Schwarzenegger calls Legislators for Emergency Budget Session

From LA Times.com:

Gov. Arnold Schwarzenegger has set Nov. 5 -- the day after next week's election -- as the start of an emergency legislative session to address the state budget deficit, which has swelled by several billion dollars in recent weeks as the stock market has continued its tumble and the economy has soured.

Schwarzenegger said this year's deficit will be "much more" than the $3 billion that state officials projected two weeks ago. Capitol budget analysts say preliminary data indicate the problem will probably grow to at least $10 billion.

The governor and legislative leaders made the announcement to reporters in the hallway outside Schwarzenegger's office, where they had been meeting in private to discuss the fiscal crisis. They said that in the coming days they also will form a commission to study ways to restructure the state tax code to make revenue more stable

Schwarzenegger's move comes a month after lawmakers passed the current budget and adjourned until December, when the next class of lawmakers is scheduled to begin work. But the governor said state revenues are dropping so fast that he and legislative leaders decided to call a lame-duck session.

"The situation is far more severe than it was when we were negotiating the budget" over the summer, Schwarzenegger said.

House Holds Hearing on Economy

According to their announcement, the U.S. House of Representatives Ways and Means Committee will hold a hearing “focusing on economic recovery and job creation through investment.”

In announcing the hearing, Chairman Rangel said, “American families are hurting and they are looking to Congress for solutions to help our economy recover and create new jobs. This hearing will examine the growing challenges facing working families as well as State and local governments to determine how we can best restore economic security throughout our nation.”

FOCUS OF THE HEARING:

The hearing will focus on challenges facing American families and State and local governments during the economic downturn and solutions to improve economic security, create new jobs and invest in America’s infrastructure.

Experts See Little Difference Between Obama's & McCain's Plan for Small Businesses

From Kansas City.com:

As the presidential campaign is in its final week, John McCain and Barack Obama each argue that his tax plan is better to help the ever suffering small-businessman.

Tax experts, however, suggest that the candidates' blueprints for helping small business are virtually identical for all but 2 percent to 3 percent of the highest-income small businesses. For them, McCain's plan is more generous.

The issue has been a campaign centerpiece since the emergence earlier this month of "Joe the Plumber," an Ohio voter who would benefit under Obama's plan but favored McCain's because it preserves the current tax brackets.

"Joe's dream is your dream," McCain said Monday night at a rally in Pottsville, Pa. "It's to own a small business that will create jobs, and the attacks on him are attacks on small businesses all over this nation. They should be ashamed."

Here's what the candidates actually propose. McCain wants to leave in place President Bush's tax cuts of 2001 and 2003 that lowered the top tax bracket from 39.6 percent to 35 percent and lowered the capital gains tax, a tax on profits, to 15 percent.

Obama would let those tax cuts expire on Jan. 1, 2011, as called for under current law, for individual tax filers whose adjusted gross income exceeds $200,000, and for joint filers whose adjusted gross income is more than $250,000.

The Democratic nominee assured a rain-soaked crowd Tuesday in Chester, Pa., "If you make less than a quarter of a million dollars a year, which includes 98 percent of small business owners, you won't see your taxes increase one single dime."

Both candidates' comments have created confusion by giving the impression that the term "small business" is somehow a special tax designation. It's not.

"People think that small businesses pay a tax and their tax is being increased," said Eric Toder, a tax analyst at the Tax Policy Center, a nonpartisan research organization in the nation's capital. "There is a perception that more people are affected by this than actually are."

So who's right?

Roughly 75 percent of small businesses file as individual tax filers, not corporations, and most report their business income using various tax forms, called schedules, for income from business ventures, farming or rental properties.

Using these three income-reporting categories, the Tax Policy Center has concluded that 1.9 percent of all individual filers reporting business income would see their taxes go up under Obama's plan. Of those who get more than 50 percent of their income from business ventures, 2.7 percent would pay higher taxes.

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Biden’s Tax Gaffe

Last week Democratic Vice Presidential Nominee Joe Biden misspoke during a television interview and broke from the Obama’s campaign in saying that no one making under $250,000 would pay more in taxes under an Obama administration. The campaign quickly tried to clarify by saying, “anyone making between $150,000 and $250,000 wouldn't get a tax cut but also wouldn't pay higher taxes.” But the interview left many people wondering “will families making less than $250,000 get a tax cut under President Obama, or not?”

Well according to WSJ.com’s opinion section, “we suspect what's going on here is more than Mr. Biden's normal gift of gaffe. As with his admission that a President Obama would quickly be tested by our enemies, the Delaware rambler was stumbling into the truth. An Obama Administration couldn't possibly pay for a tax cut for 95% of Americans by raising taxes on a mere 5%. Those 5% don't make enough money, or at least they won't after they find ways to shelter more of their income when their tax rates rise.

Just as Bill Clinton promised a ‘middle-class tax cut’ in 1992 only to raise taxes on the middle class in 1993, Mr. Obama will quickly find that his tax-revenue math doesn't add up. Add in the demands on Capitol Hill to spend more and to offset the Alternative Minimum Tax, and our bet is that even $150,000 would soon prove to be a moving tax target. Remember when the AMT was only supposed to hit 21 millionaires? Next year, without relief, it could hit 26 million taxpayers. Tax increases always hit the middle class because that's where the money is.”

What a Tax Lawyer Dug Up on 'Dracula'

From: WSJ.com:

"There are such things as vampires," says Dr. Van Helsing in Bram Stoker's novel "Dracula." The famous line comes about two-thirds of the way into the story, but it hardly delivers the punch of a staggering revelation. By the time Van Helsing utters it, the book's other characters essentially have figured out the weird truth for themselves.

Readers know even more. Does anybody pick up a copy of "Dracula" these days without first realizing it's about a supernatural bloodsucker from Transylvania? Or were you expecting a spoiler alert?

This is a challenge for a lot of classic books: The stories are so familiar that their twists and turns fail to shock or awe. Yet the publisher W.W. Norton & Co. seems to have found a commercially viable way out of this fix, with a series of annotated volumes that perform the marketing miracle of making the old seem new again. The latest, "The New Annotated Dracula," is out just in time for Halloween.

A novel such as "Dracula" still possesses plenty of well-told pleasures. An early scene in which its iconic antihero climbs out a window and crawls headfirst down a castle wall remains one of the creepiest in English literature. Yet it's the exceedingly rare reader who will scratch his head in bewilderment when Van Helsing breaks out the crucifixes and garlic.

Leslie S. Klinger, the editor of "The New Annotated Dracula," nevertheless manages to enliven the experience of reading about the world's most famous undead white male. Like a movie studio that adds "bonus features" to a DVD, Norton includes extensive commentaries in "The New Annotated Dracula" and even offers what appears to be a genuine literary discovery: The volume describes a previously unknown "alternate ending" to the 1897 text.

"The New Annotated Dracula" probably wouldn't exist but for the success of several predecessors. Annotations aren't exactly an innovation, of course, and many publishers have glossed the plays of Shakespeare and the poetry of "Paradise Lost" for college students. Norton's breakthrough idea was to produce lavish volumes full of illustrations, essays, appendices, and discursive footnotes for general readers.

A decade ago, Robert Weil, an editor at Norton, conceived of "The Annotated Alice: The Definitive Edition." It brought together Lewis Carroll's "Alice's Adventures in Wonderland" and "Through the Looking-Glass," combining and updating previous annotations by Martin Gardner, a renowned Carroll expert. "Our goal was to publish a beautiful book that would allow adults to relive a classic that they knew as children and to understand it in a new way," says Mr. Weil.

"The Annotated Alice" became a hit whose steady sales make it a backlist superstar for the publisher. Norton has gone on to try the same tack with annotated editions of more than a dozen other titles, such as "The Wizard of Oz," "Huckleberry Finn" and "A Christmas Carol." Forthcoming editions include "The Wind in the Willows," "Peter Pan" and the tales of Edgar Allan Poe.

Norton says its first printing of "The New Annotated Dracula" will number about 50,000 copies -- a healthy run for an oversized, 613-page book. Even so, it's a lightweight compared to "The New Annotated Sherlock Holmes," three volumes totaling more than 2,700 pages, also edited by Mr. Klinger.

By day, Mr. Klinger is a Los Angeles tax attorney with clients in the entertainment industry. By night, he turns his attention to genre literature. When he finished working on the Holmes books, he cast around for a similar project. His wife suggested "Dracula," which made sense because it, too, was a product of late-Victorian Britain whose central character had achieved a legendary status in popular culture -- an inspiration for everything from the movies to the Muppets.

In his book, Mr. Klinger does what annotators do. He defines obscure words and terms. He conveys little-known trivia, such as Stoker's consideration of "The Un-Dead" or "The Dead Un-Dead" as potential titles. And he proposes offbeat interpretations. Is it possible, for instance, that Quincey Morris, one of Van Helsing's vampire hunters, is secretly in league with Dracula? Stoker almost certainly didn't intend it, but a careful probing of the text leaves open this intriguing prospect.

In the vast body of amateur scholarship on Sherlock Holmes, there's a tradition of pretending that Holmes was a real person and that Arthur Conan Doyle was not a writer of fictional stories but an actual biographer. Mr. Klinger takes the same approach with "Dracula," with results that will amuse some and annoy others. "You don't have to buy into my crackpot suggestion," he says. "But the idea is to help the reader have fun."

In researching "Dracula," Mr. Klinger had to perform detective work that would do Holmes proud. Stoker left behind not only his published manuscript, but also extensive drafts and notes that provide glimpses of how his ideas about the novel evolved over several years -- rich source material for any annotator. One of the key texts is a 541-page manuscript that turned up in a Pennsylvania barn some years ago. Few people have laid eyes on it, and Mr. Klinger tried to contact its anonymous owner through Christie's, the auction house.

That effort initially failed, though the private collector ultimately approached Mr. Klinger through an intermediary and invited him to spend two days with the manuscript. Mr. Klinger had to sign a nondisclosure agreement, but this summer he received permission to identify the mysterious owner: Paul Allen, the co-founder of Microsoft.

Mr. Klinger draws extensively from this document, and the greatest payoff comes in the last chapter, when he reveals an ending different from the one Stoker put into print. The lost scene shows up in Mr. Allen's manuscript, but not in the novel as it was finally published. It takes place in Transylvania and involves a massive explosion. Saying more would spoil the surprise.

Group asks IRS to investigate Catholic bishop against Obama

From USA Today:

A church-state watchdog group has asked the Internal Revenue Service to investigate whether the Roman Catholic bishop of Paterson, N.J., violated tax laws by denouncing Democratic presidential nominee Sen. Barack Obama.

In a letter sent to the IRS on Wednesday (Oct. 22), Americans United for Separation of Church and State accused Paterson Bishop Arthur Serratelli of illegal partisanship for lambasting Obama's support of abortion rights.

