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The number of Americans signing contracts to buy previously owned homes in December held near a 19-month high, showing the stabilization in the market that began in late 2011 will extend into the new year.
The index of pending home sales decreased 3.5 percent last month after jumping a combined 18 percent in October and November, figures from the National Association of Realtors showed today in Washington. It was the best back-to-back reading since a buyer tax credit boosted demand in early 2010.
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Japan’s central bank said Tuesday it expects the economy to shrink slightly during the fiscal year ending in March instead of expanding as it forecast earlier because of the overseas slowdown.
The Bank of Japan kept its key interest rate the same at close to zero percent but downgraded its growth forecast for the year ending March 2012 to a 0.4 percent contraction from the 0.3 percent expansion it gave in October.
The bank stuck to its projection for a moderate recovery starting the first half of the next fiscal year.
But it lowered its projection for fiscal 2012 to 2.0 percent growth from 2.2 percent growth No teletrack payday loans. It was more upbeat about fiscal 2013, raising that to a 1.6 percent expansion from 1.5 percent.
The bank said the massive debt problems in Europe as well as uncertainty about the U.S. economy are risks for Japan’s outlook.
The strong yen, which erodes the value of exports from the world’s third largest economy, also dragged down growth, keeping economic activity “more or less flat,” it said.
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Should Republican presidential candidate Mitt Romney choose to release his tax returns, it likely will spur yet more debate about how much the rich should pay in taxes.
In particular, a lot of scrutiny may be given to how much tax Romney paid on the money he has made from Bain Capital, an investment firm he founded in 1984 and left in 1999.
That’s because the U.S. tax code lets fund managers of some investment firms pay a far lower tax rate on much of their compensation than they would if that money were treated as a salary or bonus.
The rule applies to managers of venture capital funds and private equity funds, both of which Bain runs.
The firm, which is a privately held investment partnership, uses money from outside investors to either invest in start-ups, buy out public companies, or invest capital in private ones, all in an attempt to boost their value and sell them at a profit.
Compensation for general partners — as Romney was at Bain — is typically based in part on the profits made on winning investments.
The partnership will set a minimum rate of return that the fund must achieve when it sells an asset, say 8%. And the general partners then get 20% of any profits above that. That compensation is called "carried interest."
Fact or fiction? Romney’s private equity past
But rather than being taxed as regular income — rates on which go as high as 35% - carried interest is taxed at the much lower capital gains rate of 15%.
The case made for applying the capital gains rate is to encourage investment. But general partners are entitled to carried interest even if they have not invested their own money in the fund (although most do invest some).
That’s why many — including President Obama — have called for carried interest to be taxed as regular income that is paid in exchange for investment services.
General partners are also paid a fixed management fee, which is taxed as ordinary income. Typically that fee is worth about 2% of the fund’s assets.
Since 1999, Romney - whose personal fortune is estimated to be as high as $264 million — has continued to profit from Bain’s work thanks to the terms of his retirement package.
Those who support taxing carried interest as a capital gain make a few arguments.
First, they say, the "sweat equity" of the general partner is as valuable as the financial equity of fund investors.
Second, the partner gets paid carried interest only if the fund does well. And it’s potentially subject to a clawback if other asset sales don’t meet their minimum "hurdle" rates.
Last, they contend, if rates did go up, it would discourage investment and risk-taking.
Gingrich’s ‘Bain bomb’ fizzles
"Carried interest is an important aspect of the capital gains tax system that is based on the uniquely American principle that we reward those who take entrepreneurial risk, whether that risk involves investing capital or other aspects of ownership that require years of time, effort, and vision," said Ken Spain, a spokesman for the Private Equity Growth Capital Council.
Others aren’t convinced.
"It’s not going to change how people do business," said Victor Fleischer, an associate professor of law specializing in venture capital and private equity taxation at the University of Colorado. That’s because the tax increase would only affect general partners, not the people who invest the bulk of money in private equity funds, he said.
