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Study: Tax reforms would curb income inequality

Written By Unknown on Kamis, 01 Mei 2014 | 00.32

WASHINGTON — The Organization for Economic Cooperation and Development on Wednesday recommended a series of tax changes to limit the worldwide rise in income inequality.

The Paris-based OECD, which includes the United States among its 34 members, advised taxing various forms of investment gains as ordinary income. Many forms of investment returns are now taxed at lower rates than ordinary income and disproportionately benefit the richest 1 percent.

The OECD also suggested abolishing tax deductions that primarily favor the wealthy, reviewing inheritance taxes and improving transparency and international cooperation on taxes.

The share of pre-tax income going to the richest 1 percent has increased in several developed countries since 1981, including the United States, the United Kingdom, Australia, Japan and Norway.


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Schilling asked to testify in Rhode Island review

PROVIDENCE, R.I. — The Rhode Island House Oversight Committee has asked former Red Sox pitcher Curt Schilling to testify as it continues its review of the deal that lured his now-bankrupt video game company to the state with a $75 million loan guarantee.

Chairwoman Karen MacBeth, D-Cumberland, said Wednesday that letters went out last week to six other individuals she hopes will come before the panel in May. The committee has not yet received any responses, according to House spokesman Larry Berman.

The committee is reviewing thousands of pages of documents related to the Economic Development Corp.'s 2010 approval of the loan guarantee for 38 Studios. The company moved to Providence from Massachusetts, then went bankrupt. Rhode Island is now on the hook for some $90 million related to the deal.

The letters from MacBeth went to former EDC Executive Director Keith Stokes and his then-deputy, Michael Saul; Sean Esten, an EDC employee who raised concerns about the wisdom of the loan guarantee; attorney Michael Corso; ex-Finance Committee Chairman Steven Costantino, the lead sponsor of the legislation that created the loan guarantee program under which 38 Studios got the funding; and former Rep. Jon Brien, another sponsor of the bill.

The letters invite them to testify "to provide your insight and describe your involvement in the Jobs Creation Loan Guaranty Program."

The EDC is suing Schilling, Stokes, Saul and 11 others, alleging its board was misled into approving the loan guarantee. The suit claims the defendants knew, or should have known, that 38 Studios was on a course to run out of money but concealed that information.

Schilling's attorney, Sarah Heaton Concannon, did not immediately return a message seeking comment. She has called the charges baseless.

MacBeth initially indicated she wanted to subpoena key witnesses but later said they would first be asked to appear voluntarily. Committee members have said they also want to hear from former Republican Gov. Don Carcieri, who set the 38 Studios deal in motion, and ex-Speaker Gordon Fox.

MacBeth said Carcieri and Fox haven't yet been asked to appear.

"These (letters) are just the beginning," she said.


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$4M bid made for North Adams hospital

SPRINGFIELD, Mass. — Pittsfield's Berkshire Medical Center has agreed to pay $4 million for the former North Adams Regional Hospital and affiliated facilities, as well as a doctors' building.

According to documents filed this week as part of bankruptcy proceedings, the purchase-and-sale agreement is contingent on whether other bidders step in with offers.

In a filing for Northern Berkshire Healthcare's Chapter 7 bankruptcy, Berkshire Health Systems and the holders of more than $30 million in bond debt have agreed on a sale price of $3.4 million for the hospital, parking garage and administrative building, and $600,000 for the Northern Berkshire Family Medicine building. The agreement includes assets including medical equipment and office furniture.

In related news, a judge Wednesday endorsed a plan to restore emergency services at the North Adams hospital by mid-May.


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Energizer to split into 2 companies to hone focus

ST. LOUIS — Energizer Holdings plans to split into two separate and publicly traded companies, one selling batteries and household items, the other selling personal care brands such as Schick razors and Edge shaving gel.

Shares jumped 16 percent in midday trading Wednesday to reach a six-year high.

The St. Louis company believes the split will give each company a clearer focus and let them make a more transparent case to investors.

