Stocks fell modestly after news that China would plan for a lower rate of economic growth this year and a Department of Commerce report that showed U.S. factory orders in January fell the most in a year. Some of the market’s concerns, however, were countered by a better-than-expected reading of the Institute for Supply Management’s nonmanufacturing index.
The Dow fell 14 points, well off its lows for the session, with 16 of its 30 components lower; the S&P 500 declined 5; and the Nasdaq lost 25. Decliners led advancers by three to two on the NYSE and six to five on the Nasdaq. The prices of Treasuries weakened. Gold futures fell $5.90 to close at $1,703.90 an ounce, and the price of crude oil rose 2 cents to settle at $106.72 a barrel.
In Other Business News:
- Greece’s major bondholders agreed to a proposed 53.5% haircut on Greek debt, according to the steering committee of the Institute of International Finance, of which a dozen of Greece’s bondholders are members.
- The U.S. service sector expanded at the fastest rate in more than a year in February, according to the Institute for Supply Management’s nonmanufacturing index. The index accelerated from 56.8 in January to 57.3 in February. A reading above 50 indicates expansion. A decline in the rate of expansion was expected by a survey of economists.
- The government of China lowered its 2012 growth target to 7.5% after its economy grew at a 9.2% rate in 2011, partially prompting a sell-off of sectors tied to fast economic growth in China, such as materials and energy. The government also said it would increase its focus on domestic consumer demand to decrease reliance on exports.
- U.S. factory orders fell 1% in January, after rising an upwardly revised 1.4% in December, according to the Department of Commerce. Reversing a strong 3.4% increase the prior month, new orders for nondefense capital goods (excluding aircraft) dropped 3.9%.
Most people are familiar with the X-Men, either having read the original comic books or watched the blockbuster series of movies. What most people likely didn’t know, according to a great podcast from Radiolab, is that the X-Men have also been featured in one of the odder tax cases in recent history.
The premise of the X-Men is that some humans are born with a random mutation that gives them some radical superpower—the ability to walk through walls, or control the weather, or manipulate metal, or be able to look good in spandex. Normal humans without any fancy mutations are understandably afraid of the mutants (and afraid of all that spandex), leading to all sorts of ethical quandaries about the status of the mutants. Are they human? Superhuman? Animals? Do they have the same rights? Shouldn’t the mutants take all their powers and take over the humans, thereby rendering this ethical argument a moot point? (A favorite argument of Magneto’s). To Marvel’s credit, the X-Men always argued that mutants should receive the full complement of human rights.
And then Marvel discovered a tax loophole, according to Radiolab. As far as U.S. tax law is concerned, an imported toy of a humanlike creature, such as a doll, is taxed at a 12% rate. An imported toy that isn’t humanlike, say, an animal, is taxed at the lower rate of 6.8%. With mutants, this presents a conundrum. Marvel had a chance to take the high road and argue that any toy based on the X-Men represented humans and thus should be taxed at the higher rate. Of course, Marvel didn’t do this. The company instead went to court and argued that imported toys based on the X-Men should not be considered “dolls” because mutants aren’t human. Ouch. Maybe Magneto was right.
Radiolab interviewed the lawyers arguing Marvel’s case (which has been going on for years) and highlighted all the contortions involved in claiming that creatures with humanlike heads, mouths, eyes, noses, hair, and torsos don’t represent humans. A major argument is that one of the mutants (named Beast) has blue hair and skin and thus isn’t human—even though this particular blue Beast also happens to quote Shakespeare. Keep in mind that this was argued in front of a judge. As noted by Bryan Singer, the director of a few of the X-Men movies, Marvel turned the situation on its head. In the movies, the government oppressed mutants; in the tax case, the government offered a full-throated defense of mutants’ humanity.
The judge eventually ruled that Marvel’s X-Men aren’t humans, and Marvel would qualify for the lower tax rate. More surprisingly, the judge also ruled that none of Marvel’s superheroes are human, even the ones who aren’t mutants. This raises an important question: If superheroes arise in our future, do they have to pay taxes?