States: It's Taxes, Taxes and More Taxes

From CNN.com:

Facing mounting budget deficits and seeing few areas left to cut spending, states increasingly are turning to the only option they have left: raising taxes.

Though public officials are loath to do this, particularly during a recession, many governors are increasing personal income taxes, raising corporate income taxes, hiking cigarette and gas taxes, or broadening sales taxes.

Already, 16 states have taken this unpopular step this fiscal year, and another 17 have proposed tax hikes for the coming year, according to the Center on Budget and Policy Priorities, a policy group. In many cases, they are making small increases in specific taxes, rather than imposing a broad rate hike.

"The question isn't whether to raise taxes, it's which taxes to raise," said Linda Bilmes, professor of public finance at Harvard's Kennedy School of Government.

Wealthier residents in Hawaii are now paying higher personal income taxes. The state increased the tax rate to 11% for single filers earning more than $200,000 and couples making more than $400,000, while also raising levies on hotel accommodations and real estate purchases.

Smokers in Rhode Island, meanwhile, now pay the highest state tobacco taxes in the nation, forking over an additional $1 for a total of $3.46 in state levies per pack.

California, where voters Tuesday defeated several budget measures, has already increased sales taxes by one percentage point and state income taxes by a quarter point. Now, Gov. Arnold Schwarzenegger says he has to make even deeper cuts to the state budget to close a $21.3 billion shortfall.

The Tax Code on your iPhone

Earlier today, I came across this useful iPhone application and I wanted to share it with all of my readers. It was created by LawToGo and it is basically the full IRS tax code displayed in an easy to use iPhone application. Check out the following review of the app from iPhone JD.

The app's website says that this app is up to date as of December 31, 2008, and says that the American Recovery and Reinvestment Act of 2009 will be included in the next (free) update. Nevertheless, from what I can tell, the app seems quite solid. You can use the app many different ways. First, you can just browse through sections, tapping to drill down to a specific section.

Additionally, you can search for a particular section. You can search for words, including AND search, OR search, and /n (within a certain number of words) search. Search terms are clearly highlighted in yellow in the search results.

If you know the particular section that you are looking for, you can also use the Search by Section Number feature. For example, like many Americans, I've recently been thinking quite a bit about my dwindling 401K. If I want to read Section 401(k) itself while I drown my sorrows, I can jump right to Section 401 and then scroll down to (k).

The app includes lots of additional features. You can use the arrows to browse back and forth through sections. You can e-mail a section of the tax code, you can add a section that you use frequently to your Bookmarks, and you can turn your iPhone screen on its side to view everything a little bit larger in landscape mode.

If you want to see this app in action before you buy it, there is a video overview on the LawToGo website. The developer has done a nice job with this app. I am sure that any tax attorney would find it very useful, and for the rest of us, it may serve as a useful sleep aid.

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Soak the Rich, Lose the Rich

From the Wall Street Journal:

With states facing nearly $100 billion in combined budget deficits this year, we're seeing more governors than ever proposing the Barack Obama solution to balancing the budget: Soak the rich. Lawmakers in California, Connecticut, Delaware, Illinois, Minnesota, New Jersey, New York and Oregon want to raise income tax rates on the top 1% or 2% or 5% of their citizens. New Illinois Gov. Patrick Quinn wants a 50% increase in the income tax rate on the wealthy because this is the "fair" way to close his state's gaping deficit.

Mr. Quinn and other tax-raising governors have been emboldened by recent studies by left-wing groups like the Center for Budget and Policy Priorities that suggest that "tax increases, particularly tax increases on higher-income families, may be the best available option." A recent letter to New York Gov. David Paterson signed by 100 economists advises the Empire State to "raise tax rates for high income families right away."

Here's the problem for states that want to pry more money out of the wallets of rich people. It never works because people, investment capital and businesses are mobile: They can leave tax-unfriendly states and move to tax-friendly states.

And the evidence that we discovered in our new study for the American Legislative Exchange Council, "Rich States, Poor States," published in March, shows that Americans are more sensitive to high taxes than ever before. The tax differential between low-tax and high-tax states is widening, meaning that a relocation from high-tax California or Ohio, to no-income tax Texas or Tennessee, is all the more financially profitable both in terms of lower tax bills and more job opportunities.

