Bramwell’s Lunch Beat: Would KPMG Bail On Phil Mickelson?

Study examines efficacy taxes on sugary drinks
A new study of how taxes might be used to curb consumption of sugary drinks suggests that applying a tax based on the amount of calories contained in a serving rather than its size would be more effective, Stephanie Strom of the New York Times wrote today.

The study, published online by the American Journal of Agricultural Economics and financed by the Robert Wood Johnson Foundation, which has been a proponent of taxing sodas and other sugary drinks as part of its efforts to reduce childhood obesity, found that consumption of calories in drinks would drop 9.3 percent if a tax of four-hundredths of a penny for every calorie was added to the price, but fall by just 8.6 percent under a tax of half a cent for each ounce in a can or bottle.

A calorie-based taxing system would also be fairer to consumers, said Chen Zhen, PhD, a research economist at the food and nutrition policy research program at Research Triangle Institute and the lead author of the study.

“It provides a better incentive to the consumer to switch to lower-calorie drinks, which would be taxed at a lower rate than higher-calorie drinks,” Dr. Zhen said, according to the article. “One of the concerns about taxing ounces of sugar-sweetened beverages is that consumers are paying the same tax whether they buy 12 ounces of a drink with 150 calories or 12 ounces of a drink with 50 calories.”

When will Phil Mickelson’s sponsors begin jumping ship?
Bleacher Report columnist Michael Fitzpatrick wrote yesterday that none of three-time Masters champion Phil Mickelson’s sponsors, including KPMG and Barclays, have made an official statement with regards to the allegations that the golfer was involved in insider trading back in 2011 and 2012, which is now being investigated by the FBI and the US Securities and Exchange Commission (SEC).

And according to news outlets such as Reuters, Barclays and Exxon Mobil, another Mickelson sponsor, declined to comment on the insider trading probe when contacted, while the rest of his sponsors could not be reached for comment.

Fitzpatrick wrote that this is not a good sign for Mickelson, as it would suggest that these sponsors, which account for the vast majority of his yearly income, are currently in crisis mode and are attempting to figure out how to proceed with a prominent spokesman who is now being investigated for insider trading.

Fitzpatrick noted that several of Tiger Woods’ sponsors jumped ship in the weeks and months following his very public sex scandal in 2009. Accenture and AT&T even decided to drop Woods based on nothing more than allegations.

“Based on the way sponsors quickly scattered from the 14-time major champion at the first sign of any activity they felt might damage their brand, one would have to believe that Mickelson is very much in danger of losing several big-time sponsorship deals, particularly with brands such as KPMG and Barclays,” Fitzpatrick wrote.

[The Wall Street Journal broke the story on Friday. Read other articles from over the weekend about the investigation hitting a snag from the Wall Street Journal and the New York Times.]

Tax question looms over Illinois governor’s race
Sophia Tareen of the Associated Press wrote this weekend that as the spring legislative session in Illinois came to an end, Governor Pat Quinn was left without signing off on an income tax increase that he says is necessary to avoid deep budget cuts, teacher layoffs, and higher property taxes.

Quinn, who is seeking re-election in November, has openly advocated for an extension of the state's 2011 temporary tax hike, which cost a typical taxpayer more than $1,000 this year, Tareen wrote. But with the election and voters in mind, fellow Democrats adjourned with an alternative budget after coming up well short of the votes needed to back a tax increase, despite the governor's personal appeals to them.

On one hand, Quinn can claim he has been upfront with voters, laying out the state's dire financial situation even if it meant embracing a politically unpopular idea, while his Republican opponent, businessman Bruce Rauner, has remained mum about details of what he wants to do if the tax rolls back in January and leaves a roughly $1.8 billion revenue hole.

House Speaker Michael Madigan acknowledged last week as lawmakers debated a budget that Democrats did not give Quinn what he wanted in the midst of a steep re-election challenge, Tareen noted. But he suggested the tax question will define the election campaign in the months ahead, with Quinn in favor and Rauner against.

[For additional reading, here is an article from the Wall Street Journal on the tax issue in Illinois.]

Tax the roads motorists drive on, not the gas in their cars
This was the subject of a column written by Boston Globe columnist Jeff Jacoby today.

“Fuel taxes are certainly connected to (most of) the benefits they’re meant to pay for: Motorists put wear and tear on the roads; taxing them when they gas up is a logical way of having them bear the costs they impose,” he wrote. “But boosting gas taxes doesn’t solve the predicament of rising fuel efficiency. If anything, it exacerbates it: Crank up the tax on gasoline, and you give drivers more of an incentive to drive cars that use less of it, or none at all.

“Taxing roads has always been a better option than taxing fuel,” Jacoby continued. “Highways shouldn’t be freeways; like any other convenience, they should be regarded by those who use them as a service to be paid for. That was once a heretical notion, but as electronic tolling technology has eliminated the need for physical booths and human collectors, toll roads are becoming more common.”

[For additional reading, here is an op-ed piece that appeared in the New York Times on Sunday from Joshua L. Schank about the shrinking US Highway Trust Fund.]

Donald Sterling faces $662 million tax bill
With a 20 percent federal income tax rate and a 13.3 percent state income tax rate, disgraced Los Angeles Clippers owner Donald Sterling and his wife, Shelly, will owe almost one-third of their profit from selling the team to the tax collectors. That would amount to about a $662 million tax bill, according to MarketWatch tax columnist Bill Bischoff. He explained how he came up with that figure in a column over the weekend.

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