In a column posted on the Diocese of Paterson's website and published in its weekly newspaper, Serratelli also compared Obama to King Herod, the biblical monarch who ordered the death of John the Baptist.

The bishop did not refer to Obama by name but only as "the present democratic (sic) candidate."

Under federal tax law, nonprofit groups — including religious organizations — are prohibited from intervening in campaigns for public office by endorsing or opposing candidates.

Fact Check: Would Obama's tax policy harm people with special needs?

From CNN.com:

The Statement:

During a speech Friday, Oct. 24, in Pittsburgh, Pennsylvania, Gov. Sarah Palin noted that parents of children with special needs often set up trusts to help ensure long-term assistance. "Many families with special needs children or dependent adults" are concerned that Sen. Barack Obama "plans to raise taxes on precisely these kinds of financial arrangements," she said. "They fear that Senator Obama's tax increase will have serious and harmful consequences, and they're right."

The Facts:

Some parents create special needs trusts in order to help ensure that their children with disabilities or other special needs will have help well into the future, after the parents retire or die. The Federal Citizen Information Center Web site explains that the primary advantage of a trust, rather than a gift or inheritance, is that the assets are owned by the trust, not the beneficiary. So, funds will be available to the person with special needs, but will not cause that person to be disqualified from the government-run Medicare program. The trust funds typically provide for such things as glasses, independent checkups, transportation, equipment, training, education, and other programs, the Web site says.

The way most of these trusts are structured, the interest they gain is taxed as part of the parents' income. Palin, in her remarks, suggests that Obama will increase taxes on these trusts in general, thereby reducing the funds in them. The McCain campaign did not respond to requests to explain or comment on the record.

Obama has pledged to increase taxes only on individuals with incomes over $200,000 and families with incomes over $250,000. He is not offering an exception for interest in special needs trusts — that income counts toward the total. So, if someone's taxes go up under Obama, the interest in a trust fund is part of what will be taxed at a higher rate.

But Obama does not have a plan to increase taxes on special needs trusts in general. And Jason Furman, economic adviser for the Obama campaign, noted that Obama has vowed to fix his plan if any individual making less than $200,000 or family making less than $250,000 is left paying higher taxes. So, if Obama's tax plan, unintentionally, forced taxes up on a special needs trust for someone at a lower income, the tax plan would change, and the person's taxes would not go up, Furman said.

Sen. John McCain is promising across-the-board tax cuts, so no one with a special needs trust would see a tax hike under his plan. As the CNN Truth Squad has reported, the nonpartisan Tax Policy Center says Obama's tax cuts would be larger for people in middle and lower income ranges.

Before Palin launched this attack Friday, the McCain campaign told the Wall Street Journal that it was coming. The newspaper, in an article published online Friday, quoted Andy Imparato, president of the nonpartisan American Association of People with Disabilities, saying he has not heard any complaints from constituents about Obama's tax plan. It was not clear what Palin's evidence was that "many families" were concerned about Obama's plan.

The Verdict:

Misleading. Obama's plan would increase taxes on individuals making more than $200,000 and families making $250,000, and it would include the income on interest in special needs trusts. But Obama does not have a plan to raise taxes on special needs trusts in general.

Progressive Income Taxation and Socialism

Professor James Edward of Mauled Again has posted his take on the “progressive tax” concept. Below is a quote from the entry, but you can read the full text by clicking here.

Perhaps we interpret Obama's statement differently. I did not read it as revoking the tax cut on the wealthy in order to give cash to the poor and middle class. I read it as revoking the tax cut on the wealthy so that the government did not need to rack up deficits to provide the health care, school lunches, head-start education programs, and other benefits that indeed give opportunity to people who otherwise would be stuck in poverty.

This nation has been doing that for decades. It's socialism, perhaps not as far along the spectrum as Sweden's version, but it's socialism. When the administration refused to raise taxes to finance the war, it ended up cutting benefits to those in need. Obama seeks to fix that problem. That problem is exacerbated by the impact of cutting taxes on the wealthy, who didn't trickle much down to the poor other than short-term smoke and mirrors and longer-term financial distress. The poor and lower middle class will suffer far more from the present and continuing recession (depression, perhaps) than will the wealthy.

What I think underlies these charges of socialism is fear. It's fear, not of millionaires paying another fifty or a hundred thousand dollars in taxes, not of government taking over ownership of all assets, but of change. For quite some time, the economic and tax arrangement have favored the wealthy. They created this arrangement by persuading the middle class and even the poor that life would be better if income taxes were cut, particularly income taxes on capital gains and dividends. Yet when all was said and done and the policies advanced by the tax cutters played out, the nation ended up in what may be the worst economic catastrophe it has faced. While wages barely kept pace with inflation, and in some instances fell, while jobs were outsourced, while the quality of products and services suffered, while health care became less affordable and less available, while resources allocated to education continued to be insufficient, the percentage of wealth owned by the wealthy increased. Because the sales pitch worked in the past, they expected it to work again, but to their surprise, the track record of the don't-tax-but-spend crowd has turned out to be no better than, and in most respects worse than, the track record of the tax-and-spend crowd. With that taking the wind out of their economic policy sails, they turned their focus on a broader question, using terminology designed to spread their fear throughout the electorate.

The answer to Joe the Plumber's question was honest. It might not be something with which people agree, but at least it's not the misleading promise that cutting taxes will make everyone economically secure. And underneath this trumpeting of the "socialism" warning cry is an unarticulated lack of faith in America, a notion that somehow citizens will sit back and do nothing if it attempts to fix the economic mess turn too sharply to what genuinely is socialism rather than returning the country to the path which uses economic policy to promote fairness, affordable health care, improvement in children's education, and the other characteristics of high quality of life that were promised but not delivered by the merchants of tax cuts for high income taxpayers. I don't see the appeal in continuing to do what has been done, when what has been done is what brought us to where we are.

State Revenues Drop

According to the Center on Budget and Policy Priorities, states across the country are beginning to report their revenue data for the July through September quarter and things are not looking good. In addition to large revenue drops the following problems are also developing.

Of 15 mostly large and mid-sized states that have published complete data for this period, the majority collected less total tax revenue in July-September 2008 than was collected in the same period in 2007. (See Table 1.) After adjustment for inflation, total revenue collections are below 2007 levels in 14 of the 15 states. (See Table 2.)

Although state revenue collections have been slowing for at least a year, the new figures are the first to show steep declines in revenue across a variety of types of taxes across a range of states from all regions of the country. Of the 15 states surveyed here, the median state experienced a 5.5 percent decline in total tax revenue after adjustment for inflation. Only Michigan, which enacted a major tax increase, experienced revenue growth; revenues in all others declined.

Sales tax revenue has been particularly hard hit. Revenues are down in every one of those 15 states, with a median decline of 7.3 percent after adjustment for inflation. Although many states have been experiencing declining or flat sales tax revenues for some time, these figures are worse than in previous quarters.

Personal income tax revenues are also down sharply from previous quarters. Until recently, the personal income tax was growing in most states. Now it has declined 2 percent in the July-September period in the median state after adjustment for inflation. Each of the surveyed states except Michigan (due to the enacted tax increase) and Minnesota experienced declines.

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Tax-refund checks await recipients

From Sign On San Diego.com:

If you don't have your economic-stimulus or federal tax-refund check yet, it may be because the IRS doesn't know where you are.

The Internal Revenue Service has more than 15,300 tax-refund checks or economic-stimulus checks belonging to Southern Californians that were never delivered because of incorrect addresses.

About 5,000 of those checks, worth $3.5 million, are owed to San Diego County residents. The average check is $684.

To receive the check, a taxpayer needs to update his or her address with the IRS.

Federal law requires that all stimulus checks be delivered by Dec. 31. Those who are owed a check must update their address by Nov. 28, an IRS spokesman said.

There are two ways to see if you are owed a check and, if necessary, to update your address. Those with Internet access can go to the IRS Web site at irs.gov and click on either “Where's My Refund?” or “Where's My Stimulus Payment?”

Those without Internet access can call (800) 829-1954 to check on the status of their refund check or (866) 234-2942 to check on their payment.

7 Ways the Next President can Improve our Economy

It is no secret that the American economy is under pressure, and politicians are scrambling to present every solution possible. It does not help that all of this is happening in the middle of an already important presidential election. Since there are long and short term goals involved, many people are concerned with what the next president can do to fix the economy. To help my blog readers make their own educated decisions, I have brainstormed and put together the following list of ways the next president can fix the economy.

1. Reputation Repair

With the stock market going up one day and down the next, good foreign investor relations need to be kept intact. The money we are spending on the bailout plan does not all belong to us, and it does not all go to American companies. A lot of our economic security lies in the hands of foreign investments, and the next president should work to improve these relations. We need to show investors that we can and will manage our money and policy better than in the past.

2. Prioritize Agenda

With so many important items on the agency, it is hard not to get caught up in too many things at once. History has shown us that problems ignored usually get a lot worse, and end up at the top of the list eventually any ways. Prioritizing his agenda early can save the next president both time and money and focus on getting the job done right the first time.

3. Improve Congressional Relationships

The relationship between legislative and executive branches has been negative for too long. If we could make this relationship more open and less attacking perhaps they might come to more well rounded, honest decisions. It is hard to get any bill passed into law with an unhappy congress, so keeping the relationships friendly and professional will benefit the country as a whole.

4. Reduce Outsourcing

With the tough economy, more and more companies are looking to outsource their manufacturing. However, the problem is that doing so can make the economy even worse. While it may be cheaper for a company to outsource, it gives valuable jobs to other countries. If the government could give these companies some incentive to produce their goods at home it would create more American jobs, and benefit the whole economy.

5. New Energy Policies

While both candidates recognize the changing climate and the attention it needs, these are only words. The winner needs to come up with a clear and concise energy policy that addresses foreign oil dependency as well as all of our individual dependency on oil. Exploring, funding, and distributing alternative energy will save the country billions in the long run and can create “green collar” jobs in the meantime.

6. Promote Innovations

By funding and rewarding technological and medical innovation and discovery, we can increase our countries competitiveness in the global market. These new discoveries will provide a service to all Americans who benefits from them, and by developing ways to reduce our dependence on foreign oil we can stop sending so much of our money to foreign producers.

7. Market Regulation

By closely monitoring trading activity and spending, we can help prevent market manipulation and hopefully prevent another mess like the one we are in now. This is an issue that both candidates have addressed, as the image of corporate “fat cats” has angered the American public. Senator Barack Obama was quoted as saying, "the American economy does not stand still, and neither should the rules that govern it. Old institutions cannot adequately oversee new practices. Old rules may not fit the roads where our economy is leading."

Candidates' tax-cut rhetoric swamps voters

From the Seattle Times:

In an outbreak of class warfare, John McCain and Barack Obama swapped sharply worded charges over tax cuts Saturday, each accusing the other of shortchanging middle-income Americans at a time of economic hardship for millions.

