Will Obama Raise Fuel Taxes?

From the Guardian:

China's decision on Friday to link domestic fuel prices to the international price of crude oil, but increase consumption taxes on gasoline and diesel sharply to spur more efficient use of energy in the medium term, raises the question whether the incoming Obama administration might be tempted to do the same.

China is taking advantage of a cyclical pull back in energy to push through a permanent structural increase in taxes and prices. The aim is to combine a short-term boost to the economy with longer-term and more consistent incentives for improving energy efficiency.

By consolidating a series of tolls and administrative charges into a single, easy to collect consumption tax, the government is simplifying the tax system, creating a new source of revenue, and ensuring the change will have no impact on the politically sensitive inflation rate.

More importantly, it creates a fairly simple mechanism for raising energy costs further in future to spur additional efficiency gains, irrespective of cyclical changes in the crude oil price.

Once short-term economic weakness is past, the government can easily raise the consumption tax progressively over the next few years.

In effect, the tax breaks the link between the government's energy efficiency program and short-term oil-market movements.

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Obama's Oil Company Windfall Profits Tax and the Wall Street Journal's Celebration

From HuffingtonPost.com:

Friday's Wall Street Journal editorial, "Barack's Windfall Reversal," in barely contained gleeful terms crowed that a transition spokesman "explained this week that that the drop in oil prices to $50 barrel has made the windfall tax a dead letter." The editorial goes on to point out with degree of "I told you so" smugness, "left unexplained was why the oil companies suddenly decided to stop profiteering, or manipulating commodity prices."

Exactly the point. The oil companies were not manipulating commodity prices. Their role was limited to cheering on OPEC and lobbying our government to remain dangerously benign, playing ostrich to OPEC's manipulation of the oil market.

You see, cartels are most effective in rising markets where supply is relatively balanced or there is perceived shortage of supply, thereby causing the cartel's manipulations to be supportive toward ever-increasing prices. Discipline among cartel members is readily maintained in that revenue from lower production is made up from higher prices.

And as the oil hedge fund speculators got blown away this year and as the world's need for oil began to recede in the face of economic crisis, OPEC's control of the market began to fade in classic cartel tradition. As supply moves from shortage to balance and oversupply, control of the market begins to slip away from the cartel. Revenues from reduced production can no longer be made up from higher prices and the discipline of the cartel begins to collapse. The OPEC cartel has no enforcement capability in place to police production quotas of its members, and the propensity for cartel producers in analogous situations has most always been to "cheat" around the edges.

More than anything, the march to $147/bbl this year was in large measure due to the OPEC cartels success in manipulating the supply of oil on the world market. Its success was tantamount to a cartel imposed tax on consumers here and throughout the world. It had nothing to do with the free functioning of the marketplace. At this very moment OPEC is plotting to curtail production again at its scheduled December meeting in the hope of changing the free market dynamics of the market from current price softness (at the beginning of the Bush presidency the price was closer to $20/bbl so even here "softness" is relative) toward programming tighter supply and higher prices.

Should OPEC be successful in any way in regaining their hegemony over the market the new Obama administration should make it clear that the imposition of the oil windfall profit's tax will be applied forthwith, in that higher oil prices under these circumstances and in turn higher oil company profits have nothing to do with the workings of a free market.

American Bar Association to Host Free Tax Workshop

According to their website, the American Bar Association (ABA) will present a free workshop in Washington, DC later today. The workshop is designed for low income taxpayers who are struggling to pay their taxes in today’s tough economy. According to the ABA’s announcement, the “workshop will cover all aspects of representing individual taxpayers in IRS examinations, and it will include a discussion of all recent legislation regarding debt relief as well as the Service’s new identity theft program… It will be held at the Doubletree Hotel Crystal City at National Airport, immediately prior to the IRS’s LITC Grantee Conference. Attendance is not restricted to LITC employees. All are welcome.”

Tax Attorney Pans IRS OIC Program

A few weeks ago I sent an open letter to the IRS regarding their Offer in Compromise (OIC) program. It recently came to my attention that WebCPA, a site with tools and news for accountants, had posted an article about my open letter. Below is the text from their article.

