubs his eye as he arrives for the seventh plenary session of the first session of the 13th National People’s Congress (NPC) at the Great Hall of the People in Beijing.

  • It was a bad week for China on the world stage.
  • President Biden is getting a warm reception in Europe rallying our democratic allies in the G7, the EU and NATO.
  • And at home, our squabbling US Senate somehow managed to pass a $250 billion bill countering China.
  • This is an opinion column. The thoughts expressed are those of the author.
  • See more stories on Insider’s business page.

This week the leaders of the Western world turned their eyes toward China, and as a result it was one of the worst weeks for Beijing on the world stage in some time.

In Washington, Democrats and Republicans in the Senate set aside their differences to pass a $250 billion industrial policy bill aimed at preparing US commerce and government for competition with Beijing. And while on a diplomatic trip to Europe, President Joe Biden is reinvigorating our ties to our allies in Europe, the G7 group of nations, and NATO. On the top of the agenda in these meetings is the question of how to counter an aggressive, totalitarian China on the rise.

This comes as every indication points to China moving farther and farther away being an open, even remotely democratic society.

Earlier this week Amnesty International published an in-depth look at life for Muslims living in the Xinjiang Uyghur Autonomous Region, calling it a “dystopian hellscape” where Muslims are terrorized and arbitrarily forced into labor camps as part of “part of a larger campaign of subjugation and forced assimilation.” The Times also reported the Chinese government is seizing Uyghur Muslims who flee abroad.

On the economic front, the Chinese legislature rushed through a bill expanding the government’s means and methods to retaliate against foreign sanctions including the ability to seize foreign companies’ Chinese assets, deny visas, and block the ability to do deals in China. Foreign businesses in the country were caught flat-footed.

At the heart of China’s bellicose behavior is the belief, held among many elites in the Chinese Communist Party, that the US and its partners in the West are in a state of decline. This idea took root during the 2008 financial crisis, and then was reaffirmed by the European debt crisis, the election of Donald Trump and his agression towards our European allies, and the United State’s handling of the coronavirus pandemic.

To the CCP, our way of life looks like chaos – a cacophony of voices sometimes forcefully pulling our discourse to the right then back to the left. They’ve convinced themselves that we can no longer organize and unify our societies to do the ambitious things that need to be done to win the future. This week the West showed China signs that – when it comes to countering a strengthening totalitarian power – that may not be the case.

A matter of trust

China squandered a massive opportunity over the last four years. As president, Donald Trump snubbed America’s traditional allies and made overtures to the world’s thugs and petty dictators. That could have been a moment when China cozied up to Europe as a more stable alternative, instead China wound up alienating the continent with its overbearing behavior.

For example, at the beginning of this year it seemed certain that the European Union and China would sign a trade deal, against the wishes of the United States. But in March, when the EU sanctioned China over its treatment of Uyghur Muslims, Beijing – in keeping with its policy of aggressive “Wolf Warrior” diplomacy – responded by sanctioning members of EU Parliament. This put the EU-China trade deal on an indefinite hold.

That brings us to Biden and his current trip to Europe, where the president is trying to rebuild trust among nations. His administration is working on undoing the tariffs the Trump administration put on its EU partners with an aim to lift them by the end of the year. He is encouraging unity on the European continent, urging UK Prime Minister Boris Johnson to settle his differences with the EU over Brexit and keep the peace on the Ireland-Northern Ireland border. Biden also announced that the US would donate 500 million doses of Pfizer’s COVID-19 vaccine to over 100 countries “no strings attached.”

Trump’s betrayal of our allies left commentators around the world wondering if US-led groups like the G7 would be able to cooperate enough to do hard things again. This week we’re seeing signs that they can and will. The first sign was Treasury Secretary Janet Yellen’s momentous announcement that the G7 had come to an agreement on an international minimum corporate tax to stop the race to the bottom in taxing the world’s richest companies.

And now it appears Biden is also rallying our allies to counter China. Before he left for Europe, Biden met with NATO Secretary-General Jens Stoltenberg at the White House. Addressing the press after their meeting Stoltenberg said China “doesn’t share our values.” Biden will attend a NATO summit on Monday, and it will produce the strongest statement in its history on NATO’s stance on China, according to the Wall Street Journal.

From the comfortable primeval mud

Legendary American diplomat George Kennan – known for outlining the US policy of containing the USSR during the Cold War – used to say that the US people are always about 10 years behind its diplomats when it comes to seeing danger from abroad. Lecturing back in 1950 he compared democracies to a giant prehistoric monster “with a body as long as this room and a brain the size of a pin” that needs to be directly confronted with a problem before it awakens from the “comfortable primeval mud.” But when a challenge does gain our attention, Kennan said, the country lashes out with “such blind determination that he not only destroys his adversary but largely wrecks his native habitat.”

Perhaps the US has learned something from Kennan. Consider the Senate’s passage of a 2,400 page bill aimed at shoring up the US as an economic and technological superpower. The size and scope of the bill shows that our leaders are trying to meet a challenge before it’s an emergency.

The bill allocates $52 billion to building up the semiconductor industry in the US in order to decrease our dependence on semiconductors from China and Taiwan. The bill also funds major research, allocating $81 billion to the National Science Foundation from 2022 to fiscal 2026 and $120 billion into technologies like artificial intelligence and quantum computing.

There are also diplomatic and intelligence measures. It bars US diplomats from attending the Olympics in Beijing, and requires the intelligence community to produce a report about China’s efforts to influence international bodies like the World Bank, International Monetary Fund, World Trade Organizations and United Nations. It passed the fractious US Senate – sometimes sardonically referred to as Mitch McConnell’s “legislative graveyard” – on a vote of 68 to 32.

China responded to the bill saying that it “slanders China” and is “full of Cold War mentality and ideological prejudice.”

In a time when the leaders of the richest country in the world are squabbling amongst themselves over whether or not to fund the building of roads and bridges, this bill is a heartening sight. The most important ways the US can counter China are by strengthening itself domestically and by preparing for the worst with its allies. If the giant prehistoric monster hasn’t awakened, this week shows that it now at least has one eye open.

Read the original article on Business Insider

The dream of the techno-utopian workplace is dead. Remote work proved that digitizing the workplace isn’t liberating, it’s a company-controlled nightmare.

laptop screen showing video meeting with pixelated blue participants with crossed out eyes and frowns
  • When the pandemic hit, companies embraced remote work, especially as productivity began to increase.
  • Instead of investing in luxury office spaces, companies are investing in employee monitoring software to maintain a sense of control.
  • As companies put profit over workers, it is clear that technology in the workplace was never going to be liberating.
  • Katya Schwenk is a journalist writing about tech and surveillance.
  • This is an opinion article. The thoughts expressed are those of the author.
  • See more stories on Insider’s business page.

When Twitter CEO Jack Dorsey abruptly announced last year that his employees could work remotely “forever,” the move was hailed as no less than “the end of the office as we know it.”

A year later, the mythos of the digital workplace persists. Companies now insist that the pandemic has heralded in a new, if inevitable, age of work – one in which technology is enabling “workforce liberation,” as one CEO wrote in March. “Once a futuristic vision,” Boston Consulting Group has pronounced, “the bionic company is here.”

The new cyborg workplace promised by corporate America is placeless; perfectly digitized and perfectly efficient. Its workers have been freed from the old shackles of the office. For years, business executives have pushed to better integrate technologies like artificial intelligence in the workplace, arguing that greater employee autonomy will follow. The pandemic, they claim, has proved this to be true. “We are seeing a human transformation right before our eyes,” Dell’s Chief Operating Officer Jeff Clarke told investors last year. Under this model, worker productivity has reached “an all-time high,” he said.