McCain, in a paid weekly radio address and at a North Carolina rally, fired the first volley, likening Obama to the socialist leaders of Europe and saying he wanted to "convert the IRS into a giant welfare agency, redistributing massive amounts of wealth at the direction of politicians in Washington."

Obama responded at a St. Louis rally that attracted 100,000 people, saying his rival "wants to cut taxes for the same people who have already been making out like bandits, in some cases literally."

"John McCain is so out of touch with the struggles you are facing that he must be the first politician in history to call a tax cut for working people 'welfare,' " Obama said.

Based on the candidates' tax proposals, Obama would provide more assistance to low-income and middle-income taxpayers than McCain.

Take a family earning the national median income of $50,233, as calculated by the Census Bureau for 2007. The family would pay $4,837 in federal income taxes for 2009 under McCain's plan, vs. $4,309 under Obama's proposal, according to a mathematical program that University of Southern Maine economics professor Jeffrey Gramlich helped develop.

The Impact of the Economic Downturn on the Legal Industry

One of my favorite blogs, TheGlassHammer.com, has posted a very interesting article by Heather Chapman on the impact of the poor economy on the legal industry. Below is a snippet from the article, so be sure to click here for the full version.

The financial market isn’t the only industry being affected by the recent downturn in the U.S. economy. Businesses all across the nation have seen a decline in customers. However, in the legal industry, the number of bankruptcy, litigation, regulatory compliance, white-collar defense, and divorce cases has risen as people and businesses try to either save themselves from collapse or cash in on someone else’s. With questions like “Should I keep investing my money?” to “What do I do about my health insurance plan?” lawyers are finding that business is booming.

Rjon Robins, attorney and founder of a lawyer coaching website, says that he is seeing more personal consumer bankruptcies. “The biggest reason is the social factor. When you see other people around you taking advantage of bankruptcy relief the social stigma is reduced which makes the decision easier for you to make. The same is true of commercial bankruptcies. Except that business owners tend to come to the decision a little faster with the help of accountants and vendors who prevent them from avoiding the reality of their predicament.”

He continued, “Litigation attorneys are seeing an uptick in new business. And we expect that trend to continue too, but not necessarily because the economy is causing people to have more reason for litigation. Rather every time we see a down-swing in the economy what seems to happen is that people who might otherwise have focused on the future instead of resorting to litigation start to try and tie-up loose ends.”

Thomas W. Kerner, attorney for Kerner & Betts in Williamsburg, North Carolina, agrees. He sees consumer debt collection and tax litigation rising, in addition to business-to-business (B2B) debt collection. “Especially among contractors and subcontractors who are not being paid because banks have pulled the funding on projects they’ve put months of work into; I would say 75-80% of it is directly or indirectly related to the building slowdown, which has been fueled by the collapse of the housing market and the tightening of lending practices which has caused a lot of projects to stop dead in their tracks.”

McCain & Palin: Obama tax plan will 'spread the wealth'

From CNN.com:

Sen. John McCain's camp on Monday continued its weekend assault on Sen. Barack Obama's tax plan, which it called an attempt to "spread the wealth."

Speaking at a campaign event in St. Charles, Missouri, McCain said Obama "wants to spread the wealth around."

A chorus of boos rang out as the senator from Arizona continued, "He believes in redistributing wealth -- not in policies that grow our economy and create jobs and opportunities for all Americans. Sen. Obama is more interested in controlling who gets your piece of the pie than in growing the pie."

In Colorado Springs, Colorado, Alaska Gov. Sarah Palin also continued her line of attack from the weekend, but softened her tone in that she didn't call Obama's plan outright socialism.

"Our opponent's plan is just more big government, and John and I think that that is the problem, not the solution," she said. "Instead of taking your hard-earned money and spreading your wealth, we want to spread opportunity so people like you and Joe the plumber can create new wealth."

IRS Issues 2009 Inflation Adjustments

According to their newest press release, the IRS has issued new inflation adjustments for the year 2009. “By law, the dollar amounts for a variety of tax provisions must be revised each year to keep pace with inflation. Consequently, more than three dozen tax benefits, affecting virtually every taxpayer, are being adjusted for 2009. Key changes affecting 2009 returns, filed by most taxpayers in early 2010, include the following:

• The value of each personal and dependency exemption, available to most taxpayers, is $3,650, up $150 from 2008.
• The new standard deduction is $11,400 for married couples filing a joint return (up $500), $5,700 for singles and married individuals filing separately (up $250) and $8,350 for heads of household (up $350). Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.
• Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $67,900, up from $65,100 in 2008.
• The maximum earned income tax credit for low and moderate income workers and working families with two or more children is $5,028, up from $4,824. The income limit for the credit for joint return filers with two or more children is $43,415, up from $41,646.
• The annual gift exclusion rises to $13,000, up from $12,000 in 2008.”

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Biden defends Obama tax-cut plan in Wash

From the Associated Press:

Democratic vice presidential candidate Joe Biden said Sunday that a Barack Obama administration would help the middle class by cutting its taxes, answering Republican claims that Obama's plan represented redistribution of wealth.

Republican presidential candidate John McCain on Saturday likened Obama to the socialist leaders of Europe, saying the Democrat wanted to "convert the IRS into a giant welfare agency, redistributing massive amounts of wealth at the direction of politicians in Washington."

In response, Biden on Sunday repeatedly linked McCain to President Bush's tax policies, saying that the wealthy and big corporations have received millions of dollars in tax cuts that could have gone to the middle class and small businesses.

"It's not just because it's fair, it's what makes the economy go. The rich do fine when the middle class is going," Biden told an audience at a rally with Washington Gov. Chris Gregoire and other state Democrats vying for office. Thousands of supporters filled Cheney Stadium in this heavily blue-collar region about 40 miles south of Seattle.

"John McCain has been a party to the most significant redistribution of wealth in American history and it has been all the wrong way," he said. "There's not one fundamental economic issue that John McCain disagrees with George Bush on."

Joe the Plumber Eligible for Obama Tax Cut?

From ABC News.com:

ABC News' Chris Bury is outside Toledo, near the home of Samuel Joseph Wurzelbacher, a/k/a "Joe the Plumber," and reports that Wurzelbacher -- such a key part of Sen. John McCain's critique of Sen. Barack Obama's economic proposals -- acknowledged that he wants to purchase the plumbing business for $250-280,000, not that he would net that much in profits.

He would make much less, he said.

Which would seem to indicate that he would be eligible for an Obama tax cut, not that he would be subject to the tax increase from 36% to 39% Obama would impose on those making more than $200,000 per person, or $250,000 per family.

Wurzelbacher this morning told ABC News' Diane Sawyer that he was talking about, in Diane's words, the prospect, the hope that someday he would make $250,000.

"Well, exactly," he said. "Exactly. I mean, not that I don't want to be taxed. You have to be taxed. But to -- just because you work a little harder to have a little bit more money taken from you, I mean, that's scary. You know, as opposed to other people. I worked hard for it. Why should I be taxed more than other people?"

Diane asked, "If those people should not be taxed additionally, even though they're in the top 5% of America, what about people who make $1 million? Or $5 million?"

"Well, I mean, quite honestly, why should they be penalized for being successful?" Wurzelbacher asked. "I mean, that's what you're telling me. That's what it sounds like you're saying. That's wrong. Because you're successful, you have to pay more than everybody else? We all live in this country. It's a basic right. And Obama wants to take that basic right and penalize me for it, is what it comes down to. That's a very socialist view and it's incredibly wrong. I mean, $250,000 now. What if he decides, well, you know, $150,000, you're pretty rich, too. Let's go ahead and lower it again. You know it's a slippery slope. When's it going to stop?"

Tax Related Misconceptions in the Final Debate

Wednesday night was the third and final debate between Sens. Barack Obama and John McCain, and as can be expect taxes and the economy were central issues of the debate. Unfortunately, both candidates used confusing figures and lies about their opponent to make their points. Fortunately, the tax experts of the Tax Foundation have reviewed the CNN transcript of the debate and have reviewed the misleading statements made by both candidates.

Fact Checking Sen. McCain

Early in the debate, John McCain once again voiced his concern over the rising national debt and claimed that he could balance the budget in his first four years in office. But given that his tax policies contain major tax cuts that will not pay for themselves (especially in 2011 and 2012 after Bush tax cuts expire), it is a pretty safe bet that Sen. McCain is not going to be balancing the budget in 2012. We definitely know that neither Obama nor McCain is going to balance the budget in the first year or two of his administration.

Next in the debate, for about the millionth time in the past six months, McCain said this about Sen. Obama's voting record:

Sen. Obama talks about voting for budgets. He voted twice for a budget resolution that increases the taxes on individuals making $42,000 a year.

Once again, that was a non-binding party-line vote taken earlier this year in the Senate. And if voting records on tax issues are relevant despite what the senator is proposing as a candidate, then shouldn't Sen. McCain's position on the Bush tax cuts in 2001 and 2003 (which he opposed) be fair game?

On the issue of energy, Sen. McCain said this about trade with Canada:

By the way, when Sen. Obama said he would unilaterally renegotiate the North American Free Trade Agreement, the Canadians said, "Yes, and we'll sell our oil to China."

What he doesn't understand is that even if Canada shipped the oil to China, the effect on the U.S. would be relatively small given that other oil that is currently going to China would flow to the United States. The difference would be transportation costs and any impact of a tariff. Basically, this statement ignores the fact that there is a world market for oil.

Moving to the issue of healthcare, Sen. McCain said this in support of his $5,000 per family health care tax credit:

The average cost of a health care insurance plan in America today is $5,800. I'm going to give them $5,000 to take with them wherever they want to go, and this will give them affordability.

The reason I bring this up is because later, Sen. Obama quoted the figure as being $12,000. It appears that Sen. McCain got his figure from this report, which says this: "Nationwide, annual premiums averaged $2,613 for single coverage and $5,799 for family plans in the 2006-2007 period. For single policies, annual premiums ranged from $1,163 for persons under age 18 to $5,090 for persons aged 60-64. For family policies, premiums ranged from $2,325 for policies covering children under age 18 to $9,201 for families headed by persons aged 60-64.

Obama's $12,000 figure appears to come from this Kaiser report.

Fact Checking Sen. Obama

Throughout the debate, Sen. Obama repeatedly showed an unfortunate ignorance of one of the fundamental principles of taxation: all taxes are paid by people. On multiple occasions, Obama claimed that businesses or corporations "can afford" to pay higher taxes. But such a statement is just ridiculous. Companies have no "ability to pay" taxes. Does the corporation's building pay the tax? How about its fax machine or water cooler? No. People pay the taxes. Here is one such example of why Sen. Obama would get an F in public finance:

Then Exxon Mobil, which made $12 billion, record profits, over the last several quarters, they can afford to pay a little more so that ordinary families who are hurting out there -- they're trying to figure out how they're going to afford food, how they're going to save for their kids' college education, they need a break.

