“Repel the calls to contain competitive markets” Claims Alan Greenspan

Last week, Alan Greenspan penned this article in the Financial Times discussing the current mood on the economy and calls for regulation in the lending industry. Below is an excerpt from the article.

“The surprise of recent months is not that global economic growth is slowing, but that there is any growth at all. The credit crunch of the past year has not followed the path of recent economically debilitating episodes characterized by a temporary freezing up of liquidity – 1982, 1989, 1997-8 comes to mind. This crisis is different – a once or twice a century event, deeply rooted in fears of insolvency of major financial institutions.

This crisis was not brought to closure by the world’s central banks’ injection of huge doses of short-term liquidity. Only when sovereign credits were substituted for private bank credit, first in the case of the UK (Northern Rock) and subsequently in the case of the US (Bear Stearns), was a semblance of stability restored to markets. But the London Interbank Offered Rate spreads on overnight index swaps and credit default swaps of financial institutions have not returned to the modest pre-crisis levels. Fears of insolvency have not, as yet, been fully set aside. There may be numbers of banks and other financial institutions that, at the edge of defaulting, will end up being bailed out by governments.

The insolvency crisis will come to an end only as home prices in the US begin to stabilize and clarify the level of equity in homes, the ultimate collateral support for much of the financial world’s mortgage-backed securities. However, US home prices will stabilize only when the absorption of the huge excess of single-family vacant homes that emerged as the US housing boom peaked in 2006 is much further advanced than it is now. New single-family home completions are currently barely under the rate of home demand generated by household formation and replacement needs. Only later this year will the current suppressed level of housing starts be reflected in completion levels consistent with a rapid rate of liquidation of the inventory glut, and this, of course, assumes that current levels of demand for housing hold up.”

FactCheck.org Accuses McCain of Multiple Distortions of Obama’s Tax Record

The nonpartisan group FactCheck.org has publicly accused presidential hopeful John McCain of using distorted information to attack Barack Obama’s tax related voting record. Below is the summary of the group’s findings, but you can read the full study at FactCheck.org.

“A TV spot claims Obama once voted for a tax increase ‘on people making just $42,000 a year.’ That's true for a single taxpayer, who would have seen a tax increase of $15 for the year – if the measure had been enacted. But the ad shows a woman with two children, and as a single mother, she would not have been affected unless she made more than $62,150. The increase that Obama once supported as part of a Democratic budget bill is not part of his current tax plan anyway.

A Spanish-language radio ad claims the measure Obama supported would have raised taxes on ‘families’ making $42,000, which is simply false. Even a single mother with one child would have been able to make $58,650 without being affected. A family of four with income up to $90,000 would not have been affected.

The TV ad claims in a graphic that Obama would ‘raise taxes on middle class.’ In fact, Obama's plan promises cuts for middle-income taxpayers and would increase rates only for persons with family incomes above $250,000 or with individual incomes above $200,000.

The radio ad claims Obama would increase taxes ‘on the sale of your home.’ In fact, home-sale profits of up to $500,000 per couple would continue to be exempt from capital gains taxes. Very few sales would see an increase under Obama's proposal to raise the capital gains rate.

A second radio ad, in English, says, ‘Obama has a history of raising taxes’ on middle-class Americans. But that's false. It refers to a vote that did not actually result in a tax increase and could not have done so.”

Top 10 Highest and Lowest Taxed States

The Tax Foundation recently released “State-Local Tax Burdens Dip As Income Growth Outpaces Tax Growth,” which also includes a list of the 10 highest and lowest taxed states. Below is the list, along with the individual states tax rates.

Highest:

1. New Jersey: 11.8%

2. New York: 11.7%

3. Connecticut: 11.1%

4. Maryland: 10.8%

5. Hawaii: 10.6%

6. California: 10.5%

7. Ohio: 10.4%

8. Vermont: 10.3%

9. Wisconsin: 10.2%

10. Rhode Island: 10.2%

Lowest:

1. Alaska: 6.4%

2. Nevada: 6.6:

3. Wyoming: 7.0%

4. Florida: 7.4%

5. New Hampshire: 7.6%

6. South Dakota: 7.9%

7. Tennessee: 8.3%

8. Texas: 8.4%

9. Louisiana: 8.4%

10. Arizona: 8.5%.

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8 Reasons to Buy a Hybrid

With gas prices putting a strain on everyone’s wallets, hybrid sales are soaring. But do not let the sticker price of a hybrid vehicle scare you – there are plenty of incentives to consider both before and after the purchase. Although we all probably know a handful of obvious reasons to buy a hybrid vehicle, there are actually a lot of incentives that you may have never heard of.