Don’t fall for this charade. A year into the pandemic, it is more clear than ever that Zoom calls and “people analytics” are no antidote to the woes of the office. Automation and new technologies have never liberated the workplace; they aren’t doing so now, either.

Instead, companies are deploying tech to cement their control over employees. This sort of control is certainly not new. In the early 20th century, Frederick Taylor pioneered a strategy of “scientific management,” which placed workers under close surveillance in a ruthless pursuit of efficiency. But the age-old trend accelerated rapidly when the pandemic forced more than a third of the US labor force to work virtually.

The ideal of a digitized, “flexible” workplace is a familiar one. It draws from techno-utopian thought birthed in Silicon Valley, which in the early days of the internet imagined technology as a democratizing force, a means to secure personal freedom.

“There was a strong sense back then … that wiring the world was good in and of itself,” Chris Hughes, a now-defected Facebook co-founder, told The New Yorker in 2019. It did not take long for this ethos to reach the workplace.

For years, gig platforms like Uber and Instacart have touted their “new model” for work – using the language of liberation to describe a labor model that, in reality, quite closely resembles exploitative practices of prior decades. Uber’s tech might be innovative, but its vision for labor is not.

An example of in-app messages sent by Uber in recent weeks
An example of in-app messages sent by Uber as part of their Prop. 22 campaign.

Uber’s lobbying campaign for Proposition 22 in California, which exempted app-based drivers from being classified as employees, deployed this same techno-utopian language. “We believe a better way to work is possible,” the company wrote to its employees, urging them to vote for the legislation. Ultimately, the ballot item passed, greenlighting an independent contractor system that takes advantage of drivers and is likely to be replicated across the country. The erosion of employee benefits is being dressed up in the language of innovation.

But the behemoth companies that have recently joined in to claim a liberated, office-free workforce were – just a year or so ago – fixated on the physical office.

From luxury offices to digital offices

In 2018, cloud-computing behemoth Salesforce unveiled its new corporate headquarters in downtown San Francisco: a 1,070-foot skyscraper that, to date, stands as the tallest building west of the Mississippi River. The building is decked out with the usual luxuries of tech campuses: lounges, meditation rooms, and a “media center.”

Then, in February, the company bluntly announced that its 9-5 workday was “dead.” Salesforce did not plan to wholly abandon its offices, president Brent Hyder assured employees, but instead hoped to “create the office of the future” – one that hinged on remote work, significantly reducing office use. Its skyscraper, which has indelibly changed the San Francisco skyline, quickly went from crown jewel to disposable commodity.

Salesforce tower
The Salesforce tower dominates the San Francisco skyline.

This about-face is less confounding if workplace technologies are understood to function in much the same way as meticulous office design. As Benjamin Naddaff-Hafrey writes, the utopian office – whether Salesforce’s skyscraper or Epic Systems’ bizarre, fairy-tale headquarters – entices workers to extend their hours, blurring the lines between work and leisure.

A virtual workplace, it turns out, does this better – or, at least, companies like Salesforce are banking on it. Studies have indeed demonstrated that “productivity” increases when employees work remotely, but attribute this effect, in large part, to longer working hours. Perhaps as a result, some studies have found that remote workers report burnout at higher rates than their in-person colleagues.

Companies, of course, could take measures to improve remote conditions by better regulating workers’ hours or easing expectations around productivity. But this is unlikely. For the most part, companies that have decided to adopt a remote or hybrid model have cited increased efficiency as a key reason for doing so.

A new form of employee surveillance

As companies invest in their virtual workplaces, they are at the same time investing in new technologies for worker surveillance. Employee monitoring has a storied history, particularly in the US, but its newfound popularity casts doubt on the “liberation” of employees in the virtual workplace.

One recent survey of 2,000 companies using remote work found a “rapid” uptick in use of such tools. More than three-quarters reported that they conducted employee surveillance. A stunning 57% of those companies said that they had implemented the tools within the last six months.

Driving the trend, the survey found, was fear held by company executives that they had “a lack of control” over their remote business. A majority reported that they “don’t trust” their employees to work without such digital supervision – an anxiety that will likely drive autocratic management practices in the virtual office.

Companies that peddle employee monitoring tools have happily capitalized on that fear, branding themselves as a cornerstone of the future of work. “With more and more employees working outside the office,” writes monitoring company InterGuard, “digital employee monitoring is more important than ever.”

Their tools are far-reaching. Teramind’s live demo of its monitoring platform demonstrates a sophisticated system, one that records keystrokes, sends live “alerts” when employees spend above-average time on social media sites, and ranks workers by their calculated “productivity.” This is our supposedly emancipated workplace.

Accidental accessibility

Yet, remote work – despite all of this – remains popular among workers. And for good reason: The fight for greater flexibility in the workplace, led by people with disabilities and working parents, dates back decades. If there is a grain of truth to companies’ claims of a liberated workforce, it is here. For many, remote work is an important accommodation. It is, maybe, a liberating one.

The issue is that the pivot to the virtual office was not intended as such. The change was forced by the pandemic and, subsequently, driven by the interests of employers – after years of companies refusing to make such changes. As StaffCop Enterprise, another employee monitoring vendor, explains it: “Gone are the days when remote work was only appealing to employees.”

As Marianne Eloise writes, disabled people still need accommodations, within a remote workplace or not. Unsurprisingly, there has been no new rush to provide greater accessibility. And many jobs, while increasingly digitized, cannot be done remotely – a reminder that the companies that claim to provide ubiquitous flexibility are generally doing so only for highly-paid, white-collar employees, widening the cracks of the fissured workplace.

A year of heightened virtual surveillance, amid false claims of freedom, has shattered the ideal of the techno-utopian office. Still, the status quo of the workplace is always under threat. Sometimes, this disruption does come in the form of technology: A ride-hailing app co-op that hopes to topple Uber and Lyft’s empire in New York City, for instance, or a company developing technologies that would aid worker unionization. But this is not innovation on its natural course; it is something we must fight for.

Read the original article on Business Insider

You pay a higher percentage of your net worth in taxes than most billionaires do. This Danish millionaire wants that to change.

Danish entrepreneur Djaffar Shalchi.
Danish entrepreneur Djaffar Shalchi.

  • Paul Constant is a writer at Civic Ventures and cohost of the “Pitchfork Economics” podcast with Nick Hanauer and David Goldstein.
  • In the latest episode, they spoke with Danish entrepreneur Djaffar Shalchi about why taxing the wealthy benefits everyone.
  • “We don’t leave anybody behind in Denmark,” says Shalchi. “I don’t see people sleeping in the streets like I see in many other countries.”
  • See more stories on Insider’s business page.

Earlier this week, ProPublica published a stunning exclusive report documenting how billionaires like Elon Musk, Michael Bloomberg, and Jeff Bezos pay very little – sometimes even nothing – in income taxes.

Based on a cache of confidential IRS documents, the ProPublica report found that the nation’s 25 richest Americans “saw their worth rise a collective $401 billion from 2014 to 2018,” but in that same time they “paid a total of $13.6 billion in federal income taxes in those five years,” a total that “amounts to a true tax rate of only 3.4%.”

The fact is, you pay a much higher percentage of your net worth than billionaires do. And none of the findings in the ProPublica report are illegal – in fact, it’s how the system is supposed to work. Our broken tax policy has created some of the wealthiest corporations in the history of the world and helped to divert $50 trillion away from the paychecks of working Americans and toward a handful of wealthy people.