Moreover, just because carried interest is dependent on good performance and may be clawed back isn’t reason to tax it more lightly than other income, Fleischer added.
"The fact that compensation is risky and not guaranteed doesn’t justify treating it as a capital gain."
Since 2007, measures to tax carried interest as ordinary income have been included in various bills, often to help pay for the cost of other tax cuts or spending increases. Should the change ever pass, it’s not expected to swell federal coffers, raising less than $20 billion over 10 years.
Robin Ebersohl knew she had a loud muffler. She couldn’t afford to get it fixed. When she saw a police car, she thought she’d chance it and drive by.
It was a mistake bigger than she could have imagined.
She thought she might get a ticket. Instead, she got three days in jail and her father lost $500 in bail money.
Ebersohl, of Livingston in Madison County, wasn’t accused of a crime. She was arrested on a court order issued at the behest of a creditor trying to collect less than $1,000 she owned in medical bills.
Ebersohl, 51, was trapped in the 21st century version of debtor’s prison.
“It was awful. You get deloused. They do this in front of the guard. It was very embarrassing. It was very degrading,” she said. “I’d never been arrested before, never been in any kind of trouble.”
The term “debtors prison” summons up images of Dickensian England and Colonial America. As a formal matter, most states did away with debtors prisons in the early 1800s, along with the whipping post.
But lots of people still go to jail over unpaid debts in America - including Missouri and Illinois. Here’s how it happens:
A creditor goes to court and gets a judgment for an unpaid debt. The debtor is then summoned to court to be questioned by the creditor, who wants to know about assets that could be seized. It’s called a “pay or appear” hearing in Illinois.
If the debtor doesn’t show up, the creditor asks the judge for an arrest order. In Illinois, that’s called a “body attachment.”
Creditors and their lawyers say it’s necessary tool to make sure that debtors obey the courts.
“If we can’t enforce our contracts, and use the law to do that, what will we become?” asked William Asa, a creditors attorney in Metro East.
Consumer advocates say its used unfairly to squeeze money out of jailed defendants and coerce others with the threat of imprisonment.
Police generally don’t go hunting for debtors. But if they’re stopped for a traffic violation or some other reason, the warrant shows up on computer records and off to jail the debtor goes.
Creditors like body attachments because they make money on them, as Ebersohl can testify. She sat in jail until her father’s pension check arrived, and he paid her $500 bail.
Then the court released the bail to her creditor, the Credit Bureau of Macoupin County. Her father was out the money.
“It’s considered the property of the defendant,” says Brent Cain, who represented the Credit Bureau. After all, the Credit Bureau had a judgement against Ebersohl and thus could take her property.
That’s common practice, says Beverly Yang, attorney at Land of Lincoln Legal Assistance, which provides free legal representation for the poor.
“This process is THE method of collection,” she said.
Arrests of debtors are common today in Southern Illinois, according to Yang. She said Madison County courts issued 65 such arrest orders from April to December of last year. Ebersohl’s arrest was in October 2007 on an order issued in Macoupin County.
Missouri courts are issuing arrest orders for debtors, too, said Rob Swearingen, attorney for Legal Services of Eastern Missouri. So-called “capias” warrents are issued “over and over again” in St business cards. Louis city, he said, although he said he is just beginning to study the issue and doesn’t know how common it is in the state.
The idea of jailing debtors is drawing criticism in Illinois. The state Department of Financial and Professional Regulation is holding hearings on the practice around the state, including one last Monday in Alton.
The department, which regulates lenders, revoked the license of a Easy Money Express, a Carbondale loan company in 2010 for obtaining arrest orders for debtors. The lender got its license back after agreeing to stop the practice.
Yang complains that defendants often don’t know they’ve been summoned to court until they are thrown in jail. Notices of “appear or pay” hearing come by regular mail, she said If the debtor has moved, or didn’t see the letter, they don’t know to appear.
That’s what Ebersohl says happened to her.