1. The Obvious

Gas consumption levels are much lower for hybrid vehicles (up to 50 mpg in city driving conditions). Studies show that by the 2^nd or 3^rd year (less if you commute or drive often) of owning the vehicle, the gas you’ve saved will have already paid for the car.

2. Future Value

Hybrid vehicles hold their value very well. After years of well-kept ownership, the value of hybrids usually only drops a few thousand dollars. This is partially because hybrids have low idle rates as their engines usually shut off at stoplights, and turn back on when you press the gas pedal again. This causes much less stress to the vehicle’s engine.

3. Maintenance

Hybrid vehicles, particularly the Toyota Prius, are made with parts that do not require much maintenance. As a Prius owner, you will only need check ups and oil changes as often as you do with normal cars.

4. Tax Incentives

Although the tax breaks have definitely decreased over time, certain tax cuts are still available to some hybrid buyers in many states. With the ongoing energy crisis, there is also growing pressure on Congress and the President to extend the old hybrid credits, or even create better ones.

5. Insurance Savings

A decent amount of insurance companies are also beginning to offer discounts for hybrid car owners. Before you buy a hybrid, call around a few different insurance companies to see if you qualify for any alternative fuel discounts.

6. Low, Manageable Leases

Major car companies, such as Toyota, have recognized the demand for hybrids is increasing and offer impressively low leases (as low as $219 a month) to help consumers who cannot afford to buy a new car.

7. Impressive Warranties

Toyota, Ford, and Honda all offer extended warranties on hybrid specific parts of their vehicles. The battery packs alone in the Toyota Prius have warranties that average out to about 12 years of use.

8. Funding a Good Cause

Buying a hybrid vehicle is one way to directly fund fuel-efficient technology. By buying and using a hybrid vehicle, you are making a statement on the ongoing energy crisis in this country.

Obama Supports Tax Rebates to Help Energy Crisis

Last week, Presidential hopeful Sen. Barack Obama proposed a new energy plan, that includes measures to fight rising costs, and a $1,000 tax rebate for middle and low income families.

"Do you think you can afford another four years of the same failed economic policies?" argued Obama. He was later quoted at a town hall meeting in Florida as saying, "with job losses mounting, prices rising, increased turbulence in our financial system, a growing credit crunch, we need to do more."

Obama hopes to pay for the $65 billion rebate package by levying a 5-year tax on the profits of major oil companies.

According to Reuters, “the proposals came as the government announced the U.S. unemployment rate hit its highest level in four years with another 51,000 non-farm jobs lost in July, bringing job losses for the year to 463,000.”

The tax rebates, which would be phased out for those making more than $150,000 a year, are an accelerated version of Obama's earlier proposal for permanent tax reductions of up to $1,000 for working families, aides said.

McCain Willing to Compromise on Fixing Social Security

The other day, I came across this interesting article on the Carpet Bagger Report on how McCain’s stance on Social Security has appeared to flip-flop in the past few weeks. The article was a good read, but I found the following section particularly interesting.

“It’s worth noting that McCain’s approach to a payroll tax increase seems relatively similar to Obama’s approach to increased coastal drilling — it’s an unwelcome idea that might be necessary to get opponents on board with a more comprehensive bill.

In other words, Obama doesn’t support increased coastal drilling, but if it’s the price of getting broad support for a comprehensive energy bill, so be it. And McCain doesn’t like the idea of a payroll tax increase, but if it’s part of a broader reform effort, he’s open to it (and closed to it, and open to it, and closed to it….).”

IRS Cellphone Rule Called Outdated

From the LATimes.com:

“Small, cheap cellphones have become ubiquitous in the workplace. But federal tax rules governing them date to the days of big handsets, big bills and big hair.