Updating some research from Richard Vedder of Ohio University, we found that from 1998 to 2007, more than 1,100 people every day including Sundays and holidays moved from the nine highest income-tax states such as California, New Jersey, New York and Ohio and relocated mostly to the nine tax-haven states with no income tax, including Florida, Nevada, New Hampshire and Texas. We also found that over these same years the no-income tax states created 89% more jobs and had 32% faster personal income growth than their high-tax counterparts.

Did the greater prosperity in low-tax states happen by chance? Is it coincidence that the two highest tax-rate states in the nation, California and New York, have the biggest fiscal holes to repair? No. Dozens of academic studies -- old and new -- have found clear and irrefutable statistical evidence that high state and local taxes repel jobs and businesses.

Chrysler To Use Tax Money For Buyouts

From Freep.com:

Chrysler will use taxpayer money to sweeten buyout deals for UAW workers who could lose their jobs at six plants likely to be closed if no buyer can be found.

The autoworkers are now being offered up to $115,000 plus a $25,000 vehicle voucher to leave Chrysler voluntarily.

The larger lump-sum payment, which was increased from $75,000 in earlier buyouts, is available to workers under 50 years old who have 10 or more years of seniority.

Workers 50 or older who qualify for some pension benefits won't receive that type of onetime payment. But those with 30 years, or whose age and years together exceed 85, will receive $50,000 plus the $25,000 voucher for a new Chrysler vehicle.

The new offer, which eligible workers have until May 26 to accept, provides a cushion for several thousand workers who could lose their jobs anyway. It also could take some pressure off the UAW's Voluntary Employee Beneficiary Association (VEBA) retiree health care fund because younger workers who take the buyout may find health care through spouses or new jobs.

The buyouts are funded through Chrysler's taxpayer-backed "debtor-in-possession" financing.

By contrast, the company reserved funds prior to the bankruptcy filing to cover similar buyouts previously offered to UAW members. It is trying to pare its UAW workforce by 3,500 from about 26,000 when the first offer was made in January.

Plants covered by the latest offer are Sterling Heights assembly, Conner Avenue assembly, St. Louis North and South assembly, Kenosha (Wis.) engine and Twinsburg (Ohio) stamping. The offer doesn't apply to workers at plants in Newark, Del., which has closed, or Detroit Axle because some of those workers will be transferred to a new Marysville axle plant that is to open in 2010."This is simply Chrysler's way of reducing the number of employees about whom it will have to worry," said Richard Block, Michigan State University professor of industrial and labor relations.

Chrysler's creditors aren't likely to object because the plants could be more marketable with fewer workers, said Sheldon Stone, a managing director of Amherst Partners.

UBS Tax Case Could Backfire On U.S.

Some experts feel the high profile case of the US vs. UBS could hurt its global economic standing, backfiring their original plan. Check out the following article from Reuters.com discussing the issue.

U.S. banks and the U.S. economy could suffer as a result of the high-profile tax evasion case pitting the Internal Revenue Service against UBS AG, supporters of the Swiss bank said in a federal court filing in Miami.

In a joint filing on Friday, five business and banking groups urged Federal District Court Judge Alan Gold to reject IRS demands that UBS (UBSN.VX) (UBS.N) reveal the names of 52,000 Americans suspected of using the bank to hide nearly $15 billion in assets and evade U.S. taxes.

Echoing a similar filing last month by the Swiss government, the petitioners said any exchange of confidential banking information should be handled through existing legal treaties rather than the courts.

The petitioners were led by the Swiss Bankers Association and Economiesuisse -- an umbrella group representing powerful Swiss industry, trade and economic associations.

They also argued that the IRS was seeking to embark on a "fishing expedition" and had no international legal standing to use a tool known as a John Doe summons to investigate suspected tax fraud by individuals whose identities and possible legal transgressions were unknown.

The IRS action violates both Swiss sovereignty and the framework of international law, the court filing says.

"Disregarding established treaty protocols and imposing conflicting obligations upon multinational enterprises, as the IRS urges, also would encourage courts in other jurisdictions to ignore established treaty protocol in taking similar measures against U.S. banks, enforcing subpoenas and similar broad-based information demands served on their overseas offices," it warned.

