Amazon ups the ante in Internet sales tax fight

Amazon.com Inc. is putting its money where its mouth is when it comes to trying to overturn a new California law that requires it and other Internet sellers to collect sales taxes on purchases by customers from the Golden State.

Late last week, the Seattle-based online retailer reported to the California secretary of state's office that it had contributed $2.25 million to the "More Jobs Not Taxes" campaign to qualify a referendum for the June primary election ballot. The contribution brought Amazon's cumulative investment in the campaign since mid-July to $5.25 million.

The referendum, if signed by about 505,000 registered voters as expected, would ask voters if they want to uphold the law, which took effect July 1, or repeal it. Amazon is asking for a repeal, claiming that the California law is an unconstitutional interference with interstate commerce.

A spokesman for the Amazon-backed campaign, Ned Wigglesworth, declined to provide details of what the Amazon money is paying for. Those specifics will only become available when quarterly reports are filed Oct. 31.

However, it's safe to say that much of the funds are being used to pay professional signature gatherers. They reportedly already are off the streets, having met their goal well before the Sept. 27 deadline for turning in filled petitions.

"We're confident we're going to get them in before Sept. 27," Wigglesworth said. "The gathering is going well."

Amazon's fast work doesn't surprise Becky Warren, a spokeswoman for the Main Street Fairness Coalition, an alliance of major retailers such as Wal-Mart Stores Inc. and independent store owners. The coalition members operate brick-and-mortar stores that collect California sales taxes. They complain that they face unfair competition from Amazon and other big Internet firms.

Requiring Internet sellers to collect sales taxes would put an estimated $317 million in new revenue into the coffers of California state and local governments, state financial experts said.

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-- Marc Lifsher

Photo: An Amazon distribution center in Goodyear, Ariz. Credit: Ross D. Franklin / Associated Press

Toyota will lower price of new generation Camry

Toyota Motor Corp. revealed the new generation of its bestselling Camry sedan and said it would lower the price to compete with Hyundai’s Sonata and the increasingly stiff competition in the mid-size sedan segment of the auto industry.

Toyota dropped the base price of its core LE Camry model by $200 to $22,500.  The more luxurious XLE model fell by $2,000 to $24,725.

The automaker, which is working to reverse a several year slide in market share, also introduced a new hybrid Camry, which it said will get 43 miles to the gallon in city driving and 41 MPG in combined driving.

The new hybrid is targeted at the popular Ford Fusion hybrid and new hybrids from Hyundai and Kia.  The price will start at $25,900, about $1,100 less than the previous generation.

Toyota said the new generation Camry will have a sportier drive with tighter suspension and handling.  It also will include 10 airbags to protect the driver and passengers.

The car will go on sale in October and will be the seventh iteration of the Camry and the first redesign of the sedan since the 2007 model year. It is expected to do well. The research firm IHS forecasts that the new version will sell 350,000 to 380,000 vehicles during its first year.

The Camry’s market share in the mid-size car segment so far this year is 13.8%. This is down from a share of 16.5% in 2010 and a peak within the last decade of 18.8% in 2009, according to Edmunds.com. Despite the slide, the Camry remains the bestselling passenger sedan in America.

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-- Jerry Hirsch

Twitter.com/LATimesJerry

Photo (top) : The new-generation Toyota Camry. Credit: Jerry Hirsch / Los Angeles Times

Photo (below): 2012 Camry. Credit: Toyota Motor Corp.

Kraft cuts prices 6% for Maxwell House and Yuban coffee

Perhaps taking a cue from J.M. Smucker, Kraft Foods Inc. said it is lowering its coffee prices by about 6%.

The price cut covers its Maxwell House and Yuban brands and equates to about 20 cents per pound for roast and ground coffees and 2 cents an ounce for instant coffees.

Last week, Smucker said it was slashing the cost of its Dunkin’ Donuts and Folgers lines as coffee bean prices begin to drop. A rough growing season had forced coffee companies to hike up their prices earlier in the year.

Kraft’s move doesn’t include its Gevalia, Tassimo and Maxwell House International brands, said spokeswoman Bridget MacConnell.

