Time to Close Wall Street’s ‘Retirement Advice Loophole’

Alliance for Retired Americans photo

There is a loophole in the rules that govern Wall Street brokers and financial firms that provide retirement investment advice that can drain away thousands, or even tens of thousands, of dollars of hard-earned savings from a single retirement account. Today, a coalition of senior, union and consumer groups launched a new website—SaveOurRetirement.org—to mobilize support to close the “Retirement Advice Loophole” through a new rule the U.S. Department of Labor is trying to adopt.

The way workers save for retirement has changed dramatically over the past decades. With the decline in traditional pensions, more and more workers depend on 401(k) plans and individual retirement accounts (IRAs), and they frequently seek investment advice from financial professionals. But the rule governing when that advice must be solely in the worker’s interest, free from conflicts of interest, has not been changed since 1975—and many loopholes exist.

The “Retirement Advice Loophole“ allows Wall Street brokers and financial firms with major conflicts of interest to provide investment advice that serves their own interests instead of what’s best for their clients.

For example, they can sell financial products that pay large commissions but hurt their clients with unnecessary fees, poor returns or excessive risks. Millions of Americans are affected by this loophole every year without even knowing it, and it is draining away their retirement savings.

Right now, some advisers are required to put their customers’ interests first while others are not—and it is often extremely difficult for workers and retirees to know which type of adviser they are dealing with.

The Labor Department rule has been under development for some time but has not been released yet. However, it is expected to require that investment advisers have no conflict of interest that might, for example, cause them to steer their clients toward investments that earn the adviser high fees but might not be in the client’s best interest. The rule should require anyone who gives retirement investment advice to act solely in their client’s best interest—a common sense standard known as the fiduciary duty.

Of course, Wall Street and the financial industry are adamantly opposed to reforming the rules. Two years ago they lobbied hard for a House bill aimed at derailing any new Labor Department investment advice rule, and surely they will be spending big money to do the same thing in 2015.

Be sure to visit SaveOurRetirement.org to learn more and find out how you can help close the “Retirement Advice Loophole.”

The groups in the coalition are the AFL-CIO, AFSCME, AARP, Americans for Financial Reform, Better Markets, Consumer Federation of America and the Pension Rights Center.

Reposted from AFL-CIO NOW

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Van Hollen Offers Battle Plan to Combat Income Inequality

Van Hollen Offers Battle Plan to Combat Income Inequality

Rep. Chris Van Hollen (D-Md.) unveiled a new plan today to address the large and growing problem of income inequality that he says, “attacks the chronic problem of stagnant middle-class incomes from both directions: it promotes bigger paychecks and lets workers keep more of what they earn.”

His plan would create or expand tax breaks for child care, apprenticeship programs, middle-class working couples, those who save for retirement and companies that raise workers’ wages, while at the same time scaling back the tax break corporations currently claim for CEO bonuses. Van Hollen said his proposals are fully paid for with a “high-rollers fee” on Wall Street.

We can pay for these new tax benefits for working Americans by changing the ways our current tax code is rigged in favor of those who make money off of money and against those who make money from work.

AFL-CIO President Richard Trumka praised Van Hollen for “showing the kind of leadership that has become far too rare in Washington, D.C., today. Many of the policy prescriptions he outlined today are part of the blueprint to seriously addressing income inequality.” He also said:

A modest Wall Street speculation tax, or ‘high-roller fee’ as Rep. Van Hollen has proposed, will help curb harmful Wall Street practices and raise billions of dollars annually. These are critical funds that could pay for infrastructure and education to lay the foundation for long-term productivity growth. Additionally, Rep. Van Hollen is absolutely right to deny tax breaks for ridiculous, out of control CEO pay—they don’t need any more handouts.

Read more about the Van Hollen plan from Alice Ollstein at Think Progress.