"Such a result not only would erode the primacy of U.S. law and treaty protocol, but could encourage non-resident aliens and foreign entities to withdraw significant deposits from U.S. based institutions to the detriment of the U.S. economy," it added.

"Further, imposing obligations on foreign businesses to violate their home country laws would discourage such businesses from entering the U.S. market."

The court filing offered no estimate of what it said could be "significant capital outflows" from U.S. financial centers, as one unintended consequence of the crackdown on UBS.

US Appeals Court Sides With IRS In 'Son Of Boss' Tax Case

From the Wall Street Journal.com:

A U.S. appeals court upheld the IRS in denying more than $50 million in tax losses claimed by two Texas lawyers in an oft-litigated tax shelter strategy known as "son of Boss."

In a Friday ruling, the Fifth Circuit Court of Appeals found that investment partnerships set up by Cary Patterson and Harold Nix lacked economic substance and should be disregarded for tax purposes.

Patterson and Nix earned about $30 million each between 1998 and 2000 representing the state of Texas in litigation against tobacco firms, according to the Fifth Circuit opinion.

"Son of Boss" refers to a category of complex tax maneuvers designed to generate huge losses with little risk to the investor, in order to shelter large capital gains.

Hundreds of taxpayers involved in "son of Boss"-type transactions have settled with the IRS since the tax collector issued a global settlement offer in May 2004.

In a statement Monday, John A. DiCicco, acting assistant attorney general, hailed the appellate court ruling and said the court had "recognized that determinations of this sort must be made on the objective evidence irrespective of the claimed motives of the individual investors."

The court rejected an argument from the government, however, that Patterson and Nix owed penalties in the case.

Hawaii Gov Vetoes Tax Hikes on High Income Earners

According to the Associated Press, Hawaii’s Governor Linda Lingle has vetoed the legislature’s plan to increase taxes on high-income earners, and tourists. Over 400 business leaders and tax protestors reportedly gathered at the Capitol to support Lingle’s decision.

"They can't tax their way to prosperity. They can't tax their way out of this economic crisis," Lingle told the applauding crowd. "The only thing that gets us out of this crisis is more visitors coming, more homes being built, more jobs being created."

Minutes later, Lingle used a stamp imprinting the word "veto" on each of the bills and held them up for the audience to see.

But Democrats, who hold nearly 90 percent majorities in both houses, have already extended this year's legislative session until Friday specifically so they can attempt the overrides, which would take two-thirds majorities in the House and Senate.

They argued that tax increase are needed to balance the state budget, and they complained that Lingle hadn't suggested realistic alternatives.

"If it's not her way, it's the highway," said Speaker of the House Calvin Say, D-St. Louis Heights-Wilhelmina Rise. "I'm just a little disappointed in having this type of promotional public relations get-together at this point in time."

Both Say and Senate President Colleen Hanabusa said they have the votes to override Lingle.

Signs the Recession Might be Nearing an End

If you are not yet sick of the word “recession,” then you have probably been living under a rock. It seems like talk of the seemingly never-ending “great recession” has been everywhere. You see it in TV commercials, you hear about it at work, and you probably at least know someone who has been directly affected by it. However, recent studies by several experts and news outlets are beginning to suggest that the worst of the recession might already be over.

There are several factors that contribute to these recent reports, but do not get too excited just yet. It is still far too early to tell if the economy is improving. Additionally, even if the U.S. economy is on the rebound, it may very likely not be back to what we consider "normal" until as late as the end of 2010, or even later.

Rising Home Sales

One of the first signs that our economy was suffering was the burst of the real estate bubble a few years ago. Since then, home values have been on a consistent decline. However, things are finally beginning to look good for the real estate industry. Between huge federal credits and record low prices, home sales are finally beginning to pickup. In the month of April, 17 different states across the country reported increase in purchases. Although sales did pick up, the nationwide average house price dropped further to only $169,000.

Many experts are predicting that we are finally seeing the bottom of the real estate burst. In fact, nearly 1 out of every 10 cities in the country actually reported an increase in home value. It may seem low, but it’s definitely a start.