How raising taxes on the uber-rich would benefit the average American

If Elon Musk paid the same percentage in taxes as the average American, his day-to-day life wouldn’t change at all. He’d still be able to fly on his private jet to any of his homes whenever he chooses, terrestrial or otherwise. He’d vacation in the same spots, eat the same food, enjoy the same fame, and enjoy the same status that he enjoys right now.

But if all the Elon Musks who right now pay very little (or even nothing) in taxes were held to the same standards as average Americans, your life would improve in uncountable ways. The government could provide affordable childcare for every parent, allowing people more freedom to join the workforce. Our infrastructure could again be the envy of the world, rather than a slowly unfolding disaster movie. The social safety net would allow Americans the security to start small businesses, take bold career risks, and establish better lives for their children.

But greed is a hell of a drug, and many rich Americans fund anti-tax politicians and campaigns that ensure they pay as little as possible every April 15th. Only a few select “class traitors,” including Abigail Disney and Nick Hanauer, actively argue that rich Americans should be taxed more.

In the latest episode of Hanauer’s podcast, “Pitchfork Economics,” millionaire Danish entrepreneur Djaffar Shalchi discussed why he’s an advocate for wealth taxes.

“I was born in 1961 in Tehran, Iran,” Shalchi said. When he was eight, Shalchi’s mother brought him and his four siblings to Europe in the hopes of a better life. Soon, he says, they settled “in one of the most beautiful places on this planet: Copenhagen, where we have what we call the welfare system.”

Shalchi’s mother told her children that in Denmark, “you can do whatever you want to do,” because of the free education, social support benefits, and health care provided by that welfare system. He took his mother at her word, studying to become a building engineer and starting his own real estate development business. “We really have the American dream in Scandinavia,” Shalchi laughed.

The reality of ‘self-made’ millionaires

While Shalchi acknowledges that he “worked hard” to build his company into a global leader, he admits to scoffing when he hears rich people describe themselves as “self-made.”

“Nobody is self-made,” Shalchi said. “Everybody is directed by society, their friends, and so on.” The Danish welfare system provides the security for smart people like Shalchi to become wealthy.

As a millionaire many times over, Shalchi has a very high tax bill. “I pay more than 50%” of his annual earnings to Denmark in an average year, he admits, and depending on how good a year he’s had, “I can go as high as something like 70%.”

But while wealthy Americans love to complain about taxes, Shalchi knows that he gets great value in return for what he pays. In Denmark, “I don’t see people sleeping in the streets like I see in many other countries,” he said. “We don’t leave anybody behind in Denmark. Everybody can make a pretty decent living. And we have security, which is extremely important for everybody.”

Why high-tax Scandinavian countries rank high in happiness

When people don’t have to worry about basic health care, education, or where their next meal is coming from, life changes from a zero-sum game to something to be enjoyed.

“That’s why we are always among the top 10 in the world when happiness reports come out every year,” Shalchi said. High-tax Scandinavian countries are always competing with each other to top the UN’s annual Happiness Report, while America tends to stagnate in the mid-to-high teens.

So what kind of tax structure would we need to build a happier, more equitable America?

“If we raised taxes on all income to 45%, reinstated some reasonable corporate tax rates, and closed all the international loopholes,” Hanauer estimated, in conjunction with better wages and protections for ordinary workers, 90% of the worst problems that have plagued America over the last 40 years “would melt away.”

“By reinstating some corporate taxes and reinstating some taxes on wealthy people, you could absolutely pay for, for instance, the American Family Plan that the Biden administration is proposing,” Hanauer said. That would combat poverty, drastically reduce childcare costs, and make community college free for all.

Rather than spending ridiculous sums of money to be sheltered from extreme poverty, crime, and public health failures, the wealthiest Americans could simply pay the same in taxes as the average American family. Doing so, Hanauer says, would “improve the lived experience for every American,” including the ultra-rich.

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A social experiment shows women may be as likely as men to accept a gender pay gap if they benefit from it

business meeting
Most women still make $0.84 on the dollar of what men earn.

  • Marlon Williams is an assistant professor of economics at the University of Dayton.
  • In a recent experiment, he found women were as likely as men to vote against closing the pay gap when they earn more money.
  • Williams hopes this research will lead people to consider how self-interest may be driving their arguments.
  • See more stories on Insider’s business page.

The big idea

Women are just as inclined as men to vote against a policy to reduce a gender pay gap if they are personally benefiting from the status quo. This is one of the main findings of my new study, which was published in January 2021 in the journal Applied Economics Letters.

I conducted a series of laboratory experiments in which I recruited participants to do a 30-question quiz. The participants knew from the start that they would be paid based on the number of questions they answered correctly. In roughly half of the sessions, the quiz was written in a way to give men an advantage. I achieved this by choosing questions that were mainly on topics that surveys show men tend to be more interested in than women, such as sports and certain movie genres. The quiz for the other half of the sessions were designed in a similar way to give women an advantage.

In the version with a male bias, men answered an average of 21 questions correctly, while women answered only 13 right. This was meant to mimic the current real-world situation in which men, on average, earn more than women. The questions were carefully chosen so that the quiz that favored women had mirrored results: The average woman answered 21 correctly, the average man just 13.

Read more: I moved to the Alaskan Bush to become a teacher after COVID-19 ruined my plans. It’s wildly expensive, but I feel at home in my village of 270 people.

Three times at different stages of the experiment participants voted to either be paid $1 for every correct answer or to give the group that was at a disadvantage a leg up. If the second payment option won the majority vote, the disadvantaged participants would get $1.25 per right answer, while those who benefited from the biased test would receive just 85 cents.

In all three votes, which had similar results, I found that women were actually more likely than men to vote against the policy that would have led to a narrowing of the pay gap when they earned more money in the quiz. On average, 96.8% of women’s votes were against the proposed corrective payment policy when they were more likely to correctly answer the questions, compared with 90.5% of the men’s votes when they had the edge.

In addition, when women were at a disadvantage, they were more likely to vote in favor of the corrective policy, with 79.5% supporting it versus 73% for the men.

While social science laboratory experiments like mine cannot fully capture every nuance, I believe my qualitative results are similar to what we would find in the real world.

Why it matters

Debate over the gender pay gap can become quite heated.

The latest data from Pew Research Center show women make $0.84 on the dollar of what men earn – a gap that hasn’t changed much in recent years.

And surveys have found that men are more likely to oppose measures to correct this gap and even question whether the gap exists in the first place. A 2019 SurveyMonkey poll showed that 46% of men believe the gender pay gap “is made up to serve a political purpose” rather than a “legitimate issue.”

My research suggests women might feel the same if the positions were reversed. Additionally, it suggests that men would also likely be equally vociferous in calling for a narrowing of the gap if they found themselves in a world where they were holding the short end of the stick.

Ideally, I hope this research will lead people to reexamine the positions they hold on issues like this one and consider how self-interest may be driving their arguments. Maybe it can lead to more understanding and increase the focus in these debates on the available evidence.

What’s next

In my current and future work, I seek to experimentally determine people’s willingness to sacrifice personal financial gains in favor of an outcome that they see as serving the common good. This involves, for example, testing how much income the average employee or executive is willing to sacrifice to reduce income inequality.

Marlon Williams, assistant professor of economics, University of Dayton

The Conversation
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Rep. Paul Gosar learned the hard way: supporting the insurrection has consequences in Congress

paul gosar trumpism 2x1
Rep. Paul Gosar (R-AZ) speaks at the Conservative Political Action Conference (CPAC) on February 27, 2021.