Reposted from AFL-CIO NOW

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Just the Facts? Not from Rick Snyder

Just the Facts? Not from Rick Snyder

In this week’s debate between Michigan Gov. Rick Snyder (R) and Democratic challenger Mark Schauer, Snyder ignored the advice Sgt. Joe Friday in “Dragnet” always proffered to witnesses and suspects, “Just the facts” when it came to his record on education, jobs and the economy. That’s alright. The good folks at You Got Schooled 2014 have the facts that Snyder ignored.

Here’s a sample. Click here for the full story.

On charter schools:

Rick Snyder: “They are giving parents choice because we have had a lot of failing schools, and the point was to give parents the opportunity to give their kids an education, create competition.”

Mark Schauer: “The first thing I will do is put the money back [Snyder] took from public schools. It is irrefutable.…Charter schools were allowed to expand with no oversight. That was a big mistake by this governor.”

The facts:

  • Traditional public schools perform better than charter schools, even when poverty is taken into account.
    “According to the Free Press’ review, 38% of charter schools that received state academic rankings during the 2012–2013 school year fell below the 25th percentile, meaning at least 75% of all schools in the state performed better. Only 23% of traditional public schools fell below the 25th percentile.“Advocates argue that charter schools have a much higher percentage of children in poverty compared with traditional schools. But traditional schools, on average, perform slightly better on standardized tests even when poverty levels are taken into account.” —“Michigan Spends $1B on Charter Schools but Fails to Hold Them Accountable,” Detroit Free Press
  • More than 80% of Michigan charter schools are run by for-profit companies.
    “Michigan has more for-profit charter schools than any other state in the country. ‘We’re an anomaly in the nation,’ says Western Michigan University professor Gary Miron. He says over 80% of the charter schools in Michigan today are operated by for-profit companies, while the national rate is 35%.” —“Three Little-Known Facts About Charter Schools in Michigan,” Michigan Radio

On $1.7 billion business tax cut:

Snyder: He thinks business owners shouldn’t be taxed on income beyond what regular folks pay. He said, “We made a fair system to encourage job creation.”

Schauer: “Yes, I will repeal the job-killing pension tax. It is wrong, it is bad tax policy and it is breaking a promise.…Our ‘accountant governor’ is missing some columns on his spreadsheet and it is called people.”

The facts:

  • Snyder shifted the tax burden from businesses to individuals, so low-income individuals and seniors saw their taxes increase the most. 
    “A major tax shift approved by the Michigan Legislature in 2011 made the state’s tax system significantly more regressive by cutting business taxes by 83% while increasing taxes for individual taxpayers by 23%, with a net loss of state revenue. Low- and moderate-income families were hardest hit, as many of the credits and deductions  intended to reduce their income tax burden were reduced or eliminated, most notably a 70% cut in the state Earned Income Tax Credit—a refundable tax credit that has been shown to lift children and families out of poverty, increase employment and reduce the need for public assistance.” —“Losing Ground: A Call for Meaningful Tax Reform,” Michigan League for Public Policy
  • Snyder’s tax increases included a new tax on pensions.
    “A big and controversial part of that income tax increase was the taxing of public and private pension income. That change alone was expected to raise for the state, and cost pension-receiving taxpayers, about $343 million in fiscal year 2012–2013.

    “The changes are phased in, with those reaching the age of 67 in 2020 or after facing more taxes.

    “According to a House Fiscal Agency analysis, a retired couple born after 1952 with $48,000 in pension income would pay $3,130 more in taxes.” —“Foul on Snyder for Playing Word Games with Pension Tax,” Bridge magazine

For even more on Snyder, check out 5 Reasons Why Rick Snyder Is One of the Worst Candidates for Working Families in the 2014 Elections.