Tax attorney Roni Deutch has written an open letter to the Internal Revenue Service criticizing the agency's offer in compromise program, which is supposed to help taxpayers settle their debts.

The letter came in response to a recent questionnaire from the IRS asking recipients how satisfied they were with the program. Deutch described several objections that she and other attorneys at her firm share. The firm has been helping taxpayers settle their debts with the IRS for 17 years.

Deutch noted that she had sent a similar list of suggested improvements in December 2005, the last time the IRS sent out a questionnaire to taxpayers and tax professionals about the OIC program, but the IRS essentially ignored them.

"In those three years, the IRS has done nothing to act upon our requests," wrote Deutch. "Thus, I resubmit these requests to you for consideration and action."

One of her criticisms is that the IRS is not doing an adequate review of its Effective Tax Administration offers in compromise. "There are not enough sufficiently trained employees at the IRS to review and accept ETA OICs," she wrote. "When an ETA OIC is filed, the taxpayer states that 'I owe this amount and have sufficient assets to pay the full amount, but due to my exceptional circumstances, requiring full payment would cause an economic hardship or would be unfair and inequitable.'"

Obama Drops Big Oil Tax as Prices Plunge

From Business Week.com:

President-elect Barack Obama won't pursue a windfall-profit tax on oil companies because crude prices have dropped below $80 a barrel. The pledge to pursue taxes on Big Oil—a key constituency and benefactor of the Bush Administration—was a potent campaign issue for many left-leaning Obama supporters and a key point of populist rhetoric as gasoline prices surged above $4 per gallon this summer. But that was then. Oil has since sunk below $50 per barrel, and with the country facing a deep recession, the incoming Administration has put new taxes on the back burner.

The Obama camp won't discuss the issue directly, with an aide on the transition team acknowledging the adjustment on Dec. 3, but speaking only on the condition of anonymity. Some liberal publications have already begun criticizing Obama for false advertising during the campaign. On Dec. 2, Mother Jones posted an online blog entry: "Obama's First Policy Retreat?" And The Huffington Post ran "Mandate Watch: Obama Backs Off Promise to Pass Windfall Profits Tax on Big Oil,", arguing that Obama is giving the industry a free pass on profiteering.

IRS Announces Two New Appeals Programs

According to their newest press release, the IRS is announcing “a two-year test of two programs: the post-Appeals mediation and arbitration procedures for Offer in Compromise (OIC) and Trust Fund Recovery Penalty (TFRP).

Beginning Dec. 1, 2008, for a two-year test period, Appeals will offer post-Appeals mediation and arbitration for OIC and TFRP cases for taxpayers whose appeals are considered at the Appeals office in Atlanta, Chicago, Cincinnati, Houston, Indianapolis, Louisville, Phoenix, and San Francisco.

Under these two alternative dispute resolution programs, the taxpayer or Appeals may request nonbinding mediation. The taxpayer may decline Appeals’ request for mediation. Appeals will evaluate a taxpayer’s request for mediation based on the criteria detailed in Revenue Procedure 2002-44 and Announcement 2008-111. A request for binding arbitration must be made jointly by the taxpayer and Appeals. The mediation and arbitration procedures do not create any additional authority for settlement by Appeals.

During the test period, Appeals employees will advise the taxpayer of the availability of these alternative dispute strategies and the deadline for timely requesting such strategies when a rejection of an OIC is sustained or a proposed TFRP assessment is sustained. An OIC submitted during Collection Due Process (CDP) as an alternative to a Collection action is not eligible for these alternative dispute resolution strategies during the test period.”

Property-Tax Collections Climb as Home Prices Fall

From USA Today.com:

Property taxes are rising across the USA despite the steepest drop in home values since the Great Depression.

Home values dropped 17% in the third quarter compared with the same period in 2007, reports the S&P/Case-Shiller Home Price Index. At the same time, property tax collections across the USA rose 3.1%, according to the U.S. Bureau of Economic Analysis.

State and local governments are on track to collect more than $400 billion in property taxes this year, the most ever. One reason: Laws in most states that prevent big tax hikes when property values soar also block big tax drops when values sink.