Consumer Confidence

U.S. consumer confidence was at an all time low in November of 2008 due to job losses and the country’s poor economy. However, it has been slowly increasing since. In April 2009, the consumer sentiment index rose to 61.9 according to Reuters. This was up from 57.3 just one-month prior. Do not get too excited though, some experts are claiming the reports have been inflated by consumers receiving their tax refunds and families preparing for the summer.

Unemployment Rates

Earlier this month a great new report came out showing that the number of job losses last month was the lowest it had been in over 6 months. This was partially due to the huge number of government jobs that were created, as well as new tax breaks for businesses. Although the forecast for the rest of the year is not clear, any decline in job losses is definitely a step in the right direction.

Stock Market

The stock market is always considered a great economic indicator, and although there have been a lot of drops over the past 6 months, things are finally beginning to settle down. In April, the stock market actually saw the biggest growth it has had in over 9 years. Additionally, stocks rose again by around 2% in the first weeks of May.

Oil Rebounds

With more and more people looking for ways to save money, oil prices had been consistently dropping over the past year. However, in recent weeks oil prices have begun to rise again. A recent CNN study claims that the national average price of gas has increased by over 12% during the last month. Although no one wants to pay more at the pump, this is actually a good thing. Since gas is traded on a global market, the price increase shows that the world economy is also beginning to recover.

Less Pending Construction

Construction projects all over the country have been put on hold as local governments struggle to generate enough revenue. However, reports show that many cities are getting back on their feet thanks to recent tax changes and stimulus money. This creates jobs, which in turn creates more revenue, and helps the economy in general.

Lending and Loans

One of the reasons the economy has been improving lately is because of the change in lending policies. For a while it was nearly impossible for first-time homebuyers to purchase a home, between long approval processes, and difficult-to-negotiate bank properties. However, more banks are easing up on their lending policies and families are finally beginning to purchase houses again.

What Makes A Tax Credit "Refundable"?

From Boston.com:

Every tax credit that is introduced is either refundable, partially refundable or non-refundable. What does "refundable" mean?

A refundable credit is a tax credit that can reduce the amount of tax you owe to less than zero. In other words, it can result in a refund where there was not one to begin with. As an example, the newly created $8000 first-time homebuyers tax credit is refundable. If your federal income tax bill without this credit is $6,000, and you qualify for the credit, $8,000 would be deducted from the amount you owe. You would end up with a $2,000 refund.

A non-refundable credit cannot reduce your tax bill to less than zero. The Hope and Lifetime Learning credits are good examples of this. For instance if your tax bill is $1,000 and you qualify for a $1,800 Hope Credit, your tax bill would be reduced to $0 and you would not owe any taxes, but you would not get a refund.

Some tax credits are partially refundable, such as the child tax credit. Taxpayers with income below a certain threshhold receive a larger refundable portion of the credit than those above the threshold.

Internet Tax Avoidance Hurts Jobs, Public

San Francisco Gate author Lenny Goldberg recently published a great article on how the legislatures avoidance of taxing Internet sales is hurting all Californians. Check out a portion of the article below, or you can find the full post here.

The demise of Cody's Books in Berkeley and Stacey's in San Francisco is a symptom of one of the key changes of our new era: the shift to the massive use of Internet sales instead of community businesses.

We are in a difficult period of transition for retailing in general and booksellers in particular. But it's particularly frustrating when the state's tax policies conspire with out-of-state sellers to inflict major damage on local businesses.

State-sanctioned tax avoidance is in fact what has been happening as a result of the failure of the state Legislature and of the state's sales tax agency, the Board of Equalization, to collect taxes on sales into California by companies with substantial presence in the state. Not only is Amazon.com abusing the law with regard to its massive sales into California, but a whole Web-based cottage industry has grown up based heavily on a business model of avoiding sales tax.

The issue has come to a head over a bill by Assemblywoman Nancy Skinner, D-Berkeley, whose legislation, AB178, is really about enforcing the sales tax law, which the Board of Equalization has failed to enforce. It says, simply, that Internet sellers with agents or representatives in the state have presence sufficient for them to be obligated to collect tax on sales to California and send it to the state.

The business model used by Amazon for years, and now by other businesses, is their "affiliate" program, by which thousands of California organizations and individuals solicit sales under a contractual relationship and receive a commission on the sales. Amazon's long-standing approach has been to gain a competitive advantage over other businesses by avoiding the collection of tax.

