In other words, in perks alone CEOs got almost five times the U.S. median household income, which shrunk 1.5% to $50,054 in 2011. (CEO pay was also up lot, rising 6.6% to $9.6 million at Standard & Poor's 500 ($INX) companies, says Equilar.) ...
IBM's ex-CEO Samuel Palmisano. Total perks: $1.61 million. While Americans on average took a 1.5% pay cut last year, in his final year on the job in 2011 former IBM CEO Samuel Palmisano got a 52% boost in his perks package to $1.61 million. That ranked Palmisano fourth for total perks last year. Most of that was for $489,327 worth of personal use of the corporate jet, and a $1 million contribution to a pension plan.
At least Palmisano's pay did not go up last year. But then, when you are making more than $31.7 million a year, as IBM reported Palmisano did in each of the past two years, maybe you don't need a raise.
Besides all this pay and the perks, Palmisano got a $170 million golden parachute last year. This raises the question: Since Palmisano earned more than three times as much as the average CEO in the past two years, and got such a rich parachute, does he need all the perks too? "You have to ask how much the board compensation committee is really holding the line," says Eleanor Bloxham of the Corporate Governance Alliance, which advises boards on pay and governance issues.
An IBM spokesman has said in media reports that the golden parachute reflects pay Palmisano has accumulated over the years, and that IBM stock has outperformed significantly on his watch. Since March 2002, when he took over, the stock has advanced 115% compared with 22.8% for the S&P 500. Company filings state that Palmisano uses the corporate jet for personal travel for security reasons.
The fact is that the 401(k) has not worked out well for millions of average Americans and one big reason is that Congress gave birth to the 401 (k), it was never intended to become a nationwide retirement system or to be used by average middle class Americans.
t was designed for the top brass – tucked into the U.S. tax code in 1978 by a New York state congressman as a favor for Kodak and Xerox, which wanted a retirement fund tax shelter for the CEO and his circle. Years later, the Treasury Department ruled that rank-and-file employees should get the same tax shelter. Then the mutual fund industry, spotting a financial bonanza for itself, sold do-it-yourself 401 (k) retirement as “power to the people,” and millions of Americans took the bait, thinking they could beat the market. ...
The hard truth is that building a proper nest-egg takes much more ambitious savings than virtually any 401(k) plan envisions. The best plans typically let rank-and-file employees sock away 6% of their pay and provide a 3% company match, for a total of 9%. But EBRI’s experts suggest the combined target should be about 15% and Dallas retirement consultant Brooks Hamilton said 18%. Most plans, says Hamilton “are half what they need to be.”
One reason for bigger contributions is that you don’t actually reap the full benefits of your long-term gains. Mutual funds or financial managers take a big bite – much bigger than you think. Their fees for handling stock transactions, setting up funds, doing the paperwork and managing your account are listed in the fine print in investment brochures that most people don’t bother to read. ...
The numbers change dramatically when you figure in the mutual fund bite. Subtract fund fees of 2% from the expected gain of 5% and that leaves the 401 (k) holder with an average annual gain of 3%. Just like long-term gains, the mutual fund bite also has a compounding effect. As Bogle figures it, the projected gain from $1 to $7.04 over 40 years gets cut way down by the mutual fund bite – down to $3.26.
“Where did the nearly $4 difference go?” Bogle asks. “It went to the fund or to Wall Street in fees. So you the investor put up 100% of the capital. You take 100% of the risk. And you capture about 37% of the return. The fund or Wall Street puts up none of the capital, takes none of the risk and takes out 63% of the return.”
More than one in four American workers with 401(k) and other retirement savings accounts use them to pay current expenses, new data show. The withdrawals, cash-outs and loans drain nearly a quarter of the $293 billion that workers and employers deposit into the accounts each year, undermining already shaky retirement security for millions of Americans.
With federal policymakers eyeing cuts to Social Security benefits and Medicare to rein in soaring federal deficits, and traditional pensions in a long decline, retirement savings experts say the drain from the accounts has dire implications for future retirees.
