Who and what to tax is a perennial policy issue. President Donald Trump recently brought the subject of taxing capital gains back to the forefront after a tweeted reference to the possibility of eliminating all taxes on capital gains. Professor Chris Sanchirico of the University of Pennsylvania Carey Law School outlines four misconceptions about capital gains tax. From annuities to mutual funds, Federated Hermes offers a broad array of asset management products to customers worldwide. The latest oil and gas news, dedicated to all things oil and gas: people, technologies, transactions, trends, and macro-economic analysis that impact commodity prices. Monday, May 18, 2020 3:21:19 PM EDT The latest Investing news, events, analysis and opinion from The Australian Financial Review BEIJING, May 18, 2020 (GLOBE NEWSWIRE) — So-Young International Inc. (Nasdaq: SY) (“So-Young” or the “Company”), the largest and most vibrant social community in China for consumers, professionals an…
Seeking ways to revive the economy, President Donald Trump on May 5 glancingly referenced the possibility of eliminating all taxes on capital gains.
Speaker Nancy Pelosi (D-Calif.) was less than enthusiastic about the idea in remarks two days later. But some reports suggest that the President’s tweeted remark was an errant spark from serious ongoing discussions within the Administration. This is something we will likely be hearing more about in the coming weeks.
Under current law, when an investor buys low and sells high—having waited at least a year in between—the “long-term capital gain” is taxed at a substantially reduced rate. While the tax rate on top-bracket salary income is 37%, the rate on long-term capital gains is only 23.8%. That’s already a 35% discount. Now, the Administration appears to be toying with the idea that the discount should be 100%.
The obvious objection is that the people who will benefit most from lower rates on capital gains are the people who, well, have capital gains. These tend to be the wealthiest taxpayers. And the wealthy, almost by definition, are well buffered against losses and are thus least in need of expensive government assistance.
But proponents of lower taxes on capital gains have always had a politically potent counter-response—one that has won the day repeatedly over the last several decades and explains the existing 35% discount. Part of its power comes from the folksy resonance of the caution that things are not always what they seem. The rest of the power comes from an appeal to rigorous mathematical logic in explaining how things actually are—that lowering taxes on investment income turns out to be the best way to help those who don’t have any.
Things are not, in fact, always what they seem. And that goes double for the set of mathematical models offered to prove that the tax rate on capital gains should be zero.
With the debate on capital gains taxation likely to heat up over the next several weeks, now might be a good time to clear up a few misconceptions concerning what the mathematics does and does not say about how investment income should be taxed.
The most common argument against taxing investment income is an appeal, not to some complex model, but to basic economic logic: Taxing investment reduces investment, which in turn reduces wages and employment.
But that’s not what basic economic logic actually says.
Basic economic logic says that when the price of gas goes up, people buy less gas. But as everyone knows, this does not mean that people spend less on gas. It’s a race of uncertain outcome between the reduction in gallons purchased and the increase in price per gallon.
The story is similar with investment. When people invest they are effectively purchasing future consumption, if not for themselves, then for their heirs. To invest is to spend on those future uses. When investment income is taxed, future uses become more expensive and people reduce their purchases. Whether people spend more or less on future uses—that is, whether they invest more or less—is a race between the reduction in “gallons” of future uses purchased and the increase in the price per “gallon” of future use.
In principle, the outcome of that race—and so whether taxing investment increases it or decreases it—might be resolved by the careful statistical analysis of good data. In practice, the data are messy, and the question remains very open.
Two highly mathematical arguments appear to produce stunningly sharp outcomes out of the smoky cloud of ambiguities of the kind just mentioned. Both are problematic on close inspection.
The first is the Atkinson and Stiglitz model from the mid-1970s. The punchline of this model is that the most efficient way to design a progressive tax system (mind you: progressive) is to base how much tax each person owes solely on wage and salary income. The implication is that capital income, inclusive of capital gains, should not be taxed.
But it turns out that this result is baked into the model. The model assumes that “leisure is weakly separable.” The assumption sounds harmlessly technical. But a bit of mathematical mining reveals that what it actually means is that, when it comes to progressive taxation, anything capital taxation can do, labor taxation can do better. In other words, the model’s assumption means its conclusion.
Then there is the Judd model from the mid-1980s—a model that focuses on economic growth over an infinite horizon and concludes that the optimal tax rate on capital in the long-run is zero—even when the tax system is specifically designed to help those who only have labor income. There are two separate problems with the Judd model. First, as was just recently noticed by Straub and Werning, Judd implicitly, perhaps unknowingly assumes a particular winner for the race mentioned above: he assumes that taxing investment lowers investment. Plugging the opposite assumption into the same model produces, roughly speaking, the opposite result. Second, the model itself, in which investors live forever, is based on an artificial quirk of infinite-horizon reasoning that render its results in either direction essentially inapplicable.