The housing market collapse has caused a recession that's hurt sales and income tax collections.

But property taxes — collected mostly for public schools — have escaped serious damage. As a result, public education is one of the few sectors of the economy still adding jobs.

Government Throws in the Towel on KPMG

From the Wall Street Journal:

It’s over. The Justice Department declined to ask the Supreme Court to review the 2nd Circuit’s ruling in U.S. v Stein. That’s the case, once billed by the government as the largest tax-fraud prosecution in history, in which U.S. District Judge Lewis Kaplan of Manhattan (pictured, left) dismissed the indictments of 13 former KPMG executives because prosecutors violated their rights. The violation? Pressuring KPMG not to pay the defendants’ legal fees.

More than three months ago, the 2nd Circuit affirmed Kaplan’s decision. The deadline to file a petition for writ of certiorari with The Supremes was last week. “All indications were that they would not [petition the Supreme Court], but we were not taking anything for granted,” says David Spears, who represents defendant Jeffrey Stein.

Meanwhile, a watered down version of the original case is underway before Judge Kaplan. Three former KPMG executives and an ex-partner at Sidley Austin are facing charges that they sold bogus tax shelters.

A spokeswoman for the Southern District of New York, which brought the case, declined to comment.

5 Ways to Change the IRS

Independent journalist David Cay Johnston recently published an article titled Change and the IRS, which you can download via TaxProf blog by clicking here. In the paper Johnston acknowledges that the federal government needs revenue, and suggests 5 ways to change the IRS to benefit both taxpayers and the government.

1. Make English, and not bureaucratese, the first language of the IRS? Taxpayers are the users, and IRS forms should be friendly. Period.

2. Hire Stanford's Joseph Bankman to make real a brilliant idea he proposed in Tax Notes -- letting most people pay their income tax without filing.

3. Stop the consumer fraud inherent in letting anyone prepare a tax return for a fee.

4, With the right technology, the IRS will be able to do something much more important than process tax returns. It will, like Oracle, be able to analyze data to detect patterns and identify not just blatant cheats, but chiselers.

5. Hire tens of thousands of auditors. Last year the audit odds were 1 in 263, down a third from the peak year of 1998, both much too low to deter anyone but a Casper Milquetoast.

Ditch Charlie

From NY Post.com:

Are congressional Democrats truly committed to dealing with the economic and fiscal policy challenges they face next year?

The answer will be seen in how they address their increasingly problematic Charlie Rangel situation.

Scarcely a day goes by without yet another ethical impropriety coming to light regarding the chairman of the House Ways & Means Committee.

Last Wednesday, the DC-based National Legal and Policy Center urged the House Ethics Committee to expand its ongoing Rangel probe to include the recent revelation that he took a "homestead" tax deduction meant for year-round DC residents - though he legally resides in New York.

Tuesday, The New York Times delved into the relationship between Rangel and oil-drilling businessman Eugene Isenberg - who made a $1 million pledge toward building Rangel's school for public service at City College of New York. Rangel later preserved a controversial offshore tax loophole that saved Isenberg's company, Nabors, millions.

Rangel's previous ethical woes, though troubling, were largely personal: not paying taxes on property in the Caribbean; using one of four rent-stabilized apartments as a campaign office; improperly storing a car in a House parking garage.

The Isenberg-Nabors deal is, potentially, far more serious: It reeks of a quid pro quo between Rangel's official duties and fund-raising for his personal project.

The Times reported that Rangel held meetings the same day, at the same hotel, with Isenberg to discuss the CCNY project and then with Nabors' chief lobbyist on the tax loophole.

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New York Runs Sting To Nab Crooked Tax Preparers

Over the weekend, I came across this article on Ailbaba.com about crooked tax preparers in New York, and I wanted to make sure post about it here on my blog. It is very important to have strict laws and regulations in place so that everyone in the tax preparation industry is properly trained and in full compliance of all tax laws. I am glad to see New York is taking action to help ensure compliance. Below is a snippet from the article, but you can read the full version by clicking here.

New York State tax officials say they have uncovered evidence of significant fraud among professional tax-return preparers in a statewide sting operation in which undercover agents posed as clients.

