Tax Receipts Rebound as 15 Biggest States Foresee Gain

From Bloomberg.com:

The two-year slide in tax collections that opened a $196 billion gap in U.S. state budgets has stopped, easing pressure on credit ratings and giving leeway to lawmakers as they craft spending plans for next year.

The 15 largest states by population forecast a 3.9 percent gain in tax revenue in fiscal 2011, budget documents show. The 50 states on average may increase collections by about 3.5 percent, the first time in two years the figure is expected to grow, said Mark Zandi, chief economist at Moody’s Economy.com,

California took in 3.9 percent more since December than projected in January, Controller John Chiang said this month. New York got $129 million above forecasts in its budget year through February, according to a report from Comptroller Thomas DiNapoli. In New Jersey, the second-wealthiest state per capita, January sales-tax collections were 1.9 percent higher than a year earlier, the first annual increase in 19 months, forecasters said in a report last month.

“This time last year, we were sliding down a mountain,” said David Rosen, chief budget officer for the New Jersey Legislature. “I don’t think we are now; it’s stabilized.”

States collected about $79 billion less in sales, income and corporate taxes in 2009 than in 2008, the U.S. Census Bureau said today in a report, as the economy struggled through its deepest slump since the Great Depression. Emergency spending cuts and tax increases became routine during the recession that began in December 2007.

Obama Signs U.S. Debt Limit Increase Into Law

After recently passing the Senate, Obama has signed a bill into law that raises the Federal debt from 12.1 trillion to 12.4 trillion. There are many critics to this bill that was passed along partisan lines. However, the Obama administration has stated that they have no other choice. Reuters.com posted a story on how the debt limit has doubled over the past decade.

Congress approved an increase in the debt limit from $12.1 trillion on Thursday, winning two more months of funding for a record U.S. deficit as Obama tries to stimulate economic growth after the country's worst recession in 70 years.

Critics say Democrat Obama is making the deficit worse, but the White House blames the recession and unfunded cuts in taxes and prescription drug aid, which were all inherited from his Republican predecessor George W. Bush.

The U.S. government posted a record $1.4 trillion deficit in the fiscal year ended September 30 and is on track during the current fiscal year to spend at least $1 trillion more than it collects.

The debt has more than doubled since 2001, thanks to wars in Iraq and Afghanistan, tax cuts and the recession, which has caused tax revenues to plunge and safety-net spending to rise.

Pending Home Sales Hit 6th Straight Increase

Yesterday a new report was published with more good news for the real estate market. According to the study, more Americans bought homes in July than in June, which represents the sixth straight month that there was an increase in home sales. Many experts claim that the increase is a direct result of the first-time homebuyers credit that expires at the end of the year. Checkout the following article from CNN on the recent findings.

The pending home sales index from the National Association of Realtors rose 3.2% in July after rising by 3.6% in June. That's 12% higher than July 2008, and it marks the sixth straight increase since record-keeping began in 2001.

The reading far exceeded forecasts of economists surveyed by Briefing.com, who predicted a 1.5% increase. Signed real estate contracts often take many weeks or months to complete, so they are considered a forward-looking indicator.

Momentum in the housing market has clearly turned for the better, said NAR chief economist Lawrence Yun, in a written statement.

"The recovery is broad-based across many parts of the country," Yun said. "Housing affordability has been at record highs this year with the added stimulus of a first-time homebuyer tax credit."

The first-time homebuyers tax credit, passed earlier this year as part of the economic stimulus package, is worth 10% of the home purchase price up to $8,000. People who have not owned a home in the previous three years are eligible for the credit.

However, the tax credit expires on Nov. 30 and it usually takes about 90 days to close on a house after a contract is signed. As of Sept. 1, there were only 90 days left before the credit ends.

House Bill For a Carbon Tax To Cut Emissions Faces A Steep Climb

From The New York Times:

Representative John B. Larson embarked again this week on his lonely quest to enact a national tax on carbon dioxide emissions.

His idea is to set a modest price on a ton of emissions, gradually increasing it each year until the desired reduction in heat-trapping-gas pollution is achieved. Under the bill he introduced this week, virtually all the revenues from the tax would be returned to the public in lower payroll taxes.

“The American people want us to level with them,” Mr. Larson, a moderate Democrat from Connecticut and a member of the House leadership, said in an interview. “We create price certainty without any new bureaucracies or complicated auction schemes.”

Many economists and academics, as well as a handful of Mr. Larson’s colleagues on both sides of the aisle and perhaps a few White House officials, if secretly, agree that a carbon tax is a simpler and more effective means of tackling global warming than the complex cap-and-trade scheme embraced by the Obama administration and most Democratic leaders in Congress.

The supporters of a carbon tax have watched as the new European cap-and-trade system has failed to achieve its emissions goals while prices for carbon permits have gyrated. They see taxing as a more effective means of cutting emissions than cap-and-trade or other hybrid plans now under consideration.

But for a variety of political, environmental and economic reasons, a national carbon tax is probably going nowhere.

Mr. Obama and Democratic leaders argue that cap-and-trade, in which polluters must either reduce emissions on their own or buy credits from more efficient companies, is a better system for assuring reductions, letting the market set the right to pollute.

But the main reason most in Washington recoil against a carbon tax is political: few are willing to openly advocate billions of dollars in new taxes at a time of economic distress, even though a cap-and-trade program also means higher energy prices.

Changes To Frivolous Tax Policy

Thinking of filing a frivolous tax return? Think again! The recently passed Tax Relief and Health Care Act of 2006 made several changes to the "frivolous tax submissions penalty" (Section 6702). Previously, the penalty for filing a frivolous tax return was only $500 and was not much of a deterrent. The new penalty has been increased from $500 to $5,000. This is a dramatic increase and should serve as a greater deterrent from filing a frivolous tax return. Also, the revised legislation gives the IRS the authority to determine what qualifies as a frivolous return. For more information on the new regulations click here.