Spitzer's Rotten Call

Someone needs to explain to Attorney General Eliot Spitzer's gubernatorial- campaign brainiacs that class warfare only works as a political tactic when you attack rich people. Spitzer's latest suit - against H&R Block, America's neighborhood tax preparer doesn't qualify.

Sure, Block is a large and very visible company. But Spitzer isn't claiming Block's officers cooked their books or helped hedge-fund billionaires make a few more million. No, the assault is over the company's "Express IRA" program - which lets folks with low incomes start putting away modest amounts of money into tax-protected retirement accounts.

Yes, Block created a way for hundreds of thousands of lower-income Americans to open Individual Retirement Accounts and begin saving for the first time. Many of these folks have never saved a dime for retirement. But thanks to H&R Block, they can take the first step toward a brighter future.

But Spitzer wants $250 million from H&R Block - because a few Express IRA owners lost money. (The vast majority, of course, continue to gain.) Yet the "victims" typically lost because they closed their accounts prematurely - a step all IRA owners are never advised to take - or made extremely small deposits. Moreover, their average loss was just $23.

No IRA owner - at any level of investment - can expect a guaranteed rate of return. And every IRA owner must expect to pay a fee to the company running the account. So, yes, a few will come out behind. That's investing, not fraud. Plus, Block's Express IRA program has earned considerable praise - including from the Aspen Institute and the New York Times editorial board - since it began. And Block has actually lost money by providing this service to low-income taxpayers. (Presumably, it sees it as a smart investment in goodwill from future customers.)

But New York's eternally campaigning attorney general isn't one to be slowed when there are headlines to be grabbed. So he went after Block, saying the company hadn't adequately disclosed its fees and falsely claimed it offered solid interest rates. Poppycock. Block clearly disclosed its fees in a number of places. And it company actually subsidized the interest rates it offered - making Express IRA rates better than what competitors offered for similar accounts.

Lost in all of Spitzer's rhetoric is the fact that many of the people who took out Express IRAs would never have started saving if not for H&R Block. The minimum investment is only $300. Try walking into a Wall Street brokerage to open an account that small - you'd be laughed all the way down the mahogany-paneled corridors and back onto the street. Go to an H&R Block office, and you get the chance to invest, save and increase your net worth through the same tax-favored means that individuals from Eliot Spitzer to Warren Buffet use for their own families.

Reportedly, Block tried to reach a cost-effective settlement with Spitzer - but refused to pay out the tens of millions he was demanding. That's when he launched a highly publicized legal assault on the firm - precisely one month before April 15, during Block's busiest time of the year. He plainly intends the attack to inflict maximum PR and economic damage.

Unlike many Spitzer targets, Block is fighting back. The highly regarded company (which provides vital tax-preparation services to millions of average New Yorkers) will give the attorney general exactly what he doesn't want: a long, drawn-out legal fight in which the company stands a good chance of success.

New York's attorney general should be protecting the poor, not stopping them from saving for a better future. H&R Block is providing a valuable service to all New Yorkers in fighting back.

Report here



(And don't forget your ration of Wicked Thoughts for today)