Reusable batteries have cut into traditional battery sales in recent years, thought the company does have its own line of rechargeable batteries.

The split will be structured as a tax-free spinoff to existing Energizer shareholders, the company said. Energizer did not say what names the companies would operate under.

The household company will sell Energizer and Eveready batteries, flashlights and portable lamps. It accounted for $1.9 billion in revenue in the year that ended March 31.

The personal care company's other brands will include Playtex and Stayfree feminine-care products and Hawaiian Tropic suntan lotion. It had $2.6 billion in revenue in the same period.

"Since becoming an independent company in 2000, Energizer has built two successful divisions and each is now well-suited to realize its full potential on a stand-alone basis," said CEO Ward Klein.

Energizer expects the split to take place in the second half of fiscal 2015, which ends in September 2015.

After the split, Energizer CEO Ward Klein is expected to serve as executive chairman of the personal care company. David Hatfield, current head of the personal care unit, will be CEO of the stand-alone company, Energizer said.

Current Energizer Chairman J. Patrick Mulcahy would be chairman of the stand-alone household products company and that unit's current chief, Alan Hoskins, would be CEO.

Citigroup analyst Wendy Nicholson said the split likely surprised most investors since the company has repeatedly said that it has more value as a single entity. The change in heart at Energizer, which Nicholson rates as a 'buy," will boost company shares, she said.

Shares of Energizer Holdings Inc. rose $15.65 to $113.36, erasing declines in the stock seen throughout this year.

Separately, Energizer reported second-quarter net income for the three months ended March 31 rose 16 percent to $98.5 million, or $1.57 per share. That compares with $84.9 million or $1.35 per share last year. Excluding restructuring and other costs, net income totaled $1.88 per share. Analysts had expected $1.73 per share, according to FactSet.

Revenue fell 3 percent to $1.06 billion from $1.1 billion last year. Analysts expected $1.07 billion.


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Stocks mixed as investors weigh earnings, economy

NEW YORK — The stock market was mixed on Wednesday as investors weighed company earnings against a report that showed economic growth stalled during the fourth quarter.

KEEPING SCORE: The Standard & Poor's 500 index rose 0.9 points, or 0.1 percent, to 1,879 as of 12:09 p.m. Eastern time. The Dow Jones industrial average rose 15 points, or 0.01 percent, to 16,551. The Nasdaq composite fell nine points, or 0.1 percent, to 4,094.

THE ECONOMY: The U.S. economy slowed in the first three months of the year as winter storms chilled business activity. The sharp slowdown, while worse than expected, is likely to be temporary as growth rebounds with warmer temperatures. The Commerce Department says growth slowed to a barely discernible 0.1 percent annual rate in the January-March quarter, the weakest since the end of 2012 and down from a 2.6 percent growth rate in the October-December quarter. Economists had forecast growth of 1.1 percent, according to FactSet.

THE QUOTE: The stock market's reaction to the report on the economy was muted because investors have already discounted the quarter due to the unusually cold winter in the U.S. this year, said Lawrence Creatura, a portfolio manager at Federated Investors.

"The stock market is giving this GDP report a pass because of the historically cold weather in the first quarter," Creatura said. "If you see a similar print for the second quarter, you're going to get a much different response."

PEP TALK: Pepco Holdings surged $3.96, or 17.4 percent, to $26.75 after it agreed to be acquired by energy provider Exelon for $6.83 billion to create a large electric and gas utility in the mid-Atlantic region. Exelon will pay $27.25 per Pepco share, an 18 percent premium to the company's $23.10 closing price on Tuesday.

EARNINGS BOOST: Sealed Air rose $1.22, or 3.9 percent, to $33.85 after the food packaging company reported earnings that easily beat Wall Street's expectations and said it was on track to post full-year earnings that were at the upper end of the range of its forecast.