Officials say they're startled not only by the unexpectedly large amounts of tax evasion they witnessed -- such as hiding taxable income and inflating deductions -- but also by the brazen nature of the cheating, which was caught on secret recordings. In one case, for example, a preparer told an undercover investigator: "I did not declare your full gross income from your business because you will pay a lot of taxes," according to a criminal complaint filed recently against a Queens, N.Y., preparer.

In another case, a tax preparer said he is going to report only $13,188 as taxable income, instead of the $131,884 the undercover agent had said was the correct amount, says an official at the New York Department of Taxation and Finance. Another preparer, referring to records given to him by the undercover agent, said: "This one and this one, I never saw this. It's going into the shredder."

Officials have already begun prosecuting some preparers on criminal charges, and they expect additional criminal prosecutions against other preparers -- as well as some clients, says William Comiskey, the tax department's deputy commissioner, office of tax enforcement. Officials will also be seeking civil fraud penalties against preparers. Mr. Comiskey says some preparers have agreed to cooperate and go undercover to show that their clients knew of the fraud and build evidence against those clients -- and, in some instances, against other preparers.

"They are cooperating against their former clients in other ways as well," such as sharing client lists and identifying fraudulent returns, Mr. Comiskey says. He says the state hasn't yet investigated tax-preparation chains, and that most of the preparers "were sole practitioners or were in small group practices."

Officials say they found evidence of fraud among about 40% of the 85 professional tax-return preparers they visited. If all the phony returns that were prepared had actually been filed, "it would have cost the federal, state and local governments approximately $4 million" in taxes, says Mr. Comiskey.

U.S. In Recession That Began Last December

From Washington Post.com:

It is official: The United States is in a recession—and it started a year ago.

The nation's economy peaked, and the recession began, in December 2007, the National Bureau of Economic Research announced today.

The group's Business Cycle Dating Committee, the semi-official arbiter of these things, defines a recession as "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators."

While analysts have been all but certain that a recession has been underway for months, there has been some debate over exactly when it began. Last winter, employers started cutting jobs and growth slowed significantly, but the decline appears to have accelerated over the summer.

The committee concluded that the start of the recession was December 2007 -- due in large part, it said in a statement, to the decline in jobs that began that month. But it noted that many other data points confirm the diagnosis.

"The committee determined that the decline in economic activity in 2008 met the standard for a recession," the group said in its statement. "Evidence other than the ambiguous movements of the quarterly product-side measure of domestic production confirmed that conclusion. Many of these indicators, including monthly data on the largest component of GDP, consumption, have declined sharply in recent months."

The NBER committee could eventually conclude that the recession has already ended. However, economists outside the group think that is unlikely, given that most economic data released in recent weeks have been getting worse, not better.

The NBER is a private, nonprofit group based in Cambridge, Mass. Its Business Cycle Dating Committee currently includes seven leading macroeconomists, and they made the recession call in a conference call Friday night, according to the group's statement.

An eighth member of the committee, Christina Romer, an economist at the University of California at Berkeley, resigned last week; she has been named chairman of the Council of Economic Advisers in the Obama administration. Her husband, fellow Berkeley economist David Romer, remained on the committee.

Why Is OfficeMax Paying Taxes Despite Tax Credits in Excess of Tax Liabilities?

Robert Willens of Columbia University has published a new research paper analyzing OfficeMax's Tax Profile. Below is the abstract from the paper, but you can download the full PDF by clicking here, thanks to Tax Prof Blog.

OfficeMax Inc. (OMX) is paying cash taxes each year yet at the same time is reporting a substantial amount of credit forwards that seemingly should operate to offset any tax liability that it might incur. However, that OMX is paying taxes while concurrently possessing tax credits well in excess of its tax liabilities can be explained by the fact that the credits are not the type that can be used to offset the particular tax liabilities it is generating. In short, the anomaly of a corporation paying taxes despite the existence of substantial tax credits can be explained by examining the nature of the credits that it has amassed.

Autoworkers Making $70 An Hour? Not Really

From CBS News.com:

If you've been following the auto industry's crisis, then you've probably read or heard a lot about overpaid American autoworkers--in particular, the fact that the average hourly employee of the Big Three makes $70 per hour.