  • Representative Paul Gosar has supported the January 6 insurrection from the beginning.
  • He has since found that it’s tougher for him to get things done in Congress.
  • Let this be a lesson to Republicans: undermining our democracy has consequences.
  • Raul Grijalva is the US representative for Arizona’s third district.
  • See more stories on Insider’s business page.

When armed insurrectionists broke into the US Capitol on January 6, I had just finished speaking on the floor of the House of Representatives. My colleagues were debating a motion to reject the results of Arizona’s election for president, which had been resolved in favor of President Biden.

I spoke against the motion – the challenge was not based on any evidence – and took my seat. I was followed briefly by Republican Rep. Paul Gosar, who has played a leading role in the insurrectionist cause from the beginning. He was, somewhat ironically, the last person to speak before security officials ordered an evacuation.

Just a few hours earlier, Rep. Gosar had challenged the certification of Arizona’s electoral votes during a joint session of Congress, receiving a standing ovation of nearly 30 seconds from his House and Senate Republican colleagues for his efforts. That morning, he led a crowd of Trump supporters in chants of “Stop the steal” at the now-infamous rally near the Capitol, and tweeted a demand that Biden concede the race, concluding ominously, “Don’t make me come over there.”

Rep. Gosar has only doubled down since then. At a May 12 hearing of the Committee on Oversight and Reform, he called the insurrectionists “peaceful patriots” who have been maligned only because of their support for Donald Trump.

It’s not unsurprising that his tune hasn’t changed. Whatever you may think of his political sentiments, they are clearly genuinely held. But like all extremists, he should be prepared to accept the consequences of his actions, and now that his colleagues are starting to impose those consequences, he is deflecting and making excuses rather than confronting them honestly.

This came to a head on May 24, when a panel of the Natural Resources Committee, which I chair, held a hearing on a politically uncontroversial bill called the Public Lands Renewable Energy Development Act. As the name suggests, the bill – sponsored by Democratic Rep. Mike Levin – creates incentives and eliminates barriers to develop clean energy projects on certain federally managed lands. It has been a popular and bipartisan piece of legislation for years.

Rep. Gosar knows the bill would benefit his own constituents tremendously, and he had been its leading Republican cosponsor in previous sessions of Congress. Unfortunately, his name carries negative weight among his Democratic colleagues, and having him play a leadership role in this Congress would hurt the bill’s chances of passage. As a result, Rep. Levin informed Rep. Gosar in mid-May that he could not serve as lead cosponsor of the bill this year and made it clear that this was a consequence of his role in the insurrection.

Rather than accepting this as a relatively small price to pay for his convictions, Rep. Gosar immediately introduced his own bill – with language identical to Rep. Levin’s – and told a reporter this was happening because of his “vocal criticisms of the Biden administration and its focus on climate change as it relates to the use of federal lands.” His own press release went so far as to suggest, disingenuously, that his bill would be the one discussed on May 24. It was not.

This is worse than crocodile tears. This is rewriting history. Rep. Gosar pretending on the one hand that a violent attack on the US Capitol is all much ado about nothing and, on the other, that he isn’t facing pushback for his leading role that day, suggests that he isn’t as ready to sacrifice for his cause as he wants his supporters to believe. If he is proud of his record, he should forthrightly say as much. Instead, we are seeing a deliberate effort to muddy the waters by a member of Congress who seems incapable of dealing with the real consequences of his actions before, during, and after January 6.

Those who try to sanitize what happened during the attack on the Capitol are free to do so, but outside their bubble, they have destroyed their credibility. Federal law enforcement agencies continue to make arrests in connection with a multitude of crimes committed that day. The big lie – that Donald Trump really won in the 2020 election – continues to wreak very public havoc, both in Arizona and elsewhere, and will unfortunately take a long time to die.

As a lifelong Democrat, I’m not in the habit of quoting Richard Nixon, but as he once observed, “The best and only answer to a smear or to an honest misunderstanding of the facts is to tell the truth.” I have no doubt that Rep. Gosar continues to believe himself the victim of smears and misunderstandings. But he needs to remember that his colleagues were there that day on the floor of the House, heading for the exits at the very moment his supporters broke into the building because of the false and dangerous story he was telling.

It’s time for him – and his like-minded colleagues who are similarly avoiding responsibility – to start telling the truth, not least of all to themselves. Their actions are unpopular, and with Democrats in the majority in Congress, there will continue to be consequences.

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Warren Buffett is under fire for avoiding taxes. Give him a break.

warren buffett
Warren Buffett.

OPINION

  • Warren Buffett is getting roasted for avoiding taxes after ProPublica’s bombshell report.
  • The billionaire investor is donating almost all of his money to good causes.
  • Buffett lives modestly, supports higher taxes on the wealthy, and doesn’t use popular tax loopholes.
  • See more stories on Insider’s business page.

Warren Buffett is being cast as the face of billionaire greed after ProPublica reported this week that he pays very little in federal income taxes relative to his vast wealth.

However, the investor’s minimal tax bill seems far less outrageous when viewed in the context of his modest lifestyle, philanthropic efforts, the nature of his company and its shareholders, his calls to raise taxes on the wealthy, and his refusal to use popular tax loopholes.

The case against Buffett

ProPublica analyzed leaked copies of Buffett’s tax returns between 2014 and 2018, and found the Berkshire Hathaway CEO paid just $24 million in federal income taxes on $125 million of reported income. The non-profit publication emphasized how little tax he paid by pointing out that his net worth grew by an estimated $24 billion in that five-year period.

“No one among the 25 wealthiest avoided as much tax as Buffett, the grandfatherly centibillionaire,” ProPublica declared.

Read more: Warren Buffett is hoarding $80 billion of cash, cleaning up his stock portfolio, and declining to bash bitcoin. Veteran investor Thomas Russo says why that strategy will ultimately pay off.

Politicians including Sen. Chris Murphy, Sen. Bernie Sanders, Sen. Elizabeth Warren, and Rep. Pramila Jayapal rushed to condemn Buffett and his fellow billionaires, calling for heftier taxes on the super rich and the closure of loopholes in tax laws.

ProPublica highlighted Buffett’s two main strategies to minimize his income, and therefore his taxes. The investor keeps over 99% of his wealth in Berkshire stock – which isn’t taxed until sold – and his company doesn’t pay a dividend, which shareholders would have to pay taxes on.

Not a typical billionaire

ProPublica reported that billionaires such as Amazon CEO Jeff Bezos and Tesla CEO Elon Musk paid no federal income taxes in some years, partly by taking out loans and deducting the interest paid on them from their incomes. There’s no indication that Buffett uses the same tricks; the investor said in 2016 that he has paid taxes every year since 1944.

Bezos is reportedly building a yacht so large that it comes with a support yacht, while Musk previously boasted a real-estate portfolio valued at north of $100 million – although he appears to have sold most of it to fund his dream of colonizing Mars.

The 90-year-old Buffett lives far less extravagantly. He resides in the same house in Omaha, Nebraska that he bought for less than $32,000 in 1958 ($290,000 in today’s dollars). He grabs breakfast at McDonald’s on his daily drive to Berkshire headquarters, guzzles Coca-Cola, and snacks on See’s Candies. He treats himself with an occasional trip to Dairy Queen, and entertains himself by playing online bridge.

The investor doesn’t use a company car, belong to any clubs where Berkshire pays his dues, or commandeer company-owned aircraft for his personal use – even though Berkshire owns NetJets, which sells fractional ownership of private jets.