What Sen. Obama doesn't understand or doesn't want to tell the American public is that when Exxon Mobil writes that check to Uncle Sam, some PERSON is paying the price for that. In the short-run, that person could be a shareholder, a worker, or a consumer. But the fact that Exxon Mobil has a lower after-tax profit means that some PERSON is worse off. For example, Exxon Mobil would likely reduce its dividend payment, or its share price could fall, and that hurts every PERSON who was invested in Exxon Mobil at the time the tax was enacted.

And this isn't controversial. If you called up Obama's top economic advisers Jason Furman or Austan Goolsbee on November 5 (after the election) and asked them who pays taxes, both of them would tell you that people pay all taxes, and that a company merely acts as a means of collecting for the government the taxes imposed on owners of capital and in some cases, the company's workers. In fact, if we truly taxed Haig-Simons income as a pure income tax would call for, it could be possible for no tax to be levied on a corporation assuming retained earnings were taxed.

Sen. Obama made a similar gaffe here:

Because after eight years of failed policies, he and I both agree that what we're going to have to do is to re-prioritize, make sure that we're investing in the American people, give tax cuts not to the wealthiest corporations, but give them to small businesses and give them to individuals who are struggling right now, make sure that we finally get serious about energy independence, something that has been languishing in Washington for 30 years, and make sure that our kids get a great education and can afford to go to college.

The fact of the matter is that there is no wealthy corporation. The stockholders of a corporation that holds in its business operation a lot of money (retained earnings) and assets may be wealthy, but the corporation itself is not wealthy. It just makes no sense. It's just populist rhetoric that sounds good.

On the issue of whose tax plan would provide more relief to middle-income taxpayers, Barack Obama once again brought out this line:

And 95 percent of working families, 95 percent of you out there, will get a tax cut. In fact, independent studies have looked at our respective plans and have concluded that I provide three times the amount of tax relief to middle-class families than Sen. McCain does.

The 95 percent figure is correct. Even though many conservatives have argued that you can't cut taxes for people who pay no income taxes, most of those who are receiving refundable tax credits on the income tax side are still net taxpayers given that they do pay payroll taxes, corporate income tax, excise taxes, etc. (And even that assumes the fact a person is a net taxpayer even matters versus the net fiscal incidence of the person, and once we go down that road, at least we are actually getting somewhere on the core questions of public finance and the role of government in distributional outcomes.)

The independent study that Sen. Obama is referring to comes from Tax Policy Center, which does indeed verify this fact for middle-income tax units when you exclude the effects of the two candidates' health care plans. What Sen. Obama doesn't tell you is that Sen. McCain's health care tax plan (which he criticizes on many occasions and runs about a billion television ads a day on) would actually provide more savings to middle-income tax units (as a group) than Sen. Obama's health care plan. And when you include the effects of these health care plans, the three-times as much tax relief claim no longer holds. When TPC ran the tax plans, they analyzed the health care plans separately from the other parts of the candidates' tax plans.

Speaking of Sen. McCain's health care plan, Sen. Obama once again made this invalid comparison about it:

By the way, the average policy costs about $12,000. So if you've got $5,000 and it's going to cost you $12,000, that's a loss for you.

Sen. Obama's saying outright that Sen. McCain's plan is a loss for you is nonsense.

The $12,000 cost and $5,000 credit are not comparable unless one assumes two facts for McCain's health care tax plan: (1) the worker will be dropped by his employer, and (2) the worker's wages will not increase to offset the lost health care. For most workers, this isn't going to happen. If somebody is receiving $12,000 in health insurance that is now taxed as ordinary income (and there is no dropping of coverage), a $5,000 credit is going to more than offset the additional tax a person must pay on his/her employer-provided health insurance. Eventually, since the credit is indexed for inflation and not health-care costs, the credit's value would diminish. But over the next ten years, Tax Policy Center has estimated that McCain's health care tax plan is a $1.3 trillion tax cut for American taxpayers, and they have shown that the average middle-income tax unit would be better off under McCain's health care tax plan than Obama's in that time period. Now it is true that the average doesn't hold for everyone in the middle and some will gain a lot in the middle and some could lose a lot in the middle (such as those whose coverage is dropped), but the reality is that the health care tax plan is the most progressive part of Sen. McCain's plan. It would make the federal income tax more progressive.

John McCain proposes new package of tax breaks

From: LA Times.com:

In an effort to seize the initiative in tackling the nation's financial troubles, John McCain on Tuesday outlined a $52.5-billion package of new tax breaks that he said would stimulate the economy and ease the money problems of many Americans.

Aiming his pitch largely at senior citizens who could be crucial swing voters in states with older populations such as Pennsylvania, McCain said he would lower the tax rate on their withdrawals from retirement accounts to 10% this year and next.

The Republican presidential nominee also proposed cutting the capital gains tax in half for two years, suspending taxes on unemployment benefits for workers making less than $100,000, and ordering the Treasury Department to guarantee 100% of Americans' savings for six months to calm fears of bank failures.

"If I am elected president, I will help to create jobs for Americans in the most effective way a president can do this -- with tax cuts that are directed specifically to create jobs and to protect your life savings," he told a cheering crowd of about 1,000 in the gymnasium of a community college here in the Philadelphia suburbs.

The new slate of proposals is an addendum to the Arizona senator's already expansive tax-cutting plans and his call to use $300 billion of the $700-billion rescue package to buy up bad mortgages and reset them with more favorable terms. It is part of McCain's effort to right his campaign and regain voters' trust in his handling of the economy, an area in which more voters favor his opponent, Illinois Sen. Barack Obama.

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7 Tips for Traveling Surfers

After the October 15th extension deadline some of us who work in the tax industry get a two and a half month break before tax season. As the weather gets colder here in the United States, I usually head towards warmer locations to ride the waves. To help out anyone else working in taxes who like to surf, I have put together this list of 7 tips for traveling surfers.

1. Think Like a Local

Make sure you have sufficient information on the place you are going to surf. Study local maps, locate hotels, and find the best beaches. If you will be surfing abroad, make sure you know the local customs and follow them accordingly. Know the foods you are likely to be eating and what sort of attire is appropriate for a visitor.

2. Check Your Attire

There is nothing worse than traveling to a new place to surf when you unprepared for the weather. Make sure you know the weather forecast during your stay, and whether you will need a wet-suit or not. Also check to see if coral reef is present so you know if you will need booties or not. Hiking shoes, sunglasses, and a windbreaker are also all likely to come in handy, no matter where you travel.

3. Be Safe

When arranging your travel plans, use only the most reliable sources for travel information (including transportation, hotels, and recreation) to assure a safe trip. Although you will probably have to go off usual path to find the best surf spots, you should always play it safe and bring a surf buddy. Additionally, it is always a good idea to have a first aid kit handy at all times, since you never now what could happen during the hike or out on the surf. You should always be ready for emergencies!

4. Prepare Yourself

As fun as surfing trips are, they are also physically straining. Keeping your body healthy with daily exercise before you go is not a bad idea. Eating healthy the week before, drinking plenty of water, and getting decent amounts of sleep will greatly improve your trip and make it much more enjoyable.

5. Bring a Spare...

Having a spare leash, fins, surf wax, pair of sunglasses, and board are all good ideas. Although all of these things can be purchased abroad, it is much cheaper to bring your own. Also, if you are surfing somewhere miles from the closest town and you break a board, then it will pretty much ruin your trip.

6. Pack Smart

Before you even begin to pack, make a list of each and every thing you need to bring. Forgetting essential things like leashes or booties can really put a damper on your trip. It is also smart to pack light, as you will have plenty of luggage to lug around when you factor in your board or boards. Bring an extra, empty backpack so you don't have to unpack your entire carry on when you are ready to go out and surf. Having plenty of healthy snacks for the plane ride is a good idea too, as it is important to keep your body both hydrated and sustained for your upcoming trip.

7. Do Not Forget the Essentials

As with any trip abroad or far away, you will need to be sure to pack identification, cash, travelers checks, and back up documents. Find out if you will need a visa for your stay, because not knowing can lead to getting put right back onto the plane and one frustrating flight back home to get one. Keep a folder with all of your tickets, maps, hotels, and any other travel or trip documents. The more organized and ready you are, the more smoothly your travel time will go and the sooner you can hit the waves and have a fun time!

Hurricane Grant Guidelines Now Available

According to their newest press release, the IRS has issued a notice designed to help eligible homeowners who received federal reimbursement grants stemming from Hurricanes Katrina, Rita or Wilma take advantage of a new tax provision.

“Notice 2008-95 provides guidelines to homeowners who received these grants, including the Louisiana Road Home Grants and the Mississippi Development Authority Hurricane Katrina Homeowner Grants.

The Housing and Economic Recovery Act, enacted this summer, included the new provision, aimed at helping grant recipients who previously claimed hurricane-related disaster-loss deductions on their main home. The new law gives affected homeowners the option of adjusting previously claimed deductions by treating their federal reimbursement grants as reimbursement for the losses they suffered on their main home from Hurricanes Katrina, Rita or Wilma.

Before this change, homeowners who claimed casualty loss deductions and received grants in a later tax year as reimbursement for the loss were required by law to pay tax on part or all of the grant to compensate for the tax benefit of the prior deduction. While individual circumstances varied, this meant that some taxpayers ended up paying more tax on the grant than they saved by claiming the deduction.

The notice explains how eligible taxpayers can amend prior-year returns to reduce the casualty loss deduction by the amount of the grant, and explains that taxpayers have one year to pay back any resulting tax due, penalty-free and interest-free. To qualify for this relief, these amended returns must be filed by July 30, 2009, and the entire resulting tax due paid by July 30, 2010, in most cases. The notice also provides special instructions for those taxpayers who have already filed an amended return.

Taxpayers should write the words, ‘Hurricane Grant Relief’ in dark, bold letters at the top of their amended return, Form 1040X, and mail it to: Internal Revenue Service Center, Austin, TX 73301-0255. Amended returns cannot be filed electronically.

The IRS cautioned that, although filing an amended return may be a good option for many, it will not necessarily be the right choice for everyone. The agency urges affected taxpayers and their representatives to consider carefully which option is best under their particular circumstances.”

Trial set to Begin in NY Tax Shelter Case

From NewsDay.com:

It was a prosecution once touted as the biggest tax fraud case in history. Now four remaining KPMG defendants are going on trial, accused of conspiring to help at least 600 wealthy people evade more than a billion dollars in taxes.

There were once 19 defendants, most of them former partners at the accounting giant. Two cut deals with prosecutors. Charges against the rest were dismissed after U.S. District Judge Lewis A. Kaplan concluded that prosecutors had unfairly pressured KPMG to break promises to pay employee legal expenses.