Founder Jeff Bezos has said he originally wanted to locate in Alameda rather than Seattle but wanted to sell tax-free into the huge California market. And somehow the company has managed to avoid the law that says that if it has representatives in the state - its affiliates - it must collect the tax.

California is not on the cutting edge of this issue. New York passed legislation that serves as the basis for Skinner's bill. Amazon did two things in response: It started collecting the tax from New York purchasers immediately, because it did not want to be liable for the money; and it filed suit. A New York court dismissed the suit, holding that Amazon had a presence in New York, and upheld the state. As a result, a number of states, California included, are attempting to follow the New York law.

Municipal Bonds Are Worth A Look If You Can Handle The Risk

From USA Today.com:

Q: How do I go about adding municipal bonds to my portfolio?

A: Lending money to cities, states and local government agencies used to be a good move for investors in high tax brackets. That's made municipal bonds attractive investments for years.

By buying municipal bonds, investors looking for income not only received regular payments, they got excellent tax savings. The income paid by municipal bonds is typically exempt from federal taxes and often exempt from state taxes, if the investor lives in the state issuing the debt.

The whole muni bond market suffered a body slam during the credit crunch. Now, investors have become increasingly concerned about the ability of states and local governments to pay their debts.

This wasn't much of a concern before, since most local governments offered investors insurance to cover the possibility of default. But many bond insurers have been crippled by mortgages losses, so the value of the insurance has diminished.

The result? Yields on municipal bonds are attractive, but only if you can handle the higher risk. Gone are the days when you could blindly buy a municipal bond and assume even if things went badly you could get your money back.

To show you just how turned around the muni bond market has become, consider the Vanguard Intermediate-Term Tax-Exempt Fund Investor Shares (VWITX). The fund, which owns a basket of muni bonds maturing in seven years on average, is yielding about 3.4%, exempt from federal taxes.

That's an astounding yield if you consider the after-tax yield for a person in the 25% tax bracket is closer to 4.5%. It's even more impressive if you consider that the yield on 10-year Treasuries is just 3.0%.

Does this mean you should consider muni bonds? Clearly, if you understand the risks it's hard to argue with the yields. Just remember, though, that you can't just blindly buy single muni bonds anymore. If you're buying individual bonds you must take the time to understand the municipalities' demographics, tax trends and fiscal position.

The alternative is to buy a mutual fund that does the work for you. One place to start looking is USATODAY.com's Mutual Fund Screener. You'll find the funds under Fixed Income - Tax Exempt by state and by maturity, long, short or intermediate.

New Tax Proposals Target Life Insurers

According to the Wall Street Journal, President Obama is hoping to generate over $12 billion in federal revenue from new taxes on life insurers. “The provisions in the Treasury Department tax plan released last week would restrict several products that have drawn attention from regulators in recent years because of the way they use life-insurance policies as vehicles for minimizing taxes on investments.”

The proposals would restrict several tax breaks received by purchasers of insurance or insurance companies themselves, and also require more information reporting in some cases. Industry representatives say the changes would hit sales in at least one significant area of the business, corporate-owned life insurance.

Several industry trade groups, including the American Council of Life Insurers and the Association for Advanced Life Underwriting, wrote last week to leading lawmakers, expressing opposition to the proposals. "Especially during a financial and economic downturn, increasing taxes on products and on an industry that encourages American consumers and businesses to plan for the future and effectively manage risk is unwise public policy," they said.

Insurance industry representatives also argue that now is a bad time to seek more taxes from the industry, given companies' recent losses on investments. The Treasury has given several big life insurers, such as Hartford Financial Services Group Inc. and Lincoln National Corp., preliminary approval to receive billions in federal aid.

A Treasury official said the tax proposals are unrelated to the federal capital infusions, adding that the insurers applied for that money months ago. The proposed tax changes generally would take effect in 2010 or 2011.

The official said the proposals are aimed at restoring fairness to the tax code. "Our proposals are designed to make sure when it comes to paying taxes, everyone pays their fair share," she said. She noted that some of the proposals are aimed at purchasers of insurance, not the companies themselves.

Lien? Levy? What’s the Difference?

The tax world is full of jargon and enough acronyms to make your eyes cross. Its no wonder so many people are confused about the difference between a tax lien and a levy. I thought it might be helpful to explain.