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Reposted from AFL-CIO NOW

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6 Reasons Union Member Mike Michaud is a Candidate Who Cares About Working Families

6 Reasons Union Member Mike Michaud is a Candidate Who Cares About Working Families

It’s an election year, and we are quickly approaching the time when working families will have the opportunity to go to the polls and vote for candidates who support policies that protect or expand our rights, raise wages and work for an economy that benefits everyone, not just the wealthy few. We’re going to focus our spotlight on some of the key candidates who care about working families, and one of those candidates is Mike Michaud, who is running for governor in Maine. Here are six reasons why Michaud would be good for working people:

1. Michaud has never forgotten what it means to be a worker having to put in long shifts and struggling to pay the bills. Born and raised in Maine, he started working in high school, pumping gas at night and washing dishes at a truck stop off Interstate 95. After high school, Michaud went right to work at the Great Northern Paper Co., the same mill where his father and grandfather worked, and joined the United Steelworkers (USW). He kept working at the mill even while serving in the Legislature and remains a card-carrying member of USW today. [Congressional website, accessed 5/16/14; Portland Press Herald, 7/6/14]

2. As a state legislator and a member of Congress, Michaud has a lifetime AFL‐CIO voting record of 96% and has a long history of supporting American workers. He opposed the radical Ryan budget that would end Medicare as we know it, and he led the fight against unfair trade agreements that would outsource good American jobs. [AFLCIO Scorecard]

3. In Congress, Michaud sponsored “Buy American” legislation promoting the use of American goods in federal projects. He also led the charge to require the U.S. military to purchase American-made shoes, including those made by Maine-based New Balance. [Bangor Daily News, 6/27/13; 4/25/14]

4. He wants to rebuild the state’s infrastructure and restore Maine’s manufacturing advantage. One way he plans to do this is by creating a comprehensive workforce training and retraining program.

5. Michaud favors a fairer tax system that helps middle-class families get ahead and requires corporations and the wealthy to pay their fair share.

6. He wants to invest in pre-kindergarten and vocational education, and make college affordable for any Maine child who wants to attend.

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Reposted from AFL-CIO NOW

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New Rules: Punching In

An interesting choice

Forgoing more liberal candidates, the Working Families Party has decided to endorse Gov. Cuomo.

A win for Mother Nature

The Environmental Protection Agency released a new set of laws to protect the environment and temper global warming by regulating carbon dioxide emissions from power plants, owners aren’t happy.

Bad news for offshore accounts

77,000 foreign banks will now share tax information with the IRS, as part of a law targeting Americans who hide assets overseas.

Official like a referee with a whistle…

Seattle’s $15 minimum wage went through a final vote yesterday, approving the wage hike and making it the city with the highest minimum wage.

Income inequality akin to civil rights movement

Former secretary of labor Robert Reich makes some bold statements on inequality in America.

Key Quote: “The current struggle of low-wage workers across America echoes the civil rights struggle of the 1960s.”

Besties?

An unlikely paring, Senators Harry Reid and Mitch McConnell will come together to testify before the Judiciary Committee on freedom of speech and political donations.

Finally…

It’s primary season. Today, primaries will be held in Mississippi, Iowa, Alabama, California, Montana, New Jersey, New Mexico and South Dakota.

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On Thursday, Let’s Talk About Taxpayers Subsidizing Walmart

On Thursday, Let's Talk About Taxpayers Subsidizing Walmart

As part of the ongoing Upworthy series, Workonomics, there will be an UpChat this Thursday to discuss how Walmart’s low wages mean that taxpayers end up subsidizing those workers to the tune of $6,000 per employee each year. Wages and benefits are so low for the country’s largest employer that many of the company’s workers are forced to take part in Medicaid, housing assistance, child care subsidies, food stamps and other government lifelines. Meanwhile, the Walton family, who owns the company, has more wealth than the bottom 40% of the country combined.

All you need to participate this Thursday, June 5, at 2 p.m. EDT is a Twitter account. Learn more details on how to participate in the UpChat and find the conversation on Twitter by looking up the hashtags #UpChat and #WalmartEconomy.

Reposted from AFL-CIO NOW

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9 Reasons Why We’re Giving a ‘Thumbs Down’ to the Ryan Budget

Liz Lemon, 30 Rock

House Republican leaders passed Rep. Paul Ryan’s (R-Wis.) budget this week by a vote of 219 to 205, with no Democrats voting in favor. The Ryan budget is chock full of so many terrible ideas that it’s hard to single out the biggest stinkers, but here goes.

