Friday, February 27, 2009

Other Executive Nominations that had Tax Problems

Over the past month, there has been a lot of controversy surrounding the tax problems of Obama’s executive nominations—and their inevitable withdrawals. In the discussions online, many have questioned Obama’s choices, and potential decision-making skills. However, if you look at the history of executive nominations, you will see that Barack Obama was not the first to President to choose candidates with tax problems for his cabinet.

1. Zoe Baird

Former President Bill Clinton's first nominee for Attorney General withdrew her name for the position after it came in to the light that she had been evading taxes. She had been employing a Peruvian couple, who were illegal immigrants, to clean her house and provide nanny services. However, Baird was not paying the required social security and employment taxes for the couple, and broke federal law by hiring undocumented workers.

2. Kimba Wood

A mere two weeks after Baird withdrew her name for the nomination, her new replacement (Kimba Wood) withdrew her name as well. Wood had similar problems surrounding taxes and undocumented workers, and the term "nanny gate" began to spread. As it turned out many high-ranking officials had been taking advantage of illegal immigrants for domestic services for several years.

3. Linda Chavez

President Bush's 2001 pick for labor secretary was forced to withdraw due to tax evasion and an illegal worker in her home as well. Chavez had been employing a Guatemalan woman for two years and had paid only paid her a total of around $1,500. In addition to breaking tax laws, Chavez had also broken numerous employment and immigration laws.

4. Bernard Kerik

As a highly respected former police commissioner, Bernard Kerik was chosen as Bush’s 2004 nominee for homeland security secretary. Unfortunately, Kerik had gone years without paying the proper employment and social security taxes on his nanny and housekeeper.

5. Shirley Chater

Ironically chosen as Clinton’s nominee as head of the Social Security Administration, Chater had failed to pay social security taxes on a part-time babysitter for a decade or so before her nomination. However, before her nomination, Chater paid the back taxes, and saved herself from having to withdrawal.

6. Charles Ruff

Ruff did not make it long as Clinton’s nominee for deputy attorney general, as it quickly was discovered that he had failed to pay social security taxes on a woman he employed to clean his house for eight consecutive years.

7. Stephen Breyer

Nominated for the Supreme Court in 1994, Breyer took the smart route and came clean about his tax evasion in order to avoid being dropped for consideration. Like Chater, he had failed to pay social security taxes on a woman performing domestic services for him, but paid the back taxes prior to his nomination.

8. Bobby Ray Inman

Clinton’s 1994 nominee for defense secretary, Bobby Inman, had no choice but to withdraw as he too had failed to pay social security taxes on a housekeeper.

9. Ron Brown

Clinton’s commerce secretary was also under the media light for failing to pay social security taxes. Like many before him, Brown was under the impression that he did not have to pay taxes on employees that only worked so few hours.

10. Michael Carns

Last on my list is Michael Carns who was a former Air Force general chosen by Clinton in 1995 to head the central intelligence agency. Unfortunately, he too had evaded social security taxes on a household employee, and even had a pending lawsuit failure to pay a former employee.

Wednesday, February 25, 2009

Obama Previews His Budget, Talks About Taxes

From CBSnews.com:

President Obama will release his first full budget on Thursday, but he previewed parts of it during his speech tonight to Congress.

One of the main headlines from this section of the speech is his call to change the way the budget deficit is counted.

"I am committed to restoring a sense of honesty and accountability to our budget," he said. "That is why this budget looks ahead ten years and accounts for spending that was left out under the old rules – and for the first time, that includes the full cost of fighting in Iraq and Afghanistan. For seven years, we have been a nation at war. No longer will we hide its price."

He also said his team is going to "go line by line through the federal budget in order to eliminate wasteful and ineffective programs." He said the administration has found "two trillion dollars in savings over the next decade."

Lastly, in this section of the speech, Mr. Obama addressed taxes and his campaign promised most often mentioned by Republicans – to raise taxes on the wealthy.

"Let me perfectly clear, because I know you’ll hear the same old claims that rolling back these tax breaks means a massive tax increase on the American people: if your family earns less than $250,000 a year, you will not see your taxes increased a single dime," Mr. Obama said. "I repeat: not one single dime. In fact, the recovery plan provides a tax cut – that’s right, a tax cut – for 95% of working families. And these checks are on the way."

IRS Outlines Tax Savings

The IRS Spokeswoman, Sue Hales, recently explained the some new tax credits in an article on the Daily Journal. You can find a clip of the article below, but the full post can be found here.

Housing Credits

The America Recovery and Reinvestment Act, which Obama recently signed into law, will affect 2009 tax returns more than 2008, Hales said, but it does include a new deduction for first-time homebuyers that can be applied this tax season. Additional real estate tax deductions of up to $500 for singles and $1,000 for married couples are available for those who file standard deductions.

Disaster Relief Credits

Net losses suffered in federally declared disasters can be deducted on tax filings.

Additional relief is being offered for victims of federally declared disasters in the Midwest that occurred between May 20 and July 31, 2008.

Qualified disaster victims can deduct casualty and theft losses without subtracting $100 plus 10 percent of adjusted gross income from that amount.

Income Tax Credit

Earned income tax credit, a refundable credit for eligible low- to moderate-income individuals, has increased to $4,824 for families with two or more children; $2,917 for families with one child; and $438 for individuals between 25 and 64 years old who have no children. If the income tax credit amount exceeds taxes owed, the difference will be refunded to the taxpayer.

Free tax filing through the IRS is available for those with a 2008 adjusted gross income of $56,000 or less. The program, available through the IRS Web site, has 20 participating tax companies, and three offer service in Spanish.

"We encourage people to e-file. There are many benefits for people to e-file," Hales said. "You can request to have it deposited in a bank account, and receive it in 10 days or less, which is much faster than mail. E-filing is far more accurate than paper filing. The error rate on e-file returns is usually less than 1 percent. The error rate on paper returns is around 20 percent."

A recovery rebate credit -- an extension of last year's stimulus payment -- is available to eligible taxpayers. Hales noted that the stimulus payment is not taxable or deductible, and only used to determine if an individual will receive a recovery rebate credit, and what amount it will be.

"Most will not be eligible for the recovery rebate credit this year," Hales said. "But if you did not receive the maximum (stimulus) amount for your financial situation last year, if your income changed in 2008, if you could be claimed as dependent in 2007 but not in 2008, or if you adopted a child in 2008, then you are eligible for recovery rebate credit."

Like Having Medicare? Then Taxes Must Rise

From The New York Times:

Toward the end of Monday’s meetings on fiscal responsibility at the White House, Senator Kent Conrad stood up and produced a little bolt of honesty. “Revenue is the thing almost nobody wants to talk about,” said Mr. Conrad, the chairman of the Senate Budget Committee. “But I think if we’re going to be honest with each other, we’ve got to recognize that is part of a solution as well.”

