Tag Archive | "President Obama"

President Once Again Takes Aim at Reinsurers


By: Gregory Arroyo

For the sixth time, President Barack Obama is taking aim at reinsurers, including in his fiscal-year 2016 budget language that would end some of the tax benefits they enjoy. Market insiders, however, believe the administration’s latest attempt to tax foreign reinsurers will once again receive little support from members of Congress.

In his budget presented on Monday, Feb. 2, the president proposed to make reinsurers pay a 14% one-off tax on cash held offshore and a 19% tax on future earnings. If passed, the proposal would make the cost of reinsurance, especially catastrophic coverage, more expensive.

According to insurance ratings company A.M. Best Co., the proposal is fielding strong opposition from member of Congress representing states that have considerable exposure to natural catastrophes. “Their concern is that a tax increase could lead to increased costs for (re)insurance coverage, or possibly a decrease in allocated (re)insurance capacity for less profitable risks,” the firm stated, in part. “Accordingly, any resolution of this issue could be years away.”

According to an economic study by the Tax Foundation’s Center of Federal Tax Policy, the president’s measure and similar legislation proposed by Reps. Richard Neal (D-Mass.) and Bill Pascrell (D-N.J.) and Sen. Robert Menendez (D-N.J) would cost the economy more than four dollars for every dollar raised. The study also projected that over the long term, the United States’ GDP would experience $1.35 billion in losses, which is approximately twice the revenue it would collect.

“The proposal is well thought out and serious, but ultimately mistaken on the policy merits,” the report states, in part. “While the deduction eliminated is neatly matched with income exclusion, there are substantial drawbacks to the proposal.”

In recent years, Democrats and Republicans have fought over ways to tax the huge stockpiles of cash held abroad by U.S. companies. Democrats want these companies to pay the current U.S. corporate tax rate of 35% on overseas profits, which Republicans have fought. However, Senator Rand Paul has signaled his support for a 6.5% tax.

“If anything were passed, it would probably be the 6.5% tax, which would still make the non-controlled foreign corps. a favorable alternative, especially for producers way above the small casualty insurance company threshold premium of $1.2 million per year,” noted Jim Smith, chairman of SouthwestRe. “I think the consensus is that with a Republican Congress and Democratic President, not much of anything is going to happen, and this proposed tax increase has even less chance than other bills.”

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Obama Administration Delays Another Health Care Rule for Small Businesses


One of these days, employers will experience the full effects of Obamacare — but not yet, reported the Washington Post.

In the latest in a long string of delays in enforcing the rules under the health care overhaul, the Internal Revenue Service and Treasury Department announced on Wednesday that they will wait until summer to start enforcing financial penalties on small businesses that provide so-called Health Reimbursement Arrangements to their employees.

Under HRAs, employers provide spending accounts that their workers can use to cover a portion of the cost of buying individual health plans. The arrangements, which give employers a tax-free means to help pay for their workers’ health costs, do not comply with insurance standards in the Affordable Care Act, commonly known as Obamacare, according to Treasury guidance issued in the fall of 2013. Consequently, employers who elect to continue offering HRAs could be fined as much as $100 per day per employee.

In a public notice, IRS and Treasury officials announced that those penalties (in the form of excise taxes) will not be levied against noncompliant small businesses until July, giving many employers a little extra time to adjust to the new rules.

“The Departments understand that some employers that had been offering health coverage through an employer payment plan may need additional time to obtain group health coverage or adopt a suitable alternative,” the notice reads. Officials also hinted at the fact that the new online health insurance exchanges set up under the law, which were meant to give small businesses more choices and more affordable health insurance options, haven’t quite delivered.

“The market is still transitioning and the transition by eligible employers to SHOP Marketplace coverage or other alternatives will take time,” they wrote.

In regards to the rules in the health care law, the delay is nothing new for employers. Most notably, the Obama administration has several times pushed back the start of penalties for business that do not provide adequate health insurance to their employees, first pushing the entire deadline back one year and then last year announcing an even more gradual, tiered (by company size) rollout.

A year earlier, the administration instituted a one-year delay in enforcing rules requiring companies to report their health insurances costs on employees’ tax forms. Officials also delayed additional rules requiring owners to provide equal coverage to all of their employees, and they later postponed fines on health plans that don’t meet certain coverage criteria in the law.

At this point, the small business community has had about enough of the temporary reprieves and is calling for permanent solutions.

“This temporary delay serves as an important immediate step to protect small businesses from costly penalties when trying to assist employees with the purchase of health insurance,” Amanda Austin, vice president of public policy at the National Federation of Independent Business, said in a statement responding to the announcement. “However, another delay to Obamacare does not fix the underlying problems – which the administration is conceding with these actions.”