That's an awful lot of money. Seventy dollars an hour in wages works out to almost $150,000 a year in gross income, if you assume a forty-hour work week. Is it any wonder the Big Three are in trouble? And with autoworkers making so much, why should taxpayers--many of which make far less--finance a plan to bail them out?

Well, here's one reason: The figure is wildly misleading.

Let's start with the fact that it's not $70 per hour in wages. According to Kristin Dziczek of the Center for Automative Research--who was my primary source for the figures you are about to read--average wages for workers at Chrysler, Ford, and General Motors were just $28 per hour as of 2007. That works out to a little less than $60,000 a year in gross income--hardly outrageous, particularly when you consider the physical demands of automobile assembly work and the skills most workers must acquire over the course of their careers.

More important, and contrary to what you may have heard, the wages aren't that much bigger than what Honda, Toyota, and other foreign manufacturers pay employees in their U.S. factories. While we can't be sure precisely how much those workers make, because the companies don't make the information public, the best estimates suggests the corresponding 2007 figure for these "transplants"--as the foreign-owned factories are known--was somewhere between $20 and $26 per hour, and most likely around $24 or $25. That would put average worker's annual salary at $52,000 a year.

So the "wage gap," per se, has been a lot smaller than you've heard. And this is no accident. If the transplants paid their employees far less than what the Big Three pay their unionized workers, the United Auto Workers would have a much better shot of organizing the transplants' factories. Those factories remain non-unionized and management very much wants to keep it that way.

But then what's the source of that $70 hourly figure? It didn't come out of thin air. Analysts came up with it by including the cost of all employer-provided benefits--namely, health insurance and pensions--and then dividing by the number of workers. The result, they found, was that benefits for Big Three cost about $42 per hour, per employee. Add that to the wages--again, $28 per hour--and you get the $70 figure. Voila.

Except ... notice something weird about this calculation? It's not as if each active worker is getting health benefits and pensions worth $42 per hour. That would come to nearly twice his or her wages. (Talk about gold-plated coverage!) Instead, each active worker is getting benefits equal only to a fraction of that--probably around $10 per hour, according to estimates from the International Motor Vehicle Program. The number only gets to $70 an hour if you include the cost of benefits for retirees--in other words, the cost of benefits for other people. One of the few people to grasp this was Portfolio.com's Felix Salmon. As he noted Friday, the claim that workers are getting $70 an hour in compensation is just "not true."

Of course, the cost of benefits for those retirees--you may have heard people refer to them as "legacy costs"--do represent an extra cost burden that only the Big Three shoulder. And, yes, it makes it difficult for the Big Three to compete with foreign-owned automakers that don't have to pay the same costs. But don't forget why those costs are so high. While the transplants don't offer the same kind of benefits that the Big Three do, the main reason for their present cost advantage is that they just don't have many retirees.

The first foreign-owned plants didn't start up here until the 1980s; many of the existing ones came well after that. As of a year ago, Toyota's entire U.S. operation had less than 1,000 retirees. Compare that to a company like General Motors, which has been around for more than a century and which supports literally hundreds of thousands of former workers and spouses. As you might expect, many of these have the sorts of advanced medical problems you expect from people to develop in old age. And, it should go without saying, those conditions cost a ton of money to treat.

New Law Encourages Cash Donations for Midwest Disaster Relief

According to their newest press release, the IRS is encouraging “Taxpayers who make qualifying cash contributions for disaster relief efforts in the Midwest could benefit from a recently passed law that suspends the percentage-of-income limits that would normally apply when taxpayers deduct the contributions on their 2008 federal tax returns.

Under the Heartland Disaster Tax Relief Act, an individual taxpayer who itemizes deductions may choose to deduct qualifying cash contributions up to 100 percent of his or her adjusted gross income, reduced by deductions for other charitable contributions. Similarly, an electing corporation may deduct qualifying cash contributions up to 100 percent of its taxable income, reduced by deductions for other charitable contributions.

