Tag: IRS

The Pay Czar at Work

Mark Calabria notes how the form of salary scheme at financial institutions played no apparent role in sparking the financial crisis.  But that hasn’t stopped the federal pay czar from boasting about his power, even to regulate compensation set before he took office.

Reports the Martha’s Vineyard Times:

Speaking to a packed house in West Tisbury Sunday night, Kenneth Feinberg rejected the title of “compensation czar,” but he also said said his broad and “binding” authority over executive compensation includes not only the ability to trim 2009 compensation for some top executives but to change pay plans for second tier executives as well.

In addition, Mr. Feinberg said he has the authority to “claw back” money already paid to executives in the seven companies whose pay plans he will review.

And, he said that if companies had signed valid contractual pay agreements before February 11 this year, the legislation creating his “special master” office allowed him to ask that those contracts be renegotiated. If such a request were not honored, Mr. Feinberg explained that he could adjust pay in subsequent years to recapture overpayments that were legally beyond his reach in 2009.

This isn’t the first time that federal money has come with onerous conditions, of course.  But it provides yet another illustration of the perniciousness of today’s bail-out economy.

Gallup Poll: Federal Reserve Makes the IRS Look Good

A recent Gallup Poll surveyed the public’s impression of how various federal agencies were doing their job.  Of the agencies evaluated, on the bottom was the Federal Reserve Board.  Only 30 percent of the respondents rated the Fed’s performance as either excellent or good.  I can understand now why Chairman Bernanke felt the need to take his act on the road.  Even the IRS managed to get 40 percent of respondents to see its job performance as excellent or good. A majority of the public, 57 percent, sees the Fed’s current performance as either poor or fair.

The result is not just driven by a general public disdain for federal agencies; over a majority of respondents thought such agencies as the Center for Disease Control, NASA and the FBI were doing an excellent or good job.

Nor is the result driven by public ignorance or indifference to the Fed; only a few years ago, back in 2003, 53 percent of Americans said the Federal Reserve was doing an excellent or good job and only 5% called its job performance poor.  But then, the Fed was also giving us negative real interest rates at that time as well.  Perhaps there’s a good reason to insulate the Fed from short-term public and political pressures.  Let’s hope Chairman Bernanke does not read these results as an excuse for repeating the Fed’s 2003 monetary policies.

IRS Wants Worker Cell Phones to Be Taxable

With about 100,000 employees (more than the CIA and FBI combined), the IRS has plenty of people who daydream about new ways of taking money from taxpayers. The latest scheme to emanate from the tax bureaucracy is to classify employer-provided cell phones as a taxable fringe benefit.

To be fair, non-pecuniary forms of compensation should be treated the same as cash income, but a bit of common sense should apply. What happens with cell phone plans with unlimited minutes, meaning that a business is not paying extra for personal calls? And if the IRS does go down this path, why harrass individuals when it would be much easier to simply make a portion of cell phone costs non-deductible for companies? It almost seems as if the IRS wants to instigate a tax revolt.

The Wall Street Journal reports:

The Internal Revenue Service proposed employers assign 25% of an employee’s annual phone expenses as a taxable benefit. Under that scenario, a worker in the 28% tax bracket, whose wireless device costs the company $1,500 a year, could see $105 in additional federal income tax….

The IRS move, which is spurring efforts by the wireless industry and others to kill the idea, would mark a stricter enforcement of an existing rule that classifies employer-provided cellphones as a taxable benefit, rather than a 24-hour-a-day work tool. Under a 1989 law, workers who use company-provided mobile phones for personal calls are supposed to count the value of those calls as income and pay federal income taxes accordingly. But businesses and workers have long ignored the requirement, prompting the IRS to consider steps the agency said would make it easier for businesses and workers to comply.

…Wireless companies also argue the IRS rule is outdated. Rates have declined so dramatically in the past decade — with night and weekend calls free under many plans — that it makes little sense for the IRS to assess employee benefits by nickels and dimes. “This is a regulation from a bygone time, dating back to the infancy of the cellphone business, and it is in desperate need of updating,” said Howard Woolley, a senior vice president with Verizon Wireless, a venture of Verizon Communications Inc. and Vodafone Group PLC.

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