Close Close
ThinkAdvisor

Financial Planning > UHNW Client Services

Sen. Warren’s Wealth Tax Plan Is ‘Nuts’: Jane Bryant Quinn

X
Your article was successfully shared with the contacts you provided.

Jane Bryant Quinn, long-trusted personal finance journalist and commentator, never pulls punches in appraising financial advisors. She doesn’t do so when it comes to politicians, either. Indeed, she calls Sen. Elizabeth Warren’s wealth tax proposal “nuts” and “hopeless.” 

“It will never get anywhere,” she argued in an interview with ThinkAdvisor in February. Warren, D-Mass., introduced the Ultra-Millionaire Tax Act Monday after pledging to do so when she joined the Senate Finance Committee.

Quinn, a bestselling author, is also forthright about annuities: She discusses two different “sucker factors” that often hold sway when folks are deciding whether or not to buy them.

One of The 25 Most Influential Women in the U.S., according to The World Almanac, Quinn last year released her most recent book: “How To Make Your Money Last: The indispensable Retirement Guide” (Simon and Schuster- Revised 2020).

The native of Niagara Falls, New York, took some of her own best advice when in 2019 she retired and relocated to Rome with her husband, Carll Tucker, the retired founder of dailyvoice.com

But that doesn’t mean Quinn isn’t keeping up with the vicissitudes of Americans’ finances or the stock market.

In the interview, she discusses the “K-shaped” U.S. economic recovery and the dichotomy between the booming market and the struggles of unemployed consumers beaten down financially by the impact of the coronavirus pandemic.

Further, she opines on better ways to collect additional taxes from the super-wealthy than Warren’s wealth tax on fortunes above $50 million. 

“Weird” is what she calls Warren’s proposal, which would impose a 2% annual tax on the net worth of households and trusts between $50 million and $1 billion. It would also levy a 1% annual surtax on net worth of more than $1 billion.

For three decades, Quinn wrote a bi-weekly column for Newsweek. Other long-running columns were for Bloomberg and CBSMoneyWatch. An Emmy winner, she co-hosted public television’s “Beyond Wall Street” and her own PBS program, “Take Charge!” Plus, she appeared on CBS News for 10 years, as well as on other network shows.

In the interview, she talks about “good” financial advisors” and “fake fiduciaries” and reveals the role her own FA plays in helping with her personal finances.

ThinkAdvisor interviewed Quinn on February 8. She was speaking by phone from her home in Rome. Commenting on the market, she said: “As far as investing is concerned, the pandemic has been a wow.” 

Here are highlights of our interview:

THINKADISOR:  What are your thoughts about the legislation [Ultra-Millionaire Tax Act] on “fortunes above $50 million” that Elizabeth Warren is introducing as her “first order of business” as a member of the Senate Finance Committee?

JANE BRYANT QUINN: The idea of a wealth tax is nuts. It’s hopeless: It will never get anywhere. 

Why not?

How do you figure out somebody’s total wealth?  Is it your financial wealth? The homes you own? The homes you own in Sardinia? Your art collection? Jewelry?  How do we find out about all the assets, including personal assets? 

Indeed.

Do we send police into people’s homes to look inside a woman’s jewelry box? It’s absolutely impossible to find out what one’s total wealth is. And I think it would be refused, given the kind of surveillance that would be necessary. It’s an invasion of privacy. I think it’s a weird proposal. 

Is there another type of tax that the very wealthy would pay that you prefer?

A transaction tax – 10 basis points per transaction – focused on high-income people. It can raise a lot of money from high-frequency traders, and it also would affect people’s pension funds and mutual funds because they’re all trading too.

What do you think of a surcharge, such as the one Michael Bloomberg proposed when he was running for president? It was a 5% surtax on incomes over $5 million a year.

A surcharge is a pretty good, clean tax because you’re just upping an individual’s income tax, say, 5%. It’s an easy way to collect [more]. You just say that people with incomes above $5 million [for example] pay 5% extra on their taxes for “X” years until the deficit is fixed.

Any other reason for your liking a surtax?

It’s got a good story behind it because you can say, “You’re the guys who got all the big tax breaks under Trump. So now let’s get some of that back.”

You write about “the sucker factor” with regard to immediate annuities. Please explain. 

The sucker factor is that you’re afraid you’ll be a sucker if you buy an immediate annuity, to get a fixed income for life, because you might die in five years. But by not buying one, you’re giving up the possibility of a higher income per month. That’s [crazy]. 

What’s your thinking?

For people who need income, moving some money out of a bond fund and into an immediate annuity from a top-rated insurance company is a good thing, a good deal. An immediate annuity provides higher income for conservative investors. If you take half of what you’ve invested in a bond mutual fund and put it into an immediate annuity, you’ll get a higher income per month.

