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Grassroots Bulletin

April 2012 Grassroots Newsletter



National Perspective: The 411 on Dividends

The current tax rate on dividends and capital gains, which is capped at 15 percent, will expire on December 31, 2012. Unless Congress acts before the end of the year, the maximum tax rate on dividend income will almost triple, reaching 43.4 percent, while the maximum tax rate on capital gains will increase to 23.8 percent.

Today's lower tax rates on dividends are good for the economy, American businesses, retirees and other investors. Such a surge in the dividend tax rate would have a devastating effect on job creation and investment in the recovering U.S. economy.

An increase in tax rates will create a significant disparity between the top tax rate on dividends and capital gains, and federal tax policy will distort investment decisions by favoring growth stocks and debt investments over dividend-paying investments. In essence, the tax code would punish Americans who invest in dividend-paying companies like Con Edison.

Dividends benefit millions of Americans

Lower dividend tax rates don't just benefit Con Edison shareholders. They also benefit the millions of Americans who own stock indirectly through mutual funds, pension funds, and 40l(k) plans.

For 2008, the most recent year data is available, 34 percent of tax filers who reported dividend income had adjusted gross income (AGI) under $75,000; 81 percent had AGI under $200,000.

Higher dividend taxes would make stocks less valuable. A share of stock is worth the discounted present value of the future earnings stream after taxes. Stock prices would fall over time to adjust to the new after-tax rate of return; this would hurt all shareholders.

If you currently pay the 15 percent rate on dividends, a $1 qualified dividend nets you $0.85 after taxes. If Congress does not act before January 2013, that same $1 dividend would net only $0.58 under the maximum dividend tax rate.

Tripling the rate investors pay on dividends would increase our cost of capital and affect Con Edison's ability to finance new projects

Lower dividend tax rates increase the value of stocks and lower the cost of capital, allowing companies to get more favorable terms when borrowing money to make investments.

The approaching expiration of the 15 percent dividend rate would cause debt to be preferred over equity in order for companies to raise capital.

The perverse result is a tax code that incentivizes companies to take on more debt.

Congress should not encourage weaker balance sheets and increasing debt.



City Council Passes Prevailing Wage Legislation

Some workers at buildings receiving city subsidies of more than $1 million would be guaranteed wages of more than $20 an hour under a bill the New York City Council approved last week.

The measure would guarantee that cleaners, porters and other building workers at some developments that benefit from city funds would be paid the prevailing wage established for their job classification by the city comptroller.

The bill would apply to buildings receiving more than $1 million in city funds and to large buildings where the city leases more than half the space. There would be exceptions protecting small businesses, nonprofits and owners of affordable housing. Only future deals would be covered by the new rules, which would guarantee experienced cleaners and porters at the largest office buildings at least $22.65 an hour.

Mayor Michael Bloomberg promised to veto the measure. But some members of the City Council have stated the bill has enough support to override a veto.

Con Edison is a member of the 5 Borough Chamber Alliance that has objected to similar legislation the Council is considering. That bill would require companies and developers receiving substantial city subsidies to pay their employees at least $10 an hour, up from the state's minimum wage of $7.25. Speaker Christine Quinn, who has been working on a compromise "living wage" bill, has said she does not support a third related proposal, which would require many employers to provide paid sick leave.



Albany 'Mega-Deal' Comes Together

Governor Cuomo and the Legislature reached an agreement on five major legislative issues, including the redrawing of Senate and Assembly lines; a constitutional amendment to change the redistricting process in 2022 and beyond; an expansion of the state's DNA database; a teacher and principal evaluation system; a constitutional amendment to permit up to seven commercial casinos in the state; and a pension reform measure that will apply to future public employees.

Governor Cuomo and lawmakers hailed the agreements and cited their bipartisan nature -- in direct contrast to the partisan rancor that dominates Washington, D.C.

Casino Gambling

The Legislature passed the first round of legislation to amend the state constitution to permit commercial casino gambling. The amendment would allow for up to seven Las Vegas-style casinos around the state. There is no indication at this time where such casinos would be located; however, Assembly Speaker Silver and Governor Cuomo have publicly commented that Manhattan would not be a likely location.

As a constitutional amendment, this must again be approved by the Legislature in 2013, and then go to the voters for approval at the November 2013 general election.

Redistricting

The federal and state constitutions require a population census to be conducted every 10 years. State officials are required to use census data to redraw congressional and state legislative districts to reflect population shifts, and ensure roughly equal representation for all citizens.

After threatening to veto any Senate and Assembly lines that were drawn in an overly partisan manner, Governor Cuomo signed into law a bill that puts into place new Senate and Assembly districts for the fall elections. The new Senate lines also add a 63rd Senate district (there are currently 62 Senate districts).

The Governor's change of heart on the issue came after the Legislature agreed to approve a constitutional amendment to establish an independent redistricting commission for the 2020 redistricting cycle. To become effective, this proposal must again be approved by the Legislature in 2013, and then go to the voters for approval at the November 2013 general election.

The Governor's approval of the new lines is not the final word in the process -- the Senate's minority Democratic Conference has filed a federal lawsuit challenging the creation of a 63rd Senate seat, and the federal Department of Justice must certify that the new legislative lines do not violate minority group voting rights.

New Congressional district lines were approved by a three-judge federal court panel in Brooklyn. The court took over the process after the Assembly and Senate gave up trying to draw new Congressional lines.



Teenagers-to-Leaders: The YMCA-Hispanic Resource Center Partnership

Con Edison supports the Teen Civic Advocacy Program, a partnership between the YMCA of Central and Northern Westchester, and the Hispanic Resource Center. The 25-week leadership development program allows young people to learn more about their communities, write and present their own bills at an event in Albany, develop leadership skills, and gain a better sense of themselves.

 



Recognition for Customer Advocacy Efforts

Con Edison received an honorable mention during the Edison Electric Institute's recent CEO meeting on March 22. The company was recognized for its work and successful advocacy in 2011 to protect its customers from a substantial rate hike. Con Edison mobilized a multi-dimensional grassroots campaign engaging elected officials, including New York State Governor Andrew Cuomo, and New York City Mayor Michael Bloomberg, as well as major media outlets, and our customers. The company's efforts led to a subsequent reversal of a Federal Energy Regulation Commission (FERC) ruling that would have resulted in a significant increase in capacity prices and our customers' electric bills.


SAVE THE DATE

The next Lunch & Learn will be hosted by the Vineyard Theatre, and is scheduled for April 27 in the Edison Room. Information to follow.



CIVICS QUIZ

Which presidents are honored on Mount Rushmore?

Submit your answers to grassroots@conEd.com with "Civics Quiz" in the subject line for a chance to win a pair of entries to Bike New York on May 6.

Congratulations to Anita Ma who correctly answered the last quiz question: "How many U.S. presidents served in the U.S. House of Representatives at some point in their careers?" The answer is "19." Ms. Ma won a pair of tickets to participate in the New York City Five Borough Bike Tour on Sunday, May 6.

Since 1789, 19 Presidents served in the US House of Representatives at some point in their career. Only John Quincy Adams (1824) became a Representative AFTER serving as president.

George H.W. Bush
Gerald R. Ford
Richard M. Nixon
Lyndon B. Johnson
John F. Kennedy
William McKinley
James A. Garfield
Rutherford B. Hayes
Abraham Lincoln
Andrew Johnson
James Buchanan
Millard Fillmore
Franklin Pierce
James K. Polk
William Henry Harrison
John Tyler
Andrew Jackson
John Quincy Adams
James Madison

Source: artandhistory.house.gov/mem_bio/mem_pres.aspx

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