1. Raising the Medicare Eligibility Age from 65 to 67.  Not only would raising the eligibility age shift costs to 65- and 66-year-olds and to seniors who still qualify for Medicare benefits, but it would actually *increase* overall costs throughout the health care system. Worst. Idea. Ever.

2. Giving Corporations More Tax Breaks for Outsourcing Jobs. The Ryan budget calls for a “territorial tax system,” which would eliminate U.S. taxes on the offshore profits of companies that send jobs overseas. Second worst idea ever.

3. Costing 4 Million Jobs. And that’s only in two years! According to the Economic Policy Institute, the Ryan budget would cost 1.1 million jobs in 2015 and 3 million jobs in 2016. Millions more jobs would be lost in subsequent years.

4. Giving Millionaires a $200,000 Tax Cut. The Ryan budget would cut the top marginal income tax rate from 39.6% to 25%, giving people who make more than $1 million per year tax cuts averaging between $200,000 and $330,000.

5. Turning Medicare into a Voucher Program. The Ryan budget once again proposes to end the Medicare guarantee, which would raise premiums for seniors who choose traditional Medicare and leave traditional Medicare to “wither on the vine” as private plans capture the healthiest seniors.

6. Gutting Education. The Ryan budget would slash funding for kindergarten to 12th grade education by$89 billion and higher education by $260 billion over 10 years, making college less affordable and increasingstudent indebtedness by $47 billion.

7. Gutting Investment in Transportation. The Ryan budget would slash transportation investments by$52 billion in 2015, costing jobs and making America less competitive.

8. Gutting Medicaid. The Ryan budget would cut Medicaid funding by $732 billion over 10 years by turning Medicaid into a block grant program. It would further cut Medicaid funding by repealing the Affordable Care Act, for a total cut to Medicaid of some $1.5 trillion.

9. Slashing Tax Rates for Profitable Corporations. The Ryan budget would slash the corporate tax rate from 35% to 25%, squandering $1.2 trillion to $1.5 trillion in tax revenue over 10 years.

Reposted from AFL-CIO NOW

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The Latest Republican Plan to Outsource Jobs

House Republicans are proposing another enormous tax break for corporations to outsource jobs. The latest Republican outsourcing plan is very similar to the one promoted by former Gov. Mitt Romney in the 2012 presidential campaign, which President Barack Obama said would cost 800,000 jobs.

The outsourcing plan was included in a “tax reform” proposal unveiled recently by the chairman of the House Committee on Ways and Means, Rep. Dave Camp (R-Mich.).

Poll after poll shows America’s working families strongly oppose tax breaks for outsourcing that already exist under current law. This is hardly surprising, since between 1999 and 2010, U.S. corporations eliminated 1 million jobs in the United States while creating 3 million jobs overseas.

Here’s how the House Republican plan would promote even more outsourcing: it would allow outsourcers to pay almost no U.S. taxes on their overseas profits when they send jobs overseas. To be precise, outsourcers would be taxed at a rate of 1.25% on most offshore profits. Obviously, if outsourcers can pay taxes at a lower rate when they send jobs overseas, they’re going to have more of an incentive to outsource.

Here’s how Obama described this terrible idea during the 2012 campaign:

“There’s a new study out by nonpartisan economists that says Gov. Romney’s economic plan would in fact create 800,000 jobs. There’s only one problem: The jobs wouldn’t be in America. They’d be in other countries. By eliminating taxes on corporations’ foreign income, Gov. Romney’s plan would actually encourage companies to shift more of their operations to foreign tax havens, creating 800,000 jobs in those other countries.”

The technical name for this idea is a “territorial tax system.” Why is it called “territorial”? Because the United States would only tax American corporations on their profits within the “territory” of the United States, not on their profits overseas.

A “territorial tax system” is a terrible idea for lots of reasons. As Obama explained during the 2012 campaign, it would encourage job creation abroad instead of at home, lowering U.S. wages in the process and opening up opportunities for multinational corporations to avoid paying their taxes by playing accounting games to pretend their domestic profits are earned in foreign tax havens.

