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3 Things 6-19-23

Thing One


Insuring Against Cyber Attacks


“Several U.S. government agencies have been hacked in a cyberattack exploiting a software bug that had already compromised major businesses in the U.K. and elsewhere, U.S. officials said Thursday…”


That was the opening sentence of a Wall Street Journal Article from last week that went on to describe a rash of attacks that have also hit private businesses.  A separate article on the topic makes clear that individuals are at increased risked for cyber attack as well and suggests that they consider personal cyber insurance to counter the potential negative financial impact.  See below for some details:


Who should consider cyber insurance:


Anyone who uses online banking or invests online might want to consider cyber insurance.  The same goes for anyone who might be susceptible to a phishing attack (which basically means anybody who uses email).  That pretty much means everybody should at least consider it. As for statistics, the FBI’s Internet Crime Complaint Center reports that the total value of complaints about personal cyber attacks over the past 5 years had a total value of $27.6 billion and involved over 3 million complaintants.



Who offers personal cyber insurance?


“…AIG, Berkley One, Chubb, Cincinnati Insurance Cos., PURE Insurance and State Farm, offer some form of cyber protection as an add-on to a homeowner’s or renter’s insurance policy. Some carriers also offer a stand-alone policy…”


What’s covered?


“…Personal policies may cover things like reputational damage from a cyberattack, money lost to social-engineering fraud, ransomware-attack remediation, data restoration, identity theft and cyberbullying. Some policies offer round-the-clock access to experts to help policyholders recover quickly in the event of a cyber incident. Other policies cover extras such as tech support, legal advice and psychological counseling to help with cyberbullying…”


What might it cost?


“…Costs can vary widely depending on the carrier, policy limits selected and what cyber events are covered by the policy. In many cases, as a rider on their annual homeowner’s or rental insurance, consumers might expect to pay anywhere from an additional $20 to $300 a year. In many cases, how much can be recovered can range from $10,000 to $100,000, and may be higher for affluent households…”


Will I qualify?


“…It isn’t hard to qualify for these policies. Unlike commercial lines, where carriers have been imposing more restrictions, there aren’t many underwriting requirements for less than $100,000 in coverage.  Higher limits may require additional underwriting…”


It won’t be a revelation to anyone reading this to hear that more and more of our personal financial business is, can, or will be conducted online.  Cyber insurance won’t stop you from being a victim of a cyber attack, but it might help ease the pain of dealing with one.  


If you’re interested in adding cyber insurance but unsure how to proceed, start with your current property and casualty carrier.  Secondarily, you can reach out to us and we’ll be glad to help.


Thing Two


The Wealth Tax Reconing


Charles and Kathleen Moore, of Washington state, are currently in the throes of a court battle over whether or not unrealized income is subject to taxation.  So far, they’ve lost their argument (that it shouldn’t be) in both federal district court and a panel of the Ninth Circuit Court of Appeals.  They were also denied their request to have the full Ninth Circuit hear their case.  Undeterred, the Moores have appealed to the Supreme Court.


At issue for the rest of us is whether or not our unrealized income (think brokerage accounts for now but don’t rule out 401ks and IRAs with large balances later) will be subject to taxation as a result of some politician’s desire to implement a wealth tax.  As usual, they’re using the trojan horse of “billionaires not paying their fair share” to make the argument that even paper gains that aren’t realized should be taxed.  None other than our commander-in-chief seems to have signed on to this cause.  See a recent quote below from him on the topic:


“Imagine trading off less food inspections so the wealthy can have a giant tax cut. Imagine denying poor and disabled Americans on Medicaid — Medicaid, not Medicare — the treatment they need for asthma and diabetes so the wealthiest Americans can keep cheating on their taxes. And, by the way, I’m not saying every American cheats on their taxes. But you have — we have a thousand billionaires in America. You know, the average tax rate they pay? Eight. E-I-G-H[-T] percent. Eight percent.”


The White House followed up his comments by adding:


In a typical year, billionaires pay an average tax rate of 8%.

President Biden is calling on Congress to pass a billionaire minimum tax – so no billionaire pays a lower tax rate than a teacher or firefighter.”


The problem is that, according to an article in the Wall Street Journal, “…the 8% figure is a fabricated number based on how much the rich would be paying today if the United States had an imaginary (and unconstitutional) federal tax system that plundered wealth, not just income…”


The article goes on to quote William McBride of the Tax Foundation who explained what tax payers pay under the tax plan that actually exists this way:


“…High income taxpayers... pay the highest tax rates, according to the IRS. The average income tax rate in 2020 was 13.6 percent. The top 5 percent of taxpayers paid a 22.4 percent average rate while the top 1 percent of taxpayers paid a 26.0 percent average rate—more than eight times higher than the 3.1 percent average rate paid by the bottom half of taxpayers. The top 0.001 percent, or the richest 1,575 tax returns filed in 2020, paid nearly $71 billion in income taxes and had an average tax rate of 23.7 percent…”


He went on to explain why the richest 1% pay a somewhat higher rate than the richest thousandth of a percent by noting that:


“The average tax rate for the top 0.001 percent is slightly lower than that of the top 1 percent because a larger share of the top 0.001 percent’s income is capital gains, which face a lower rate schedule. One justification for the lower rate is that capital gains income is earned in an environment where other taxes have already been applied. In particular, shareholder taxes on capital gains and dividends essentially apply on top of the corporate income tax of 21 percent. That is, the same dollar of corporate income is first taxed by the corporate income tax and then taxed again when distributed to shareholders in the form of capital gains and dividends. Note that the shares and average tax rates cited above do not reflect the additional burden of the corporate income tax.”


None of this is unknown to the people intent on raising the rates on income that is already double (and perhaps triple) taxed.  But they’re content to play on the class envy angle to get the rank and file behind their plan to raise large sums from the billionaire class.  The problem is there aren’t enough billionaires for their income raising schemes to work on that basis alone so they’ll eventually descend from the aforementioned trojan horse, armed with the same mandate, to raid the accounts of non-billionaires - if we let them.

Thing Three


Just A Thought


"If you are out to describe the truth, leave elegance to the tailor." - Albert Einstein



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