Posts Tagged ‘Tax Equity’

The following letter was sent to SEC Chair Mary Schapiro and IRS Commissioner Doug Shulman on “tax day” with the hope they will jointly work at restoring the integrity of cash flow statements, without question the most important analytical tool for investment advisors like myself.  It is simply astonishing, given their material nature, that listed companies are not fully disclosing purchased and accumulated net operating losses nor the impact of complying with the “fractions rule” in the case of private equity partnerships.


Parish & Company
10260 S.W. Greenburg Rd., Suite 400
Portland, OR 97223
Tel:(503)643-6999 Fax:(503)293-3507
Email: bill@billparish.com

April 15, 2011

Mary Schapiro
Office of the Chairman
Securities and Exchange Commission
Mail Stop 1070
100 F Street NE
Washington, D.C. 20549

cc: Elise B. Walter – SEC Commissioner
Troy A. Parades – SEC Commissioner
Robert Khuzami – SEC Director
Doug Shulman – IRS Commissioner
Heather Maloy – IRS Commissioner Large Business Division
Walter Harris – IRS Director Financial Services
Elise Bean – Congressional Oversight Committee

Dear Chair Schapiro,

In 15 years as an investment advisor I have always done my best to support the SEC’s work, having led many key corporate governance related initiatives. Past Chairs Levitt, Pitt and Donaldson are all familiar with my work, which has also been reported in front page stories in leading publications including Bloomberg, the New York Times, Barrons and USA Today.


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One century ago Republican Theodore Roosevelt was elected president and instituted sweeping changes in government, including the establishment of an estate tax and the national park system.  What followed was an economic boom that lasted for years. Roosevelt knew the importance of circulating wealth in order to revitalize the economy by investing in key infrastructure, including the public education system.

Today fierce battle lines are drawn over whether or not the estate tax should be repealed.  On one side are Bill Gates Jr., Grover Norquist and the Wall Mart heirs and on the other side are Bill Gates Sr. and Chuck Collins.  This is certainly not a case of “like father like son.”

While Bill Gates Sr. has co-penned a book with Chuck Collins calling for increased exemptions but not abolishment of the estate tax, Bill Gates Jr. has been the prime funder of Grover Norquist as Norquist tours the country relentlessly advocating a complete repeal of the tax.  Like Bill Gates Sr., I believe the exemption should be raised to $5 million yet do not support a repeal.

I met Grover Norquist, the nation’s most ardent anti-tax advocate, here in Portland some years ago and was amazed at his persuasive skills, and also his ability to bend facts. When I asked Norquist what he would think if I told him Microsoft made more than $10 billion in one year without paying a penny of federal income tax he replied, good for them.

Norquist seems oblivious to the growing acknowledgment that tax equity or fairness is essential to healthy capitalism.  Even the Howard Jarvis tax institute, founded by his mentor, publicly stated that there were serious fairness issues related to Microsoft’s scheme.

Also participating in the debate is Warren Buffet, who like Bill Gates Sr. opposes any repeal of the estate tax, saying:

“We have come closer to a true meritocracy than anywhere else
around the world.  You have mobility so people with talents can be
put to the best use.  Without the estate tax, you in effect will have
an aristocracy of wealth, which means you pass down the ability to
command the resources of the nation based on heredity rather than merit.”                                                     [NYT, 2/14/01]

But Warren Buffet, like the younger Gates, has also been able to sell vast holdings within the structure of his foundation, thereby avoiding all taxes.  The Bill and Melinda Gates Foundation has sold all of its Microsoft shares, not even keeping 10% out of loyalty to the company’s employees.  Of course not a penny of tax was paid on any of these sales and today the Gates Foundation aggressively invests in activities ranging from private equity to currency speculations with all gains completely shielded from any tax consequence.

One simple reform to the system would be to allow tax exempt income status to foundations and endowments only for that portion of their investments invested in US government securities.  All other investments would be taxed at normal capital gain rates.  Perhaps this would help to stabilize the markets and eliminate the excessive risk-taking and speculation many of these tax exempt entities are engaged in, knowing they would have no tax liability on gains.

As the policy debates rage on regarding changes to the tax law, let’s hope that overall fairness has a strong seat at the table, whatever the outcome.

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