TWITTER STORM: Twitter fell $4.29, or 10 percent, to $38.34. The social media company's growth disappointed investors when it reported quarterly results late Tuesday. Twitter had 255 million monthly users at the end of March, up 25 percent from a year earlier, but 2 million fewer than industry analysts had expected. Twitter shot higher after its IPO at $26 a share in November, going as high as $73.31 in December. The stock has been steadily declining since then.

NOT WHAT THE DOCTOR ORDERED: Express Scripts fell $4.02, or 5.7 percent, to $66.99 after it lowered its earnings guidance for the year, saying that it would handle a lower volume of prescriptions. The nation's largest pharmacy benefits manager also reported a 12 percent drop in its first-quarter earnings Tuesday. Its prescription sales were hit by severe winter weather and slower-than-expected enrollment in the new public insurance exchanges.

FED: The Federal Reserve will release a statement following the conclusion of its two-day meeting at 2 p.m. Eastern time Wednesday. Policy makers are expected to make a further reduce the Fed's bond purchases, even though growth slowed in the first quarter.

TREASURYS AND COMMODITIES: Bond prices rose. The yield on the 10-year Treasury note fell to 2.66 percent from 2.70 percent on Tuesday. The price of oil fell 93 cents, or 0.9 percent, to $100.35 a barrel.


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Survey: US businesses add 220K jobs in April

WASHINGTON — U.S. businesses boosted hiring in April, according to a private survey, a sign the economy may improve after a sluggish start this year.

Payroll processer ADP said Wednesday that private employers added 220,000 jobs in April, the most since November and up from 209,000 in March.

The figures suggest that the government's jobs report for April, to be released Friday, could show a healthy gain. Economists forecast that report will show employers added 210,000 jobs in April, according to a survey by FactSet. That would be the most in five months.

A strong increase of 200,000 or more jobs would give the economy a much-needed boost after harsh winter snowstorms kept shoppers indoors and dragged down home and car sales. The economy barely expanded in the first three months of this year, according to a separate report Wednesday. The Commerce Department said growth was just 0.1 percent at an annual rate in the first quarter, much lower than the fourth quarter's 2.6 percent pace.

More hiring would put more money in Americans' pockets, potentially boosting spending and growth. Most economists expect growth to accelerate in the spring and summer, as the weather improves and hiring picks up.

The ADP report says most of the hiring occurred in service industries such as retail, transportation, and professional services. Construction firms added 19,000 jobs, a healthy gain. Manufacturing added just 1,000.

Hiring was also widespread among small, medium-sized and larger companies.

The step-up in hiring comes after job gains faltered over the winter. The federal government says employers added only 84,000 jobs in December and 144,000 in January. Hiring then improved to 197,000 in February and 192,000 last month.

There are other signs the job market is getting better. The number of Americans seeking unemployment aid has fallen to the lowest level since the recession, a sign companies are laying off fewer workers.

The ADP numbers cover only private businesses and often diverge from the government's more comprehensive report. Mark Zandi, chief economist at Moody's Analytics, said that ADP's figures have been off by about 40,000, on average, from the government's report each month for the past 18 months. Moody's calculates the figures for ADP.


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1 million thermostats recalled for fire risk

NEW YORK — More than 1 million thermostats are being recalled because the batteries can leak and cause a fire.

The thermostats are made by White-Rodgers, but some have different brand names printed on the front, including ComfortSentry, DICO, Emerson, Frigidaire, Maytag, Nutone, Partners Choice, Rheem, Ruud, Unico, Water Furnace, Westinghouse and Zonefirst.

There have been seven reports of burn damage to the thermostat, with two involving minor property damage, the U.S. Consumer Product Safety Commission said. No injuries have been reported.

The thermostats were sold for between $30 and $70 at hardware stores and heating and air conditioning companies from January 2006 to December 2013. About 740,000 of the thermostats were sold in the U.S. and 403,000 were sold in Canada.

Recalled thermostats don't have a battery icon on the left side of its blue lighted screen, the CPSC said. Customers should call White-Rodgers at 888-624-1901 or register at www.regcen.com/1f8recall/ .