Buffett also buys damaged cars and has them repaired to save money, and drove the same Cadillac for eight years until his daughter told him it was embarrassing and badgered him into upgrading to a newer model in 2014.

Notably, the Berkshire chief has drawn a $100,000 annual salary for the past 40 years – a fraction of the $15 million average pay of S&P 500 CEOs in 2019 – and doesn’t receive bonuses or stock options. While some details might be embellished, it’s clear that he lives a modest lifestyle relative to other billionaires.

Giving it all away

Buffett defended his tiny tax bill in a detailed statement to ProPublica, explaining that he’s pledged to donate more than 99% of his fortune to good causes. He’s donated about half of his Berkshire stock – worth about $100 billion at the current stock price – to five foundations since 2006.

The Berkshire chief told ProPublica that he prefers to hand his money to charitable organizations such as the Bill and Melinda Gates Foundation instead of the government.

“I believe the money will be of more use to society if disbursed philanthropically than if it is used to slightly reduce an ever-increasing US debt,” he said.

Read more: Warren Buffett’s Berkshire Hathaway has $140 billion in cash, yet it pulled billions out of Apple, Costco, and Chevron. Veteran investor Chris Bloomstran explains why the cash pile isn’t excessive and the sales made sense.

Buffett, aware that skeptics would likely dismiss his charity as a tax write-off, added that he’s only garnered 50 cents in tax benefits for every $1,000 he’s donated over the past 15 years.

The investor made a similar point in 2016, after Donald Trump accused him of taking a massive tax deduction. Buffett shared the details of his 2015 tax return, highlighting that he paid $1.8 million in federal income tax on $11.6 million of gross income, and only deducted $3.5 million for charitable contributions despite giving almost $2.9 billion to charity that year.

Moreover, Buffett noted that only $36,000 of his $5.5 million in total deductions that year were unrelated to charity or state income taxes. He added that he’s never used a “carryforward,” which allows taxpayers to deduct losses or tax credits from previous years. He pegged his unused carryforward at north of $7 billion in 2010.

Buffett clearly sees charitable donations as a reasonable way to pay fewer taxes, and has championed them in the past.

“If you want to give away all of your money, it’s a terrific tax dodge,” he quipped in response to an investor’s question at Berkshire’s annual shareholder meeting in 2010. “I welcome the questioner or anybody else following my tax dodge example and giving away their money. They will save a lot of taxes that way, and the money will probably do a lot of good.”

Buffett is also happy to keep his fortune in Berkshire stock. It signals to investors that he’s confident in his company and focused on generating long-term value, and means he has more skin in the game than anyone else. Moreover, he doesn’t feel guilty as his company’s success will ultimately benefit society.

“Many shareholders, including me, enjoy the long-term buildup in value, knowing that it is destined for philanthropy, not consumption or dynastic aspirations,” he told ProPublica.

Buffett also explained that Berkshire doesn’t pay a dividend because its shareholders overwhelmingly voted against one in 2014. They prefer Buffett to allocate Berkshire’s profits across the conglomerate and use them to buy quality stocks and businesses, instead of returning cash to them. Buffett also views buybacks as superior to dividends for several reasons, not just tax efficiency.

Buffett wants higher taxes

While some billionaires complain of excessive taxes on the wealthy, Buffett has called for higher taxes on the richest 1% of Americans, as well as changes to the tax code to prevent tax avoidance.

The investor highlighted more than a decade ago how ridiculous it was that his secretary paid a higher tax rate than him. The revelation spurred President Barack Obama to pursue the removal of tax breaks for the wealthy, and name his ultimately unsuccessful bill after Buffett. “If all the diseases have been taken, I’ll take a tax,” the investor joked at the time.

Buffett has also called for policies to reduce income inequality, such as expanding the earned-income tax credit to help workers get ahead. He once testified to Congress that estate taxes should be higher and better enforced, he told ProPublica, but his “persuasive powers proved to be limited.”

Overall, it’s not surprising that under the current tax rules, a 90-year-old who keeps his fortune in his company’s stock, and funds a simple lifestyle with a modest income, doesn’t pay a lot of tax.

It seems harsh to go after Buffett when he’s giving away virtually all of his money, calling for higher taxes on the wealthy, refusing to use several loopholes to pay less tax, and running a company where holding its stock for the long term and not paying a dividend makes perfect sense.

Read the original article on Business Insider

COVID-19 was meant to usher in a flexible work revolution. But for part-timers, it’s making things worse.

Waitress carrying plates back facing camera
many part-timers work in the sectors that have been hardest hit by the pandemic, such as hospitality.

  • COVID-19 forced people to work from home, raising hopes workplaces could become less inflexible.
  • But a report highlighted this week how the pandemic has hit those who were working part-time.
  • In this op-ed, researcher Emma Stewart warns they face exclusion from workdplaces if nothing is done.
  • See more stories on Insider’s business page.

For those of us in the flexible working sphere, the pandemic has driven a focus on different ways of working.

It feels like a positive step forward. Perceived barriers have come crashing down.

The UK HR body Chartered Institute of Personnel Development has found evidence suggesting that productivity and wellbeing have improved in many cases.

There is an overall sense that many workplaces are undergoing serious transformation.

But a huge proportion of the changes are in where people work. The flexible working revolution has, in fact, largely been a remote working one, which mainly benefits workers who left their offices but still keep full office hours.

There has been little focus on when or how much people work.

For people in frontline roles, who can’t work from home, the “new normal” of remote working isn’t an option.

There’s a danger of a split evolving. And part-time employees, in particular, are being massively, and disproportionately, affected by the fallout of COVID-19.

This week, TimeWise, the consultancy I co-founded, published new research that revealed real inequalities.

In the first UK lockdown from March to July 2020, half the country’s part-time workforce were recorded as being “temporarily away from work” – furloughed under the government scheme to protect jobs of those who couldn’t work – or having their hours reduced.

This compared to just a third of full-time workers, who are also returning to work faster than part-timers. Rates of part-time employment have fallen to their lowest levels since 2010.

The result is that many part-timers feel as if they are clinging onto disappearing jobs. And for those who need to work part-time in order to work at all, getting another one won’t be easy.

A total of 80% of part-time workers do not want to work more hours but, with only 8% of jobs currently advertised as part-time, they will be looking for a needle in a haystack.

One reason this is happening is that many part-timers work in the sectors that have been hardest hit, such as retail, hospitality, and leisure.

Some have already been let go. For others, the furlough scheme (where the government pays 80% of salaries) is masking the fact that their jobs may no longer be viable, which will become clear when the scheme ends in September.

Another issue is employers still tend to see part-time staff as more dispensable than their full-time colleagues. Anecdotally, we are hearing part-timers are the first to be let go.

The result of all this is that people who need to work part-time are facing a stark choice – attempt to find a full-time job or leave the workforce altogether.

The former is often challenging because of the reasons they needed to work part-time in the first place.

Many people who work part-time do so because they are caring for someone or have health problems themselves. So while they may be able to sustain a full-time job in the short term, it’s unlikely to be sustainable, and may simply delay the point at which they have no choice but to leave the workforce entirely.

It would be ironic if the fallout from the pandemic, which has been heralded as a new era of flexible working, leads to people who need to work part-time being excluded from the workplace. But without action, that’s the future of work we’re facing.

Of course, some of these issues are systemic, and need to be tackled at a policymaker level. But there is also a great deal that employers can do to increase and improve part-time opportunities within their organisations.

