The Boston Diaries

Thursday, April 15, 2004

Beware the Ides of April

Through explicit policies, as well as tax laws never reported in the news, Congress now literally takes money from those making $30,000 to $500,000 per year and funnels it in subtle ways to the super rich—the top 1/100th of 1 percent of Americans.

One 1985 law, promoted in the Senate as relieving middle class Americans, gave a huge tax break to corporate executives who make personal use of company jets. CEOs may now fly to vacations or Saturday golf outings in luxury for a penny a mile. Congress shifted the real cost of about $6 per mile to shareholders, who pay two-thirds, and to taxpayers who suffer the rest of the cost lost as a result of reduced corporate income taxes.

Via Ceejbot, Stroke the rich—IRS has become a subsidy system for super-wealthy Americans—IRS winks at rich deadbeats

Something to think about as you are doing your last minute tax preparations. On the flip side though, about those lear jets:

This paper studies perquisites of major company CEOs, focusing on personal use of company planes. For firms that have disclosed this managerial benefit, average shareholder returns under-perform market benchmarks by more than 4 percent annually, a severe gap far exceeding the costs of resources consumed. Around the date of the initial disclosure, firms' stock prices drop by an average of 2 percent. Regression analysis finds negative associations between CEOs' personal aircraft use and their compensation and percentage ownership, in accord with Jensen-Meckling (1976) and Fama (1980), but both relations have small magnitude.

Via Jason Kottke, Flights of Fancy: Corporate Jets, CEO Perquisites, and Inferior Shareholder Returns

I wonder if we'll be seeing a rise in civil court actions by shareholders? Again, something to think about as you fill out your 2003 Form 1040 …