White-Rodgers, based in St. Louis, Mo., is a division of Emerson Electric Co. The thermostats were made in China.

___

ONLINE:

CPSC recall information: http://1.usa.gov/1lzgaLK


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US economy slowed to 0.1 percent growth rate in Q1

WASHINGTON — The U.S. economy slowed sharply in the first three months of the year as a harsh winter exacted a toll on business activity. The slowdown, while worse than expected, is likely to be temporary as growth rebounds with warmer weather.

Growth slowed to a barely discernible 0.1 percent annual rate in the January-March quarter, the Commerce Department said Wednesday. That was the weakest pace since the end of 2012 and was down from a 2.6 percent rate in the previous quarter.

Many economists said the government's first estimate of growth in the January-March quarter was skewed by weak figures early in the quarter. They noted that several sectors — from retail sales to manufacturing output — rebounded in March. That strength should provide momentum for the rest of the year.

And on Friday, economists expect the government to report a solid 200,000-plus job gain for April.

"While quarter one was weak, many measures of sentiment and output improved in March and April, suggesting that the quarter ended better than it began," said Dan Greenhaus, chief investment strategist at global financial services firm BTIG.

Still, the anemic growth last quarter is surely a topic for discussion at the Federal Reserve's latest policy meeting, which ends Wednesday afternoon.

In its report, the government said consumer spending grew at a 3 percent annual rate last quarter. But that gain was dominated by a 4.4 percent rise in spending on services, reflecting higher utility bills and an expansion in health care spending from provisions of the Affordable Care Act. Spending on goods barely rose. Also dampening growth were a drop in business investment, a rise in the trade deficit and a fall in housing construction.

The scant 0.1 percent growth rate in the gross domestic product, the country's total output of goods and services, was well below the 1.1 percent rise economists had predicted. The last time a quarterly growth rate was so slow was in the final three months of 2012, when it was also 0.1 percent.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said he expects growth to rebound to a 3 percent annual rate in the current April-June quarter. Other economists have made similar forecasts.

A variety of factors held back first-quarter growth. Business investment fell at a 2.1 percent rate, with spending on equipment plunging at a 5.5 percent annual rate. Residential construction fell at a 5.7 percent rate. Housing was hit by winter weather and by other factors such as higher home prices and a shortage of available houses.

A widening of the trade deficit, thanks to a sharp fall in exports, shaved growth by 0.8 percentage point in the first quarter. Businesses also slowed their restocking, with a slowdown in inventory rebuilding reducing growth by nearly 0.6 percentage point.

Consumer spending on goods rose just 0.4 percent, the smallest gain in nearly three years. That made for a tough quarter for The Legacy Companies, a Fort Lauderdale, Fla.-based company that makes blenders, juicers and other kitchen supplies.

Neal Asbury, the CEO, said his U.S. sales fell 5 percent in the first quarter. Retailers such as Macy's, Bed Bath and Beyond and Kohl's had stocked up on his company's wares in anticipation of solid first-quarter sales, as in previous years. This year, "that didn't happen to the degree people expected it to happen."

But in recent weeks, retailers have started to clear out their excess supplies, Asbury said. That could boost his company's sales in future months once retailers need to restock.

"We seem to be through the worst part of it," he said.

Also holding back growth: Less spending by state and local governments. That pullback offset a rebound in federal activity.

Economists say most of the factors that depressed growth in the first quarter have already begun to reverse. Most say stronger growth should endure through the rest of the year as the economy derives help from job gains, rising consumer spending and a rebound in business investment.

In fact, many analysts believe 2014 will be the year the recovery from the Great Recession finally achieves the robust growth that's needed to accelerate hiring and reduce still-high unemployment. Many analysts think annual economic growth will remain around 3 percent for the rest of the year.

If that proves accurate, the economy will have produced the fastest annual expansion in the gross domestic product, the broadest gauge of the economy's health, in nine years. The last time growth was so strong was in 2005, when GDP grew 3.4 percent, two years before the nation fell into the worst recession since the 1930s.