Major employers, including the University of California system, have been hit with bills for hundreds of thousands of dollars in back taxes for violating the anachronistic laws. If the rules aren't changed, many employers say they will stop handing out cellphones to their workers.

The problem stems from the tax code's inability to keep up with technological advances.

When the makers of the 1987 film ‘Wall Street’ wanted to convey corporate raider Gordon Gekko's power and success, they gave him one of the era's most exotic executive perks: a cellphone.

The Motorola DynaTAC 8000X that actor Michael Douglas carried as he strolled along the beach was roughly the size of a brick and cost $3,995 when introduced three years earlier. A call during peak times cost upward of 50 cents a minute.

Times and technology have changed. Federal tax rules have not. The Internal Revenue Service still considers cellphones to be a pricey fringe benefit and has started enforcing regulations beginning in 1989. That's when Congress decided that mobile phones should be treated like company cars and other executive perks: Their personal use qualifies as extra compensation.

Continued…

The Tax Rebates were a Flop?

Although it may be a bit early to be making such a dramatic statement, Martin Feldstein of the Wall Street Journal has done so in an opinion piece.

“The evidence is now in and that optimism was unwarranted. Recent government statistics show that only between 10% and 20% of the rebate dollars were spent. The rebates added nearly $80 billion to the permanent national debt but less than $20 billion to consumer spending. This experience confirms earlier studies showing that one-time tax rebates are not a cost-effective way to increase economic activity.

These conclusions are significant for evaluating the likely impact of Sen. Barack Obama's recent proposal to distribute $1,000 rebate checks to low- and middle-income workers at an estimated cost of approximately $65 billion. His plan, to finance those rebates with an extra tax on oil companies, would reduce investment in refining and exploration, keeping oil prices higher than they would otherwise be.

Here are the facts. Tax rebates of $78 billion arrived in the second quarter of the year. The government's recent GDP figures show that the level of consumer outlays only rose by an extra $12 billion, or 15% of the lost revenue. The rest went into savings, including the pay-down of debt.

For a more comprehensive picture, we can see how households divided their overall increase in disposable personal income -- that is, household income including the rebates and net of income taxes and payroll taxes -- between additional consumer outlays and saving. The official GDP figures show that disposable personal income increased between the first and second quarters by some $98 billion (one-fourth of the annualized figure of $393 billion shown in the government report), up from an increase of $22 billion between the final quarter of 2007 and the first quarter of 2008. So disposable personal income rose by an additional $76 billion, a bit less than the rebates because of declining employment and reductions in other sources of income. The corresponding rise in consumer outlays increased to $36 billion from $24 billion. So the additional $12 billion of consumer spending was less than 16% of the extra $76 billion of disposable personal income. By comparison, savings rose by $62 billion, or five times as much.”

Feldstein does present valid information. However, I think it is still probably too early to see the entire affect of the economic stimulus package. Taxpayers who used the money to pay-down debt will likely have more spending money in the next few months.

IRS Releases 2006 State-by-State Income Data

Earlier in the week, the IRS Statistics of Income Division published the “First-Time Release of Tax Year 2006 Individual Income Tax Return Statistics by Cumulative Percentiles Based on Income Size and State” report that you can download in Microsoft Excel format here.

According to the report, “the first annual IRS release of tax year 2006 individual income tax return statistics by selected descending cumulative percentiles classified by state is now available. This table shows statistics on income and tax by cumulative percentiles based on numbers of returns filed for each state and the District of Columbia. The information includes distributions of AGI and total income tax by descending cumulative percentiles of returns for the top 1%, 5%, 10%, 25%, and 50% of returns with positive amounts of AGI. The table was compiled from the master file of tax year 2006 income tax returns that were filed and processed by the IRS during calendar year 2007. Returns for prior years processed during calendar year 2007 were not included in this tabulation. Tax year 2006 is the only year that percentile data by state are available. Similar data for tax year 2007 are planned for release in the spring 2009.”