Camp claims several features of his plan would keep multinational corporations from avoiding their taxes.  However, as Citizens for Tax Justice (CTJ) explains, “[I]t is impossible to believe they would work since his overall proposal would dramatically increase rewards for any American corporation that can make its U.S. profits appear to be earned in offshore tax havens.”

Unfortunately, the Republican outsourcing plan has not gotten all the bad press it deserves. Why not? Partly because it has been competing for attention with all the other problems with the House Republican “tax reform” proposal. For example, the proposal would increase the deficit over the long term.

In February 2014, the AFL-CIO took a strong position against a “territorial tax system,” arguing that it would increase the tax incentive for shifting jobs and profits overseas. Instead, the AFL-CIO called for the elimination of all—not just some—of the existing tax incentives for outsourcing. What does this mean in practical terms? It means taxing offshore profits no differently than domestic profits—that is, taxing both kinds of profits at the same rate and at the same time.  Legislation that eliminates all tax incentives for outsourcing would generate $583 billion over 10 years, and this is the benchmark by which any international tax reform proposal should be measured.

Although prospects for the House Republican “tax reform” proposal are uncertain, the idea of a “territorial tax system” has wide support among Republicans in Congress, was recently endorsed by Sen. Marco Rubio (R-Fla.) and has attracted interest from some Democrats as well. It would be very dangerous to allow this terrible idea to pick up steam.

Reposted from AFL-CIO NOW

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Sen. Ayotte Pits Unemployed Workers Against Poor Children

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Sen. Kelly Ayotte (R-N.H.) has a plan. She says that to pay for extending unemployment insurance (UI), we should cut off the Child Tax Credit for 2 million families (5 million children), most of them Latino.

Let’s repeat that because it sounds kind of important.

To help the families of the 1.3 million workers who have been out of work for six months or more and lost their UI payments just before Christmas, Ayotte’s solution is to take money away from poor Latino children whose families are taxpayers.

That may be a valid solution to the extremists who run the Republican Party these days, but it comes across as a vindictive and mean-spirited move to most people, including a coalition of organizations that condemned the proposal in a Monday press conference.

“Senator Kelly Ayotte says she understands families, but her proposal to deny a child tax credit to a taxpaying immigrant family is an attack on innocent children. Pitting children against the long-term unemployed is nothing more than an ugly attempt to derail legislation to extend emergency unemployment for struggling families,” said Sister Simone Campbell, executive director of NETWORK, a Catholic social justice group that is part of the coalition. “Her proposed amendment should be soundly defeated as antithetical to the Gospel call to care for children and those at the margins of society, and to long-held values in our nation.”

The AFL-CIO is also part of the coalition and Executive Vice President Tefere Gebre also condemned Ayotte’s plan:  “This cynical proposal doesn’t reflect the America I have come to know and love as an immigrant. My America doesn’t need to pit the jobless against the children of immigrants. We are better than that.”

The proposal targets not only aspiring citizens, but any individual not eligible for a Social Security Number, something that isn’t limited to undocumented immigrants. Ayotte’s proposal would deny Child Tax Credit eligibility to families using the alternate option for those who can’t obtain a Social Security Number, the Individual Tax Identification Number, and who are legally eligible for the Child Tax Credit.  This would deny the credit to approximately 5 million children in low-wage families, making it harder for those families to feed and provide housing for these children.

A recent poll on the topic found the obvious that voters oppose cuts to the Child Tax Credit, with 68% of those surveyed in opposition.

Photo by Gage Skidmore on Flickr

Reposted from AFL-CIO NOW

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Warren Buffett and Bill Gates Find This Unfair (It Might Surprise You)

The wealthiest 1% contributes too little in taxes. Although tax rates have risen on dividends and the top rate on ordinary income increased this year, this point still rings true.

Watch the video to see what Bill Gates and Warren Buffett say in 2005 about their tax rates.

Reposted from AFL-CIO NOW

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