“We’re going from bad to worse,” said Diane Oakley, executive director of the National Institute on Retirement Security. “Already, fewer private-sector workers have access to stable pension plans. And the savings in individual retirement savings accounts like 401(k) plans — which already are severely underfunded — continue to leak out at a high rate.” ...
In 1980, four out of five private-sector workers were covered by traditional pensions that paid them a fixed benefit based on their salary and length of service once they retired. Now, just one in five workers has a pension, leaving 401(k)s and similar retirement savings accounts as the primary vehicles for retirees to supplement their Social Security benefits. ...
Experts warn that when workers draw on their retirement accounts to pay current bills, they put themselves at greater risk of descending into poverty upon retirement, which would leave them dependent on government programs such as subsidized housing or food stamps. Nearly 6 million senior citizens were living in or near poverty in 2010, according to a Senate committee, a number expected to increase sharply over the coming decade after a long period of decline.
We, the petitioners want IBM to keep the automatic contribution at semi-monthly and NOT an annual contribution.
IBM, by moving the automatic contribution from semi-monthly to an annual contribution effectively denies employees who are terminated in resource actions up to the cut off of December 15 of the given year, the matching contribution from IBM. Furthermore, the movement of the automatic contribution to the end of the year denies interest generated for the employees 401(K) account. Sign this petition to tell IBM to REVERSE this decision, immediately!
And if you are an active IBM employee, please Join Alliance@IBM CWA Local 1701.
Web site: http://www.allianceibm.org; Twitter ID: @Allianceibm; Facebook: Allianceibm CWA
If seniors were not allowed to enroll in Medicare until 67 starting next year, federal spending would drop by $5.7 billion in 2014, according to the Kaiser Family Foundation. But Americans enrolled both in private health insurance plans and Medicare, as well as employers and states, would see expenses jump by $11.4 billion.
"Raising the age doesn't address the larger concern of reducing health care spending overall," said Juliette Cubanski, associate director of Kaiser's Program on Medicare Policy. "It just shifts costs from the federal government to other payers in the system." ...
One of the major concerns raised had been that many 65- and 66-year-olds would be left in the cold, without employer-based coverage or affordable individual insurance. That worry, however, has been blunted somewhat by the Affordable Care Act, which would provide insurance in government exchanges and subsidies for those of moderate income. Poor adults could be covered by an expanded Medicaid program, though not every state will opt to widen its program.
About 435,000 of these youngest seniors would be at risk of becoming uninsured, out of the roughly 5.5 million in that age group, according to estimates by the Center for American Progress, a left-leaning group.
But many of those who remain covered will likely pay more than they would had they transitioned to Medicare. Two-thirds of adults would pay more out of pocket in premiums and cost-sharing, to the tune of $3.7 billion in 2014, according to Kaiser.
There would also be a ripple effect. Employers will pay $4.5 billion more because they would have more of these older workers on their insurance rolls. And premiums in government exchanges would rise by $141 per person to accommodate the additional people in the pool. States would pay $700 million more to cover those eligible for Medicaid.
Even Medicare recipients would see higher annual premiums -- $46 on average -- because raising the age would remove comparatively healthy participants.
"It increases Medicare costs because it takes out the youngest patients and puts them into a group where they are the oldest and sickest," said Maura Calsyn, associate director of health policy for the Center for American Progress.
UnitedHealth Group Inc. CEO Stephen Hemsley told analysts the insurer's involvement in online exchanges that are expected to help millions buy coverage will depend on whether it's financially viable for the company.
"We will only participate in exchanges that we assess to be fair, commercially sustainable and provide a reasonable return on the capital they will require," he said.
"But dependency on government has never been bad for the rich. The pretense of the laissez-faire people is that only the poor are dependent on government, while the rich take care of themselves. This argument manages to ignore all of modern history, which shows a consistent record of laissez-faire for the poor, but enormous government intervention for the rich." From Economic Justice: The American Class System, from the book Declarations of Independence by Howard Zinn.
Yet the fixes are incomplete. The purpose of the A.M.T. is to ensure that wealthy taxpayers cannot make excessive use of deductions, shelters and other tax breaks. It was supposed to hit multimillionaires and billionaires whose tax shelters reduce their tax bills to a pittance relative to their incomes. In the absence of comprehensive reform, the A.M.T. will continue, for the most part, to allow the highest-end taxpayers to escape, while still afflicting many taxpayers below those lofty levels.