They need to create more part-time roles. We know that huge numbers of people want to work flexibly, but that doesn’t just mean remote – thinking creatively about whether a job could be made to work across fewer days (or shifts) will immediately open it up to people who can’t work full-time.

Critically, employers need to make part-time jobs available at the point of hire. We know that candidates find it hard to ask for part-time as they fear being seen as uncommitted.

We’re also hearing that companies are struggling to find the right people to fill their vacancies. Both of these could be solved by increasing the number jobs advertised as part-time up front.

Offering part-time roles isn’t just a nice thing to do. It helps employers attract a wider, more diverse pool of talent; it helps them hold on to, and progress, the employees they already have.

And when it comes to wellbeing, it’s not a huge leap to suggest that giving people the ability to fit their work around the rest of their lives will make them happier, healthier and so more productive.

Emma Stewart is co-founder of flexible working consultancy TimeWise.

Read the original article on Business Insider

We’re scientists who don’t want to see business travel to return to normal after the pandemic. Here’s why.

roblox developer conference
Attendees at the Roblox Developer Conference on in Burlingame, California.

  • Katherine H. Freeman is a geochemist at Penn State, and Raymond Jeanloz is a geophysicist at the UC Berkeley.
  • They say virtual conferences should continue post-pandemic to improve access and be more eco-conscious.
  • This article was produced in collaboration with Knowable Magazine, a digital publication covering science.
  • See more stories on Insider’s business page.

In 2020, the annual committee meeting of the journal we edit was a bit of a mess. It took place in March, just days before the World Health Organization declared COVID-19 a pandemic, so some attendees canceled their travel even as others were arriving at the meeting site. At the last minute, we pivoted to a hybrid meeting, with half the attendees in-person and the other half virtual. While the meeting was successful in terms of editorial decisions, the mixed format hampered our normally free-flowing discussions.

Katherine H. Freeman
Katherine Freeman.

The 2021 meeting of the journal, the Annual Review of Earth and Planetary Sciences, was entirely virtual. And it went much more smoothly.

Raymond Jeanloz
Raymond Jeanloz.

By then, we all had a year’s experience working in an online environment. Everyone was remote, which made the means of communication equitable, and we made sure each member had a chance to participate. We included breaks to reduce video fatigue, and breakout rooms for parallel small-group discussions that helped increase efficiency. We developed a more scripted schedule that we followed closely to ensure that everyone knew what to expect.

In many professions, business travel is part of the job

This is particularly true in science, where international collaborations are the norm. But as we look ahead to a post-COVID world, we’re not sure that we want to go back to spending so much of our professional lives in planes, hotels, restaurants and rental cars. There are obvious benefits to in-person meet-ups, but they don’t always outweigh the costs: time, money and the effects of travel on the climate. More industries should explicitly consider those costs, and the benefits of virtual meetings.

We’re not the only ones who don’t want a return to “normal”: More than 400 scientists have signed a letter urging US scientific organizations to explore more remote meetings in the future. A recent poll of more than 900 readers of the journal Nature found that nearly three-quarters want scientific meetings to be all virtual, or at least to have a remote option, even after COVID is over.

The benefits are obvious. A 2019 analysis from Runzheimer found that every business trip costs $1,300 per traveler. To US companies, that translated to roughly $112 billion in expenses in 2019 alone. Those costs render in-person meetings off-limits to many companies and individuals, effectively widening existing gaps.

Even if people can afford to buy a plane ticket, they may have other limitations that make the trip impossible, such as illness or challenges with securing childcare

Some online accessibility features, such as real-time captioning, are not always available at in-person meetings. Virtual meetings can eliminate some of those barriers, and they may be more accessible: When the European Geosciences Union made its 2020 meeting virtual, attendance rose from a typical 16,000 to 26,000.

Travel also has an enormous impact on climate. In one estimate published in Nature, air travel to a single scientific meeting – the fall meeting of the American Geophysical Union, attended by 28,000 people from around the world – generated the equivalent of 80,000 tons of carbon dioxide, the average amount emitted by the entire city of Edinburgh over the course of a week.

We can’t just flip a switch to virtual meetings without working out some kinks. Our 2021 virtual editorial committee meeting started at 8 a.m. California time, which was midnight for a colleague in Japan – who then had to stay awake for a further eight hours. It will be near impossible to pick a time that is convenient for everyone around the world, but we need to make sure that benefits outweigh inconveniences for each participant.

Virtual meetings also must provide ways for people to interact socially, particularly newcomers

Dinners and receptions at in-person events can help attendees new to the scene get to know other board members and make invaluable work connections, but these are difficult to replicate over a screen. Work discussions (let alone socializing) can be particularly tricky during hybrid meetings, so ways must be found to ensure that remote participants – including those from underrepresented communities – can network as fully and freely as people who are able to attend in person. Small group meetings ahead of time can ensure that each individual’s insights are clearly heard, and breakout rooms designated for specific topics help constructively focus discussions.

Of course, virtual or hybrid meetings can’t replicate everything about the in-person experience. Attendees may lose the opportunities for exquisite restaurant meals with colleagues, or the excuse for a family trip. And there are intangible benefits to gathering experts in a room to mutually educate each other, where you can easily interject or pull someone aside. But given the potential benefits of virtual meetings to improve access, cut expenses, and help the planet, we want to see more of them in the future. Let’s not go back to the way things were before.

Katherine H. Freeman is a geochemist at Penn State. Raymond Jeanloz is a geophysicist at the University of California, Berkeley. This article was produced in collaboration with Knowable Magazine, a digital publication covering science and its emerging frontiers.

Read the original article on Business Insider

ProPublica’s billionaire tax data shows the importance of closing 2 key tax loopholes. Here’s how.

taxes
  • Too much of billionaires’ true economic income is not getting counted on their tax returns.
  • We can count more capital gains as income, to make them report more income and pay more tax.
  • To do this, eliminate “stepped-up basis” rules and prevent double deduction of charitable giving.
  • See more stories on Insider’s business page.

ProPublica has obtained years of federal income tax information for the 25 wealthiest Americans, and has released an analysis comparing their federal income tax bills to the rise of their net worth over the period from 2014 to 2018, showing their federal income tax bills added up to just 3.4% of their wealth gains.

ProPublica calls this their “true tax rate.” While I have some quibbles with their analysis, the investigation does demonstrate a real problem: The wealthiest Americans are paying less income tax than our tax policies are supposed to collect from them, and less than is fair.

But I also have a hopeful message. There are solutions available to this problem, and they don’t need to involve a wealth tax, which is appealing as a political soundbite but faces enormous political, constitutional and administrative challenges.

Our income tax is not defining “income” correctly. Adopting a more comprehensive definition of income would make it possible to collect more tax from the likes of Jeff Bezos and Elon Musk. In fact, closing just two major loopholes would get us a long way toward that goal.

What is income?

If you ask an economist what “income” is, they’re likely to point to a concept called “Haig-Simons income,” which says your income for a given period is equal to your expenses plus the change in your net worth. This makes intuitive sense: your income either gets spent or saved, so if you add up your spending and your savings, that’s your income. But unrealized gains create issues for this definition in relation both to the tax code and to popular conceptions of income.

Suppose your house was worth $300,000 a year ago, but is worth $350,000 today. Did your house produce $50,000 of income to you over the last year? Haig-Simons would say so, but few people think about things that way. Your home’s appreciation doesn’t actually feel like income until you sell it. And this is also how the tax code works: Asset appreciation isn’t counted as income until the asset is sold.

This is the main tax “avoidance” strategy demonstrated in the ProPublica article. The wealthiest Americans owned interests in major companies whose stocks rose. They didn’t sell their shares, and therefore didn’t report any income related to that appreciation.