A group of economists surveyed this month by The Associated Press said they expected unemployment to fall to 6.2 percent by the end of this year from 6.7 percent in March.

One reason for the optimism is that a drag on growth last year from higher taxes and deep federal spending cuts has been diminishing. A congressional budget truce has also lifted any imminent threat of another government shutdown. As a result, businesses may find it easier to commit to investments to modernize and expand production facilities and boost hiring.

"Growth came to a grinding halt early this year, but with consumers spending and payrolls expanding, the future looks a lot brighter," said Joel Naroff, chief economist at Naroff Economic Advisors.

___

AP Economics Writer Christopher S. Rugaber contributed to this report.


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Senate GOP blocks Dems' minimum wage boost

WASHINGTON — Senate Republicans blocked an election-year Democratic bill on Wednesday that would boost the federal minimum wage, handing a defeat to President Barack Obama on a vote that is sure to reverberate in this year's congressional elections.

The measure's rejection, which was expected, came in the early months of a campaign season in which the slowly recovering economy — and its impact on families — is a marquee issue. It was also the latest setback for a stream of bills this year that Democrats have designed to cast themselves as the party of economic fairness.

The legislation by Sen. Tom Harkin, D-Iowa, would gradually raise the $7.25 hourly minimum to $10.10 over 30 months and then provide automatic annual increases to account for inflation. Democrats argue that if fully phased in by 2016, it would push a family of three above the federal poverty line — a level such earners have not surpassed since 1979.

"Millions of American workers will be watching how each senator votes today. To them, it's a matter of survival," Senate Majority Leader Harry Reid, D-Nev., said before the vote.

He pointedly added, "For Republicans, this vote will demonstrate whether they truly care about our economy."

Republicans, solidly against the Democratic proposal, say it would be too expensive for employers and cost jobs. As ammunition, they cite a February study by the nonpartisan Congressional Budget Office that estimated the increase to $10.10 could eliminate about 500,000 jobs — but also envisioned higher income for 16.5 million low-earning people.

"Washington Democrats' true focus these days seems to be making the far left happy, not helping the middle class," said Senate Minority Leader Mitch McConnell, R-Ky.

"This is all about politics," said No. 2 Senate GOP leader John Cornyn of Texas. "This is about trying to make this side of the aisle look bad and hard-hearted."

The vote was 54-42 in favor of allowing debate on the measure to proceed, six votes short of the 60 that Democrats needed to prevail. Sen. Bob Corker, R-Tenn., was the only Republican to cross party lines and vote "yes." Reid switched his vote to "no," which gives him the right to call another vote on the measure. No other Democrats opposed the bill.

Sen. Susan Collins, R-Maine, who has been seeking a deal with other senators on a lower figure than $10.10, said Wednesday that she will continue that effort. Maine Sen. Angus King, an independent who usually sides with Democrats, said he too favors finding middle ground.

But Democratic leaders have shown no inclination to do that — a view shared by unions that favor an increase and business groups that oppose one.

"We're not going to compromise on $10.10," Reid told reporters after the vote.

In a clear sign of the political value Democrats believe the issue has, Democrats said they intend to force another vote on the increase closer to this year's elections.

The White House issued a statement urging the bill's passage and saying the administration wants legislation "to build real, lasting economic security for the middle class and create more opportunities for every hardworking American to get ahead."

Supporters note that the minimum wage's buying power has fallen. It reached its peak value in 1968, when it was $1.60 hourly but was worth $10.86 in today's dollars.

The legislation is opposed by business groups including the National Council of Chain Restaurants and the International Franchise Association. The National Restaurant Association has hundreds of members at the Capitol this week lobbying lawmakers on several issues, including opposition to a higher minimum wage.