The three former KPMG executives and a lawyer who remain in the case are charged with conspiring to obstruct the Internal Revenue Service, evading taxes and filing false tax returns. The trial, with jury selection on Tuesday, is scheduled to last four months or longer.

Prosecutors say the men conspired to market complex tax shelters from 1997 until 2000 to wealthy individuals who wanted to dodge taxes.

In court papers, lawyers said the defendants acted legally and that any questionable tax shelters were challenged by the IRS and appropriate taxes were paid.

The defense said the government was seeking "to poison the jury with allegations of tax evasion far beyond anything it can or will even try to prove."

McCain Unveils New Economic Plan

According to the International Herald Tribune, on Tuesday presidential hopeful John McCain announced a new economic proposal with a focus on helping American struggling in the uncertain economy. Earlier in the week Democratic nominee Barack Obama announced a new plan of his own, and with Obama polling better on economic issues it is no surprise that McCain was so quick to release a new plan.

"If I am elected president," McCain said near here, "I will help to create jobs for Americans in the most effective way a president can do this: with tax cuts that are directed specifically to create jobs and protect your life savings."

His plan, estimated to cost $52 billion, relies on an array of tax-relief measures: It would ease the burden on people withdrawing money from retirement accounts; reduce capital gains taxes on stock profits; accelerate tax write-offs for stock losses; and temporarily suspend the tax on unemployment insurance benefits.

"These are all targeted at people who have been hurt by the recent financial crisis: seniors, savers, workers, people who are trying to get to college," said McCain's chief economic adviser, Douglas Holtz-Eakin.

"We're putting a lot of cash into the hands of people because that's the near-term duress," he told Reuters separately. "What businesses are looking for right now are customers."

Obama-Biden Campaign Unveils Tax Calculator

From Washington Wire:

Playing offense on a favorite Republican attack issue, Barack Obama is offering voters a sneak peek at their share of his proposed tax cuts. Just punch in your income, marital status and a couple of key details, and the “Obama-Biden Tax Calculator” spits out the estimated tax cut that the Democratic ticket is promising you.

Single and making $60,000? The calculator has a $500 check with your name on it. Filing jointly with two kids and $100,000 of family income? $1,000 is on the way, according to the calculator.

The new Web gadget is meant to highlight Obama’s proposed middle class tax cut, which would reduce taxes for 95% of working families, according to the campaign. But punch in an income above $250,000 and the tool says, “You will probably not get a tax cuts under the Obama-Biden plan” –and zero mention of the tax increase planned for the wealthiest taxpayers.

The McCain campaign calls the gadget deceptive for leaving out mention of tax hikes and excluding small business taxes from its calculations. “Barack Obama supports raising taxes during an economic crisis – so the fact that his ‘tax calculator’ is a sham shouldn’t surprise anyone,” said McCain spokesman Tucker Bounds. The conservative group Americans for Tax Reform has also criticized the calculator for leaving out small business tax rates and over-promising on credits for college tuition and retirement savings.

But Wall Street Journal/NBC polling suggests that Republicans have been unable to tag Obama with the toxic tax-and-spend label that has damaged Democrats in the past, despite McCain’s attacks on that front.

The latest survey, conducted in early October, showed voters equally view Obama and McCain, both at 40%, as the best candidate on taxes.

McCain Makes New 401k Proposal

From the CNN.com:

John McCain proposed suspending the requirement that investors begin drawing down their IRAs and 401Ks soon after age 70, his second major economic proposal of the week.

"We must also protect investors – especially those relying on their investments for retirement," McCain told the crowd at a campaign event in La Crosse, Wisconsin Friday.

"Current rules mandate that investors must begin to sell off their IRAs and 401Ks when they reach age 70 and one half. To spare investors from being forced to sell their stocks at just the time when the market is hurting the most, those rules should be suspended."

Earlier this week, McCain unveiled a $300 billion plan for the government to purchase mortgages at full value from banks and directly re-negotiate the terms with homeowners. The plan has drawn criticism from economists and from the Obama campaign, which has charged that it would mean major profits for lenders and saddle taxpayers with the cost.

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AIG Plans Another Lavish Resort Event

Last week, AIG (American International Group Inc.) got lots of bad publicity for hosting a $440,000 conference just weeks after getting bailed out by the federal government. Both the White House and Congress spoke out in displeasure, and both presidential candidates have also chastised AIG for the costly event. However, according to Bloomberg, they are already planning another.

“The event, at the Ritz-Carlton in California's Half Moon Bay, aims to ‘motivate and educate'’ about 150 independent agents who sell AIG coverage to high-end clients, said spokesman Nicholas Ashooh.

White House spokeswoman Dana Perino today called ‘despicable’ expenses from the first gathering, a weeklong conference last month at the St. Regis Resort in Monarch Beach. Those costs included $23,000 for spa services, according to Representative Henry Waxman, chairman of the Oversight and Government Reform Committee.

AIG considered buying advertisements to explain its position, only to be told by public relations consultant George Sard that it would be ‘a really bad idea.’

‘To spend the taxpayer's money on an expensive ad campaign to apologize for how you used taxpayer money leaves you open to further attacks,’ Sard wrote in an e-mail to Ashooh. Sard, chief executive officer of New York-based Sard Verbinnen & Co., said the message was a private e-mail mistakenly sent to Bloomberg and wasn't intended to be a public statement.

President George W. Bush didn't push for the bailout ‘to help top executives go to a spa,’ Perino said today at the daily White House briefing. Hours later, the Federal Reserve agreed to loan AIG an additional $37.8 billion on top of the initial $85 billion.

AIG Chief Executive Officer Edward Liddy, who replaced former CEO Robert Willumstad as a condition of the federal loan, today told Treasury Secretary Henry Paulson that the company intends to reevaluate expenses.

‘We understand that our company is now facing very different challenges,’ Liddy wrote in a letter to Paulson. ‘We owe our employees and the American public new standards and approaches.’

States to Zero-in on Tax Cheats as Economy Sags

From the Associated Press:

The U.S. financial meltdown is creating brighter job prospects for at least one occupation: tax collector.

Several states — including New York, Massachusetts, California and Illinois — are beefing up tax enforcement and collection efforts as they face widening budget deficits.

"As their budgets quickly hit the skids and the pressure is on, they're going to be looking to see where those dollars are," said Verenda Smith of the Federation of Tax Administrators, an association of tax agencies from all 50 states.

Their targets range from major corporations to small businesses and individuals.

State governments are always seeking ways to narrow their "tax gaps" — the sometimes billion-dollar chasms between what they believe they're owed and what tax cheats and delinquents actually pay. The sliding economy is forcing states to intensify efforts to close the gaps.

In New York, tax collectors have been trumpeting their crackdown, aiming to persuade tax cheats to change their ways.

"At the end of the day, I'm not interested in a lot of arrests. I'm interested in increasing the number of voluntary taxpayers," said William Comiskey, the state tax department's deputy commissioner for enforcement.

New York tax collectors recently sent letters to thousands of small businesses advising them of the consequences of not collecting or remitting state sales taxes. They'll soon send letters to thousands of taxpayers whose returns were done by preparers who are under investigation for fraud, Comiskey said.

The warning letters are part of a broader campaign to publicize the crackdown and steer tax cheats to a new program that will allow them to come clean and avoid criminal prosecution.

Officials expect the program to yield $30 million a year, a pittance compared to New York's projected $8 billion budget deficit for next year.

Common Misconceptions About the Wall Street Bailout

With ongoing media coverage from every angle, the Wall Street bailout legislation has become a web of complicated myths and facts that can be difficult for the average taxpayer to untangle. In times like these we turn to political leaders to let us know what is going on and what they are going to do about it. Unfortunately, we are at the tail end of an election season and many of our leaders are more concerned about the election then fixing our economy. It hard to trust candidates fighting for your vote or leaders who waste time playing the blame game. To help out the readers of my blog sort through this web of facts, I have compiled this list of common misconceptions about the Wall Street bailout.

Myth: The bailout will only help Wall Street, not people living on Main Street

Reality: Although Wall Street has lost the trust of taxpayers, our economy depends on it. The bailout isn't made to directly "help" any one specific person, but to help maintain the lifestyle of all Americans. It means keeping your bank accounts, loans, small business, insurance, and job in place. It means keeping your life in place.

Myth: Nancy Pelosi's speech changed Republican votes

Reality: While Pelosi’s speech was a toe over the line and obviously attacked Republicans, it is still doubtful to me that it actually changed any votes. By the time congress was in session that day, they should have sufficiently reviewed the bill and already had their votes decided. While some Republicans and Democrats alike were upset by what Pelosi said, her words caused outrage—not the death of the first legislation.

Myth: Congress spent too much time passing the bill

Reality: While many were upset by the first bills failure, Congress was simply doing their job. It is their duty to review, re-review, and thoroughly discuss important bills. Hundreds of billions of dollars were on the table, and rash decisions were simply not the right way to go. I doubt anyone really wanted them to push the bill through without giving it the attention it deserved.

Myth: The entire economic crisis is Bush’s fault

Reality: While it'd be easiest to point the finger at a single person, the fact is the economic crisis been coming for longer than just eight years. Democrats and Republicans alike pushed changes to regulations that governed financial institutions. In addition, I would not solely blame improper loan companies or even the corporations that need bailing out. This is a deep-rooted crisis cause by dozens, if not hundreds of mistakes that have been made.

Myth: The bailout will provide immediate relief

Reality: While the country watches as more jobs are lost and the DOW continues to fall, they are wondering why the bailout is not working yet. The truth is that the U.S. Treasury Department needs to set up a system to distribute the funds, and it could take as long as six weeks before they get to that point.

Myth: Innocent taxpayers are paying for the bailout

Reality: What a lot of people do not realize is that their money is not being wasted. In exchange for the funds, the federal government will take partial ownership of the companies it bails out. Then will then be able to sell these shares in the future, possibly even for a profit! Additionally, by investing into companies it will assure a more sound American economy, which will benefit everyone who lives in this country.

Myth: Why bail them out? The sooner they fall, the sooner we recover

Reality: While this could work, the downside is that if it does not, we will all be in the hole. Unfortunately this country is not just relying on itself, and a pretty big chunk of our debt lies on foreign investors who are not very impressed with the situation. If those investors decide to pull their funds from American investments, then the economy could get much worse.

Myth: The bailout will reduce the value of the dollar

Reality: The U.S. dollar is on a flux, meaning that it is not going up or down... it is doing both. Even before the bailout this was the case, and it is not likely to affect inflation dramatically either way. The financial meltdown is a worldwide crisis, and the dollar has actually made significant improvements over foreign currencies over the past few weeks.

It's Time to Think Big on Tax Cuts

From the Wall Street Journal:

John McCain needs to show the nation that he has the economic recovery plan to restore long-term economic growth. To do that, he needs to refocus his campaign with a new tax plan. Mr. McCain should come out for an alternative, optional flatter tax system, which he has already supported.

