Lampert on taxes, e-commerce and last book he read

By The Associated Press

Billionaire investor Edward Lampert rarely speaks publicly about Sears Holdings Corp., the retailer of which he is chairman.

But twice a year -- once at a shareholder meeting each spring and once in a letter to investors -- he offers up his thoughts on everything from the retailer's business strategy to his latest reading list.

Here are selected items from this year's 13-page missive:

ON FEDERAL SPENDING: Our budget deficit has left many searching for ways to raise revenues through new taxes, rather than reducing spending and generating new revenues through growth and through the removal of the impediments to growth from existing regulations and threats of new regulations.

Here are a few ideas, none original, that can contribute to reducing unemployment over the near term without additional government spending: reduce U.S. corporate tax rates (amongst the highest in the world), extend individual tax programs that are scheduled to expire or that are subject to debate (freeing up individual time and attention devoted to tax planning and strategies), deal with entitlements and don't create additional ones (we can't afford the ones we currently have), and stop providing selective benefits to individual companies or industries (it creates an uneven playing field).

ON THE FINANCIAL SYSTEM: Capital can quickly reorganize and provide financing for businesses and projects that create value for our society, without the heavy hand of government planning and policy. I disagree with most people calling for a gigantic overhaul of our financial system led by new and "improved" regulations. Instead, begin the process of allowing more competition in financial services and begin the removal of implicit and explicit government guarantees that provide the perception that some are "too big to fail."

While there are those that claim that their institutions are not too big to fail, they surely recognize the significant competitive advantages that come from this perception. Of course they will accept regulations as long as these regulations do not permit additional competition from entities and institutions that do not take insured deposits, do not have access to Federal Reserve funding, and do not have government guarantees associated with their debt offerings. Regulatory capture comes when there is little competition allowed outside regulated entities and a "freezing" of competitors and innovation in an industry.

ON E-COMMERCE: There remains, however, one advantage that the major online retailers retain that is both unfair and problematic, for competition and for communities and jobs as well. For customers in many states, Amazon and other online retailers are not required to collect sales taxes on purchases made by their customers. ... I would propose that there be a leveling of the playing field for e-commerce merchants. Either we all collect taxes or nobody collects taxes.

If state and local governments are going to require retailers like Sears and Kmart to collect sales taxes and not retailers like Amazon.com, they should recognize that over time their sales tax base will erode significantly and that they place companies who have chosen to locate stores locally at a competitive disadvantage. This will lead to a loss of revenues, the closing of local businesses, the loss of tax revenue, and ultimately to the increase in other types of taxes to compensate for the lost jobs and revenues.

ON HIS BOOK SHELF: I just finished Thomas Sowell's most recent book, "Intellectuals and Society." For those not familiar with his writings, Thomas Sowell is one of the clearest and most insightful writers of our era. I look forward to every book and column he publishes.

In this book, he discusses the "vision of the anointed" and how their views shape society regardless of their merit. He describes how often these views conflict with reality without altering these views and, paradoxically, sometimes strengthening them. I couldn't help noticing the parallels between his comments and the "vision of the anointed" in the financial and business world over the past few years.

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On the Net:

http://www.searsholdings.com/invest/Letter--to--Shareholders.pdf