Mr. Conrad’s frankness was delivered in the cryptic language of budget experts, and many people might have missed the point. So allow me to translate:

Your taxes are going up.

They will probably go up in the coming decade, and the increase will be permanent. For a half-century, federal taxes have remained fairly constant relative to the size of the American economy — equal to about 18 percent of gross domestic product. But the 18 percent era has to end soon.

It won’t end because President Obama is some radical tax and spender, either. It will end because of a basic economic reality.

Americans have made it clear that they want a certain kind of government, one that can field a strong military and also maintain popular programs like Medicare. Yet we are not paying nearly enough taxes to maintain those programs. Even major changes to the health care system — the single most important step for closing the budget gap — will not close it entirely. Taxes must rise, too.

Republicans agree, even if they do so with euphemism. “We are on an unsustainable path,” says Peter Orszag, Mr. Obama’s budget director. Judd Gregg, the ranking Republican on the Senate Budget Committee, has said, “Revenues are going to have to go up.” Douglas Holtz-Eakin and Dan Crippen, budget experts who advised the McCain campaign, have quietly acknowledged the same.

Californians Cling To Easily Dispelled Tax Myths

From The New York Times:

Seems like only yesterday that I was at the Orange County fairgrounds to watch Arnold Schwarzenegger drop a wrecking ball on a car, symbolically crushing the auto tax to the delight of supporters who never asked how the governor-to-be might cover the lost revenue.

Since then, he's continued to put that wrecking ball to use, crushing one campaign promise after another.

But not until the governor signed on to raising taxes, including the car tax, did GOP leaders and good citizens get angry, vowing to go after not just Arnold but any Republican legislators who voted with him on a budget that includes the new revenues.

It didn't matter that state services of every type were threatened from Chico to Chula Vista, that the bus was headed for the cliff, that inmates were packing their bags for early release, or that firing every state employee wouldn't have balanced the budget without new revenue.

All that mattered were taxes.

"California has the highest taxes in the country," a reader named Mary wrote to me.

"I guess it's our patriotic duty, as residents of California, to pay the highest taxes (or close to it) in the country, for the most incompetent government in any state," wrote Art.

Most incompetent government? We're probably in the running, but two other states I've lived in were at least as screwed up, with Pennsylvania actually taking pride in its monumental incompetence.

As for the claim that Californians pay the highest taxes of any state or close to it, I'm sorry to disappoint, given the great joy so many people seem to derive from hyperventilating.

Expanded Tax Break Available for 2009 First-Time Homebuyers

According to their newest press release, the IRS has announced today that taxpayers who qualify for the first-time homebuyer credit and purchase a home this year before Dec. 1 have a special option available for claiming the tax credit either on their 2008 tax returns due April 15 or on their 2009 tax returns next year.

Qualifying taxpayers who buy a home this year before Dec. 1 can get up to $8,000, or $4,000 for married filing separately.

“For first-time homebuyers this year, this special feature can put money in their pockets right now rather than waiting another year to claim the tax credit," said IRS Commissioner Doug Shulman. “This important change gives qualifying homebuyers cash they do not have to pay back.”

The IRS has posted a revised version of Form 5405, First-Time Homebuyer Credit, on IRS.gov. The revised form incorporates provisions from the American Recovery and Reinvestment Act of 2009. The instructions to the revised Form 5405 provide additional information on who can and cannot claim the credit, income limitations and repayment of the credit.

This year, qualifying taxpayers who buy a home before Dec. 1, 2009, can claim the credit on either their 2008 or 2009 tax returns. They do not have to repay the credit, provided the home remains their main home for 36 months after the purchase date. They can claim 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately.

The amount of the credit begins to phase out for taxpayers whose adjusted gross income is more than $75,000, or $150,000 for joint filers.

For purposes of the credit, you are considered to be a first-time homebuyer if you, and your spouse if you are married, did not own any other main home during the three-year period ending on the date of purchase.

The IRS also alerted taxpayers that the new law does not affect people who purchased a home after April 8, 2008, and on or before Dec. 31, 2008. For these taxpayers who are claiming the credit on their 2008 tax returns, the maximum credit remains 10 percent of the purchase price, up to $7,500, or $3,750 for married individuals filing separately. In addition, the credit for these 2008 purchases must be repaid in 15 equal installments over 15 years, beginning with the 2010 tax year.

Latest Good Reads:

Change, Tax, Mileage-Based Road Fees, and Secrecy.

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How's Your 401(K) Lookin' Upside Your Peers?.

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Reasons to be a Multiple Unit Franchise Owner

WatchMeFranchise.com, a blog sponsored by RDTC Inc., posted an interesting article last week on reasons why it is beneficial to be a multiple unit franchise owner. Check out a portion of the article below, or check out WatchMeFranchise.com for the full version.

1. More Profitable

The biggest reason to open multiple units of a franchise is because you have the opportunity to make much more money. There is only so much money to be made from owning a single location, but if you begin to expand then the income possibilities are essentially limitless.

2. Franchise Incentives

Depending on the franchise you own, there may be incentives offered by the franchisors for owning multiple units. Incentives could be a reduced price, free services for your store, or even prime store locations. Franchisors will usually offer these incentives for multiple-unit owners, as it saves them time and money as well for you to have multiple locations.

3. Advertising Savings

If you own multiple franchises, you can save on advertising by running one set of ads, but providing two (or three, or four, etc.) contact sections. You have probably seen this in ads all over the place, but had never considered it as an advantage to the franchise owners.

4. Multiple-Unit Management

Managing one store can be hard enough at times; so many people get quite concerned about the idea of managing multiple stores. However, most multiple-unit franchise owners will decide to hire a store manager for each location. That way, as the owner, you become more of an over-seer and will not need to handle as many day-to-day operations.

5. Higher Success Rate

It has been proven that multiple-unit franchise owners have a much higher success rate than that of single-unit owners. While all franchises have a statistically higher success rate than other small businesses, multiple-unit franchisees have an even higher success rate.

Take a Look At Tax Law When Converting An IRA

The News Tribune recently published a great article examining the tax laws surrounding the conversion of a Traditional IRA to a Roth IRA. You can check out a portion of the article below, but the full post can be found here.

Over the next two years, you are likely to see more people convert assets from Traditional Individual Retirement Accounts to Roth IRAs.

Three considerations make understanding the IRA to Roth conversion more important for many investors:

• Lower values of most IRAs as a result of the market correction.

• The prospect of increased taxes in our future.

• The elimination of an income limit in 2010.

