Thursday, September 5, 2013

How Business Can Help Us Avoid the Looming Retirement Crisis

Posted by American Forum at 7:05 AM



By Denise Bowyer 

I am a business leader, a baby boomer, and a consumer. In each of these roles, I am concerned about retirement security -- or should I say, the lack of it? But it is in my role as a business leader that I have the most concern. In business when vision and business plans collide, disaster normally follows.
Like me, many hard-working Americans hold a vision of retirement based in financial security. I imagined a comfortable seat in a comfortable home on a sturdy three-legged financial stool. For most Americans today however, that sturdy three-legged stool, made up of social security, employer pensions and private savings, is broken, wobbly and missing a leg or two.
Business leaders, working Americans and the policy makers who represent us are faced with a choice. We can either change our vision, or fix the problem.
Business is driven by confidence that a consumer will want to -- and be able to -- to purchase a good or service. A survey of small business owners recently released by the American Sustainable Business Council (ASBC) showed that 70 percent believe that the lack of retirement security is a threat to business and the overall economy. They understand that business cannot be sustained unless it has a sustainable customer base, including older Americans.
The solution should be a combination of public policies that strengthen social security, ease the path for employers to offer and administer transparent defined benefits or defined contribution plans, promotes personal responsibility and financial literacy. Here's how to do it one leg a time.
The first leg is Social security. It touches the lives of most Americans, and today for many working families it is the only leg of their retirement stool. At its founding it was not meant to be the only source of income, but to replace only about 40 percent of a workers income for retirement. That's a little more than half of the 70 percent of pre-retirement income that research suggests for a decent sustainable retirement. The mechanism of social security, equal employer and employee contributions coupled with payroll deduction, have proven to be a winning combination for 57 million Americans currently receiving benefits to the tune of $1,200 per month. Strengthening social security should be the single issue that all business people agree on.
There is no longer a universal second leg on the retirement stool. Employer-sponsored defined and contributed benefit plans are weak and/or broken. It is business' interest to protect the last bastion of defined benefits still in existence.
It is also in business interest to find cost effective solutions in implementing and executing employer sponsored plans. In the ASBC survey of small business owners, cost not values was cited as the single biggest obstacle to offering a retirement plan. There needs to be a way for public policy to reward small business who would offer a portable, universal, transparent, retirement supplement to their workers. America's future retirees and older business customers are the 50 percent of workers without an employer sponsored retirement plan. The average balance in a 401K today, hovers around $80,000. Half of Americans don't even have that option. A sound second leg option would go a long way towards helping the 67 percent of small business owners who do not currently offer a retirement plan.
The third leg of the retirement stool is supposed to be personal savings. Unfortunately, for most workers, savings amounts to three percent of their retirement needs at best. Today, most workers use savings for emergencies not retirement. In a time of flat and declining wages, saving for retirement is not realistic.
The solution to the lack of financial resources for retirement chosen by many who can is simply to work longer. For some of course, that is not an option. And even those who do often wind up being laid off from career jobs and forced to take low-wage jobs.
Business leaders are some of the best voices offering solutions to real life issues that affect our communities and impact our bottom line. We should listen to them. A wobbly, one-legged stool simply cannot support business or our customers for the long haul.
Bowyer is Vice President of American Income Life Insurance Company, based in Waco, TX

 

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Obama's Tax Plan a Bad Bargain for Small Business

Posted by American Forum at 7:01 AM



By Frank Knapp 

President Obama is right to address the urgent need to modernize our once grand infrastructure. Unfortunately, the president's corporate tax reforms would leave us in a deeper hole down the road.
The President's plan to cut corporate tax rates responds to the tireless mantra of U.S. multinational corporations that America's tax rates hurt their global competitiveness. In reality, American corporations are enjoying their highest level of profits in 60 years while their federal income taxes are close to the lowest level. The Government Accountability Office recently reported that large profitable U.S. corporations paid an effective federal tax rate of just 12.6 percent in 2010, a rate lower than many small businesses and middle-class families.
Large corporations like Pfizer, Bank of America and Google have avoided paying their fair share of U.S. taxes by abusing offshore tax havens and using accounting gimmicks to disguise U.S. profits as foreign profits. U.S. corporations are holding about $2 trillion offshore to shield it from U.S. taxation. These corporations have gamed the tax system, contributing mightily to the deficit while leaving small businesses and households to pick up a greater share of the cost of public services and infrastructure -- from schools and police to roads and safe drinking water.
While the details aren't clear, the President's plan includes a one-time fee on offshore profits -- much lower than the regular corporate tax rate -- that he wants to use for investing in our country's aging infrastructure and other priorities. Small businesses applaud increased investment in bridges, ports and other needed infrastructure that will also create jobs and put money on Main Street. However, history shows that rewarding corporate tax dodgers with hundreds of billions of dollars in tax breaks -- as happened with the 2004 tax holiday that promised job creation and delivered a windfall to CEOs and shareholders instead -- only accelerates tax haven abuse in the future. It would incentivize the armies of corporate accountants and lobbyists to create and exploit new loopholes even as old ones may be closed.
Ending corporate tax dodging is not a Republican issue or a Democratic issue; it's an American issue. In a nationally representative poll, in which Republicans outnumbered Democrats, more than 90 percent of small business owners said it is a problem when large corporations use accounting gimmicks to shift their U.S. profits to foreign tax havens in order to avoid taxes pay. Whether called a one-time fee or a tax holiday, a corporate tax amnesty policy is completely unacceptable to small businesses.
The President could close offshore tax loopholes without temporarily or permanently cutting corporate tax rates through a number of bills currently pending in Congress. These include bills to end deferral of taxes on corporate profits held offshore so that corporate income is taxed as it is earned and requiring offshore transactions to have an economic purpose beyond simply avoiding taxes.
Moreover, lobbyists who could not prevent the top-bracket Bush tax cuts from being reversed are saying that the President's plan for reducing corporate tax rates to 28 percent, with a lower 25 percent rate for manufacturers, should be accompanied by a reduction in top tax rates for individuals in order to be fair to small business owners -- most of whom report their business profits on their personal tax returns. This is another effort to use middle-class small business owners as a foil to help hedge fund managers, wealthy lawyers and big businesses like Bechtel, the nation's largest engineering firm, that are formed as pass-through income organizations. These are the two to three percent of high-income "small business" owners who would reap a big windfall if income tax rates for those at the top were reduced; the rest of the real small business owners would not be affected.
The reality is that what small businesses really need is dependable modern infrastructure and more demand for their goods and services, not tax breaks for big corporations and wealthy individuals. We can strengthen this demand by making big corporations pay their fair share of taxes and investing the new revenue in economic development.
Tax reform should be about building a vibrant 21st century economy for all businesses, not rewarding big corporations for free loading on the rest of us.
Knapp is the president and CEO of the South Carolina Small Business Chamber of Commerce and Co-Chair of the American Sustainable Business Council Action Fund.
 


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