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Tag: political spending
Shareholders’ Quest For More Transparency

Shareholders’ Quest For More Transparency

If you own a share of a company, how much information about the company are you entitled to? That is the question embedded in the debate over a proposed Securities and Exchange Commission rule that would force publicly traded companies to disclose their political spending to their shareholders.

As of this month, a 2011 petition to the SEC proposing the rule has received more than 1 million comments — most of them in favor of the mandate. Supporters of the rule, some of whom demonstrated outside the SEC last week, say that’s the highest number of public comments ever submitted in response to a petition for a SEC rule. That level of public engagement, the proponents say, means the agency must stop delaying and implement the proposal. They also say that as hundreds of millions of dollars flood into politics through anonymous “dark money” sources, the rule is more needed than ever.

If adopted, the proposal, written by law professors, would codify and standardize disclosures shareholders have long been requesting from various companies. Those requests have been among the most common proposals at annual shareholder meetings. At the same time, major institutional investors such as the New York state and city pension funds have used their shares to press companies to disclose their political expenditures.

Thanks to that pressure, the Center for Political Accountability reports “almost 70 percent of companies in the top echelons of the S&P 500 are now disclosing political spending made directly to candidates, parties and committees,” and “almost one out of every two companies in the top echelons of the S&P 500 has opened up about payments made to trade associations.” The center calls that a dramatic increase from a decade ago when “few, if any, companies disclosed their political spending.”

In early 2013, the SEC placed the proposal on its regulatory calendar, signaling that the agency would be moving towards a formal rule to make such disclosures a legal requirement rather than a voluntary act. However, major corporate lobbying groups like the American Petroleum Institute and the U.S. Chamber of Commerce filed comments opposing the proposal. Those lobbying groups represent corporations that would have to disclose their political spending under the new rule — including the budget spent on those lobbying groups themselves. Following the pressure from those groups, the SEC removed the proposal from its calendar.

In combating the proposed SEC disclosure rule, business groups are making a constitutional argument, claiming imposing disclosure rules only on one type of entity — publicly traded corporations — violates the First Amendment. In a 2012 Georgetown Law Journal article, two of the lawyers pressing for the SEC rule countered that claim.

“The court’s First Amendment analysis has long given the SEC considerable deference in the development of rules that provide investors with information necessary to facilitate the functioning of securities markets,” wrote Lucian A. Bebchuk of Harvard University and Robert J. Jackson Jr. of Columbia University. They noted the Supreme Court’s Citizens United decision reaffirmed the right of the government to mandate disclosure of political spending.

Though the complex legal arguments are important, this all comes back to the aforementioned question: Should shareholders have the right to know how their money is being spent? That question will ultimately be contingent on the answer to an even more fundamental question: Is the government going to side with shareholders or management?

On the merits, it should be an easy call. But a political system dominated by big money rarely is motivated by the merits of an argument. It is anyone’s guess how or whether the SEC will act.

David Sirota is a senior writer at the International Business Times and the bestselling author of the books Hostile Takeover, The Uprising and Back to Our Future. Email him at ds@davidsirota.com, follow him on Twitter @davidsirota or visit his website at www.davidsirota.com.

Photo: “kaje_yomama” via Flickr

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Why They Hate Warren Buffett

WASHINGTON — Maybe only a really, really rich guy can credibly make the case for why the wealthy should be asked to pay more in taxes. You can’t accuse a big capitalist of “class warfare.” That’s why the right wing despises Warren Buffett and is trying so hard to shut him up.

Militant conservatives are effective because they are absolutely shameless. Many of the same people who think the rich should be free to spend unlimited sums influencing our politics without having to disclose anything are now asking Buffett to make his tax returns public. I guess if you’re indifferent to consistency, you have a lot of freedom of action.

Buffett has outraged conservatives by saying that he pays taxes at a lower rate than his secretary. He’s said this for years, but he’s a target now because President Obama is using his comment to make the case for higher taxes on millionaires.

Thus did The Wall Street Journal editorial page call on Buffett to “let everyone else in on his secrets of tax avoidance by releasing his tax returns.”

Somehow, the Journal did not think to ask its friends who battle vigorously for low taxes on capital gains to release their tax returns, too. But aren’t they just as engaged in this argument as Buffett is? Shouldn’t accountability go both ways? Nor, by the way, did the Journal suggest that the Koch brothers could serve the public interest by releasing a full accounting of all their political spending.

Buffett’s sin is that he spoke a truth that conservatives want to keep covered up: Taxing capital gains at 15 percent means that people who make their money from investments pay taxes at a much lower marginal rate than those who earn more than $34,500 a year from their labor. That’s when the income tax rate goes up to 25 percent. (For joint filers, the 25 percent rate kicks in at $69,000.) For singles, the 28 percent bracket starts at $83,600, the 33 percent bracket at $174,400.

So if an investor such as Buffett pockets, say, $100 million of his income in capital gains, he pays only a 15 percent tax on all that money. For everyday working people, the 15 percent rate applies only to earnings between $8,500 and $34,500. After that, they’re paying a higher marginal rate than the multimillionaire pays on gains from investments. Oh, yes, and before Obama temporarily cut it by two points, the payroll tax added another 6.2 percent to the burden on middle-class workers. That levy doesn’t apply to capital gains, or to income above $106,800, so it hits low- and middle-income workers much harder than the wealthy.

No wonder partisans of low taxes on wealthy investors hate Warren Buffett. He has forced a national conversation on (1) the bias of the tax system against labor; (2) the fact that in comparison with middle- or upper-middle class people, the really wealthy pay a remarkably low percentage of their income in taxes; and (3) the deeply regressive nature of the payroll tax.

And it’s worth noticing that while conservatives who talk about religion get a lot of coverage — and I will always defend their freedom to speak of faith in the public square — what really get the juices flowing on the right these days are tax rates. I’m not sure that a politician who renounced the Almighty would get nearly the attention Buffett has received for his renunciation of low capital gains taxes.

Advocates of higher taxes on the wealthy do not want to “punish” the successful. Buffett and Doug Edwards, a millionaire who asked Obama at a recent town hall event in California to raise his taxes, are saying that none of us succeeds solely because of personal effort. We are all lucky to have been born in — or, for immigrants, been admitted to — a country where the rule of law is strong, where property is safe, where a vast infrastructure has been built over generations, where our colleges and universities are the envy of the world, and where government protects our liberties.

Wealthy people, by definition, have done better out of this system than other people have. They ought to be willing to join Buffett and Edwards in arguing that for this reason alone, it is common sense, not class jealousy, to ask the most fortunate to pay taxes at higher tax rates than other people do. It is for this heresy that Buffett is being harassed.

E.J. Dionne’s email address is ejdionne(at)washpost.com.

(c) 2011, Washington Post Writers Group