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-- Tiffany Hsu

Photo: A cup of coffee may cost you a little less if you shop right. Credit: Mariah Tauger / Los Angeles Times

Report: Government-backed loans drove increase in delinquencies

An increase in delinquencies in government-backed Federal Housing Administration loans was probably the largest contributor to the overall pickup in national delinquencies during the second quarter, according to a report published Tuesday by analysts at investment bank Keefe, Bruyette & Woods.

As Times staff writer E. Scott Reckard reported Monday, the percentage of homeowners who have missed at least one mortgage payment has risen for the second straight quarter, according to a closely watched survey by the Mortgage Bankers Assn. That is a bad sign for the housing market and an indication of just how much homeowners are struggling to make their payments in the midst of a stubbornly bad economy.

Delinquency rates increased to 12.62% from 12.03% for FHA loans, outpacing the increase in the overall rate. The overall delinquency rate for loans on one- to four-unit residential properties increased to 8.44% on June 30, up from 8.32% on March 31. The delinquency rate was slightly lower at 8.12% in California, one of the states hit the earliest and hardest by the housing meltdown.

The KBW analysts, in their note, said that the uptick in FHA loan delinquencies was the largest driver of the overall rate. As those loans mature they will probably continue to push up the overall delinquency rate going forward, they said.

"We believe that the moderation in FHA loan growth will likely result in further increases in delinquencies on this portfolio which will likely push up the national averages,” the analysts wrote. “However, this credit risk resides with the government.”

The federal agency has significantly increased the number of loans it guarantees after the housing market started to stutter five years ago. The number of fixed-rate FHA loans approached nearly 6 million by the end of the second quarter of 2011, up from about 2.8 million in the third quarter of 2007, according to the KBW report.

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-- Alejandro Lazo

Twitter: @AlejandroLazo

Photo: From left, Housing and Urban Development Secretary Shaun Donovan, Treasury Secretary Timothy Geithner and Federal Deposit Insurance Corp. Chair Sheila Bair talk prior to President Obama delivering remarks about the home mortgage crisis in 2009, at Dobson High School in Mesa, Ariz.

Credit: AP Photo/Gerald Herbert

East Coast earthquake causes financial markets to tremble

An East Coast earthquake shook buildings all over New York City and traders reacted as they always do in times of uncertainty. They sold.

In the minutes after the earthquake, at around 1:50 p.m. New York time, the market charts reflected the seismographic charts, with the Dow Jones industrial average dropping a quick 50 points.

Anthony Conroy was sitting at his desk in midtown Manhattan when his computer screen started shaking.

PHOTOS: East Coast earthquake

"Everybody just got very nervous -- that sort of thing doesn’t happen in New York," said Conroy, the head equity trader at BNY ConvergEx. "That nervouseness causes volatility until people figured out exactly what it was."

A number of buildings around New York evacuated after the tremors, but the big exchanges and banks waited it out, and trading has continued normally.

Indeed, markets began to head up within a few minutes of the shaking after news reports made it clear that it was caused by an earthquake with an epicenter in Virginia and a magnitude of about 5.9.

The Dow was recently trading above where it was when the earthquake hit, up for the day 227.47 points, or 2.1% at 11091.93.

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-- Nathaniel Popper

twitter.com/nathanielpopper

File photo: Morgan Stanley's New York headquarters. The city was jittery Tuesday after a 5.9 earthquake. Credit: Peter Foley / Bloomberg

Want to make your cow pretty for the fair? Try hair spray.

 
You may not put lipstick on a pig, but what about hair spray on a cow?

Absolutely.

In the highly competitive world of livestock contests and state fair competitions, beautifying a steer before the judges take a peek takes time, skill and a whole lot of grooming products. That’s where the roll of cattle fitters, or “show jocks” in circuit slang, come in. They are the beauticians to the bovine set, and they are charged with gussying up their clients to their championship best.

There are scores of these fitters on the circuit. Some are 4-H kids, learning how to care for their animals, or college students eager to put their years in Future Farmers of America to use. Others are ranchers who primp their own cattle and occasionally handle other people’s animals for $100 a day and all the fair food they can stomach.

Their beauty kits hold an array of tools, from industrial-strength hair dryers and hair oils that smell like roses to jugs of Clear Choice, billed as “the ultimate in livestock shampoos!”