All else the same, it would be best if all taxes were zero. But when a certain amount of revenue must be raised, lowering the tax on one type of income means raising it on another. The resulting tradeoffs are still only roughly understood. So while it is good to be skeptical of the way things seem, it is also good to be suspicious of the pat-answer outputs of opaque models.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Chris William Sanchirico is the Samuel A. Blank Professor of Law, Business and Public Policy at the University of Pennsylvania Carey Law School.
Author: By Chris William Sanchirico
Muni and Stock Advantage Fund (FMUCX)
dagger disclosure The funds expense ratio is from the most recent prospectus. The expense ratio may reflect voluntary fee waivers and/or expense reimbursements determined by the funds Advisor and its affiliates. The voluntary waivers and/or reimbursements, if applicable, are in effect up to but not including the later of 01/01/2021 or the date of the funds next effective prospectus.
Total returns for periods of less than one year are cumulative.
Total return may have been lower in the absence of temporary expense waivers or reimbursements.
Bond prices are sensitive to changes in interest rates, and a rise in interest rates can cause a decline in their prices.
International investing involves special risks including currency risk, increased volatility, political risks, and differences in auditing and other financial standards.
High-yield, lower-rated securities generally entail greater market, credit/default and liquidity risks and may be more volatile than investment-grade securities.
Fund income may be subject to state and local taxes. Although this fund pursues tax-advantaged income and seeks to invest primarily in securities whose interest is not subject to the federal alternative minimum tax, there are no assurances that it will achieve these goals.
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As indicated in its name, Federated Muni and Stock Advantage Fund invests in both municipal (muni) securities and equity securities (stock) as described in the fund’s prospectus. Thus, the fund is not entirely a “tax-exempt” or “municipal” fund, and a portion of the income derived from the fund’s portfolio (or dividend distributions) will be subject to federal income tax and state and local personal income tax.
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Federated Securities Corp., Distributor
Not FDIC Insured
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Author: Federated Hermes, Inc.
BlackRock Income and Growth Investment Trust Plc – Portfolio Update
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Investing | Latest News & Analysis | The Australian Financial Review | AFR
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CEO Jamie Dimon signalled the bank would have to balance tightening underwriting standards with simultaneously supporting its clients and the country.
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Nick Griffin from Munro Partners and Aitken Investment Management’s Charlie Aitken on what global stocks to buy, hold and sell in the coronavirus economy.
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Nick Griffin from Munro Partners and Aitken Investment Management’s Charlie Aitken on what global stocks to buy, hold and sell in the coronavirus economy.
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So-Young Reports First Quarter 2020 Unaudited Financial Results
BEIJING, May 18, 2020 (GLOBE NEWSWIRE) — So-Young International Inc. (Nasdaq: SY) (“So-Young” or the “Company”), the largest and most vibrant social community in China for consumers, professionals and service providers in the medical aesthetics industry, today announced its unaudited financial results for the three months ended March 31, 2020.
First Quarter 2020 Financial Highlights
- Total revenues were RMB182.6 million (US$25.8 million1), exceeding the high-end of the Company’s previous guidance of RMB160 million to RMB180 million.
- Net loss was RMB35.9 million (US$5.1 million), compared with a net income of RMB45.9 million in the same period of 2019.
- Non-GAAP net loss2 was RMB21.6 million (US$3.1 million), compared with a non-GAAP net income of RMB51.9 million in the same period of 2019.
First Quarter 2020 Operational Highlights
- Average mobile MAUs were 4.17 million, an increase of 116.8% from 1.92 million in the same period of 2019.
- Number of paying medical service providers on So-Young’s platform were 3,295, an increase of 22.0% from 2,701 in the same period of 2019.
- Number of medical service providers subscribing to information services on So-Young’s platform were 1,862, representing a slight increase from 1,853 in the same period of 2019.
Mr. Xing Jin, Co-Founder and Chief Executive Officer of So-Young, commented, “Despite the significant impact of the COVID-19 pandemic on our business, we delivered solid results during the quarter and are strategically adapting our business to ensure growth when normal operating conditions resume in the second half of 2020. COVID-19 has created a challenging operating environment for the industry and caused great loss globally. We previously anticipated that it would be a difficult quarter and have accelerated the deployment of resources to enhance the user experience.”