Cash contributions qualify for this special treatment if they are made to a public charity for disaster relief efforts related to certain areas in Arkansas, Illinois, Indiana, Iowa, Missouri, Nebraska or Wisconsin. The areas must have been declared federal disaster areas on or after May 20 and before Aug. 1 of this year as a result of severe storms, tornados or flooding, and the areas must have been designated to receive individual assistance from the federal government because of the damage resulting from the disasters.

The contributions must be made no later than Dec. 31, 2008. “Cash” includes payments made by check or credit card. Qualifying cash contributions do not include payments to a supporting organization as described in section 509(a)(3) or for the establishment of a new, or maintenance of an existing, donor-advised fund.

Qualifying cash contributions of more than the amount allowed as a deduction can be carried over and deducted in succeeding tax years, subject to the normal limits. To substantiate the deduction, a taxpayer must obtain from the charity a written acknowledgment that the contribution was or will be used for relief efforts related to one or more of the Midwestern disaster areas.

In addition, deductions by individuals for qualifying contributions are not treated as itemized deductions for purposes of the overall limitation on itemized deductions. This means that, for taxpayers with higher adjusted gross incomes, the deduction for these qualifying contributions is not limited the way other itemized deductions are limited.”

Despite Charlie Rangel's Tax Problems, He Might Help Republicans Keep Bush's Tax Cuts

From US News.com:

It's looking like House Ways and Means Chairman Charles Rangel is going to face an ethics committee investigation for, among other things, failing to report income on rental properties and supporting a tax law change favoring a big donor to an institute named after Rangel. I'm sorry to see this. I like Charlie Rangel, I think he's a decent person and a charming pol, and I'm inclined to cut him some slack because he served in the Korean War and survived some of the most horrific fighting that American men in arms have ever faced. I think it would be sad to see him lose the chairmanship of Ways and Means for sins which are more venial than mortal, just as I thought it was sad that his predecessor as chairman, Dan Rostenkowski, lost not only his chairmanship but also his seat in Congress and, for a while, his freedom for some small bits of chicanery that were dwarfed by his public policy achievements, notably in the enactment of the tax reform bill of 1986.

The more so, because I think that the tax bill Rangel brought forward in the outgoing Congress showed he was open to major changes in tax law along the lines of the 1986 bill—a lowering of rates combined with a reduction in tax preferences that have accumulated, like barnacles on the ship of state, over the intervening two decades. Rangel's bill would have cut the corporate tax rate, which is far higher than in almost any other advanced country, at least a little bit, and was intended to get rid of the Alternative Minimum Tax which, because it's not indexed to inflation, threatens to cover hugely larger percentages of taxpayers every year. Taxpayers, as I have noted several times, who are concentrated in high-nominal-income, high-state-and-local-tax, heavily Democratic states like Massachusetts, Connecticut, New York, New Jersey, Maryland, and California.

The obvious deal goes something like this. Democrats get repeal of the AMT and perhaps some increase in refundable tax credits (the latter being part of Barack Obama's tax platform). Republicans get a retention of the Bush tax cut rates on higher earners and lower corporate rates. All this is "paid for" by eliminating tax preferences. It is something that is feasible only if done on a bipartisan basis, which is possible here because Democrats do not look likely to have the 60 votes to cut off a filibuster on a major tax bill in the Senate and because there is an ongoing practice of bipartisan deals between Senate Finance Chairman Max Baucus and ranking minority member Charles Grassley. Rangel's bill is an indication that he is interested in acting on a bipartisan basis in the House and would not (as his predecessor Bill Thomas did on the 2003 Medicare prescription drug bill) exclude the minority party (in that case Charlie Rangel himself) from participation in drawing up the legislation.

The Pros and Cons of an Auto Industry Bailout

With the economy what it is and our country in the middle of a presidential transition, another huge bailout request is a lot for the average American to take in. It is hard to decipher fact from fiction at a time like this, let alone make an objectionable opinion from all the bias political statements being made. For this reason, I decided to do some research of my own and compile a list of the pro’s and con’s of an auto industry bailout.