The term “levy” is used to describe a number of collection methods the IRS employs. Levies actually redirect funds to the IRS as a repayment of a debt. Following are a few different types of levies:

• Wage garnishments actually fall under the levy heading. Wage garnishments redirect a portion of your income directly to the IRS. A garnishment continues until either the debt is repaid, expires, or you successfully negotiate a release. Wages can be a paycheck from your employer, federal payments like Social Security, or if you are an independent contractor, accounts receivable.
• Bank levies are one-time events. The IRS freezes assets in an account up to the amount owed plus interest for 21 days then takes those funds to repay your debt. The 21-day period is supposed to allow for resolving account ownership.
• Property seizures constitute the most extreme use of a levy, allowing the IRS to actually take and sell your property. This could be a car, or a boat, even a house. Again, this is not terribly common and usually only used in extreme cases.

A levy is an active form of collections, and a taxpayer must be sufficiently warned before the IRS will undertake any type of levy. Generally, they mail several notices with one final 30-day notice. This 30-day period is your window to take action to resolve the debt, or make an appeal. I recommend taking action as soon as the first notice arrives. Fighting a levy takes time for even the most experienced tax attorney or CPA.

A lien, on the other hand, is a passive form of collections. Tax liens essentially “lock” your property (whether a car, or a home, even artwork and jewelry) so that should you sell it, the IRS gets first crack at the proceeds. I often hear from clients asking, “when can you get my lien released?” And the honest answer is, when the debt is paid or expired. You cannot argue to have a lien removed; tax liens stay in place until the debt is repaid in full or expires. Even if you enter into a tax debt resolution with the IRS, such as an Installment Agreement, the lien stays put. This is a security measure protecting the IRS’s interest. However, a tax lien should not impact your life or finances, provided you don’t sell your property.

Making Work Pay Tax Credit May Cause Tax Debt

Everybody loves getting a little extra money, and the new Making Work Pay stimulus package is designed to give everybody a refundable tax credit spread out over every paycheck. The amount for 2009 and 2010 is up to $400 a year for individual taxpayers and up to $800 for married couples filing a joint return. Sounds great right? Well for some it is, but for seniors whose only income is a pension it may actually create a tax bill for them at the end of the year.

Seniors whose sole income is a private pension or annuity are not eligible for the credit. However, since the new tax tables change the amount being withheld for everyone regardless of their individual situations, many seniors may end up having to pay the credit back! This could mean a reduced tax refund come April 2010 or even a tax debt. Yikes!

So how do you know if you are at risk? All taxpayers should review and adjust their W4 each year to ensure that they have the correct amount withheld and adjusted for the credit. If you have not already done so, take ten minutes and check your withholdings. Additional at-risk taxpayers who are no eligible for the credit include: younger wage earners who are claimed as dependents by their parents, workers with multiple jobs, and Social Security recipients who also have other sources of income.

In addition, the IRS website, www.IRS.gov, provides a withholding calculator you can access on-line to ensure that enough tax is being withheld. You can also request Publication 919 for guidance on tax withholding. Doing so now will ensure that you nip this problem in the bud before it becomes a tax headache next April.

Roni Deutch Hires Director of Franchise Sales for the Roni Deutch Tax Center

The other day Franchise.com published a press release on the recent addition of Barry Auchenbach to the Roni Deutch Tax Center team. You can read a part of the release below, or check out the full post here.

Roni Deutch Tax Center has hired Barry Auchenbach, a top franchise industry professional, as Director of Franchise Sales to lead the charge for franchise development for the Roni Deutch Tax Center.

"With his extensive background in franchising, bringing Barry on board ultimately strengthens the most important elements to our success," said Roni Deutch, CEO and Founder of Roni Deutch Tax Center. "Barry's experience in franchise sales and development proved to be instrumental for his past employers' growth and expansion, and we expect that he will achieve even better results for Roni Deutch Tax Center."

As Director of Franchise Sales, Auchenbach will be responsible for implementing strategic franchise development plans to sell tax center locations and territories to interested franchisees to increase the number of locations within the Roni Deutch Tax Center franchise system.