In 2011, for instance, more than half of taxpayers in the $200,000 to $500,000 income range paid the A.M.T, compared with only one-third of taxpayers who made more than $1 million, according to the Tax Policy Center. The situation will be much the same for 2012 and beyond unless Congress acts to rectify it. ...
Tax breaks for dividends and capital gains, however, are not counted as shelters subject to the A.M.T. As a result, the wealthiest Americans — who reap the lion’s share of such investment income while enjoying the low tax rates that go with them — are less likely than not-so-wealthy filers to fall into the A.M.T. Income-tax rates on capital gains and dividends top out at 20 percent, compared with a top rate of 39.6 percent on salary and wages. The saving to investors is roughly $90 billion a year. The upshot is that a professional couple with three children in New York City earning $250,000 is more likely to pay the A.M.T. than someone with no dependents in Florida who makes millions a year from a tax-favored stock portfolio.
It wasn’t always that way. For many years after the inception of the A.M.T. in 1969, tax breaks for capital gains were included in the A.M.T. and, accordingly, most A.M.T. payers were filers who had large capital gains. But starting in the 1990s, Congress no longer required investors to report such tax breaks under the A.M.T. The omission was not an oversight. It was a deliberate policy to cut taxes for the rich that has endured to this day.
At issue is the way inflation is calculated. The administration’s offer in the fiscal cliff talks — and the approach long advocated by Republicans — calls for using a new measure of inflation, called the “chained” Consumer Price Index, to calculate the COLA.
Unlike the gauge of inflation currently in use, the chained index captures the ability of consumers to adjust their spending across categories as relative prices change — for instance, spending less on fuel as gas prices go up and more on groceries as food prices go down. Such substitution causes the chained C.P.I. to rise more slowly than the current measure, which would result in a lower annual COLA and huge budget savings. The move to a chained C.P.I. would reduce benefits by some $135 billion over 10 years, and far more in later decades because of compounding. ...
What is known is that elderly households tend to have lower incomes and lower expenditures than younger households, and that more of their purchases are for needs that cannot be met by switching to products and services in unrelated categories. That indicates that they do not have the same flexibility as younger households to respond to price changes while still maintaining their standards of living. And because of the way it is calculated, the chained C.P.I. would also result in delayed upward adjustments in the COLA in times of accelerating inflation. Such delays would translate into real benefit cuts, leaving retirees worse off.
If, as the administration says, the aim is to set the COLA in the most accurate way possible, then the obvious approach is to have the Bureau of Labor Statistics develop a statistically rigorous index to track inflation as experienced by retirees. A more informal index from the bureau that looks at the effects of inflation on the elderly shows that the COLA is too low, not too high, in part because of medical costs. But the number of households sampled is too small to be sure.
Many millionaires are certainly paying at least 30 percent of their income in taxes, a goal President Obama set out in last year’s State of the Union address. But they’re more likely to be doctors, lawyers and people working in the financial services industry who get the bulk of their earnings in the form of paychecks.
Partners in private equity firms and hedge fund managers, on the other hand, earn much of their money as a share of their funds’ earnings. And that income gets preferential tax treatment as so-called carried interest.
A similar special tax treatment still holds true for Mr. Buffett as long as the bulk of his income comes from his investments and not a paycheck. The long-term capital gains rate for incomes over $400,000 is 23.8 percent, including the Medicare surcharge. That’s a far cry from the top marginal tax rate on income above that amount of 40.5 percent, which includes a 0.9 percent Medicare surcharge on earned income. ...
Despite what both political parties say about the importance of small-business owners for creating jobs, the new tax rates will adversely effect everyone whose businesses are set up so their earnings flow through to their individual income tax returns.
J. Leigh Griffith, a lawyer and partner at Waller, a national law firm based in Nashville, said many in this group would be paying taxes at a higher marginal rate than big corporations like I.B.M. and General Electric. He said about half of all companies today were structured as so-called pass-through entities.