Under this proposal, Americans could file their income taxes under the existing tax code or they could choose instead to pay taxes under a simpler code with fewer deductions but lower tax rates. Building on work already done by Steve Forbes and House Budget Committee member Paul Ryan, a Wisconsin Republican, Mr. McCain could propose an optional tax system with just two rates, 10% and 25%, compared to the six rates of the current code ranging from 10% to 35%.

What's more, such a proposal would include a cut in income taxes, and tax rates, for every American who pays taxes. The alternative system would impose no income taxes on the poor and what is often called "the working class" (the bottom 40% of income earners who don't pay federal income taxes now). This proposal would also eliminate federal income taxes on the middle class, the middle 20% of income earners who pay only 4.4% of all federal income taxes today.

The new tax system would allow most Americans to file their taxes on a single sheet of paper, saving them the hundreds of dollars they spend today to have their taxes professionally prepared.

And such a tax reform would be an antidote to the class warfare, neocollectivist tax policies of Barack Obama. If implemented, it would also jump-start the economy. Under this optional tax system, savings would increase and investment would soar as capital around the world is drawn to a suddenly more confident U.S. economy.

This new surge of capital would end the credit crunch, and allow old businesses to expand and new ones to start. Wages would grow, along with the overall economy. And as the world invested in America, the dollar would strengthen, as happened in response to the tax cuts that generated the 1980s Reagan boom. This would ease inflationary fears and pressures on the Fed.

With a strong dollar, the Fed would be under less pressure to try to revive the economy through monetary policy. That would give Mr. McCain the flexibility to push for a new "price rule," which would base monetary policy on prices of a basket of commodities, including gold.

Tax Misrepresentations in Last Night’s Debate

Last night was the second debate between Senators Barack Obama and John McCain, and as usual there were numerous misrepresentations of the facts. Thanks to The Tax Foundation Blog, who have reviewed the CNN transcript, below are the tax related errors from both candidates.

Obama's Errors

Early in the debate, Sen. Obama took a shot at the fiscal policies of President Bush:

But I think it's important just to remember a little bit of history. When George Bush came into office, we had surpluses. And now we have half-a-trillion-dollar deficit annually.

When George Bush came into office, our debt -- national debt was around $5 trillion. It's now over $10 trillion. We've almost doubled it.

And so while it's true that nobody's completely innocent here, we have had over the last eight years the biggest increases in deficit spending and national debt in our history. And Sen. McCain voted for four out of five of those George Bush budgets.

First, on the issue of a surplus when Bush came into office, it's somewhat unfair to say that he inherited a surplus situation given that a recession began the month he took office. (The deficits of the recent years are another story.) Regarding the claim that we have had $500 billion deficits annually under Pres. Bush, that is not entirely true. The deficit for the fiscal year that was just completed (Sept. 30) was estimated to be $438 billion. However, the highest deficit of the seven years previous was $413 billion in FY 2004. The average deficit in that eight year period was $248 billion (which includes a surplus year of FY 2001) and the average deficit of the past four years has been $292 billion.

It is true that for FY 2009, the deficit will likely be astronomical and higher than $500 billion, but we have not had "half-a-trillion dollar deficits annually" under Pres. Bush. As for the debt rising from $5 trillion to $10 trillion, the starting point is closer to $6 trillion than $5 trillion (5.7) when Bush assumed office.

As for the claim that Sen. McCain voted for Bush's budgets, there are many parts of the budget that are voted upon each year. And actually, Sen. McCain voted against two of the major provisions that added to the national debt: the 2001 and 2003 tax cuts. (More on this later.)

On the issue of Sen. McCain's tax cuts, Obama said this about who would benefit:

Now, when Sen. McCain is proposing tax cuts that would give the average Fortune 500 CEO an additional $700,000 in tax cuts, that's not sharing a burden.

The $700,000 figure is only an "additional" tax cut for those CEOs if you do not count the Bush tax cuts that have already been put in place. Since those tax cuts are set to expire, that's a technically valid point. But this is somewhat misleading voters when he says "additional tax cuts" because it can be interpreted by many that those CEOs would be getting that much in tax cuts on top of the tax cuts they have received from the Bush tax cuts, which are set to expire on Jan. 1, 2011.

Responding to Sen. McCain's comments about tax policy, Sen. Obama made many claims about his tax plan and that of his opponent in rapid succession in this portion of the debate:

So let's be clear about my tax plan and Sen. McCain's, because we're not going to be able to deal with entitlements unless we understand the revenues coming in. I want to provide a tax cut for 95 percent of Americans, 95 percent.

If you make less than a quarter of a million dollars a year, you will not see a single dime of your taxes go up. If you make $200,000 a year or less, your taxes will go down.

Now, Sen. McCain talks about small businesses. Only a few percent of small businesses make more than $250,000 a year. So the vast majority of small businesses would get a tax cut under my plan.

And we provide a 50 percent tax credit so that they can buy health insurance for their workers, because there are an awful lot of small businesses that I meet across America that want to do right by their workers but they just can't afford it. Some small business owners, a lot of them, can't even afford health insurance for themselves.

Now, in contrast, Sen. McCain wants to give a $300 billion tax cut, $200 billion of it to the largest corporations and a hundred thousand of it -- a hundred billion of it going to people like CEOs on Wall Street.

He wants to give average Fortune 500 CEO an additional $700,000 in tax cuts. That is not fair. And it doesn't work.

Sen. McCain's Errors

Like Sen. Obama, Sen. McCain repeated many of the same misleading statements on tax policy that he has made on the campaign trail throughout the campaign season

Early in the debate, Sen. McCain made it a point to complain about the $10 trillion national debt:

We obviously have to stop this spending spree that's going on in Washington. Do you know that we've laid a $10 trillion debt on these young Americans who are here with us tonight, $500 billion of it we owe to China?

If Sen. McCain is concerned with the national debt, his tax proposals do not show it. That's because over the next ten years, according to the Tax Policy Center, Sen. McCain's tax proposals would grow the national debt by over $4 trillion. He can't cut that much spending by just going after earmarks. (Sen. Obama also doesn't balance the budget under his tax plans and likely spending over the next ten years, according to TPC.)

On the issue of tax history, McCain made this statement to attack Obama's tax plan:

But he wants to raise taxes. My friends, the last president to raise taxes during tough economic times was Herbert Hoover, and he practiced protectionism as well, which I'm sure we'll get to at some point.

My friends, that depends upon your definition of "tough economic times." Pres. George H.W. Bush raised taxes in 1990, a period of stagnant economic growth. And FDR, who followed Hoover (take note, Joe Biden, if you are reading) in 1933, raised taxes throughout the 1930s and 1940s.

In that same portion of the debate, McCain also criticized Obama for frequently changing his tax plan. While it is true that many key parts of Obama's tax plan started off murky in this campaign and became clearer as the campaign moved on (payroll tax cap and capital gains, to name two), a similar problem is that Sen. McCain had different plans at different times of the day. Both he and Sen. Obama will say one thing on the stump and tell organizations like the Tax Foundation or Tax Policy Center something else. Sen. McCain does that with his rhetoric about how he would provide Americans with an alternative flat tax (a la Fred Thompson), as well as repeal the AMT, when in fact he would merely patch it. Furthermore, his position on tax policy has changed rather significantly given his opposition to the 2001 and 2003 Bush tax cuts, and now his support for the extension of those tax cuts plus many more tax cuts.

IRS eases tax rules on US firms with foreign units

From the Associated Press:

The Internal Revenue Service, seeking to make cash more available during the current credit crunch, has issued a rule making it easier for U.S. corporations to bring home money made by their foreign subsidiaries.

The IRS temporarily expanded a 1988 ruling allowing corporations to borrow money held by foreign subsidiaries without having to pay the 35 percent corporate income tax.

"We were recognizing that there were liquidity restraints for companies" during the current credit crisis, Treasury Department spokesman Andrew DeSouza said Tuesday. He said the action would make it easier for foreign subsidiaries to provide loans to their domestic parents.

The current rule allows a company's foreign units to make a tax-free loan to the company as long as it is repaid in 30 days. Over a one-year period, the company can have outstanding loans from its subsidiaries for up to 60 days.

The temporary rule change would allow the U.S. company to keep cash from a single loan for up to 60 days. In total, the company could have borrowed money for up to 180 days in a one-year period.

To avoid being subject to taxation, the money would have to be paid back and could not be used as distributions such as dividends.

Congress, as part of tax legislation passed in 2004, enacted a similar break giving corporations a one-time deduction of 85 percent on dividends received from foreign subsidiaries. That act, aimed at encouraging domestic investment, lowered the effective tax on qualifying dividends from 35 percent to 5.25 percent.

The IRS said in a recent report that 843 corporations took advantage of the deduction. It said that $312 billion in repatriated dividends qualified for the deduction, creating a total deduction of $265 billion.

The Candidate’s Tax Returns Compared

Thanks to the TaxProf Blog, below is a chart comparing the tax returns of the four major presidential and vice presidential candidates (Sen. Barack Obama, Sen. John McCain, Sen. Joe Biden, and Gov. Sarah Palin). As you can see, Mr. Biden donated the lowest percent of his income to charity, but made more in the past two years than Mrs. Palin.

Tax Profs Agree: Gov. Palin's Tax Returns Are Wrong

From Tax Prof Blog:

Jack Bogdanski (Lewis & Clark) & Bryan Camp (Texas Tech) have independently reviewed the tax issues raised by the release of Gov. Palin's 2006 and 2007 tax returns and financial disclosure form, as well as the remarkable opinion letter issued from Washington D.C. tax lawyer Roger M. Olsen. Jack and Bryan conclude that there are serious errors in Gov. Palin's returns as filed and that she and her husband owe tens of thousands of dollars in additional taxes.

Jack Bogdanski, There's No Debate: Palins Owe Thousands in Back Taxes:

There is no serious debate (at least, none that has been brought to our attention) about the fact that at least the amounts paid for the children's travel -- $24,728.83 in 2007, according to the Washington Post -- are taxable. The campaign's tax lawyer has got at least that much of the law, and perhaps more, wrong. ... The Palins, who had their tax returns done by HR Block, simply got it wrong. And the fact that the state payroll office got it wrong, too, doesn't erase the Palins' unpaid tax liability.

Bryan Camp, A Brief Analysis of Governor Palin's Tax Returns for 2006 and 2007:

The release of an opinion letter by attorney Roger M. Olsen dated September 30, 2008, has stirred up the pot once again about the accuracy of Sarah and Todd Palin’s 2006 and 2007 tax returns. Not only that, but Mr. Olsen’s letter raises a couple of new issues.

This paper focuses on five problems: three raised in the tax returns and two new ones raised by Mr. Olsen’s letter. Here’s a summary of the five problems and my conclusions, for those who want to cut to the chase. My analysis will follow.