With a Traditional IRA, when you take withdrawals of your contributions and earnings, they are subject to ordinary income tax. Also, once you reach 701/2 you are forced to take annual distributions. (These required minimum distributions have been waived for 2009.)

With a Roth IRA, as long as you’re over 591/2 and have held the account for five years, the assets grow tax free, there’s no tax on withdrawals and no requirement to take annual distributions if you don’t need the income. This way, more potential growth may be available for your later years or for beneficiaries of the account.

Determining whether or not to make this conversion can be complicated. You need to weigh the short-term consequences vs. the long-term impact. In order to make the conversion, you have to pay income tax on the amount converted. But if you can afford that hurdle, the long-term benefits may be worthwhile.

For many, a Roth conversion makes sense if you expect income tax rates, or those of your heirs, to rise. An increasing personal tax burden seems likely given the rapidly growing fiscal deficit due to bailout and economic stimulus packages.

There are different reasons driving Roth conversion decisions in 2009 and 2010. This year, investment declines during this recession have presented a more immediate opportunity. If your modified adjusted gross income is less than $100,000 in 2009 (filing jointly or single), you are eligible to make the move from Traditional to Roth IRA. And for many, the tax bill associated with the conversion will be significantly less than it would have been to make the same conversion at this time last year.

Obama: People Should See Tax Cut Help By April 1

From The Star Tribune:

The latest: President Obama said Saturday that most Americans will start seeing the benefits of the new tax cuts by April 1. "Never before in our history has a tax cut taken effect faster or gone to so many hardworking Americans," Obama said in his weekly address. In tandem, the Treasury Department began directing employers to reduce the amount of taxes withheld from people's paychecks as soon as possible.

His address: Obama said he was grateful to Congress, governors, mayors and all the people who supported the $787 billion economic stimulus measure, which including both tax cuts and new spending. Still, he added: "It is only a first step on the road to economic recovery. And we cannot fail to complete the journey." He said the country also must stem foreclosures, repair the banking system and revamp financial regulations.

What to expect: The tax credit -- up to $400 for individuals and up to $800 for married couples -- will be doled out through the rest of the year through a payroll tax cut reflected in paychecks. Most workers should see about a $13 per week increase in their take-home pay. But the credit is phased out for higher-income taxpayers. People who do not earn enough money to owe income taxes can file for their share.

New details: The IRS released new withholding tables on its website (www.irs.gov) to help guide employers in reflecting the new credit. It says more instructions about tax provisions in the law will be available soon and will be mailed to more than 9 million employers next month.

Your Share of Stimulus Tax Breaks

Earlier this morning I saw an article on kcbd.com discussing the tax breaks the new stimulus offers, and who qualifies for what. A segment of the article can be found below, but the full post can be read here.

A study of the recovery plan shows most households will qualify for a tax break. Boost for some could be worth several hundred to several thousand dollars.

Roughly 97% of American households could see tax savings as a result of the American Recovery and Reinvestment Act, according to a new analysis by a nonpartisan research group.

The Tax Policy Center crunched the numbers and concluded that the average savings would be $1,179. But how much a household actually gets depends on income, marital status and whether a filer has children. The savings range from a few hundred dollars to several thousand.

The law, which President Obama signed on Tuesday, contains a range of tax breaks for individuals. Those likely to affect the greatest number of households are the new Making Work Pay credit worth up to $400 ($800 for joint filers); a patch to protect middle- and upper-middle-income families from having to pay the Alternative Minimum Tax; and expansions of the earned income tax credit and the child tax credit for low-income families.

There are also breaks that address specific situations: a new credit for first-time home buyers, a sales tax deduction for car buyers and a new credit to help pay for college tuition. For people receiving unemployment benefits, the first $2,400 will be tax free.

On Saturday, Obama said the government had already taken action on the broadest of the law's cuts -- the Making Work Pay.

The Treasury Department has told employers to reduce the amount of taxes withheld from paychecks by April 1. Treasury estimates that a typical family will begin taking home about $65 more per month, according to Obama.

"Never before in our history has a tax cut taken effect faster or gone to so many hardworking Americans," Obama said in his weekly video and radio address.

Tax Breaks Could Spur Business Investment

From The Washington Bureau:

The American Recovery and Reinvestment Act gives companies two reasons to invest in new equipment this year, and it provides many small businesses a way to find the money to make these purchases.

The economic stimulus package extended two tax incentives for business investment through the end of this year. Companies can write off 50 percent of the cost of new equipment immediately instead of following the usual depreciation schedules. Small businesses can expense up to $250,000 of new equipment purchases this year.

These breaks can be a powerful incentive for business investment, especially when combined, said Bill Smith, director of the national tax office for CBIZ MHM.

Smith cites an example of a small business investing $500,000 in equipment that normally is depreciated over five years. The business could take the $250,000 Section 179 expensing limit and then apply 50 percent bonus depreciation. The business could then depreciate $25,000 of the remaining $125,000 of the investment this year. The end result: The business could write off $400,000 of the $500,000 investment this year, instead of having to wait to recover this money.

That's good for cash flow, but many companies may not have the cash or credit to make this kind of investment, especially in such a weak economy.

Business tax breaks

Under the economic stimulus package:

Businesses can immediately write off 50 percent of the cost of new equipment purchased in 2009

Small businesses can immediately write off $250,000 for capital expenditures made this year

Small businesses with gross receipts of $15 million or less can carry back net operating losses for five years instead of two years

Some companies can defer taxes on certain types of business debt repurchased before 2011

Source: Senate Finance Committee

"A lot of small businesses aren't going to have the capacity to do it right now," said Clint Stretch, managing principal for tax policy at Deloitte Tax.

The economic stimulus package provides a solution, however, to businesses with less than $15 million in annual revenue. The new law allows these businesses to carry back net operating losses for five years, instead of the previous two-year limit. A business that currently is losing money could apply these losses to a previous profitable year and then claim a refund for taxes paid that year.

Tuesday, February 24, 2009

10 Tips for Other Attorneys to Market Themselves Better Online

I am always taken aback when I come across an attorney who is not a part of the online marketing game. A huge portion of my law firm’s clients come from online outreach. To help some of my fellow attorneys boost their business and their name brand awareness, I have put together my top 10 tips for other attorneys to help market themselves online.

1) Create an Avvo.com profile

Avvo is a Web 2.0 property completely dedicated to lawyers, law advice, and lawyer reviews. This is a great place to strut your stuff and show others how much you know about the law. Answer questions, review other’s advice, and make a free profile for yourself and your practice.

2) Maintain a blog

Writing—and most importantly, maintaining—a blog is a great way to both give helpful advice and generate high quality customer opportunities. You can either put an actual blog on your site, or sign up for a free blog service such as Blogger.com. However, once you start the blog, it is important to make sure you do not forget it and post at least one entry every week.