Research by the NFIB, which has staunchly opposed the health care overhaul since it was being debated in Congress, suggests that one in seven small businesses that do not provide health care plans offer some type of reimbursement arrangement.

Katie Vlietstra, vice president for government relations and public affairs at the National Association for the Self-Employed, conveyed similar frustration, calling the short delay “welcome news for our community” but insisting that “a long-term, legislative solution is still urgently needed.” She added: “America’s smallest employers need the stability of a permanent fix in order to continue to utilize this critical tool to help provide health care coverage to their employees.”

Austin’s and Vlietstra’s groups have support in Congress. Reps. Mike Thompson (D-Calif.) and Charles Boustany (R-La.) in December introduced legislation that would do precisely what the small business groups are asking for, requiring the IRS to permit small firms to continue offering HRAs. Theirs is one of many proposed tweaks to the health care law that are expected to be considered and potentially put in front of the president by the new Republican Congress.

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Obama’s Budget, a Mixed Bag For Small Businesses


President Obama has sent his federal budget proposal to Congress – and in keeping with recent history, it’s highly unlikely lawmakers will approve it. But that’s not what’s important to someone running a small business, reported The Washington Post.

What’s important is to be prepared for what happens when Congress does approve a budget compromise that the president is willing to sign. Based on the blueprint Obama presented on Monday, the budget debate that will play out over the coming months could have a significant impact on your company – in at least three good ways, and three not-so-good ways.

First, the good.

Obama wants to spend money, and that could benefit thousands of small companies across the country. He’s proposing a $478 billion investment in infrastructure spending, and he wants to go 7 percent over previously agreed-upon sequestration caps to increase the defense budget by $38 billion. For businesses in these sectors, including construction firms and military contractors, more spending means more potential revenue.

It also opens up more opportunities for start-ups, minority owned businesses and other small firms looking for government work. The budget also calls for a 6 percent increase in funding for research and development, creating more opportunities for smaller biotech and research companies that collaborate with government agencies.

The budget also includes a tripling of the childcare tax credit, as well as a continuation of the president’s push for universal access to preschool, $1 billion in additional funding for Head Start and a previously announced program to help students go to community colleges. For businesses and non-profits that provide direct (education, transportation, meals, after-school care, textbooks) and indirect (cleaning, repairs, construction, technology) services to the education industry, the extra funding could deliver a welcome boost to their bottom lines.

In addition, the White House is continuing its push to fund seven more manufacturing institutes which partner with federal agencies, companies and the academic world to support and grow the manufacturing sector. At this point, few can argue that the president has taken a significant interest in helping U.S. manufacturers. Along with the Department of Commerce and the existing manufacturing institutes, White House officials have held competitions to boost innovation, provided funding, helped manufacturers find locations for their factories and provided other programs to support the industry. Countless small manufacturing firms have benefited, both directly and indirectly.

In short, the president’s budget has some very good stuff for small businesses. But it’s not all good.

First, there are the tax increases. Obama wants to increase capital gains taxes on those earning more than $500,000 per year, close what he calls the “trust fund loophole” and impose new taxes on current and future profits parked overseas by corporations. Most of the business owners I work with have seen their taxes rise significantly over the past few years and are frustrated with new tax-raising proposals. The more business owners are dis-incentivized to earn profits above certain thresholds, the less likely they will be to invest, grow and hire new people.

Our national debt is also being ignored. The president talks about “keeping deficits stable,” which means he’s targeting our annual deficits to be near half a trillion a year, along with a growing national debt – as long as they’re within an “acceptable” percentage of gross domestic product. This continues to unnerve members of the business community.

And calling an end to the sequester cuts “mindless austerity brought about through manufactured crisis” is troubling. The business people I know balance their budgets and do not carry excessive liabilities – not as long as they intend to stay in business in the long term. Continued spending that increases our national debt will likely only serve to further rattle financial markets, undermine economic growth, increase the likelihood of significant future austerity measures and, most importantly, hamper our government from raising funds when the need arises.

All of these issues continue to weigh heavily on the minds of the business owners with whom I work.

Finally, the budget again takes a swipe at big business and the wealthy. And for many small businesses, these are our best customers. It’s breaks for the middle class and an immediate 14 percent tax hike to corporations that have been legally keeping their profits overseas where tax rates are lower. Some of these are the same corporations that have provided us with services and products to improve our lives, employ hundreds of thousands of people and outsource billions of work to small businesses around the country.

Ultimately, what materialized today is a budget that focuses more on government spending, taxation and wealth redistribution and less on what most business owners want: A leaner, pro-growth, pro-business environment that rewards rather than penalizes companies for making money.