But it’s a realistic possibility that you could die in five years, correct?

Let’s say you do. Yes, you haven’t gotten all your money back. On the other hand, during those five years, you’ll have had a higher income than if you kept that $100,000, or so, in a bond fund. And, you probably would have had a higher income than from your stock dividends.

To what extent are financial advisors recommending immediate annuities?

I see a growing number of advisors getting interested in them. I think fee-only advisors are proposing them more. One problem is that it isn’t a fee-only product, so a fee-only advisor winds up with a commission whether they like it or not. But they’re working on annuities for fee-only advisors because many want to propose them — they’re good, solid income for their clients.

With interest rates so low, is now actually a good time to buy an immediate annuity?

It’s still a better deal than bond funds but not as great a deal as it was five or 10 years ago. However, it remains a very good product for conservative investors needing income.

You also write about a different sort of “sucker factor” related to annuities. Please talk about that one.

You’re a sucker if you buy one of those really complicated annuities that are linked in some way to the stock market. People have the idea that they’re going to get a huge return with this type of annuity. But basically, it’s designed to only yield a little more than bonds, something people just don’t understand.

But with the market doing so well, fixed indexed annuities seem appealing, do they not?

Yes, but basically these are truly fixed income investments – they’re like bond investments but with a little overlay of stocks. It’s possible that you could do very well over a 10-year period, or so, with some of them. But it’s going to be very hard to do any better than you could with a bond fund. These are designed, basically, to slightly outperform bond mutual funds. Sometimes they do, and sometimes they don’t. And they’re expensive.

Please discuss the situation that, amid the pandemic, the stock market is booming, and investors are getting richer, while people who lost their jobs are suffering economically.

That’s why it’s called a “K-shaped” recovery. It’s absolutely terrible that people lost their jobs and can’t pay for food, utilities, rent or mortgage, credit card bills, and have, maybe, stopped contributing to their 401(k)s.

But on the other hand, investors are doing so well in the stock market.

Yes. As far as investing is concerned, the pandemic has been a wow. A significant amount of government payments that people received under the CARES Act went into paying down debt or into investing. That will happen with the next [stimulus checks] too. So deficit spending is very good as a source of business profits and a source of cash for the stock market.

Please elaborate.

If you’re a stock investor doing sensible things, like asset allocation and low-fee investing, you’re just sitting back and saying, “Wow, look how my money has gone up!”    

But what if the subpar economy declines badly and corporate earnings of companies that people invest in plummet? This would impact market returns, and investors’ portfolios would be affected negatively.

Yes, but we get big stock market declines every few years. The recent one we had was artificial because it was pandemic-related. Experienced investors have lived through, probably, five to 10 market declines during their lifetime. They know how to deal with them. You just prepare for the possibility.

How helpful can financial advisors be in that regard?

A good financial advisor is extremely helpful to clients in telling them not to panic. But again, experienced investors have learned not to panic. A good advisor creates the asset allocation that will be good for the client in good markets and bad markets. So that in a bad market, they can say, “You’re OK. Remember the last [bear market] we went through? You were OK. And you’ll be OK during this one too because you’ve got a good asset allocation – we figured it out in advance.”

Many people are generally distrustful of financial advisors, for various reasons. What can advisors do to improve their image?

They should be fee-only. But if advisors are advertising themselves as fee-only and are also taking commissions under another hat, that’s wrong. If someone says they’re a fee-only fiduciary, how does [a prospect know] if they’re a fake fiduciary? 

What do you suggest?

They should look under “disclosures” in the papers they have to sign to open an account. If there’s a long paragraph about buying [certain types of investments], you’ve got a fake fiduciary. A true fee-only fiduciary has a very simple fee set-up and a very short paragraph under conflict-of-interest disclosures. 

Do you personally have a financial advisor?

I have someone who manages my pension fund, and once a year we talk about where we are, what I see ahead and if there are any changes likely in my income or situation. But I don’t have a financial advisor that covers everything because I’ve got an accountant too: I have a second opinion.

What’s an example?

When I wanted to see if I could afford to retire, I asked them both. They figured it out separately, and both said yes. 

Are you working on a new book in your retirement?

Nope! I don’t want to write anymore. I don’t even like to write letters home! I had five deadlines a week – significant work — including appearing on television. And I wrote books. I’ll never write another book. I’m done. My husband [Carll Tucker] and I walk through Rome every day looking at churches or museums. I’m studying Italian and reading novels and histories. I’m having a wonderful time without deadlines. I’m a very happy retiree living in Rome!