But some products are off-limits. Using black paint was once a staple in show jocks’ beauty kits for primping Black Angus cattle. The American Angus Assn., however, in 2004 banned the practice of using the paint on the breed. Why? The paint, officials said, helped show jocks hide tricks that were not allowed, such as using a chemical sprays to create –- no joke -– cattle hair extensions.

To read more about two cattle fitters and their show ring star, click here.

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-- P.J. Huffstutter

Photo: Elizabeth Vietheer, 10, uses a show stick to gently scratch the belly of her Black Angus cow and calm the animal before she is groomed at the California State Fair Livestock Pavilion. Credit: PJ Huffstutter / Los Angeles Times

B of A shares drop again, but other banking stocks rise

 
Worried that Bank of America Corp. may need to raise more capital, investors have driven its shares to more than a two-year low on a day in which most bank stocks are trading higher.

Bank of America shares, which traded above $47 in late 2006 and early 2007, were off 16 cents at $6.27 in midday trading in New York, a 2.4% decline.

By contrast, Wells Fargo & Co. was up more than 2%, JPMorgan Chase & Co., Citigroup Inc. and City National Corp. were up more than 3%, and East West Bancorp was higher by nearly 5%.

A strong defender of Bank of America, Rochdale Securities analyst Dick Bove said this morning that B of A has ample capital and that you cannot "break the bank" by driving its stock price lower.

But as Bove notes, there are huge fears in the market that the bank still may have to swallow more bad news related to mortgage loans made by Countrywide Financial Corp., the Calabasas home lender that was near collapse when Bank of America acquired it.

Bove told Bloomberg TV that some people think the bank will have to take losses of more than $100 billion as it is forced to buy back Countrywide mortgage that were bundled up to back securities. He said he believes that exposure is no more than $35 billion.

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Photo: The typical Bank of America customer sees no difference when the bank's shares go up or down -- unless he owns shares in the company. Credit: Paul Sakuma / Associated Press 

Airline passenger protection rules take effect

A new set of passenger protection rules takes effect Tuesday, requiring airlines to increase the compensation for passengers who are bumped from a scheduled flight and reimburse checked baggage fees for luggage that is lost, among other new rules.

The rules are the latest imposed by the U.S. Department of Transportation in the last two years, sparked by several notorious cases of flight delays, including the plight of passengers stranded for nearly six hours on a plane in Rochester, Minn., in 2009.

Under the new rules:

Airlines must refund any checked bag fee for lost luggage.

Passengers who are bumped from a scheduled flight can be compensated up to $1,300, an increase from the previous maximum compensation of $800.

Also, international flights of foreign airlines that takeoff or land in the U.S. must return passengers to the terminal if they are delayed on the tarmac for up to four hours. The current rule requires only domestic airlines to return passengers to the terminal if a plane is delayed on the tarmac for up to three hours. Airlines that violate the tarmac rule face fines of up to $27,500 per passenger.

Another set of rules that mandates that airlines disclose all fees and taxes, among other requirements, takes effect in January.

-- Hugo Martin

Photo: Passengers at Bob Hope Airport in Burbank. Credit: Los Angeles Times

Sales of new homes down slightly in July

Sales of newly built homes fell slightly from June to July, the government said Tuesday.

Newly constructed, single-family homes sold at a seasonally adjusted annual rate of 298,000 last month, according to the Commerce Department. That represented a 0.7% drop from June but is 6.8% above the same period a year earlier.

The market for new homes has been weak ever since the collapse of the housing market five years ago. Sales got a boost from tax credits for buyers last year but fell again once those credits expired last summer. New homes have faced stiff competition from foreclosure properties and buyers have been scarce because of tight credit and a poor economy.

The seasonally adjusted estimate of new houses for sale at the end of July was 165,000, representing a supply of just over six months and two weeks at the current sales rate.

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Photo: Homes under construction in Southern California. Credit: Getty Images

Stocks rise for second straight day

Stock prices surged again despite data showing that home sales in the U.S. continue to fall as hope grew in advance of a Federal Reserve meeting this week.

In early trading the Dow Jones industrial average rose 117.77 points, or 1.1%, to 10,972.42. The broader Standard & Poor's 500 index was up even more sharply.