Average Income Up $60,000 for Top 1 Percent, up $430 for Bottom 90%

A new report from the Center on Budget and Policy Priorities shows that the average pre-tax income increased by $60,000 (5.8%) for the top 1 percent of American households in 2006. However, the average income for the bottom 90% of American households increased by only around $430 (1.4%). Below are some of the study’s findings, but you can read the full study by clicking here.

“2006 marked the fourth straight year in which income gains at the top outpaced those among the rest of the population. Since 2002, the average inflation-adjusted income of the top 1 percent of households has risen 42 percent, whereas the average inflation-adjusted income of the bottom 90 percent of households has risen about 4.7 percent.

As a result, the share of the nation’s income flowing to the top 1 percent has increased sharply, rising from 15.8 percent in 2002 to 20.0 percent in 2006. Not since 1928 – just before the Great Depression – has the top 1 percent held such a large share of the nation’s income. (See Figure 1.) In 2000, at the peak of the 1990s boom, the top 1 percent received 19.3 percent of total income in the nation.”

Should the Bush Tax Cuts be Extended?

Last week one of the blogs on my blogroll, A Taxing Matter, posted an entry analyzing whether the Bush tax cuts should be extended or not. Below are some of the author’s findings.

“The federal government has borrowed $1.6 trillion from 2001-2008 to pay for the tax cuts.

Consequence: all Americans will have to pay for this tax-cut-related debt, reducing their after-tax income.

One third of the benefits of the cuts go to the top 1 percent of households; one fifth of the benefits of the revenue reductions went to the top 0.3% of households that earn more than $1 million per year. Consequence: inequality in America is increasing, with the top 1% grabbing more of the anemic growth AND the benefits of the Bush revenue reductions; meanwhile, the bottom is stagnating

Investment and economic growth have not equaled other growth periods. Consequence: with anemic growth and other policies that favor the wealthy, the vast majority have been hurt, not helped, by the tax cuts

Making the cuts permanent would cost $3.4 trillion just over the next decade, including borrowing costs – three times what is needed to close the Social Security funding gap!”

Business Tips Video on WatchMeFranchise.com

In addition to my own personal blog, the Roni Deutch Tax Center® also sponsors WatchMeFranchise.com, a business and franchise video blog. In addition to videos with individual franchise owners, they also post a monthly business tips video with advice for small business owners. Embedded below is the newest video that covers 10 common mistakes that new business owners make.

My Top 10 Favorite Baseballs Players of All Time

Baseball has always been my favorite sport, and anyone who has ever met me or seen my office knows that I am a huge Giant’s fan. Even as a little girl I have always loved baseball. To me, there’s nothing like the smell of cut grass, hot dogs, and anticipation before a game. In honor of my favorite sport I have decided to put together this list of my top 10 favorite baseball players for all the readers of my blog.

1. Steve Garvey

Garvey, well known for playing 193 consecutive, errorless games at first base, an MLB record, is the only player in the history of baseball to have played an errorless season at the position. His 1984 NL championship game-winning home run hit, also known as his “blast”, is one of the most unforgettable hits in baseball history.

2. Greg Maddux

With an eerie talent of guessing what a hitter is going to do next, Maddux has made a name for himself using his brain just as much as his arm. Not only does he hold the major league record for seasons leading his league in games started, but as of November 2007, Maddux holds the record for most gold gloves in MLB history.

3. Barry Bonds

Following in the footsteps of his father Bobby and godfather Willie Mays, Barry Bonds is a definite baseball legend. Among his many, many achievements, Bonds holds 7 MVPs, 8 gold gloves, the record for most home runs – as well as the record for most home runs in a season, 73 – and is the only member of the 500/500 club and third member of the 700 club.

4. Hank Aaron

Best known for breaking Babe Ruth’s all-time home run record, Aaron held the record of most home runs (755) until 2007. Aaron’s resolve during the home run chase raised the bar for players and fans alike. He and his brother also hold the record for most home runs by a team of brothers, and Aaron himself was inducted into Cooperstown in 1982.

5. Ted Williams

A man of many trades, Ted Williams was a great ball player but also an expert fly fisherman as well as an expert fighter pilot. Some of his baseball achievements include the record for reaching base in most consecutive games (84) as well as two-time MVP and a two-time triple crown winner.