3) Create social community profiles

Having a profile on social communities such as MySpace, FaceBook, or LinkedIn will help you connect with both other lawyers and potential clients. Keep the page professional though, and be sure to have all of your contact and business information on the pages.

4) Answer questions on advice sites

Becoming a notable legal expert is just a click away. By answering questions of potential clients looking for guidance, you are becoming regarded as a trustworthy expert in your field. There are tons of advice sites out there, but I would suggest starting off with Yahoo Answers, LawGuru.com, and Avvo’s advice section.

5) Send out e-newsletters

Sending out an e-newsletter is a great way to let clients, potential clients, and business colleagues know what you are currently offering. It is also a great way to monitor what people find the most intriguing. By adding a few tracking parameters to any hyperlink in your email, you will know which articles are the real attention grabbers.

6) Network, network, network

There are plenty of great ways to network with other professionals to get the word out about your services. One very helpful and easy way to network is to join your local chamber of commerce. If you do not have time for an extra monthly meeting, there are always more networking events available, do not pass too many of them up! When you do go to a networking event, bring a pocketful of business cards, a well-practiced pitch, and a friendly smile.

7) Google yourself

Do you ever "Google" a person or a business to see what kind of life or business they run? Well, do not hesitate to think others will do the same with your name and business. Make a habit of routinely "googling" yourself and your business, and see what comes up.

8) Refresh your website

In order to get online visitors to become clients, your site needs to be fresh and modern. If your site design is more then two years old, then you should probably consider having it redesigned. Web design is constantly evolving and you want to make sure your site’s design stays current. Additionally, you will also want to keep your site updated with blog entries, news, pictures, advice, etc. so that users know you are making a strong effort to be active online.

9) Stay in touch with clients

Keeping in touch with former clients will always benefit you in the future. Always collect your clients full contact information (including their e-mail address) so that this will be possible later down the road. You can use a list of client e-mails to send out an occasional "new tips" article, or news about your firm. Even if they do not need your services at that time, they may know some one else who does.

10) Regular press releases

Using free press release sites online to get the news out on your firm and your lawful opinions is a great marketing tactic. Create several "articles" of advice, news, and helpful hints to post on the sites later on. Press release sites always have an about section for your firm and website link. Ideally, you should try to draft and release at least one press release per month.

I’m On the Money, I’m On the Money

That is right, I have two appearances on CNBC’s On the Money, with Carmen Wong Ulrich. Last night, I was on the telephone talking about Refund Anticipation Loans and Tax Scams. You can catch my appearance by clicking here to access CNBC’s website.

Tonight, I am going to be on via satellite discussing tax information only a tax attorney would know. I also will be answering callers’ questions, ensuring that they are “Armed and Dangerous” come this tax season. Check me out at 7:00 PM (Pacific).

Radio Appearances This Week

This week, I will be featured on two different radio shows to talk about taxes. Today, I will be on the Thom Hartmann radio program at noon, to offer tax advice and take questions from callers. I will also be promoting my book and offering tax advice on Oprah and Friends radio with Jean Chatzky this Friday. Be sure to check your local listings and listen in for free tax advice!

New Withholding Tables Now Available on IRS.gov; Most Workers Will See Bigger Paychecks this Spring

According to the IRS’ newest press release, they have released “new withholding tables that will result in more take-home pay this spring for millions of American workers.”

The new tables incorporate the new Making Work Pay credit, one of the key tax provisions included in the American Recovery and Reinvestment Act of 2009 that became law earlier this week.

“For most taxpayers, the additional credit will automatically start showing up in their paychecks this spring,” said IRS Commissioner Doug Shulman. “Since employers and payroll companies will handle this change, people typically won’t need to take any additional action. The IRS will continue working to implement this and other provisions of the new law as quickly as possible.”

The new withholding tables, along with other instructions related to the new tax law, will be incorporated in new Publication 15-T. This publication will be posted to this Web site next week and mailed to more than 9 million employers in mid-March. The IRS asks that employers start using these new tables as soon as possible but not later than April 1. Most workers will see a boost in their take-home pay soon thereafter.

Eligible workers will get the benefit of this change without any action on their part. This means that workers don’t need to fill out a new W-4 withholding form to get the Making Work Pay credit reflected in their take-home pay. A Form W-4 will not need to be submitted for the automatic withholding change. Individuals and couples with multiple jobs may want to submit revised Form W-4 forms to ensure enough withholding is held to cover the tax for the combined income. Publication 919 provides additional guidance for tax withholding.

Obama To Increase Taxes In A Recession

Earlier this morning, the SF Examiner posted an article discussing Obama’s plans to raise taxes on individuals and businesses, to reduce the size of the Federal budget. A snippet of the post can be read below, but the full text can be found here.

President Obama announced today that he will reduce the size of the federal budget, cutting $513 billion in his first term by increasing taxes on individuals and business who make over $250,000 and by slashing spending on the wars in Iraq and Afghanistan. He cited concern over a burgeoning federal deficit that he himself helped to create with a $787 billion stimulus package, admitting that large deficits will make it hard for the economy to grow over time.

The announcement may have been ill-timed. So far, the stock market has shown little confidence in the administration's handling of the economy and is poised for another down day on Monday. Raising taxes while cutting government spending reduces liquidity that can be used to create investment. Businesses will immediately adjust their plans to compensate for reduced demand and investment capital. As Alan Greenspan said today at the Economic Club of New York, a fiscal stimulus plan that only increases GDP through temporary government spending will fail unless it "primes the pump" and increases demand. If the stimulus package does not work, permanent tax increases could put more strain on economic activity.

Schwarzenegger Defends Tax Hikes, Applauds Stimulus

From The Los Angeles Times:

Gov. Arnold Schwarzenegger on Sunday defended his decision to raise taxes as a necessary step to stem California's staggering economic crisis.

During appearances on morning news shows in Washington, D.C., Schwarzenegger said he would gladly accept money from the federal stimulus package approved by Congress last week even though some fellow Republican governors had balked at the program. And he predicted that although California's economy would begin rebounding next year, it would take "years from now to get back to where we were."

"I don't think that we have turned a corner yet," Schwarzenegger said on CNN's "State of the Union With John King."

The $130-billion state budget signed Friday by Schwarzenegger has earned the second-term governor jeers from state Republicans, some of whom argued for more spending cuts over tax hikes, which include across-the-board sales- and income-tax increases for the first time in 17 years. Schwarzenegger said that he drastically slashed spending in the new budget and that elected officials who disagree with his approach are "not in touch" with the public.

"It's very simple. Listen to the people," Schwarzenegger said on ABC's "This Week With George Stephanopoulos."