“Our strategic focus on enhancing engagement expanded our vibrant community of users and medical aesthetic professionals as average mobile MAUs increased by 116.8% to 4.2 million compared to the first quarter of 2019. We are using a series of creative and incentivizing promotion plans, working more closely with medical aesthetic influencers to generate valuable content. Meanwhile, in order to build a healthier and more regulated ecosystem, we have established an “Authentic Alliance” to enhance information governance on our platform. We are confident that we have the right strategies in place to navigate through this challenging business environment and are well positioned for healthy and sustainable growth once normal operating conditions return.”
“As the COVID-19 pandemic continues to impact consumer behaviors, efficient management of resources and investment in areas that can position us for strong growth once conditions normalize were a priority during the first quarter,” added Mr. Min Yu, Chief Financial Officer of So-Young. “We believe that our strategic investments and expenditure in the first quarter will significantly improve the stickiness of our platform, further enhance the quality of our rich content portfolio and better leverage synergies created across our community. We are well positioned to capitalize on a rebound in macroeconomic conditions and the drivers of our long-term business growth remain very strong.”
First Quarter 2020 Financial Results
Total revenues were RMB182.6 million (US$25.8 million), a decrease of 11% from RMB206.1 million in the same period of 2019. The decline was primarily due to the outbreak of COVID-19 which curtailed medical service providers’ spending and required end-customers to shelter in place which delayed the demand in the first quarter of 2020.
- Information services revenues were RMB126.0 million (US$17.8 million), a decrease of 12% from RMB142.6 million in the same period of 2019. Total number of medical service providers subscribing to information services on So-Young’s platform were 1,862.
- Reservation services revenues were RMB56.5 million (US$8.0 million), a decrease of 11% from RMB63.5 million in the same period of 2019. Total number of users purchasing reservation service were 77.5 thousand and the aggregate value of medical aesthetic treatment transactions facilitated by So-Young’s platform was RMB475.3 million.
Costs of Revenues
Costs of revenues were RMB43.1 million (US$6.1 million), an increase of 18% from RMB36.4 million in the first quarter of 2019. The increase was primarily due to an increase in personnel related costs. In addition, cost of revenues included share-based compensation expenses of RMB2.2 million (US$0.3 million) during the first quarter of 2020, compared with RMB0.3 million in the corresponding period of 2019.
Total operating expenses were RMB185.9 million (US$26.2 million), an increase of 41% from RMB131.7 million in the first quarter of 2019.
- Sales and marketing expenses were RMB109.1 million (US$15.4 million), an increase of 45% from RMB75.5 million in the first quarter of 2019. The increase was primarily due to an increase in expenses associated with marketing campaigns and user acquisition initiatives. Sales and marketing expenses for the first quarter of 2020 included share-based compensation expenses of RMB0.7 million (US$0.1 million), compared with RMB0.5 million in the corresponding period of 2019.
- General and administrative expenses were RMB34.0 million (US$4.8 million), an increase of 37% from RMB24.8 million in the first quarter of 2019. The increase was primarily due to an increase in personnel related expenses. General and administrative expenses for the first quarter of 2020 included share-based compensation expenses of RMB8.3 million (US$1.2 million), compared with RMB4.7 million in the corresponding period of 2019.
- Research and development expenses were RMB42.8 million (US$6.0 million), an increase of 37% from RMB31.3 million in the first quarter of 2019. The increase was primarily a result of costs associated with increased hiring to support product development which is in line with the Company’s strategy of strengthening its technology and big data analysis capabilities. Research and development expenses for the first quarter of 2020 included share-based compensation expenses of RMB3.0 million (US$0.4 million), compared with RMB0.5 million in the corresponding period of 2019.
Income Tax Benefit
Income tax benefit was RMB4.3 million (US$0.6 million), compared with a RMB7.0 million income tax expense in the same period of 2019, primarily due to the decrease in taxable income during the first quarter of 2020.
Net loss was RMB35.9 million (US$5.1 million), compared with a net income RMB45.9 million in the first quarter of 2019.
Non-GAAP net loss
Non-GAAP net loss, which excludes the impact of share-based compensation expenses was RMB21.6 million (US$3.1 million), compared with RMB51.9 million non-GAAP net income in the same period of 2019.
Basic and Diluted Earnings per ADS
Basic and diluted loss per ADS attributable to ordinary shareholders were RMB0.34 (US$0.05) and RMB0.34 (US$0.05), respectively, compared with basic and diluted earnings per ADS attributable to ordinary shareholders of RMB0.28 and RMB0.25 in the same period of 2019.
Cash and Cash Equivalents, Restricted Cash and Term Deposits and Short-Term Investments
As of March 31, 2020, the Company had cash and cash equivalents, restricted cash and term deposits and short-term investments of RMB2,758.5 million (US$389.6 million), compared with RMB2,844.0 million as of December 31, 2019. The decrease was primarily due to the cash used in operating activities during the first quarter.