Ebersohl was truck driver in 2002, when she came down with cancer. She conquered that, but the ordeal aggravated her diabetes, and she could no longer drive a truck.
She lost her health insurance, along with her job, but her medical bills kept piling up. Eventually, she qualified for disability benefits.
Her creditors sued, got a judgment against her, and began summoning her to “pay or appear” hearings every few months. That’s also a common practice, says Yang, who considers it harassment.
Ebersohl says she went to court every time she got a notice. But says she was never knew about the hearing that caused her arrest. “If I’d got the notice, I would have went,” she said.
Sharon, who identified herself as manager at the Credit Bureau of Macoupin County, declined comment on Ebersohl’s particular case. But she said the agency takes a slow, phased approach to collections.
Before filing suit, the collection agency spends three months trying through letters and phone calls to persuade a debtor to pay, always politely, she said.
“Sometimes people get pretty violent. I’ve been threatened a few times, even today,” said Sharon, who declined to give her last name. “We try to be really nice.”
The agency files suit only if the debtor is making no effort to pay or stay in contact.
“A warrant is issued only when they are in contempt of court - when they refuse to show up or follow the judge’s order,” she said.
Rather than by mail, all their legal papers are delivered by off-duty policemen, she said.
Swearingen says his debtor clients in Missouri often never learn they’ve been sued until after they’re facing a wage garnishment. Missouri law doesn’t allow legal papers to be served by mail in most cases. But it does allow service to someone at the same address. Especially if the defendant has moved, he may never see the papers.
Yang is pressing for changes in Illinois forbidding serving papers by mail, or by summoning people to “pay or appear” hearings over and over again. In some counties, debtors must appear every month, she says. One hearing should be enough.
Less than 12 hours after German Chancellor Angela Merkel emerged from an all-night crisis summit on Oct. 27, Joerg Asmussen appeared in front of lawmakers in Berlin to sell the deal he helped broker in Brussels.
One in eight people earning at least $1 million annually was audited by the Internal Revenue Service last year, making them far likelier to be examined than those making below $200,000, according to IRS data released Thursday.
Just 1 in 100 individuals earning less than $200,000 had their income tax returns examined, the IRS said.
The 12 percent of millionaire earners audited in 2011 was appreciably higher than the 8 percent who were audited in 2010. IRS officials said the high ratio was part of an effort to demonstrate that tax laws are applied fairly.
“That has been something we’ve concentrated on to assure that there’s equity in the system, to assure that those at the lower end of the spectrum know that those at the higher end of the spectrum are subject to the same rules and enforcement as everyone else,” Steven Miller, deputy IRS commissioner for services and enforcement, said in an interview.
In recent weeks, President Barack Obama and congressional Democrats have sought to boost taxes on the wealthy as a way to pay for jobs programs, a theme they are expected to continue in this presidential and congressional election year. IRS spokeswoman Michelle Eldridge said the growing portion of millionaire earners’ returns audited is not related to politics.
“The IRS is an agency of civil servants, and we base our audit decisions on tax issues _ nothing else. We don’t play politics here,” she said.
Between 2004 and 2009, the percentage of millionaire earners audited ranged between 5 percent and 7 percent.
The data was divided into only three categories of income: below $200,000, $200,000 and up, and $1 million and higher.
About 1 in 25 people earning $200,000 and more was audited in 2011.
The IRS also audited a greater proportion of large corporations than smaller ones, the data shows.
Last year, 1 percent of corporations with assets under $10 million were audited. Among corporations with assets of $250 million and up, 28 percent were audited.
The IRS said its enforcement efforts to collect all taxes owed _ which include audits, court cases and other activities _ netted $55 billion last year. That is nearly $3 billion less than the previous year, which Miller attributed to a falloff in estate taxes and corporations writing off their losses.
All together, the IRS audited nearly 1.6 million of the 141 million individual income tax returns that were filed. In 2010 _ the most recent year available _ more than 8 in 10 individuals audited ended up paying additional taxes.