Of course, that’s not cheating – it’s just how the law works. And it would be fine so long as the gains got taxed eventually: if the tax liability is building up and sure to be paid in a future year when the gain actually gets realized, that’s fine. The problem is that our tax code too often allows rich people to never pay taxes on those gains.

Joe Biden wants to close the “step-up in basis” loophole

One of the biggest problems with the way our tax code treats unrealized gains is that you get a big bonus for holding on to your assets until you die.

If you buy an asset for $200,000 and it’s worth $800,000 when you die, the IRS then readjusts the value and your heirs only pay taxes on realized gains above the new $800,000 value. The $600,000 in gains accrued during your lifetime never get treated as taxable income. This creates a huge incentive for wealthy people to hold assets instead of selling them, and is a major way their true economic income gets excluded from tax.

Joe Biden
US President Joe Biden speaks on the economy at Cuyahoga Community College Manufacturing Technology Center, on May 27, 2021, in Cleveland, Ohio.

But the tax code doesn’t have to work this way. In fact, President Biden has proposed to change the law so that death is a “realization event.” If a person has more than $1 million of unrealized gains when they die, those gains over $1 million would be subject to capital gains tax as though they sold them on their death bed. Not only would this generate more tax, it would eliminate much of the incentive for rich people to cling to specific assets, so it would encourage more capital gain realizations (and more tax payments) even before they die.

Of course, there is political resistance to this idea, partly because it would also raise taxes on people who are rich but much less rich than Jeff Bezos.

Still, if the goal is to get these ultra-wealthy to pay more, you could offer an exemption much larger than $1 million per decedent, reducing collections from the merely rich while still capturing much more of billionaires’ true income as taxable income.

Defining income better makes higher tax rates possible

Capital-gain income, income made from selling investments like stocks, bonds, etc., has almost always been taxed at a lower rate than wage income. There are several policy justifications for this, but a major reason capital gains tax rates need to be lower than wage tax rates is that capital gains taxes are relatively easy to avoid.

You can jack taxes on high earners’ wages and salaries up very high – likely 70% or higher – before you have to worry that the higher rate is going to cause them to report so much less income that they pay less tax overall. But economists typically estimate that the “revenue-maximizing” tax rate on capital gains is much lower, closer to 30%, mostly because there are better strategies to avoid capital gain taxes.

But if you eliminate the stepped-up basis loophole, the government can collect more tax in three ways. First, taxes will be imposed directly on appreciated assets at death. Second, the impossibility of avoiding tax entirely through delay will encourage more wealthy people to go ahead and realize taxable gains before they die. Third, with a key avoidance avenue eliminated, the government can impose a higher capital gains tax rate and still expect that high earners will grimace and pay it.

This is why Biden has paired his plan to raise capital gains tax rates to as much as 43.4% on the highest earners with his plan to abolish stepped-up basis at death. The former policy does not work well without the latter one.

Charitable deductions are calculated in a way that is too favorable to the rich

Besides unrealized gains, one of the obvious ways the wealthy people discussed in the ProPublica investigation avoid tax is by giving their wealth to charity.

I am not one of those people who is grumpy about billionaire philanthropy. I think the tax code should reward charitable donations. But the way we hand out tax benefits for charitable giving now is excessively generous to the wealthy, while ordinary people get little or no tax benefit for their own charitable donations. The rules need to change.

Felipe Castro holds a sign advertising a tax-preparation office for people who still need help completing their taxes before the IRS deadline on April 14, 2010, in Miami.
Felipe Castro holds a sign advertising a tax-preparation office for people who still need help completing their taxes before the IRS deadline on April 14, 2010, in Miami.

Suppose you are an affluent person and you donate $10,000 to charity. Your marginal federal income tax rate is 24% and you itemize deductions, so this donation reduces your tax bill by $2,400, or 24% of the amount you donated.

Now suppose you’re rich and you donate $100,000 worth of appreciated stock to charity. You bought this stock many years ago for just $20,000. Donating an appreciated asset is not a gain realization event, so not only do you get to reduce your taxable income by $100,000 – the value of the donation – you also never have to pay the capital gains tax on the $80,000 in value the stock gained. Plus, your income tax rate is higher – 40.8% on ordinary income, though just 23.8% on capital gains – which means your $100,000 deduction reduces your federal income tax liability by $59,840, or 59.8% of the amount donated, compared to if you had simply sold the appreciated stock.

Now suppose you donate $1,000 to charity. Your income is more towards the median for an American family, and you take the standard deduction instead of itemizing. In most years, a charitable donation doesn’t reduce your income tax liability at all. But for 2020 and 2021, there’s a special provision allowing people who take the standard deduction to additionally deduct $300 in charitable contributions. Your marginal income tax rate is 12%, so this deduction reduces your tax bill by $36, or 3.6% of the amount donated.

That all doesn’t seem fair, does it?

We can make charitable deductions more fair while still encouraging charity

There are ways to improve how we use the tax code to reward charity.

One is to close the loophole about appreciated assets – when you donate an appreciated asset, you should be able to deduct only what you paid for it. That still provides extensive tax savings, but does not allow the rise in asset value to be deducted twice. Essentially, it would mean any donation of $100,000 would shield only $100,000 of income from tax, not more.

Additionally, you could cap the value of charitable deductions, as the Biden administration has proposed to do. Regardless of the actual tax rate paid, Biden has proposed that taxpayers should only be able to reduce their tax liability by 28% of the amount of a donation. This rule would reduce the incentive to give to charity among the wealthiest. But it would also generate revenue that could be used to enhance the charitable deduction for a broader swath of the public, for example by converting the deduction into a more generous and more widely available tax credit.

A more democratized approach to tax incentives for charity could ideally maintain the overall level of charitable giving in society while tilting tax liabilities toward the wealthiest Americans and reducing the influence of billionaires on the priorities of charitable institutions.

If we do these two things, we don’t need to do other, harder things

There are other ideas about how to get the wealthiest Americans’ reported income for tax purposes closer to their true economic income about which I am much less eager.

One, discussed briefly in ProPublica’s story, is to switch from taxing capital gains only upon realization to taxing them every year. If your stock portfolio appreciates by $100,000, you’re taxed on that $100,000 this year. If it declines by $50,000, you get a $50,000 tax deduction.

Just because your assets went up in value doesn’t mean you have lots of cash to pay new taxes, but because this system would eliminate the tax implications associated with selling appreciated stock, there would be an easy way for taxpayers to finance their tax bills: by selling stock.

But there are problems.

One is that other assets, like real estate, art, and interests in private firms, are not so liquid as stocks. It’s also harder to figure out what these assets are worth in years when they don’t get sold. So some taxpayers would have good reason to contend their asset appreciation hasn’t made them liquid enough to pay more tax today, and they’d also have more ability to argue with the IRS about what their true “income” really was.

The IRS is already strapped for enforcement resources, and while I favor increasing the agency’s budget, I am wary of new tax rules that would make enforcement much more complicated and therefore spread even expanded enforcement resources thinly.

IRS
The IRS.

Abolition of stepped-up basis would only require tedious arguments about the true value of illiquid assets when a taxpayer dies – a time when we already have to have those tedious arguments in order to calculate estate tax. Taxing unrealized gains would require having these tedious arguments every year, with the IRS facing off against expensive lawyers retained by wealthy people fighting to keep their tax bills down. It would just be much more costly and difficult to implement.

Other proposals to better capture the income of the very wealthy involve taxing unrealized gains only on easy-to-value liquid assets like stocks. We would keep the old method for assets like private companies and art.