1. The Palins did not report as income some $17,000 that Governor Palin’s employer (the State of Alaska) paid her as an “allowance” for her travel. Can they do that? Yes, most likely.

2. The Palins did not report as income some $43,000 that the State of Alaska paid the Governor as an “allowance” for her husband and children’s travel. Can they do that? No, most likely not.

3. The Palins deducted $9,000 on their 2007 return, claiming it was a loss from Mr. Palin’s snow machine racing activity. Can they do that? Most likely not, but more info could make the deduction o.k. If any of the above issues goes against the Palins they then risk getting hit with the section 6662 penalty for “negligence or disregard of rules or regulations.”

4. Can the Palins avoid the section 6662 negligence penalty by claiming that they reasonably relied either (a) on the W-2’s sent to them by their employer, which did not reflect either the $17,000 or the $43,000, or (b) on their tax return preparer H&R Block, or (c) on Mr. Olsen’s opinion letter dated September 30, 2008? The three reliance defenses are unlikely to succeed, but more info may make the (b) defense a good one.

5. Does Mr. Olsen have any exposure to sanctions by the IRS because of his letter? I believe Mr. Olsen’s letter probably violates 31 C.F.R. section 10.35. If so, he would be exposed to possible sanctions from the IRS Office of Professional Responsibility.

Hybrid Sales Decent in September, but Still Down

With the credit freeze, and people scared of loosing their savings accounts, car sales have dropped drastically in the last month. Although most companies saw sales drop by as much as 30% in September, according to AugoblogGreen, “U.S., General Motors actually did better than many companies with only a 15.8 percent drop in September compared to last year. There were even some bright spots in the numbers with the Malibu being up 192 percent and the Vibe jumping 91.1 percent. GM's hybrid models are also continuing to gain ground with 1,957 units moved during the month. The combined total of Tahoe and Yukon Two-Mode Hybrids topped 1,000 for the first time and the Malibu and Vue mild hybrids held steady at 382 and 443 respectively. The new Escalade hybrid still hasn't climbed into triple digits and the Saturn Aura still doesn't seem to be more than an afterthought with 31 sales. All together, GM has sold 9,053 hybrids through nine months.”

Although General Motors does have impressive numbers, according to CanadianDriver.com, “ales of hybrids in the U.S. in September dropped 8.9 per cent to 20,836 units when compared to September 2007, the lowest September sales volume since 2005, according to a report by the Green Car Congress. Overall sales of light-duty vehicles in the U.S. in September dropped 26.6 per cent year-on-year; hybrids accounted for 2.2 per cent of the new vehicle market share for the month.

Sales of the Prius dropped 13 per cent to 10,873 from September 2007, which Toyota said is due to continuing limited availability. The Prius will be built at a plant in Mississippi in late 2010 to help meet demand. Camry Hybrid sales were down 33.6 per cent to 2,785 units, representing 9.4 per cent of all Camry models sold in the month; total Camry sales were down 27 per cent. The Highlander Hybrid rose to 921 units, up from 193 in September 2007, and represented 16.1 per cent of all Highlander sales, which dropped a total of 30 per cent from 2007, to 5,729 units.”

Palin tax returns for 2006 and 2007 released

From the Associated Press:

Sarah Palin is the breadwinner and husband Todd is, well — he takes a lot of deductions for his fishing and snowmachine racing careers, according to 2007 and 2006 federal tax returns released Friday.

Sarah Palin makes $125,000 a year as Alaska governor. Plus, since she took the job in December 2006, she hasn't paid taxes on the more than $17,000 she received in controversial per diem payments for working out of the family's lakeside home in Wasilla — some 575 miles from the capital of Juneau.

For the 2007 tax year, Todd Palin's self-employment brought him $66,893 in gross receipts — $49,893 from fishing and $17,000 from snowmachine racing. But, the returns show, he claimed so many deductions that he reported only $15,513 net profit from the fishing operation and claimed a $9,639 loss from his racing, leaving him with an overall net income of only $5,874. In addition, Todd earned $43,519 last year working part-time on the North Slope for BP Exploration.

The self-employment deductions left the Palins, who have four dependent children, with a 15 percent tax rate for 2007 and a rate of less than 10 percent for 2006. Todd Palin also deducted for the business use of their home in Wasilla. A fifth child was born to the couple this year.

An Associated Press analysis of the returns released by the McCain campaign also reveals that the Palins underpaid their estimated taxes with an April extension and likely owe interest.

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IRS Sends Compliance Questionnaires to 400 Colleges and Universities

According to the newest IRS press release, “approximately four hundred U.S. colleges and universities will begin receiving compliance questionnaires from the Internal Revenue Service in the next few days as part of the agency’s focused effort to study key areas in the tax-exempt community. The college and university questionnaire will focus on unrelated business income, endowments and executive compensation practices. The questionnaires are being sent to a cross-section of small, mid-sized and large private and public four-year colleges and institutions.

Private nonprofit universities are generally exempt from tax under Internal Revenue Code section 501(c)(3) and like state universities are subject to unrelated business income tax.

‘This effort reflects our work to build a better understanding of the largest, most complex organizations in the tax-exempt sector,’ said Doug Shulman, IRS commissioner. ‘The information gathered will help us identify issues and areas that may need more outreach and education or further scrutiny.’

Among other things, the questionnaire will gather information from the schools about how they report revenues and expenses from their trade or business activities, classify their activities as exempt or taxable activities, and calculate and report income or losses on taxable activities. The questionnaire also will gather information regarding how the organization invests and uses its endowment funds and determines compensation of certain highly paid individuals.

The IRS said it expects to receive most of the responses within the next several months, analyze the results of the compliance questionnaire and conduct examinations of a sample of the organizations. The IRS said it expects to issue a report on the project in 2009.”

Senator McCain's New Tax on Health Insurance

From TPM Café:

Strange winds are blowing in economic policy land. After failing to privatize social insurance, the Bush Treasury is now socializing private insurance. The Democratic presidential candidate is running on a tax reform platform that provides three times greater tax cuts for middle class families than the Republican candidate's platform. And the Republican candidate, after advocating deregulatory policies for 26 years in Congress, has now embraced the rhetoric of a populist regulatory reformer.

But the most unlikely wind of all is Senator McCain's health care proposal which by the end of his first term would increase taxes by $1362 for middle-income American families, while raising marginal tax rates on labor income by more than President Bush's tax cuts have reduced them.

Here's how the McCain plan works. Every family receives a refundable tax credit of $5000 that can be used only to purchase health insurance. Individuals receive $2500. McCain's advisers say the cost of this tax credit is $3.6 trillion dollars over ten years. They also say that their plan is revenue neutral because they introduce a new tax on employer-based health insurance that the Joint Committee on Taxation scores as raising $3.6 trillion over 10 years.

Currently, employee compensation in the form of employer-provided health insurance is exempt from both the personal income tax and FICA payroll taxes. Most employee payments for employer-based health insurance are also tax preferred. McCain's plan would eliminate these and other health-related tax expenditures.

The fact that the plan is revenue neutral means that the tax savings for families receiving tax cuts are exactly balanced by the tax increases for families whose taxes go up. But because the tax cuts are front loaded, after just a few years most American families will see their tax bills go up under the McCain plan.

Tax Misrepresentations in Vice Presidential Debates

As many of you know, last night was the first and only Vice Presidential debate between Sen. Joe Biden and Gov. Sarah Palin. The debate covered a wide range of topics, but not surprisingly taxes and the economy engulfed a large part of the discussion. As usual, there were quite a few misrepresentations of the facts from both sides.

Fortunately the experts at The Tax Foundation have reviewed the debate transcripts and outlined all the inaccuracies in both candidates’ arguments. Below are snippets from both Biden’s and Palin’s gaffes, but you can read the full review by clicking here.

Sen. Biden's Errors

First, Joe Biden responds to a charge by Gov. Palin, who said that Sen. Obama voted to raise taxes on people making as little as $42,000. We've been over this numerous times, and while Gov. Palin's claim is misleading (see below), Sen. Biden's response contained an error as well:

The charge is absolutely not true. Barack Obama did not vote to raise taxes. The vote she's referring to, John McCain voted the exact same way. It was a budget procedural vote. John McCain voted the same way. It did not raise taxes.

While Sen. Biden is correct to say that the vote did not raise taxes, actually, Sen. McCain did not vote on this non-binding resolution. It passed 51-44, but Sen. McCain was one of five members of the Senate who did not vote in that roll call vote. Therefore, Sen. Biden's claim that he "voted the same way" is incorrect.

A little later in the debate, Joe Biden made this statement:

The middle class under John McCain's tax proposal, 100 million families, middle class families, households to be precise, they got not a single change, they got not a single break in taxes. No one making less than $250,000 under Barack Obama's plan will see one single penny of their tax raised whether it's their capital gains tax, their income tax, investment tax, any tax. And 95 percent of the people in the United States of America making less than $150,000 will get a tax break.

Actually the "100 million" figure is not families. It is not households. It is tax returns. But that's a somewhat minor issue in the whole scheme of things. The figure is incorrect because Sen. McCain, even relative to a current policy with Alternative Minimum Tax (AMT) patch baseline, does cut corporate income taxes and provides his refundable health care tax credit, which would reduce that "100 million won't get a tax break" figure. That figure is technically correct if you look only at the individual income tax and ignore Sen. McCain's health care tax plan, and if you do it relative to a current policy baseline with AMT patch. Furthermore, Sen. Biden makes the same error as Barack Obama in mixing baselines. The "95 percent" figure (when properly used) gives Obama credit for an AMT patch whereas he does not give McCain credit for an AMT patch tax cut when referring to the 100 million figure.

But the "95 percent" figure is just plain wrong as well. According to the Tax Policy Center, no income quintile (including those earning under $150,000) would even see 95 percent of its tax units receiving a tax break under Pres. Obama's tax plan in 2009. Even in 2012 under Obama's tax plan relative to current law, an average of the fraction of tax units that receive a tax cut in the bottom four quintiles is less than 90 percent. In other words, Biden's statement is factually incorrect. The "95 percent" figure is fairly accurate when Obama uses it to talk about the fraction of working families that would receive a tax cut under his plan, but not the entire population nor the entire population earning under $150,000.

Gov. Palin's Errors

Gov. Palin started off early in the debate trying to label Sens. Obama and Biden as tax hikers. She said:

Now, Barack Obama and Sen. Biden also voted for the largest tax increases in U.S. history. Barack had 94 opportunities to side on the people's side and reduce taxes and 94 times he voted to increase taxes or not support a tax reduction, 94 times.