Of course some people may have heard Vice President Joe Biden when he told an audience in Virginia that there would be no cuts to Social Security if President Obama got reelected. Biden said: "I guarantee you, flat guarantee you, there will be no changes in Social Security. I flat guarantee you." ...
If we actually did have to reduce the deficit it's hard to see why Social Security would be at the top of the list. After all, the vast majority of seniors are not doing especially well right now. Our defined benefit pension system is disappearing and 401(k)s have not come close to filling the gap. Retirees and near retirees have lost a large portion of whatever wealth they had managed to accumulate when the collapse of the housing bubble destroyed much of their home equity.
From a policy standpoint it would make far more sense to tax Wall Street speculation. Congress' Joint Tax Committee estimated that a 0.03 percent tax on each trade could raise almost $40 billion a year. Such a tax would also make the financial sector more efficient by eliminating a huge volume of wasteful trading. ...
The benefit cutters argument is another nice piece of D.C. humor. The argument is that the current index overstates inflation. However, there is an experimental index produced by the Bureau of Labor Statistics that shows the current index actually understates inflation for seniors. ...
The bottom line is that President Obama and many leading Democrats are prepared to give seniors a larger hit to their income than they gave to the over $250,000 crowd. And the whole reason it is necessary is that the Wall Street types who wrecked the economy say so. Is everybody happy?
But today we figured something out: it wasn’t that the WSJ was wrong in their coverage. They were reporting on a different country!
We figured this out when the WSJ published a graphic explaining how going over the so-called “fiscal cliff” would people at different income levels:
Notice anything strange? Yes, all of it. Every single number is laughably high, and applies only to the wealthiest tiny fraction of Americans. ...
Now, fair is fair: the graphic does not say that these calculations apply to the average person in these demographic groups. But why would you make a graphic with such generic pictures and publish it on a widely distributed site when it only applies to such a tiny percent of the American population, perhaps less than one percent?
Our theory: The Wall Street Journal has only seemed wrong and backward in their reporting about the American economy because they weren’t actually writing about the American economy. They were reporting on the financial comings and goings of a fictional country – let’s call it “Wall Street” – where they worship the free market, scoff at the rule of law, and react with anger when their infallibility of their main industry is questioned. Oh, and they also consider salaries many times higher than the average American annual income to be merely “average.” In this country, even single mothers make over $200,000 a year!
Consequences that are evident in a report last week by the National Research Council and Institute of Medicine which found the U.S. ranked last in life expectancies among 17 affluent countries. All the others have some form of a national healthcare system. No gold medals for us in this international competition, except in how much we spend and waste on health care as a result of our profit-focused private system.
It’s important, however, to be clear about what’s going on here, and in particular about the nature of the debate within the GOP. Some commentary depicts it as a debate between radicals and moderates; but it’s actually a debate between extortionists and con men.
Here’s what I mean. Essentially the entire GOP is committed to radical policy goals that are also deeply unpopular. All but 10 House Republicans voted for the Ryan plan, which would privatize and defund Medicare, impose savage cuts on Medicaid, and cut taxes on the wealthy and corporations. There was effectively no dissent from the notion that we need to dismantle the welfare state in order to make room for low taxes at the top.
But the public favors higher taxes on the affluent, and strongly supports all the major social insurance programs. So the divide within the GOP is about how to get past this awkward political reality.
One faction basically wants to use the party’s power of obstruction: threaten to provoke a crisis over the debt ceiling — in fact, do this again and again — and thereby force Obama to implement the GOP agenda.
The other faction wants to achieve the same goals by stealth. Pretend that what you’re really concerned about is debt and the fate of our children; cultivate the Very Serious People and the deficit scolds; impersonate a budget wonk; and smuggle the agenda in by dressing it in fiscal responsibility camouflage.
Now imagine the reverse: Rich CEOs have used every tax loophole in the book to add to their own wealth, have been bailed out directly or indirectly by the American taxpayer, and have rigged corporate governance so that they make far more than they're worth.
Now, to make sure the milk and honey keeps flowing their way, they want to cut Medicare and Social Security benefits for the beleaguered American majority. Sounds crazy, right? Meet the CEOs of the Business Roundtable.
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