6. Chipper Jones

With a name to suit him, Chipper Jones plays for the fun and love of the game and the love of his family. Jones isn’t all fun and games though, a 6-time NL All-Star, NL MVP in 1999, as well as a World Series winner in 1995 with the Atlanta Braves, he is made history already and is still making it.

7. Ivan “Pudge” Rodriquez

Some see “Pudge” as the best all around catcher in baseball today. Being the first catcher in history to have more than 20 home runs and 20 steals in the same season, it is no surprise at age 29, he was the youngest catcher ever to amass 1,000 hits. Pudge is also the first American League catcher to hit .300 or better five years in a row.

8. Mark McGwire

With a portion of interstate named after him (interstate 70 in St. Louis, to honor his 70 home run achievement) Mark McGwire earned the love of baseball enthusiasts’ nationwide. Although his 70 home runs in a season record was broken by Barry Bonds in 2001, he still holds the records for most home runs by a rookie (49).

9. Mike Schmidt

A 1980 World Series MVP, Schmidt made his mark in MLB history. In addition to being a 12-time NL All-Star, he was a 3-time NL MVP and won 10 gold gloves. Combined with immense patience and a deep-rooted love for the game, it was no shock when he was introduced to the baseball Hall of Fame in 1995.

10. Pete Rose

Well known for his records of most games (3562) at bats (14053), hits (4256), and singles (3215), Rose was simply determined. Some say Rose was not the most skilled (though still very talented) player in the game, but certainly the most determined. He must have been doing something right though, at the end of his career he left as a World Series MVP (1975), 3-time World Series winner (1975, 1976, 1980), a 17-time NL all-star, and winner of 2 gold gloves.

IRS Releases Updated Drafts of Corporate and Partnership Tax Forms

According to a recent news release, the IRS has “released for public comment draft revisions to Form 1065, U.S. Return of Partnership Income, Form 1120, U.S. Corporation Income Tax Return, and certain related schedules. Included in the release are new Schedule B for Form 1120 and Schedule C for Form 1065. These forms will be for use for tax years ending on or after Dec. 31, 2008.

The draft forms reflect changes suggested in comments received from the initial drafts released in August 2007.

‘The draft revisions and new forms will increase transparency about the ownership and relationships between entities that make up complex enterprise business structures,’ said Frank Y. Ng, Commissioner of the Large and Mid-Size Business Division of IRS. ‘This will enable IRS to better assess compliance risk.’

The major change to Form 1120 is to Schedule K and involves reporting direct and indirect ownership. When ownership meets certain percentage thresholds, it must be reported on Schedule K. Certain questions on Schedule K have been revised for this reporting.

The new Schedule B (Form 1120) is required of corporations that file Form 1120 Schedule M-3. Schedule B (Form 1120) will provide IRS information about allocations, transfers of interest, cost sharing arrangements, and changes in methods of accounting.

The major changes to the Form 1065 also involve ownership issues. When ownership meets certain percentage thresholds, it must be reported on Schedule B (Form 1065). The revised Schedule B (Form 1065) will also be used to provide information about cancelled debt, and like-kind exchanges that the partnership may have participated in at any time during the tax year. For small partnerships, the asset threshold for filing Schedules L, M-1 and M-2 with Form 1065 has been increased from $600,000 to $1,000,000.

The new Schedule C (Form 1065) will be required of Form 1065 filers that file Schedule M-3. Schedule C (Form 1065) will be used to report information about related party transactions, allocations, transfers of interest, cost sharing arrangements and changes in methods of accounting.

New instructions for Item J of Schedule K-1 (Form 1065) clarify how partnerships determine partners’ percentage share in the profit, loss, and capital at beginning and end of the partnership’s tax year.”

Video on Wealthy Tax Evaders

Embedded below is an interesting video on the current problems our country is facing with tax evasion. According to the video, the government loses about $100 billion in revenue from tax evasion, which makes up a huge part of the tax gap. Just for comparisons sake, $100 billion is more than what the federal government spends on education and training, triple what they spend on the environment and natural resources, and nearly five times what they spend on temporary assistance for families in need. Thanks to the American News Project, and TaxProfBlog, for the video.