Also opposed were conservative organizations including Heritage Action and Americans for Prosperity, which is backed by Charles and David Koch. The billionaire brothers are spending millions this year to unseat congressional Democrats, and Senate Majority Leader Harry Reid, D-Nev., and his allies are casting them as unfettered villains.

Other Democratic bills that have splattered against GOP roadblocks this year would restore expired benefits for the long-term unemployed and pressure employers to pay men and women equally. Democrats plan future votes on bills easing the costs of college and child care.

Opposition from Republicans running the House makes it unlikely that chamber would debate minimum wage legislation this year.

According to the federal Bureau of Labor Statistics, about two-thirds of the 3.3 million people who earned $7.25 an hour or less last year worked in service jobs, mostly food preparation and serving.

More than 6 in 10 of those making $7.25 or under were women, and about half were under age 25. Democrats hope their support for a minimum wage boost will draw voters from both groups — who usually lean Democratic — to the polls in November, when Senate control will be at stake. The GOP's hold on the House is not in doubt.

Harkin's bill would also gradually increase the minimum wage for tipped workers like waiters to 70 percent of the minimum for most other workers. It is currently $2.13 hourly, which can be paid as long as their hourly earnings with tips total at least $7.25.

The minimum wage was first enacted in 1938 and set at 25 cents.

Congress has passed nine laws slowly increasing it, including one each decade since the 1980s. The minimum has been $7.25 since 2009.

___

Associated Press writer Matt Daly contributed to this story.


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Senate GOP pushes Russia sanctions bill

WASHINGTON — Senate Republicans on Wednesday slammed President Barack Obama's response to Russian aggression as timid and insufficient, and offered an alternative that would impose sanctions on banking and energy sectors and provide weapons to Ukraine.

In an election-year broadside against administration policy, eight Republicans led by GOP Leader Mitch McConnell unveiled a package of penalties on Russians, assistance for NATO and exportation of U.S. natural gas. The senators said they hoped to secure Democratic support, and at a minimum, force the White House to develop a cohesive strategy rather than its ad hoc response.

"Without being overly partisan," McConnell, who faces re-election this year, said of the administration, "I'm deeply disappointed with the tepid response to Russian aggression."

The U.S. and the European Union imposed new sanctions against government officials in Moscow and some businesses this week, the latest round of penalties in response to Russia's annexation of Crimea and the increasing unrest in eastern Ukraine.

In the latest development, Ukraine's acting president, Oleksandr Turchynov, said the country's police and security forces are helpless to quell unrest in two eastern regions bordering Russia, and in some cases are cooperating with pro-Russian gunmen who have seized government buildings and taken hostages.

Russia has been emboldened, placing tens of thousands of troops near the border with Ukraine and increasing fears in Ukraine of an invasion.

At a Capitol Hill news conference, McConnell, Sen. Bob Corker, the top Republican on the Foreign Relations Committee, and a half dozen other Republicans assailed the administration's actions and cast them as ineffective as the U.S. response to Syria and Libya.

"Insufficient, tepid, too timid," said Sen. Kelly Ayotte, R-N.H.

"The president has an uncanny ability of underestimating every crisis and being late," said Sen. Lindsey Graham, R-S.C.

A day earlier, Treasury Secretary Jack Lew defended the administration and EU sanctions, saying there had been "quite a substantial deterioration in the Russian economy."

The legislation would accelerate work on a missile defense system in Europe and provide missile defense support to NATO allies, impose penalties on four Russian banks, energy monopolies such as Gazprom and the Russian arms dealer, Rosoboronexport. It would provide $100 million of direct military aid to Ukraine, including anti-tank and anti-aircraft weapons and small arms.

Sen. John McCain, R-Ariz., lashed out at Obama's criticism that the GOP effort was tantamount to U.S. military action.

"Intellectually dishonest," McCain said, adding: "We can't wait for our European friends. We need to lead."

In a preview, Corker said on the Senate floor that Obama's policies are creating dangers for U.S. citizens and amount to nothing more than rhetoric.

Republicans said they had 19 GOP senators backing the legislation.


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