The governor called the federal stimulus plan a "terrific package" and said Republican leaders throughout the nation needed to shelve party ideologies in the face of the ongoing economic crisis. He cited, for example, South Carolina Gov. Mark Sanford, who has said he may refuse federal stimulus money for his state.

Thursday, February 19, 2009

Obama Launches $75 Billion Foreclosure Rescue Plan

Earlier today, JS Online posted an article on Barack Obama’s new foreclosure rescue plan outlining what it is and whom it will help. I’ve included a portion of the article below, thanks to JS Online.

President Barack Obama threw a $75 billion lifeline to millions of Americans on the brink of foreclosure Wednesday, declaring an urgent need for drastic action - not only to save their homes but to keep the housing crisis "from wreaking even greater havoc" on the broader national economy.

The lending plan, a full $25 billion bigger than the administration had been suggesting, aims to prevent as many as 9 million homeowners from being evicted and to stabilize housing markets that are at the center of the ever-worsening U.S. recession.

Government support pledged to mortgage giants Fannie Mae and Freddie Mac is being doubled as well, to $400 billion, as part of an effort to encourage them to refinance loans that are "under water" - those in which homes' market values have sunk below the amount the owners still owe.

"All of us are paying a price for this home mortgage crisis, and all of us will pay an even steeper price if we allow this crisis to continue to deepen," Obama said.

The new president, focusing closely on the economy, in his first month in office, rolled out the housing program one day after he was in Denver to sign his $787 billion emergency stimulus plan to revive the rest of the economy. And his administration is just now going over fresh requests for multiple billions in bailout cash from ailing automakers.

Wall Street has shown little confidence in the new steps, declining sharply on Tuesday before leveling off after Wednesday's announcement. The Dow Jones industrials rose 3 points for the day.

Success of the foreclosure rescue is far from certain.

The administration is loosening refinancing restrictions for many borrowers and providing incentives for lenders in hopes that the two sides will work together to modify loans. But no one is required to participate. The biggest players in the mortgage industry temporarily had halted foreclosures in advance of Obama's plan.

Complicating matters, investors in complex mortgage-linked securities, who make money based on interest payments, could still balk, especially those who hold second mortgages or home equity loans. Their approval would be needed to prevent many foreclosures.

A New California Budget: Program Cuts And $12 Billion In Tax Hikes

From The Los Angles Times:

After a three-month impasse, the California Legislature has approved a budget package that addresses the state's massive deficit with billions of dollars in new taxes and program cuts. There are billions of dollars in cuts to schools, healthcare institutions, higher education and programs for the poor.

If signed by Gov. Arnold Schwarzenegger, who helped devise the package, the plan also would raise personal income taxes and the state sales tax, although a 12-cent-per-gallon increase in gasoline taxes was eliminated in the final hours. The gas tax would be replaced with federal economic stimulus money.

The final version of the plan would raise the state sales tax by 1 percentage point and nearly double the vehicle license fee, to 1.15%. The plan would reduce the dependent credit that Californians are allowed to claim on their taxes. The package also would increase personal income tax rates by 0.25 of a percentage point.

California Vet Tax Defeated

Earlier today I came across this post on VeterinaryNews.com that discusses the final California budget and pet owner relief. Apparently the California legislature did not include veterinary tax in their final budget, although it had been included in prior versions. Check out the full story below.

Legislators finally passed a 17-month budget during after overnight session Feb. 19 after months of negotiation. The final bill, approved by state Senate and Assembly, does not include a veterinary service tax included in previous versions of the budget proposed by Gov. Arnold Schwarzenegger.

The governor's plan was harshly criticized by veterinary, who say the tax would have put a huge burden on pet owners and compromised public health. The California Veterinary Medical Association (CVMA) also opposed the tax on the grounds that it would have made veterinary medicine the only taxed healthcare service in the state.

"Requiring pet owners to pay a tax to care for their animals is bad public policy," says Bill Grant II, president of the CVMA. "We are pleased the members of the 'Big Five,' including the governor, recognized that and that the proposed tax was removed from the final budget bill." The CVMA organized a large-scale grassroots campaign to oppose the tax, which was first proposed in November to help close California's $42 billion budget deficit. The veterinary service tax would have added about 10 percent to veterinary bills and, along with other non-medical service taxes, provide about $350 million in new revenue for the state.

"The opposition of veterinarians, pet owners and concerned citizens was so intense, a special extension was added to the governor's budget voicemail line to handle the opposition to the tax on pets," Grant says, adding thousands of calls and letters flooded the governor's office. "We believe the overwhelming number of calls delivered an emphatic message to the governor that taxing pet owners would be hugely unpopular and inequitable."

The California Legislative Analyst's Office, which reviewed versions of the state budget proposals agreed in a recent analysis, saying the veterinary tax would "create inequities in the tax structure by taxing some services while leaving other similar services untaxed."

A full version of the new budget was not available at press time, but it does include other tax increases outside the veterinary tax. There is no word yet on when the governor plans to sign the new budget into law.

UBS To Pay $780 Million In Tax Conspiracy Case

From Marketwatch.com:

UBS AG agreed to pay $780 million for helping U.S. customers avoid taxes, the Department of Justice said Wednesday.

Switzerland's largest bank also agreed to turn over the identities and accounts of some of its U.S. clients to the American government, in an unprecedented move that could shine a light into the country's secretive banking industry, the DOJ added.

UBS entered into a deferred prosecution agreement on charges of conspiring to defraud the U.S. by impeding the Internal Revenue Service. The government will dismiss the charges if the bank fulfills its obligations under the agreement, the DOJ explained.

Chart of UBS

"A veil of secrecy has been pulled aside," John DiCicco, acting assistant attorney general of the Justice Department's Tax Division, said in a statement. "We will continue to aggressively pursue those who shirk their federal tax obligations or assist others in doing so."

In June, a U.S. District Court gave the IRS permission to serve UBS with a so-called John Doe summons. The summons demands information that would help track down U.S. taxpayers with UBS Swiss bank accounts that they've been trying to hide from the IRS. Usually, such summonses have to specifically name individuals, so the broader John Doe version has the potential to uncover many more possible tax evaders.

Wednesday, February 18, 2009

Gov. Sarah Palin To Pay Back Taxes

According to the Miami Herald, former Vice Presidential candidate and current Alaskan Governor, Sarah Palin, must pay back taxes on thousands of dollars in expense money she received over the past few years. A snippet of the article can be found below, but the full text can be found here.

The governor's office wouldn't say this week how much she owes in back taxes for meal money, or whether she intends to continue to receive the per diem allowance. As of December, she was still charging the state for meals and incidentals.