Obama Says More NATO Troops Means Tax Cuts at Home

Last week, Presidential hopeful Sen. Barack Obama spoke with CNN on his plan to increase the amount of NATO troops in Afghanistan. He claimed that by getting Europe more involved, they can fight together for a common cause, while also providing valuable tax breaks to middle Americans. Below is a quote from the article, but you can read the full text at CNN.com.

“Barack Obama said Friday that persuading NATO allies to contribute more troops to Afghanistan could lead to U.S. troop cuts and help improve the U.S. economy, with reduced military expenditure being diverted into tax cuts to help middle class families.

‘Part of getting that right is having the Europeans engaged and involved in this same battle that we're involved with,’ the Democratic presidential contender told CNN's Candy Crowley in Berlin, Germany, where he had addressed an estimated crowd of 200,000 a day earlier.

Obama's multi-nation trip, which has included stopovers in Afghanistan, Iraq and Israel, is aimed at bolstering his foreign policy credentials. The one-term senator has been criticized as inexperienced by Republican rival, Sen. John McCain.

Obama landed in France on Friday for a meeting with President Nicolas Sarkozy. He ended Friday in the UK where he was scheduled to meet Prime Minister Gordon Brown and opposition leader David Cameron.”

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Housing Bill to Hurt Small Business Owners?

Although everyone seems to be talking about how much the new American Housing Rescue and Foreclosure Prevention Act is going to help American homeowners, it will to make life harder for thousands of small business owners. According to Sharon McLoone's business blog on WashingtonPost.com, the bill will force credit card processing companies to collect more information from merchants, and will even impose a 28% fee on those who do not comply. Below is a quote from McLoone's blog, but you can read the full thing at Housing Bill Includes Sweeping Data Reporting Provision.

"The housing bill includes a sweeping provision requiring credit and debit card firms to report the transactions of certain businesses to the IRS, sparking privacy concerns and stirring the ire of the small business community.

Small business lobbyists plan to aggressively push back on the language requiring firms like MasterCard and Visa to give the IRS data on businesses that have made at least 200 transactions annually that together total $20,000 or more.

The provision says that any company that processes electronic payment transactions will have to report to the IRS the annual gross receipts of those transactions for each merchant beginning in 2010.

The soon-to-be law 'will have a significant, negative effect on the small business community,' said Kristie Darien, executive director with the National Association for the Self-Employed.

The provision is part of a greater effort to increase business and consumer tax compliance and narrow the 'tax gap,' which the IRS defines as the difference between the amount of tax that taxpayers should pay for a given year and the amount that is paid voluntarily and on time.

The proposal, which originally was included in President Bush's fiscal 2009 budget request, will raise an estimated $9.5 billion over 10 years, according to a summary of the bill by the House Ways and Means Committee."

GOP Blocks Tax & Renewable Energy Package

According to another article form the Associated Press, “for the fourth time this summer Republicans stopped the Senate from taking up wide-ranging legislation that extends tax breaks for teachers, businesses and parents and provides tax credits to an array of renewable energy entrepreneurs.

Major business groups, usual GOP allies, have implored Congress to act on the tax credits, many which expired at the end of last year or will run out at the end of this year. But for many Republicans, it's a matter or principle and politics: many oppose what they say are new tax increases to pay for parts of the package and nearly all say the Senate's only business now is acting on an energy bill that promotes drilling and other measures to boost domestic oil supply.

The White House, citing new taxes and other objections to the bill, threatened a presidential veto.

The vote Wednesday was 51-43, nine short of the 60 needed to begin floor debate.

‘All the Republicans want to do is not pay for anything and we know the House would not accept that,’ said Senate Majority Leader Harry Reid, D-Nev., anticipating the defeat.

But Sen. John Cornyn, R-Texas, said his party sees a ‘need to dispose of the pending energy bill to help bring down the price of gas at the pump before turning to other matters.’

The bill would extend some $18 billion worth of renewable energy tax credits, helping out investors in wind and solar power, clean coal, plug-in electric vehicles and a variety of others.”