Say what you will about the president, but he’s run a relatively corruption-free administration and has been extremely clear about his priorities. And this budget has laid out the priorities for both his administration and his party. He has provided a clear blueprint for how he wants the government to impact our lives and businesses. The smart business owners I know don’t get emotional about this – they just make their plans accordingly and go about their business.

So, what’s next? The Republicans’ counter-proposal is expected sometime this spring. Stay tuned.

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How Obama Would Build a Middle Class Economy


Sounding a broadly optimistic note in his State of the Union Address on Tuesday night, President Obama urged the nation to turn the page on 15 years of war and economic deprivation and to usher in a new era of middle class prosperity, reported Inc.

The address, the president’s first before the newly Republican-led joint houses of congress, offered a bold vision that puts business, and middle class ownership of business, at the center of politics and the economy. In order to accomplish his goals, taxes would have to be raised for the wealthiest, and congress would have to rise above partisan rancor that has proven so detrimental to business, through events like the government shutdown in 2013.

“Know this, the shadow of the crisis has passed and the state of the union is strong,” the president said, in rhetoric that was both soaring and confident. “At this moment, with a growing economy and a shrinking deficit and bustling industry and booming energy production, we have risen from recession, freer to write our own future than any nation on earth.”

Drawing comparisons to policy changes made in the American economy around the era of World War II, which included the creation of Medicare, the president said he wanted to lay the groundwork for a more prosperous, middle class economy for generations to come.

Here’s a look at some of the key elements of last night’s speech:

Taxes

In recent days, details of the president’s tax plan have emerged. A cornerstone of the changes he proposes would include lowering the tax rate of middle class earners, while raising them for the wealthiest. Essentially, The president wants to return to the top capital gains tax rate to 28 percent for those earning $500,000 or more, the rate under former president Ronald Reagan. The president would also close loopholes, such as inversions, which allow some U.S. businesses to incorporate overseas and avoid paying federal taxes.

Free Community College

The president would make two-year college education at community colleges free, just as a high school education is free for all U.S. citizens today. The goal is to train the American workforce to be more competitive and to meet the complex challenges of the new jobs of the 21st century. That’s a note that nearly every small business survey points to, the inability of owners to find qualified workers. “We need to up our game and do more,” Obama said. “By the end of this decade, two in three job openings will require higher education.”

The Minimum Wage and Paid Leave

Citing the example of the 28 states that have already raised their minimum wages, the president urged congress to act to pass a law that would increase the federal minimum wage to $10.10 an hour. The president issued an executive order that raises the minimum wage for federal contractor workers to that amount in 2014. The president, who signed a memorandum authorizing six weeks of paid leave for new parents who are federal workers last week, said he wanted to formalize this into a national program for all workers. He’s expected to ask congress to pass legislation requiring companies to give workers paid time off for illness, as well as create $2.2 billion in grants to states to help support the initiative.

Cybersecurity

Following the international brinkmanship caused by North Korea’s alleged hack attack of the Sony Corporation in December, and the almost daily attacks of hackers against other businesses, the president proposed a plan that will nationalize the patchwork of laws that currently exist about company reporting obligations following a break-in. He would also enlist the help of businesses in sharing information about cybercrime and cyber attacks, and protecting online identities.

Trade Agreements

The president wants to strengthen trade by passing pending trade agreements. These are the Trans-Pacific Partnership, being negotiated with 11 trading partners in Asia, and the Transatlantic Trade and Investment Partnership with the European Union. “Twenty-first century businesses, including small businesses, need to sell more American products overseas, and today we export more than ever, and exporters pay higher wages than ever,” Obama said. “Ninety-five percent of the world’s customers live outside our borders, and we can’t close ourselves off from those opportunities.”

Infrastructure

Building new infrastructure, including a state of the art national broadband network, and rebuilding old infrastructure to meet the demands of the 21st century will make us more competitive globally and will attract more business investment in the U.S., the president said. He urged Republicans to think beyond passing just the Keystone Pipeline for oil to a broader set of initiatives. “Twenty-first century businesses need 21st century infrastructure: modern ports, stronger bridges, faster trains and the fastest internet,” the president said. “Democrats and Republicans used to agree on this.”

For their part, some small business groups had mixed reactions to the president’s speech, generally applauding Obama’s commitment to strengthen cybersecurity and global trade agreements, while questioning what might be a too limited overhaul of corporate taxes, which would leave in the lurch a majority of small businesses, which operate as pass-through entities and report taxes on an individual level.

“Corporate-only tax reform is a nonstarter for small business,” Todd McCracken, the president and chief executive of the National Small Business Association, an advocacy group, said in a statement. “Eighty-three percent of small businesses are pass-through entities and therefore not only will they not benefit from corporate-only tax reform, there is a chance they could lose some current deductions, resulting in a higher effective tax rate.”