This approach would be relatively easy to administer. But it would also create economic distortions. Wealthy taxpayers would prefer illiquid assets to liquid ones, and might make economically inefficient choices, like taking companies private to avoid the new rules. This could have negative effects on the economy.

There is hope for taxing the rich

Back in 2015, when I was at The New York Times, the paper ran an exposé on how the top 400 taxpayers in the country were paying lower tax rates than they had been two decades earlier. Their effective federal income tax rate had fallen from the 26.4% in the mid-1990s to 16.7% in 2012. The story attributed this to increased use of creative strategies to shield their income from tax.

Hours after the article was published, the Obama Administration responded by publishing data from 2013, showing that in just one year, these taxpayers’ effective tax rate had zoomed back up to 22.9%, closing more than half the gap.

What happened here? Well, tax rates for high earners were cut in 1997, 2001, and 2003. And then, in 2013, parts of the Bush Tax Cuts expired and tax increases on high earners included in the Affordable Care Act came into effect. So the story seems pretty straightforward: cut rich people’s taxes and they pay less in taxes; raise their taxes and they pay more in taxes.

Much of the typical response to stories like the one from ProPublica is unproductive: conservatives pointing out that this is just how and liberals dreaming up extremely complex approaches like wealth taxes that will never be imposed. The experience in 2013 suggests these approaches are both wrong.

Look to 2025

The experience from 2012 to 2013 shows that very rich people’s income tax bills are responsive to changes in income tax policy. We don’t need entirely new taxes to get them to pay their fair share. We just need to define income more comprehensively, make deductions more rational and equitable, raise rates where economically appropriate, and properly fund enforcement at the IRS.

There is a reason the Biden administration is focusing its tax policy efforts in the areas I am describing: These reforms work within our existing tax system and are administrable. And while I do not see major tax increases passing in the current congress, many provisions of the Trump tax cuts are set to expire in 2025. If Democrats control the presidency or either house of Congress then, Republicans will be forced to work with them on a bipartisan deal to set new tax policy terms.

That’s a reason Democrats need to focus on getting Joe Biden reelected in 2024. Just as Barack Obama’s reelection in 2012 paved the way for the tax increases on the wealthy that became effective in 2013, a Biden win in 2024 should set the stage for a tax bill in 2025 that makes billionaires pay their fair share – within the existing income tax system.

Read the original article on Business Insider

Laws requiring board diversity are becoming more common – here’s what business leaders need to know

meeting
Retaining diverse board members should be viewed not as a risk mitigation strategy but as an opportunity for growth.

  • Some states have started mandating gender, ethnic, and social diversity across company boards.
  • While certain regulations could include fines for companies that fail to comply, others are advisory.
  • For now, experts say the real pressure to increase board diversity is coming from company investors.
  • See more stories on Insider’s business page.

Companies have long been talking about how their boards need to be more diverse. But now the legal landscape is changing, with some states mandating that companies do more than talk.

In Illinois, for instance, boards of publicly owned companies are required to disclose female and minority board membership, as well as how they identify and appoint those members. California has gone even further, mandating that boards have at least one woman, as well as a certain number of directors from underrepresented racial, ethnic, or LGBTQ communities. Other states, including Washington, Colorado, and Pennsylvania, have also passed legislation to encourage diverse boards, and more are considering this step.

All of this means that, in addition to being an ethical and reputational imperative, boosting board diversity is quickly becoming a legal one as well. So what should companies keep in mind?

“Because there’s such a patchwork of inconsistent state statutes – and because many of these statutes are looking at different kinds of diversity – it’s very hard, from a compliance standpoint, to figure out a one-size-fits-all answer,” said Mark McCareins, codirector of Kellogg’s JDMBA program and a clinical professor of business law.

That said, there are certain things that companies should understand about this quickly evolving legal landscape.

Read more: We identified 10 corporate board candidates with deep experience in M&A, tech, marketing, and social impact to keep an eye on

At least for now, the real pressure is coming from investors

Not all of these new legal requirements come with teeth. While some of the new state regulations include fines for companies that fail to comply, others are merely advisory.

“Some of the new statutes say, ‘we want to know what you’re doing in this area, but we haven’t decided yet what we’re going to do if you don’t report or you report and the numbers aren’t to our liking,'” McCareins said.

There are also some inherent limits to just how strong their enforcement can be. For example, a company in one state can reincorporate in another if it feels overly burdened by the board regulations.

That’s why, at least for now, the larger incentive is reputational.

“The biggest hammer in all this is probably from a perception in the equity markets that you are not a company that plays by the rules,” McCareins said.

Investors are making their will known in other ways, too. Last year, the NASDAQ submitted a proposal to the SEC that called for instituting diversity requirements. And institutional investors such as BlackRock, Vanguard, and StateStreet have begun bringing shareholder lawsuits against firms over board composition.

“If I’m a public corporation, whether or not I’m currently under state or federal regulation, I’m probably going to be as concerned about what my investor base – and specifically my institutional investors – are thinking about this issue,” McCareins said.

As with other ESG issues such as climate change, McCareins predicts that scrutiny over board diversity from a range of stakeholders will only increase over time.

“Companies want to be ahead of the curve on this and other issues,” he said. “These statutes have brought it into the corporate mindset that there really hasn’t been sufficient progress to diversify corporate governance. So regulators and investors are going to start taking baby steps in the hopes of getting companies’ attention – and in the hopes that they end up doing the right thing.”

Consider your bylaws

All of this means that as companies anticipate new mandates, they must also consider whether their own bylaws could stand in their way.

“Let’s say our company has bylaws where a five-member board all have eight-year terms,” McCareins said. “They have just been appointed in the last year. The company would love to be more diverse, but now we’re stuck with this board for the next seven under our bylaws.”

This can put companies in a legal bind. A company that slow-rolls its compliance efforts may face legal action from shareholders. But if the company takes actions to comply with new state laws and runs afoul its own bylaws in the process, that may create other legal problems.

“You could see shareholder derivative suits against boards for not fulfilling their fiduciary duties,” McCareins said.

Ultimately the power to change the board’s bylaws resides in the hands of shareholders. After all, while boards typically make recommendations to reconfigure their own makeup, they cannot do so unilaterally.

“Let’s say shareholders vote and say, ‘no, we don’t want to change the bylaws,'” McCareins said. “That’s where the rubber hits the road and state regulatory policy runs head-on into the shareholders who own the company.”

McCareins recommends that the board’s governance committee start by gaining a comprehensive understanding of the applicable state DEI statutes.

“Where a change is – or will be – mandated, the governance committee then needs to formulate proposals to reflect these changes in board composition,” he said. “If the governance committee feels ill-equipped to evaluate DEI principles, an outside consultant in such matters can be brought in to assist.”

Embrace the opportunity

There is plenty of good advice out there on how to find and retain diverse board members – and set them up for success. (For instance, see here and here.)

McCareins advises companies to embrace the process – not just as a risk mitigation strategy, but as an opportunity for continued growth.

He recommends codifying the nomination criteria and diversity metrics that would comply with necessary requirements and would fit the company’s goals. In addition to boosting gender or racial diversity, this may also be an opportunity to diversify in terms of professional backgrounds or skills. Or perhaps it is an opportunity to recruit directors who can better represent the voices and experiences of diverse clients, customers, and other stakeholders.

“Every company is different and every company culture is different,” McCareins says. “It is up to the nominating committee to spend time early in the process to identify the metrics which make sense and are attainable for their business.”

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