Pro 1: Eco Cars

If the bailout money works the way it is supposed to and pulls the big three out of the hole, good things could potentially come of it. One proposal is that after being saved the automakers could be pushed to manufacture and sell cars that are both good for the environment and economy. As Jeffrey D. Sachs of the Washington Post states, "Washington should seize the opportunity to begin a new era of U.S. technological leadership in the global auto industry, starting with an immediate loan. This is an opportunity to embark on a major industry restructuring to position the United States to lead the world in producing cars that get 100 miles or more per gallon".

Con 1: Taxpayer Cash

Perhaps the most obvious con, it is no secret that we will all be helping bail these companies out. Although it is still unknown where the money may or may not come from, taxpayer cash will be included for sure. Bloggers, business leaders, and experts are expressing their frustration about this all over the Internet. Mark J. Perry, an economics professor at the University of Michigan, questions, “should U.S. taxpayers really be providing billions of dollars to bailout companies that compensate their workers 52.5% more than the market (assuming Toyota wages and benefits are market), 54% more than management and professional workers, 132% more than the average manufacturing wage, and 157% more than the average compensation of all American workers?” However, many still concede to the bailout because they feel it is the only feasible option, and claim that the effects of a bankrupt auto industry would cost more to taxpayers then a bailout would.

Pro 2: Recession Woes

While most are already feeling the effects of a recession on their wallets and gas tanks, it could be a lot worse if something else “big” happens. Some experts feel not bailing out the big three could result in a much deeper and more severe recession then we are already in. With thousands of jobs connected to the auto companies and stocks across the board, their downfall could have a large effect on our economy.

Con 2: Bankruptcy

One of the only other options for GM and the rest of the big three is to file bankruptcy under chapter 11. It is true that we have already assisted these companies financially this year and it helped them for few months. For this reason, some economists feel another bailout would just be like bailing out a sinking ship that is going to sink no matter what we do. Bankruptcy however, could be their only salvation, and many experts claim that it could be their best option. Michael Levine of the Wall Street Journal claims, “the cost of terminating dealers is only a fraction of what it would cost to rebuild GM to become a company sized and marketed appropriately for its market share. Contracts would have to be bought out. The company would have to shed many of its fixed obligations. Some obligations will be impossible to cut by voluntary agreement. GM will run out of cash and out of time.”

Pro 3: Chrysler Bailout

As history tends to repeat itself, I think it important to consider the Chrysler bailout of 1979. In the mid 70's while our country was going through a gas crisis, Chrysler refused to stop making their biggest most gas guzzling luxury cars. This mistake led them to requesting a bailout in late ‘79. However, to the surprise of the watching country, Chrysler came out with the "K-car" that sold like hot cakes and pulled the company out of a financial crisis. Chrysler then paid off their debt to the government 7 years early, and the government made over $660 million in profit from the bailout when all was said and done. Many people claim that if given another bailout, the auto companies could pull themselves out from near bankruptcy, and the federal government could generate revenue as well.

Con 3: Private Jet-setting

Unfortunately, when the CEO's of the big three traveled to Washington D.C. to request billions from taxpayers early this week, all three CEO's took private jets with round trip travel costs totaling of over $40,000 per CEO. This ostentatious show of wealth was considered highly disrespectful to the taxpayers about to consider bailing them out and created tons of bad publicity for the potential bailout. If companies are going to get taxpayer’s money, then we need to know that they are being frugal with it.

End-of-Year Tax Planning Takes Election Year Twist

Earlier in the week, I was quoted in an article released by the Associated Press about end of the year tax planning. Below is a quote form the article, including my tip!

Heading into the holidays it's likely that you're going to be thinking a lot about money. And this time of year tax advisers like to remind us that there are ways to minimize our tax bill next April. But with an economic downturn in full swing and a new president waiting in the wings, that typical advice is coming up against a range of uncertainties this year.

Since President-elect Barack Obama has pledged to raise taxes for families making more than $250,000 and increase capital gains taxes, for instance, she said some of the usual year-end planning advice might soon be reversed. As 2008 draws to a close, here are some step you can take to minimize your taxes.

GET ORGANIZED

The first step in the planning process is to make sure that your records are organized and up to date, said Roni Deutch, a California-based tax adviser. "Without records and without substantiating your deductions, you have no deductions," she warned.

Read the rest of the article at Forbes.com