For the second quarter of 2020, So-Young expects total revenues to be between RMB320 million (US$45.2 million) and RMB350 million (US$49.4 million), representing a 12.3% to 22.8% increase from the same period in 2019. The above outlook is based on the current market conditions and reflects the Company’s preliminary estimates of market and operating conditions, and customer demand, particularly in view of the potential impact of the COVID-19, the effects of which are difficult to analyze and predict, which are all subject to change.
Non-GAAP Financial Measures
To supplement the financial measures prepared in accordance with generally accepted accounting principles in the United States, or GAAP, this press release presents non-GAAP income from operations and non-GAAP net income by excluding share-based compensation expenses from income from operations and net income, respectively. The Company believes these non-GAAP financial measures are important to help investors understand the Company’s operating and financial performance, compare business trends among different reporting periods on a consistent basis and assess the Company’s core operating results, as they exclude certain expenses that are not expected to result in cash payments. The use of the above non-GAAP financial measures has certain limitations. Share-based compensation expenses have been and will continue to be incurred in the future and are not reflected in the presentation of the non-GAAP financial measures, but should be considered in the overall evaluation of the Company’s results. The Company compensates for these limitations by providing the relevant disclosure of its share-based compensation expenses in the reconciliations to the most directly comparable GAAP financial measures, which should be considered when evaluating the Company’s performance. These non-GAAP financial measures should be considered in addition to financial measures prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, financial measures prepared in accordance with GAAP. Reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP financial measure is set forth at the end of this release.
Conference Call Information
So-Young’s management will hold an earnings conference call on Monday, May 18, 2020, at 7:30 AM U.S. Eastern Time (7:30 PM on the same day, Beijing/Hong Kong Time). Participants can register for the conference call by navigating to
Once preregistration has been completed, participants will receive dial-in numbers, an event passcode, and a unique registrant ID.
To join the conference, please dial the number you receive, enter the event passcode followed by your unique registrant ID, and you will be joined to the conference instantly.
A telephone replay will be available two hours after the conclusion of the conference call through 9:59 AM U.S. Eastern Time, May 26, 2020. The dial-in details are:
Additionally, a live and archived webcast of this conference call will be available at http://ir.soyoung.com.
About So-Young International Inc.
So-Young International Inc. (Nasdaq: SY) (“So-Young” or the “Company”) is the largest and most vibrant social community in China for consumers, professionals and service providers in the medical aesthetics industry. The Company presents users with reliable information through offering high quality and trustworthy content together with a multitude of social functions on its platform, as well as by curating medical aesthetic service providers that are carefully selected and vetted. Leveraging So-Young’s strong brand image, extensive audience reach, trust from its users, highly engaging social community and data insights, the Company is well-positioned to expand both along the medical aesthetic industry value chain and into the massive, fast-growing consumption healthcare service market.
Safe Harbor Statement
This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “confident” and similar statements. Among other things, the Financial Guidance and quotations from management in this announcement, as well as So-Young’s strategic and operational plans, contain forward-looking statements. So-Young may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including but not limited to statements about So-Young’s beliefs and expectations, are forward-looking statements. Forward looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: So-Young’s strategies; So-Young’s future business development, financial condition and results of operations; So-Young’s ability to retain and increase the number of users and medical service providers, and expand its service offerings; competition in the online medical aesthetic service industry; changes in So-Young’s revenues, costs or expenditures; Chinese governmental policies and regulations relating to the online medical aesthetic service industry, general economic and business conditions globally and in China; the impact of the COVID-19 pandemic to So-Young’s business operations and the economy in China and elsewhere generally; and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in the Company’s filings with the Securities and Exchange Commission. All information provided in this press release and in the attachments is as of the date of the press release, and So-Young undertakes no duty to update such information, except as required under applicable law.
For more information, please contact:
Ms. Vivian XU
E-mail: [email protected]
Mr. Christian Arnell
E-mail: [email protected]
Ms. Linda Bergkamp
Email: [email protected]
* Both Class A and Class B ordinary shares are included in the calculation of the weighted average number of ordinary shares outstanding, basic and diluted.
1 This press release contains translations of certain Renminbi (RMB) amounts into U.S. dollars (US$) solely for the convenience of the reader. Unless otherwise specified, all translations of Renminbi amounts into U.S. dollar amounts in this press release are made at RMB 7.0808 to US$1.00, which was the U.S. dollars middle rate announced by the Board of Governors of the Federal Reserve System of the United States on March 31, 2020.
2 Non-GAAP net income is defined as net income excluding share-based compensation expenses. See “Reconciliation of GAAP and Non-GAAP Results” at the end of this press release.