This is not true. Even if one considers the expiration of the so-called Bush tax cuts to be a tax increase (it is technically not a tax increase), it would not be the biggest tax increase in history under almost any measure that adjusts for the size of the economy. And Sen. Obama's presidential tax plan does "raise taxes" relative to a current policy baseline over ten years, but it's not even close to being the largest tax increase in U.S. history. Relative to a current law baseline, Sen. Obama is actually cutting taxes rather significantly in the aggregate (nearly $3 trillion).

Sticking with the "Obama will raise your taxes" theme, Palin also repeated the "$42,000" line that Sen. McCain has repeated over and over and over:

But we do need tax relief and Barack Obama even supported increasing taxes as late as last year for those families making only $42,000 a year. That's a lot of middle income average American families to increase taxes on them. I think that is the way to kill jobs and to continue to harm our economy.

As I wrote when Sen. McCain said this in the first debate: That was a non-binding Senate vote earlier this year, and it's different from what Obama is proposing as a candidate. Very few households making $42,000 per year would pay more in taxes under Obama's tax plan. Some may say that Obama is voting one way and proposing something else on the campaign trail. If that's fair, then McCain's drastic change of heart on the Bush tax cuts is fair game as well. McCain voted against the 2001 and 2003 tax cuts, but now supports extending almost all of them with the exception of the full repeal of the estate tax.

Gov. Palin's most egregious error of the night was actually repeated twice in 20 seconds. It was on the issue of Sen. McCain's health care plan, which neither side appears to understand.

I am because he's got a good health care plan that is detailed. And I want to give you a couple details on that. He's proposing a $5,000 tax credit for families so that they can get out there and they can purchase their own health care coverage. That's a smart thing to do. That's budget neutral. That doesn't cost the government anything as opposed to Barack Obama's plan to mandate health care coverage and have universal government run program and unless you're pleased with the way the federal government has been running anything lately, I don't think that it's going to be real pleasing for Americans to consider health care being taken over by the feds. But a $5,000 health care credit through our income tax that's budget neutral. That's going to help. And he also wants to erase those artificial lines between states so that through competition, we can cross state lines and if there's a better plan offered somewhere else, we would be able to purchase that. So affordability and accessibility will be the keys there with that $5,000 tax credit also being offered.

Sen. McCain's health care tax plan is not budget neutral. It is a $1.3 trillion tax cut over the next ten years, which is therefore the amount that would be added to the national debt under this proposal. It does cost the government something over the next ten years, and it's almost as expensive as Sen. Obama's health care tax plan, according to Tax Policy Center preliminary estimates ($1.6 trillion). To be budget neutral, Sen. McCain would essentially have to eliminate the exclusion from payroll taxes for employer-provided health insurance as well as the income tax exclusion. He does not do that. Notice that Gov. Palin, like Sen. McCain did in the first debate, doesn't give you the whole story on this plan, avoiding the inconvenient fact that he would tax employer-provided health insurance.

Helio Castronoves Heads to Court for Tax Fraud Case

From Yahoo News:

Two-time Indianapolis 500 winner and “Dancing With The Stars” champion Helio Castronoves was set to appear in court Friday to face allegations he used offshore accounts to hide millions of dollars in income from the Internal Revenue Service.

The 33-year-old driver was indicted Thursday on charges of conspiracy and six counts of tax evasion for purportedly failing to report to the IRS about $5.5 million in income between 1999 and 2004, according to court documents. Each count carries a maximum five-year prison sentence.

One of his attorneys, David Garvin, said he was disappointed that the tax dispute could not be resolved without criminal charges.

“Helio has always done the appropriate thing and hired accountants and attorneys he relied upon,” Garvin said. “We are of the strong belief that he did not do anything wrong. We’re looking forward to going to court.”

Job Losses Reach 159,000 in September

In the month of September, 2008 there was a net loss of 159,000 jobs in the United States. This number represents the largest number of lost jobs in five years. According to CNN Money it was the ninth month in a row that we saw job losses. In August there were 73,000 lost jobs, which is under half of September’s record breaking total that brought the year to date total to over three quarters of a million.

“Economists surveyed by Briefing.com had forecast the loss of 105,000 jobs in the month. It was the largest monthly job loss total since March 2003, when payrolls were down 212,000, and the second-largest decline since the months that followed the Sept. 11 terrorist attack in late 2001.

Job losses were again widespread. Manufacturing lost 51,000 jobs while construction employment shrank further by 35,000 jobs. But retailers also trimmed payrolls by 40,000 workers, and the leisure and hospitality industries cut 17,000 jobs.

Professional and business services, a catchall category seen by some as a proxy for overall economic activity, had a 27,000 drop in employment.

The only two major sectors to post gains were government, which added 9,000 jobs, and education and health services, in which employment grew by 25,000. Government hiring has stayed strong throughout the downturn, as the private sector has now lost nearly a million jobs since December, when employers started cutting back.”

Schwarzenegger to U.S.: State may need $7-billion loan

From LA Times:

California Gov. Arnold Schwarzenegger, alarmed by the ongoing national financial crisis, warned Treasury Secretary Henry M. Paulson on Thursday that the state might need an emergency loan of as much as $7 billion from the federal government within weeks.

The warning comes as California is close to running out of cash to fund day-to-day government operations and is unable to access routine short-term loans that it typically relies on to remain solvent.

The state of California is the biggest of several governments nationwide that are being locked out of the bond market by the global credit crunch. If the state is unable to access the cash, administration officials say, payments to schools and other government entities could quickly be suspended and state employees could be laid off.

Plans by several state and local governments to borrow in recent days have been upended by the credit freeze. New Mexico was forced to put off a $500-million bond sale, Massachusetts had to pull the plug halfway into a $400-million offering, and Maine is considering canceling road projects that were to be funded with bonds.

California finance experts say they know of no time in recent history when the state has sought an emergency loan of this magnitude from the federal government. The only other such rescue was in 1975, they said, when the federal government lent New York City money to avoid bankruptcy.

"Absent a clear resolution to this financial crisis," Schwarzenegger wrote in a letter Thursday evening e-mailed to Paulson, "California and other states may be unable to obtain the necessary level of financing to maintain government operations and may be forced to turn to the federal treasury for short-term financing."

Senator Clinton Calls for Renewed Bipartisan Action on Economic Crisis

From Yonkers Tribune.com:

Sen. Hillary Rodham Clinton today underscored the need for quick bipartisan action to halt the growing economic crisis. In a conference call with media, Senator Clinton said the economic impact of failing to address the crisis would spread well beyond Wall Street and seriously damage Main Street as well. Senate Clinton said jobs, family incomes, and the broader economy is at risk if nothing is done to stem the crisis. She described the bipartisan plan narrowly rejected by the House of Representatives yesterday as a flawed but necessary compromise and a major improvement over the Bush Administration’s initial proposal.

“I understand the deep skepticism surrounding the proposal, and clearly I was against the original plan sent over from the Treasury because it was a blank check giving Treasury virtually unlimited powers to do whatever they saw fit,” Senator Clinton said. “But we have negotiated through the Congress on a bipartisan basis a better alternative that installed taxpayer protections, asserted oversight and accountability, and came up with the checks and balances we should have had rather than the blank check.”

Senator Clinton urged her colleagues to set aside their differences and make hard compromises for the good of the nation.

“We cannot let the perfect be the enemy of the good, or in this case the enemy of what’s necessary,” Senator Clinton said. “We have to go back and in a bipartisan fashion, face up to the difficult decisions ahead of us.”

Earmarks a Gateway Drug?

As any one who watched the debate will know, Senator McCain boldly stated that earmark spending was a “gateway drug.” However, although he made the claim he did not really back the claim up with any data. Below is a video clip from the debate where McCain discusses the topic.

McCain’s attacks got dozens of members in the blogging community riled up, with people arguing both sides of McCain’s statements. Below is quote from Volokh Conspiracy where a member attempts to better explain McCain’s statement that earmarks are a gateway drug.

“Let me give it a shot. Let's say Congressman X is an idealistic young Congressman. Some constituents in his rural district ask him to get federal funding for a new emergency room in a local hospital, because the nearest emergency room is 100 miles away. Congressman X is skeptical of earmarks, but this particular one both seems like a good idea and a way to help ensure his reelection--he won his first term with only 52% of the vote. He manages to slip the hospital funding into an appropriations bill.

Soon thereafter, Congressman X becomes aware of a new $5 billion initiative that is a complete and utter boondoggle, but will benefit the districts of several influential congressmen. He starts sending out press releases opposing the initiative, and threatens to a force a vote on an amendment removing the initiative from the bill to which it is attached.

The senior Congressmen who support the initiative schedule a meeting with Congressman X. Like mafia thugs, they tell the Congressman, "It would be a real shame if anything was to happen to your hospital funding--and any future funding for your district, for that matter." The message is clear; if Congressman X wants any hope of bringing federal money into his district, he had better stop opposing wasteful spending supported by his colleagues. He drops his opposition to the $5 billion project, gets the hospital funding, is reelected easily, and never again shows any "spending hawk" tendencies. Soon, in fact, he is rather senior himself, and finds himself meeting with a junior Congressman, telling him "It would be a real shame if anything was to happen to your hospital funding--and any future funding for your district, for that matter."

So, even though earmarks are a small percentage of the federal budget, they are a very important part of a broader system of corruption that leads to out-of-control federal spending.”

Euro Falls Most Since 2001 Against Dollar as Bailouts Spread

From Bloomberg.com:

The euro fell the most against the dollar since 2001 after France and Belgium led a state-backed rescue of Dexia SA, as the widening financial crisis forces governments to prop up financial institutions across Europe.

The cost of borrowing in dollars and euros reached record highs today as banks' reluctance to lend at the end of the third quarter exacerbated the freeze in global credit markets. The dollar rose against the yen on speculation the U.S. Senate will salvage a $700 billion bank-bailout plan as early as tomorrow after Congress rejected it yesterday.

``The consensus is the U.S. banking system is a little bit further along in its exposure of its toxic assets,'' said Firas Askari, head currency trader at BMO Nesbitt Burns in Toronto. ``It's a case of which is relatively worse. The dollar's going to benefit against the euro because Europe has more to expose.''

The euro tumbled 2.4 percent to $1.4092 at 5 p.m. in New York, from $1.4434 yesterday, the most since a 2.5 percent slide in January 2001. The currency dropped as much as 3 percent, the biggest intraday decline since its 1999 debut. The euro slid to 149.56 yen from 150.38. The yen weakened to 106.11 per dollar from 104.18, after reaching 103.54, the most since Sept. 16.

Implied volatility on one-month euro-dollar options rose to 16.9575 percent, or the highest in almost eight years. On Sept. 18, it reached 15.55 percent, the same level that triggered the Group of Seven nations to buy euros in 2000 to halt the 27 percent slide from its 1999 debut. The dollar had its biggest drop ever against the euro Sept. 22, falling 2.1 percent.

The euro also fell against the British pound after Belgium and France said they would lend Dexia, the world's biggest lender to local governments, $9.2 billion to shore up capital.

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