Investors appeared to be drawing optimism from a Federal Reserve meeting on Friday at which a new fiscal stimulus program could be unveiled.

In addition, the Federal Deposit Insurance Company released a report Tuesday morning indicating that its list of trouled banks shrank for the first time since 2006.

In recent weeks investors have worried about the continuing vulnerability of U.S. banks; the report said banks were more healthy now than they were before the financial crisis.

One bank that saw its shares rising Tuesday morning was Goldman Sachs, which was hit Monday afternoon with the news that its chief executive, Lloyd Blankfein, had hired a criminal defense attorney. Investors appeared to rethink their initial panicked response to the report, which sent the stock down nearly 5% in 15 minutes. Tuesday morning the bank's stock was recently up 0.5%, more than other Wall Street banks. 

The report on housing showed that sales of new homes fell for the fourth straight month.

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-- Nathaniel Popper

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Photo: Richard Drew / Associated Press

The Rich Can Afford to Pay More Taxes

Bruce Bartlett held senior policy roles in the administrations of Ronald Reagan and George H.W. Bush and served on the staffs of Representatives Jack Kemp and Ron Paul.

Warren Buffett’s commentary in The New York Times on Aug. 15 has opened a new front in the continuing debate on whether taxes should be raised to reduce projected budget deficits.

Today’s Economist

Perspectives from expert contributors.

Mr. Buffett asserted that the well-to-do could easily shoulder a higher burden. Specifically, he proposed an increase in the current 35 percent top rate for those making more than $1 million and a further increase on those making more than $10 million. He also proposed taxing dividends and capital gains as ordinary income (currently, they are taxed at a maximum rate of 15 percent).

Perspectives from expert contributors.

Conservative groups such as the Tax Foundation pooh-pooh the idea of raising tax rates on the rich, asserting that there isn’t enough money available to bother with.

On Friday, however, the respected Tax Policy Center published estimates showing that the potential revenue would have a significant impact on projected deficits. It looked at several options, including a 50 percent top rate on incomes over $1 million and changes to the taxation of dividends and capital gains.

As one can see, the revenue potential depends critically on what baseline is assumed. That is because the top tax rate is already scheduled to rise to 39.6 percent on incomes over $380,000 in 2013. Moreover, dividends on corporate stock would go back to being taxed as ordinary income. And capital gains would go back to being taxed at a maximum rate of 20 percent.

The larger question is how much the well-to-do should pay. According to the Internal Revenue Service, in 2008, those in the top 1 percent of the income distribution, with incomes over $380,000, had an effective tax rate of 23.3 percent. In 1986, a year when the real gross domestic product grew a healthy 3.5 percent, their effective tax rate was 33.1 percent. It has been much lower every year since.

If this group were still paying 33.1 percent, federal revenue would have been more than $166 billion higher in 2008 alone. That would be enough to reduce the budget deficit by about 10 percent this year. If the top 1 percent of taxpayers had continued to pay the same effective tax rate they paid in 1986 every year from 1987 to 2008, the federal debt today would be $1.7 trillion lower.

Of course, these are not hard numbers. If the effective tax rate had stayed at 33.1 percent on the top 1 percent of taxpayers all these years, their behavior would undoubtedly have changed.

And it probably would have been impractical to maintain a higher rate on just the top 1 percent of taxpayers without having had higher rates on many of those below that percentile. But it does show the order of magnitude of how much revenue has been sacrificed from tax cuts on those with very high incomes.

Some will argue that those tax cuts bought higher economic growth, but that is very doubtful. Growth was stronger in the 1990s when the relative revenue loss was small and was dismal during the George W. Bush administration, when two-thirds of the aggregate revenue loss occurred.

It is not class warfare to suggest that the richest 1 percent of people in society pay one-third of their income to the federal government, as they did under Ronald Reagan. Keep in mind that dividends were taxable as ordinary income every year of his administration, and in the Tax Reform Act of 1986 he supported taxing capital gains as ordinary income as well.

Higher effective tax rates on the rich could even be achieved without raising the top tax rate bracket to 50 percent, as it was under President Reagan. There are many tax preferences that largely benefit the well-to-do that could be scaled back to avoid raising marginal rates.