"The amount of taxes owed is a private matter," Sharon Leighow, Palin's spokeswoman, said in an e-mail. "If the governor collects future per diem, those documents would be a matter of public record."

The revelation about Palin comes as U.S. senators, including Sen. Mark Begich, D-Alaska, are under scrutiny over back taxes. A survey by the political newspaper and Web site Politico found that Begich was one of seven senators who acknowledged owing back taxes.

Some other state employees also owe back income taxes for travel payments and will be getting revised tax forms, Annette Kreitzer, state administration commissioner, said in an e-mail.

She wouldn't say which, or how many, employees will be receiving the notifications.

The payments became a touchy issue for Palin last fall when she was running for vice president and campaigned as a budget watchdog.

Cities and States Press Travel Sites to Collect Hotel Taxes

From The New York Times:

There is a reason some online travel sites can offer cheap hotel rooms: State and local governments contend that the sites are not paying all of their taxes.

And faced with fast-shrinking budgets, those governments want the online travel services like Expedia Inc., Priceline, Orbitz and Travelocity to hand over what could amount to tens of millions of dollars.

The issue arises because the travel sites use a two-step process for billing and paying for hotel rooms. The site first bills the consumer for the cost of a hotel room, plus a service fee. Separately, the hotel pays taxes to local governments based on the price actually paid by the travel company — an amount less than the price the consumer pays.

Lawyers for the various governments argue that the travel companies owe hotel occupancy taxes based on the higher price consumers pay.

“That’s the insidious nature of this scam,” said Patrick O’Connell, a lawyer at Baron & Budd, a firm based in Dallas that represents municipalities seeking tax revenue. “The hotel pays tax on the amount that the hotel was paid. The city doesn’t have a clue that the transaction was actually conducted by the online travel company.”

Anaheim, Calif., is one of dozens of state and local governments trying to collect from the online travel services. This month, a city hearing officer concluded that travel companies owed Anaheim $21.3 million in back taxes, interest and penalties.

“There is no reason why online travel companies should be paying a different amount of taxes than others who book the same hotel rooms,” Mayor Curt Pringle of Anaheim said in a statement.

IRS Offers Tips to Avoid Recovery Rebate Credit Confusion

According to their newest press release, the IRS is urging taxpayers and tax preparers to make sure they properly determine eligibility for the recovery rebate credit before they file their 2008 federal tax returns.

Some individuals who did not get the economic stimulus payment, and a smaller number of those who did, may be eligible for the recovery rebate credit. However, most taxpayers who received the economic stimulus payment last year will not qualify for the recovery rebate credit on their 2008 federal income tax return.

An early sampling of tax returns shows about 15 percent have errors involving the recovery rebate credit. Some tax returns erroneously claim the credit, do not claim the proper amount of recovery rebate credit or mistakenly enter the amount of the stimulus payment they received on the recovery rebate credit line.

To avoid delays in tax refunds, it is critical that taxpayers know the correct amount of the stimulus payment they received last year, if any, to help determine whether they qualify for the recovery rebate credit now.

The amount of the stimulus payment will not be entered directly on the tax return. For people using a paper tax return, the stimulus payment amount will be required when completing a related worksheet. For people using tax software, the stimulus payment amount will be needed as part of the return preparation process.

GOP Leader Ousted Over Tax Hikes; Still No State Budget Deal

From The Mercury News:

The Senate Republican leader who agreed to a budget deal with billions of dollars in tax increases was ousted by his GOP colleagues in a late-night coup early this morning, injecting another dose of uncertainty into the high-stakes battle over the state budget.

Around midnight, the Senate Republican caucus voted to boot Dave Cogdill of Fresno, one of the so-called "Big 5" leaders who reached a pact last week to close the state's staggering $40 billion deficit with a mix of steep tax hikes, spending cuts and borrowing.

Cogdill, who was chosen to lead the caucus last year in large part because of his conservative anti-tax credentials, angered his GOP colleagues last week when he brought them a budget package that included $14.3 billion in tax increases. The measure remains a single Republican vote in the Senate shy of approval.

"It's a shame it ended this way," the usually straight-faced Cogdill said with a hint of emotion after learning the news. "But we did what we thought was right. I love this state." Voted in as the new Republican leader was Dennis Hollingsworth, R-Murietta, who wasted no time emphasizing his opposition to higher taxes while criticizing the budget deal.

What effect Cogdill's ouster will have on the search for the final budget vote wasn't immediately clear. But it did not go unnoticed that the two Republicans targeted as the most likely possibilities for casting the decisive vote in favor of the deal — Abel Maldonado of San Luis Obispo and Dave Cox of Fair Oaks — opposed Cogdill's removal.

Ford to get $55 Million State Tax Credit for Battery Development

From Crain’s Detroit:

Some $55 million in tax credits for Ford Motor Co. to continue work in electric vehicle and battery development were among items that on Tuesday morning were to go before the Michigan Economic Growth Authority board.

In a news release, Ford said the refundable tax credits will be used to accelerate its plans to produce next-generation hybrids, plug-in hybrid electric vehicles and battery electric vehicles.

According to state briefing memos, other Southeast Michigan projects up for state tax breaks at the MEGA board include:

A $17.2 million Macomb Township investment by aerospace industry supplier Global Tooling Systems. The Utica-based company plans to relocate operations to Macomb Township, creating 184 jobs, according to state documents.

An $8.9 million expansion at McLaren Performance Technologies in Livonia. The firm, which specializes in the design, development, integration and validation of powertrain systems, plans to create 34 jobs in an expansion to support power transfer unit business.

A $2.23 million investment by Patrick Energy Services Inc. in Livonia. The company, which provides services that support utilities, transmission system operators and industrial clients, proposes to relocate its offices in Livonia to a larger building in Novi, adding 90 jobs.

A more than $1 million investment by Michigan Seamless Tube L.L.C. in South Lyon, a manufacturer of carbon and alloy seamless cold drawn pipe and tube. The company is entering a technology collaboration with OG Technologies Inc. in Ann Arbor, for a tube inspection system. OG Technologies plans to create 20 jobs.

A $946,000 investment by Royal Oak-based RIIS, L.L.C., a consulting and services firm. The company plans to expand its headquarters in Royal Oak or Southfield to accommodate new software and application development contracts, creating 40 jobs.

A defense-related business and development center being established in Sterling Heights by BAE Systems Land and Armaments L.P. The $44 million project, creating 460 jobs, was approved for a $22 million MEGA tax credit in April 2008.

The element of the project before the MEGA board Tuesday was a brownfield redevelopment work plan proposing nearly $1.5 million in local and school tax capture to support the project.