The agency collected a total of $2.3 trillion in revenue last year from individuals and businesses, including the $55 billion from its enforcement efforts.
The IRS figures also showed that:
_In 2011, the agency garnisheed wages or seized money from bank accounts 3.7 million times, put liens on property 1 million times and seized 776 pieces of property.
_77 percent of individual returns were filed electronically last year, up from 69 percent in 2010.
_70 percent of callers to IRS taxpayer information telephone lines got through, slightly less than the 74 percent who reached someone in 2010. Miller attributed that to budget cuts to the agency.
_The information IRS officials dispensed over the phone to taxpayers was accurate 93 percent of the time, the same as the previous year.
_The IRS website, http://www.irs.gov, was visited 319 million times in 2011, a slight increase.
The data was presented by federal fiscal years, which begin on the previous Oct. 1.
Global stock markets opened a risk-filled new year still smarting from a rough 2011, as many exchanges remained closed. German and French stocks rose in light volumes as a a reading of manufacturing activity in Europe improved.
Germany’s DAX closed up 3 percent Monday at 6,075 while the French CAC-40, which ended 2011 17 percent lower, climbed 2 percent to 3,222. Stocks fell in South Korea and closed flat in Taiwan.
Trading was light with the New York, London and most Asian stock exchanges closed.
Investors appeared to be reassured by European purchasing managers survey index numbers that improved in December from November. Activity in the manufacturing sector was up, but at levels that still show a fifth straight month of contraction.
Many of the world’s leading indexes are coming off a down year. Britain’s FTSE was off 5.6 percent by year end, Japan’s Nikkei fell 17 percent to its lowest close since 1982, and the Standard & Poor’s 500 showed zero gain.
Data releases later in the week such as eurozone inflation on Wednesday and German factory orders and U.S. non-farm payrolls on Friday will give traders more grist. The U.S. employment figure is expected to rise by some 150,000 after increasing 120,000 in November.
Markets face an uncertain first quarter as eurozone leaders try to get control of government debt woes that threaten to harm the global economy with another financial meltdown.
Much of the attention in coming weeks will center on Italy, the eurozone’s third-largest economy and the focal point of the eurozone’s struggle to deal with a crisis caused by heavy levels of government debt. Fears of default on those debts mean that bond investors demand ever-higher interest, making it a challenge for the new government of Prime Minister Mario Monti to roll over euro53 billion ($69 billion) in debt maturing in the first quarter cash advance. If a country can no longer borrow affordably to pay off bonds that are maturing, it faces eventual default or a bailout.
Debt woes may be compounded by at least a mild recession over the last quarter of 2011 and the first part of 2012.
In Asia, South Korea’s Kospi, which lost 11 percent of its value last year, closed nearly unchanged at 1,826.37. South Korea’s tech sector move higher, with Samsung Electronics up 2.1 percent and LG Electronics gaining 2.3 percent. Steel giant POSCO slid 1.1 percent and Korea Electric Power shed 1.8 percent.
Taiwan’s TAIEX, which was also open for business Monday, fell 1.7 percent to 6,952.21. Foxconn Technology, the world’s biggest contract electronics manufacturer, which makes iPads and iPhones for Apple Inc., fell 0.9 percent. Personal computer maker Acer Inc. shed 2.3 percent.
The Asian-Pacific region’s major benchmarks, including Japan’s Nikkei 225 index, Hong Kong’s Hang Seng Index and Australia’s S&P ASX 200, were closed.
Last year was one that traders would prefer to forget: most Asian equity indexes closed out 2011 deeply in the red. The Nikkei in Tokyo ended the year at 8,429.45 _ its lowest closing since 1982.
China’s benchmark Shanghai Composite Index, closed Monday, endured a 21 percent loss for the year as the impact of Beijing’s multibillion-dollar stimulus faded and the government tightened curbs on lending and investment to cool blistering economic growth.