The important thing is for people to accept that we can no longer afford such low effective tax rates on those with the greatest capacity to pay at a time when total revenue as a percentage of G.D.P. are at their lowest level in 60 years and we are facing a debt crisis. The issue is not whether the rich should pay more, but how best to accomplish it.

Expat pensioner exodus: would the last person to leave Britain please switch off the lights?

Falling standards of living in Britain are encouraging rising numbers of pensioners to retire overseas – but experts warn expats to beware the dangers of disappointment.

Hopes of warmer weather and lower costs are two obvious motivations for leaving Britain when you no longer need to go to work every day – and recent legal changes have made it easier for expats to take their pensions with them.

More than 1m British passport holders are believed to have retired overseas and Standard Life reports that Spain remains the most popular destination – despite Foreign & Commonwealth Office (FCO) statistics which show it is also the country where Britons abroad are most likely to get into trouble.

For example, according to the FCO, while there are slightly fewer British residents in Spain than America, 50pc more Britons were arrested in Spain than America last year. More than five times as many Britons were hospitalised in Spain and a total of 1,786 died there, compared to 148 in America.

One explanation is that 13.3m Britons visited Spain on holiday, compared to 5.25m British holidaymakers in America. Elsewhere, Australia was the second most popular retirement destination, while France was pushed into fourth place by America, with Ireland coming fifth.

John Lawson, Head of Pensions Policy, Standard Life commented: “Retiring abroad is a dream for many people, but does require careful planning and advice. Many people think living abroad is cheaper than living in the UK, but this isn’t always the case.

“Doing your homework in advance of moving, matching your retirement income and expenditure, and making the appropriate decisions around purchasing an annuity or using income drawdown are key considerations. Your retirement income could also be subject to exchange rates and currency fluctuations, as well as local tax laws.

“You also need to think about your state pension and what, if any, reciprocal agreement is in place. A reciprocal agreement entitles you to any increases in the UK state pension, paid for by the country you retire to. However, if there isn’t a reciprocal agreement in place, then you need to be very careful your retirement income is sufficient to cover your living costs over a long period of time. Over a 20 year retirement, your basic state UK pension could halve in real terms if a reciprocal arrangement is not in place.”

Recent legal changes have made it easier to take your private sector pension overseas – and return to Britain later if you wish. However, David Franks of specialist wealth managers Blevins Franks said: “The expatriate needs to carefully consider whether they should move their UK regulated pension fund  into a Qualifying Recognised Overseas Pension Scheme (QROPS), which is an approved overseas pension fund.

“The benefits include being able to invest in your new country’s currency to remove exchange rate risks and costs, removing your fund from UK regulations, and you may even be moving into an improved tax regime.  You need to evaluate what UK guarantees you might be giving up, and the costs of any new structure.

“An interesting new development is proposed new UK tax residence rules. These give far greater certainty over exactly how many days you can spend in the Britain without becoming a tax resident.”

More pensioners look set to become expats in future. A survey of 7,500 people by benefits consultants Aon found that nearly six in 10 Britons wanted to retire overseas last year.

Less than half or 43 per cent of Britons said the United Kingdom was their preferred retirement location, making us the most unhappy Europeans about the quality of life in our home country. Among other Europeans questioned, only the Germans (46 per cent) and the Irish voiced nearly as low levels of satisfaction with their home countries at 46 per cent and 49 per cent respectively.

By contrast, Spain (87 per cent) and France (81 per cent) topped the popularity tables when it came to workers intending to retire in their home country, followed by the Danes (74 per cent).

Oliver Rowlands, head of retirement at Aon Consulting said: “Cheap air travel and the communication tools available over the internet means that retiring overseas doesn’t necessarily mean being completely absent from your family’s life, making the prospect of emigration to other countries on an previously unseen scale a real possibility.

“There are financial implications that people thinking about retiring overseas need to consider. Cost of living may be higher in the country of choice. There can also be tax implications and healthcare benefits can vary widely for expatriates and this will be a major concern for retirees as they grow older.”

Few expat pensioners can do much to increase their income if local taxes rise or sterling continues to fall against the currency of the country of their choice. So it is important to beware exchange risks and other potential setbacks before leaving Britain – and resist the temptation to hope financial worries end at Dover.