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Obama to Ask WTO To Sanction China Over Illegal Auto Export Subsidies


WASHINGTON – According to an article in the Los Angeles Times, the Obama administration is set to launch a new enforcement action with the World Trade Organization against China, alleging that the Asian economic giant is putting U.S. manufacturers at a competitive disadvantage by illegally subsidizing exports of autos and auto parts.

The president, blending his roles as candidate and incumbent officeholder, will announce the move at the first of two campaign stops scheduled Monday in Ohio, a state where 1 in 8 jobs is tied directly or indirectly to auto manufacturing.

According to administration officials, who provided details about the case on the condition of anonymity before the formal announcement is made, China has provided at least $1 billion in export-contingent subsidies between 2009 and 2011 in violation of WTO rules and the nation’s agreement upon joining the organization in 2001. The subsidies contribute to the outsourcing of U.S. auto-parts production to China, the officials said.

The WTO action follows one in July in which the U.S. challenged China for imposing duties on more than $3 billion in American-produced automobiles. The administration is also announcing Monday that it will request that the WTO form a dispute settlement panel to consider that case.

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Chrysler Dealers Defend ‘Halftime in America’ Ad


Chrysler Group LLC’s U.S. dealers swung into action on Wednesday to rebut complaints that the auto maker’s emotional Super Bowl ad provided support to President Obama’s re-election campaign.

“We have no doubt that this ad had no political agenda of any kind but rather [was] a statement of fact and hope for the future for all of us and America,” the company’s National Dealer Council said following an emergency meeting.

The single airing of the auto maker’s “Halftime in America” two-minute commercial on Sunday during the Super Bowl sparked debate from living rooms to dealerships across the country. The controversy boosted viewership with more than five million people viewing the ad on YouTube, reported The Wall Street Journal.

Oliver Francois, Chrysler’s chief marketing officer and architect of the ad, said he finds the controversy perplexing. “It was designed to deliver emotions and I don’t think emotions have a party. There was zero political message. It was meant more of a rally cry to get together and what makes us strong is our collective power and not our individual disagreements.”

At issue is whether the ad’s intent was to sell cars or to help President Barack Obama in this fall’s presidential campaign. His administration provided bailout funding and ushered Chrysler and rival General Motors Co. through a quick bankruptcy protection process in 2009.

“To say it was a political favor is bull hockey,” said Valdosta, Ga., dealer Cass Burch, who owns two Chrysler stores. “That comment makes me want to fistfight somebody. Here I was overwhelmed with emotion and pride…It is bush league for them to take something that is so heroic and so patriotic about our company and to make it political.”

In the spot actor Clint Eastwood intones: “Seems that we’ve have lost our hearts at times. The fog of division, discord and blame, made it hard to see what lies ahead but after those trials we all rallied around what was right and acted as one. Because that is what we do. We find a way through tough times and if we can’t find a way then we’ll make one. All that matters now is what’s ahead. How do we come from behind? How do we come together and how do we win?”

The following day, the advertisement became fodder for talk shows after Republican commentator Karl Rove told Fox News he was offended by the commercial. He described it as “a sign of what happens when you have Chicago-style politics and the President of the United States and his political minions are in essence using our tax dollars to buy corporate advertising.”

David Axelrod, Obama’s strategist, and Dan Pfeiffer, the White House communication director, praised the spot in tweets they posted to Twitter. Their reaction fueled complaints the ad touts the Detroit bailout ahead of the fall presidential election. The White House has said it wasn’t involved in the ad.

So far, the firestorm has had little effect on the Chrysler brand or on its sales, according to dealers and research companies that track consumer sentiment by monitoring social media websites, blogs, news websites and message boards.

Zeta Interactive, a New York-based marketing firm that mines 200 million different blogs and social media sites, said the buzz around Chrysler’s ad has been 83 percent positive. Collective Intellect, a tracking firm in Boulder, Colorado, said its research shows that since the spot aired, consumers’ affinity and favor of the Chrysler brand has increased.

Auto-shopping website Edmunds.com said it saw a 27 percent jump in consumers looking for information about Chrysler after the ad aired. The ongoing debate seems to have helped keep that momentum going. Edmunds.com said Tuesday’s traffic for the auto maker is showing a 23 percent increase, down slightly from Monday, but higher than all but two of the other auto brands that appeared in the game.

“Chrysler and its dealers have to be in heaven right now,” said John Durham, advertising professor at the University of San Francisco. “The shelf life of this ad has been significantly extended.” Super Bowl buzz “typically dies out shortly after the game.”

Some branding experts believe the political uproar isn’t resonating and is unlikely to tarnish the Chrysler brand.

“It is more of them talking to themselves,” said Charles Rashall, founder of brandadvisors, a branding firm in San Francisco, Calif. “Most people are fed up with that stuff.”

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