A 7.4 acre redevelopment in Hazel Park to include a new retail center featuring a Save-A-Lot grocery store, restaurant and retail/commercial space. The project by Hazel Park Development Company L.L.C. is expected to create 250 jobs, 150 of which would be permanent.

The project was approved in early February for a $497,293 state brownfield tax credit and seeks approval of a brownfield work plan that includes more than $1 million in local and school tax capture to support the project.

Obama Set To Sign Stimulus Bill Into Law

After weeks of renovation and a long approval process, Obama is now making his way to Denver, to sign his Stimulus Bill into law at a science museum. NECN.com posted a video and article discussing the plan and how it went. A portion of the article can be found below, but the video and full post can be viewed here.

As President Obama boarded Air Force One this morning for Denver, he left behind Washington D.C., where the stimulus bill faced nearly unanimous Republican opposition.

Instead, he'll sign the bill at a science museum, and focus on investment in green jobs and technology like wind and solar power.

It's a massive bill combining spending and tax breaks -- $787 billion dollars in all.

Some of the first money, $27 billion, will go to states for projects like road and bridge repair.

The bill also includes a $400 tax credit and incentives to buy first homes and new cars.

There's $100 billion in new spending for schools and colleges.

Unemployment and food benefits will be extended, a bit of help for these auto industry employees, who learned just yesterday, they're losing their jobs.

But will it work, and how fast? So far, stocks have tumbled as Wall Street investors worry it may be some time before the stimulus money helps turn the economy around.

GM and Chrysler, which have already received billions in federal loans, must submit plans to the government for staying viable by the end of the business day.

While the Obama administration reviews the proposals, the automakers will ask for another $7 billion dollars.

International Tax: The New Hunt For Tax Havens

From Web CPA:

Congressional leaders are looking to clamp down on offshore tax havens after a Government Accountability Office report found that 83 of the 100 largest publicly traded U.S. corporations have subsidiaries in jurisdictions listed as tax havens or financial privacy jurisdictions, while 63 of the 100 largest publicly traded federal contractors reported having subsidiaries in such jurisdictions.

"This report shows that some of our country's largest companies and federal contractors, many of which are household names, continue to use offshore tax havens to avoid paying their fair share of taxes to the U.S. And some of those companies have even received emergency economic funds from the government," said Sen. Byron Dorgan, D-N.D. "I think we should take action to shut down these tax dodgers and we will be introducing legislation to do just that."

Sen. Carl Levin, D-Mich., echoed Dorgan: "We must get to the bottom of activities such as the following: Citigroup has set up 427 tax haven subsidiaries to conduct its business, including 91 in Luxembourg, 90 in the Cayman Islands, and 35 in the British Virgin Islands. Hundreds more tax haven subsidiaries operate under strict secrecy laws in places like Switzerland, Hong Kong, Panama and Maurituius."

Levin, who chairs the U.S. Permanent Subcommittee on Investigations, has made offshore tax abuse a major subject of its investigations.

Robert Gallagher, managing editor of WG&L Journal of International Taxation at Thomson Reuters, observed that the GAO study "correctly notes that there is no agreed-on definition or list of 'tax havens.' Instead, they cobbled together their list from three old ones."

The GAO said that while there is no agreement on a definition, various governmental, international and academic sources used similar characteristics to define and identify tax havens: "Some of the characteristics included no or nominal taxes; a lack of effective exchange of information with foreign tax authorities; and a lack of transparency in legislative, legal or administrative provisions."

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Tuesday, February 17, 2009

Taxes 101 For Domestic Parents & Same-Sex Couples

As Benjamin Franklin famously said, "nothing in this world is sure but death and taxes". Unfortunately, this is more than true for domestic parents and same-sex couples all across the country. What many people do not realize is that there are significant tax disadvantages for non-married couples that nearly all gay couples face every year. Even though dozens of states and over 50% of Fortune 500 companies offer domestic couple benefits, the federal government does not offer any.

This tax season I am reaching out to LGBT Americans by providing insightful tax tips and advice. A few weeks ago I posted an entry with generic tax tips for members of the LGBT community, and to follow up I decided to take a closer look at the tax and financial issues faced by domestic partners and same sex couples in this country.

Civil Marriages vs. Legal Documents

To understand the importance of tax equality, I think it is first important to understand the common misconceptions surrounding same-sex couples and taxes. You have probably heard before that civil marriages and same-sex marriage are not even necessary, that you can have any lawyer draw up the necessary documents. However, this is false. While it is true you can have a power of attorney appointed for certain asset-sharing and finances, it does not assure your partner access to your full wealth like a marriage would. Additionally, we all know lawyer fees are not cheap. In fact, it can cost a same sex couple thousands of dollars in legal fees to get similar financial rights as those awarded by a marriage. While a marriage license on the other hand, usually costs under about $50.

Taxes for Same-Sex Couples with Children

Perhaps the biggest tax inequality concerning the LGBT community affects couples who have children. Since the federal government does not recognize same sex marriages, couples who have children, or adopt, do not always qualify for the benefits most married couples would. Due to this large disadvantage, many same-sex couples with children can only take advantage of tax benefits for single parents.

Can Gay Marriage Save the Economy?

M.V. Lee Badgett, an economist at the University of Massachusetts’ Institute for Gay and Lesbian Strategic Studies did a study that found "...over the next three years about 32,200 same-sex couples would travel from other states to marry in Massachusetts, which became the first U.S. state to legalize gay marriage in 2004." All of these couples will be spending their weddings, and money, in Massachusetts, and will greatly help stimulate the state’s economy.

According to studies the U.S. gay community spends a whopping $174 billion annually within the country, and just imagine how high that number would be if those couples were allowed to wed. With that much money being spent you would think the federal government would want a piece of the pie. Although the US economy may not be saved by gay marriage's legalization, it could certainly help.

Social Security Tax Disadvantage

The LGBT community, like everyone else, must pay their social security taxes every tax season. The difference is, no matter how many years they have been with their partner, they cannot take spousal benefits or survivors’ benefits. Reports from the census 2000 found "when a gay, lesbian, or bisexual senior dies, his or her surviving partner faces a financial loss that can amount to tens of thousands of dollars.”

LGBT Real Estate Taxes

Another financial difficulty same sex couples face has to do with the transfer or property between one another. An article by the Advocate Online found that "when someone puts his or her same-sex partner on the title to a home, it often constitutes a transfer of 50% of the value of the home -- as if the two were strangers -- and is taxed accordingly. Different-sex married couples do not pay this tax. Inheritance taxes apply when a taxpayer dies and leaves assets to another person. Different-sex spouses receive a complete exemption from such inheritance taxes, but same-sex partners do not. Because thresholds for state inheritance taxes are much lower than the federal threshold, inheriting the couple’s common home (or even the half of it that belonged to the deceased partner) can trigger inheritance tax."

Connecticut and Massachusetts Residents

Since these are the only two states where same-sex marriages are recognized, different tax incentives apply to same-sex couples there. In these two states, married same-sex couples can claim all marriage tax incentives, on their state returns. However, on their federal returns, since same-sex marriage is not federally recognized, same-sex couples must file separately.

Monday, February 16, 2009

As Tax Season Continues, Beware of Scams

From The Washington Post:

As sure as the taxman cometh each year, so do the scam artists.

The Internal Revenue Service is warning U.S. taxpayers to be prepared for a steady increase in scams and virus attacks via e-mail, telephone and the Web as the April 15 tax-filing deadline approaches.

"We see a big upswing in complaints about these phishing emails January through April during the tax filing season," IRS spokeswoman Nancy Mathis said.

The most common type of scam arrives via e-mails claiming to come from the IRS or Treasury Department. They typically try to either scare consumers into thinking there is an error with their tax filing, or that they are eligible for a tax rebate or benefit from the government economic stimulus package that just passed on Capitol Hill.

These so-called "phishing" e-mails typically arrive in an e-mail that urges users to visit a site, which in turn prompts visitors to enter their personal and financial data, information that is then sent off to identity thieves.

Regardless of the type of come-on used in these scams, the IRS wants taxpayer to hear one message loud and clear:

"The Internal Revenue Service does not communicate with taxpayers via unsolicited e-mail," said J. Russell George, treasury inspector general for tax administration. "Some of these bogus e-mails are so sophisticated that people who are uninformed can and do fall prey to this type of scam. That is why it is so imperative that we continue to get this message out to people."

On Feb. 6, the U.S. Computer Emergency Readiness Team (US-CERT), warned Americans about a phishing scam that spoofed the IRS, offering recipients stimulus package payments. These e-mails include text that attempts to convince users to follow a link to a Web site or to complete an attached document.

These types of attacks, which prompt people to click on e-mailed links and download documents, also are frequently attempts to install malicious software that steals sensitive and financial information from infected systems, the government warns.

Since 2005, George's office has received nearly 2,000 complaints about phishing, and it estimates that at least 11,000 taxpayers have been victimized by these scams to date.

Survey: Many Small Business Owners Favor Tax Cuts Over Asset Plan

The Dallas News posted an article earlier today discussing a poll of small business owner’s opinions on tax cuts to stimulate the economy. Check out a portion of the study’s findings below, or check out the full text here.

Many small business owners disagree with the U.S. government’s allocation of funds from its Troubled Assets Relief Program (TARP) and think tax cuts are a better way to stimulate the stalled economy, according to a survey released on Monday by online payroll service SurePayroll.

“Small business owners are screaming for a different solution," Michael Alter, president of Glenview, Ill.-based SurePayroll, which conducted the survey this month. "They know firsthand the challenges their businesses are facing, and have seen no relief from Washington."

Nearly three-quarters of the survey respondents disapproved of TARP, which was set up last year to funnel $700 billion to financial institutions hurt in the subprime mortgage crisis. Survey respondents blamed Congress, U.S. Treasury Secretary Henry Paulson and lobbyists for the mishandling of TARP disbursements. Only 3 percent deemed TARP effective.

Nearly three out of four small business owners think the government should take a different approach to boost the economy, with about half saying the answer is to cut taxes. Other suggestions included:

• A massive stimulus program (11 percent).

• Easing the small business health care burden (10 percent).

• Forcing banks to lend money (9 percent).

Compromise Stimulus Bill Trims Tax Break for Car Buyers

From The Los Angeles Times:

Congress has downsized a proposed tax break for new-car buyers. The compromise version of the ginormous economic stimulus bill includes a Senate-approved provision that would allow consumers to claim a federal income tax deduction for sales taxes and excise taxes paid on new vehicles.

But the compromise worked out between House and Senate negotiators deletes another provision that senators had approved, which would have made interest on new-vehicle loans deductible as well.

Under the new version, a family could save between $300 and $600 on a new car, according to a statement released by Sen. Barbara A. Mikulski (D-Md.), who sponsored the original tax break.

Mikulski had said her original version would have saved buyers $1,500 on a $25,000 new-car purchase.

According to Automotive News, the tax break was scaled back to appease lawmakers concerned about the high cost of the $790-billion stimulus package. Trimming the interest deduction from Mikulski's proposal cut the cost of the tax break from $11 billion to $2 billion.

Congressional leaders said Thursday that they hoped to vote on the stimulus package today and send it to President Obama by Presidents Day, which is Monday.

Calif. Legislators Try Again To Reach Budget Deal

California officials have been trying to come to an agreement on a budget plan, and have recently taken to trying to pin down some decisions. The associated press recently posted an interesting article discussing the newest developments in their decisions. A snippet of the post can be found below, but the full article can be found here.

California lawmakers are still trying to pass a massive $42 billion budget-balancing plan after a marathon weekend session that produced some last-minute fireworks but no agreement on a key part of the plan — $14.4 billion in higher taxes.

Senate President Pro Tem Darrell Steinberg planned to bring lawmakers back Monday to try to salvage the combination of spending cuts, tax hikes and additional borrowing designed to erase the deficit after angrily adjourning the proceedings Sunday night without a deal.

"We're going to come back at 11 o'clock tomorrow morning, and we're going to stay and we're going to work again and we are going to come back every day until we get this done," he said. "This will get done, and it will get done with the framework that has been presented to you as a result of 90 days of work by your elected leaders."

The proposed tax hikes include an increase of 1 cent on the dollar in the state sales tax, a 12-cent-a-gallon hike in the gasoline tax and a boost in vehicle licensing fees.

The measure also includes a one-time, 5-percent income tax surcharge for taxpayers who owe money to the state at the end of 2009. The surcharge would drop to 2.5 percent if California gets its expected share of money from the federal stimulus bill.

Many of the tax hikes would remain in effect through the 2013-14 fiscal year if voters approve a cap on state spending at a special election Gov. Arnold Schwarzenegger plans to call in May. That deal is designed to limit opposition to the spending cap, which was sought by Republicans as part of the budget deal.

Steinberg said that the Assembly was ready to approve the tax bill, but that Republicans refused to supply enough votes to get it out of the Senate. It needs a two-thirds majority to reach the governor's desk.

Schwarzenegger and legislative leaders from both parties warned that California faces insolvency unless the Legislature enacts a midyear budget fix.

"I don't know what it takes for people to believe this really is a crisis," said Senate Budget Committee chair Denise Ducheny, a Democrat. "Maybe with a little sleep folks will appreciate the fact the governor and the leaders and many of us believe we have a budget."

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