"My decision to join Roni Deutch Tax Center was primarily based on my experience in helping people achieve their dream of business ownership," said Auchenbach. "After meeting with Roni and the rest of the team, I realized that my experience in all aspects of the franchise spectrum, having been an owner, consultant, and broker, would be a great addition to the tax center franchise."

Prior to joining Roni Deutch Tax Center, Auchenbach was the Vice President of Franchise Sales for AAMCO Transmissions, Inc. Before that, he joined Cottman Transmission Systems in 1996 in Franchise Sales. In 2006, when Cottman Transmission Systems and AAMCO Transmission joined forces, Auchenbach was named as the Vice President of Franchise Sales for AAMCO. Prior to 1996, Auchenbach spent 10 years as a franchise owner, franchise consultant, and franchise sales broker for various franchise organizations.

Report: Tax Collections Down In Nearly Every State

From BusinessWeek.com:

Tax collections continued to drop in almost every state during the first quarter of 2009, off an average 13 percent from a year earlier as the recession and wary consumers cut into income and sales tax revenue.

The Rockefeller Institute of Government's latest report shows a nearly 16 percent average decline in personal income taxes. That's the steepest drop since 2002.

An institute analyst says tax revenue is expected to decline further in the quarter ending in June, which will include April income tax returns hit hard by financial market declines in 2008.

The report released Wednesday says corporate income taxes fell 16 percent and sales taxes were off almost 8 percent. It was the second quarter in a row with income, sales and corporate tax collections all dropping.

U.S. Eyes Bank Pay Overhaul

Barack Obama and his administration have been considering a major bank overhaul as a potential solution to stabilize the way financial services companies are paying their employees and executives. Check out the following segment of a WallStreetJournal.com article discussing the topic.

The Obama administration has begun serious talks about how it can change compensation practices across the financial-services industry, including at companies that did not receive federal bailout money, according to people familiar with the matter.

The initiative, which is in its early stages, is part of an ambitious and likely controversial effort to broadly address the way financial companies pay employees and executives, including an attempt to more closely align pay with long-term performance.

Administration and regulatory officials are looking at various options, including using the Federal Reserve's supervisory powers, the power of the Securities and Exchange Commission and moral suasion. Officials are also looking at what could be done legislatively.

Among ideas being discussed are Fed rules that would curb banks' ability to pay employees in a way that would threaten the "safety and soundness" of the bank -- such as paying loan officers for the volume of business they do, not the quality. The administration is also discussing issuing "best practices" to guide firms in structuring pay.

At the same time, House Financial Services Committee Chairman Barney Frank (D., Mass.) is working on legislation that could strengthen the government's ability both to monitor compensation and to curb incentives that threaten a company's viability or pose a systemic risk to the economy.

It is unclear how such a bill would fit with what the Fed and others are already considering. But any legislation passed would make it harder for policy makers to dial back limits once the financial crisis subsides.

Senate Considers Federal Tax On Soda

From CBSNews.com:

The Senate Finance Committee today is hearing proposals on how to pay for President Obama's proposed universal health care plan, which is expected to cost more than $1 trillion. Among the proposals, as Consumer Affairs reports: A three-cent tax on sodas as well as other sugary drinks, including energy and sports drinks like Gatorade. Diet sodas would be exempt.

"While many factors promote weight gain, soft drinks are the only food or beverage that has been shown to increase the risk of overweight and obesity, which, in turn, increase the risk of diabetes, stroke, and many other health problems," Michael Jacobson of the Center for Science in the Public Interest, which is pushing the idea, said in his testimony. "Soft drinks are nutritionally worthless…[and] are directly related to weight gain, partly because beverages are more conducive to weight gain than solid foods."

According to Jacobson, "Beverage companies market more than 14 billion gallons of calorie-laden soft drinks annually. That is equivalent to about 506 12-oz. servings per year, or 1.4 servings per day, for every man, woman, and child."

He argued that each penny of tax on a 12-ounce drink would raise $1.5 billion annually and lower consumption roughly one percent, improving overall health. The Congressional Budget Office estimates that a three-cent tax would generate $24 billion over the next four years.

Such a tax might well be considered a "sin tax" similar to the taxes levied on cigarettes, which are extremely high compared to most other consumer products. Jacobson also wants the taxes on alcohol raised -- he argues that doing so will "compensate society for the costs of alcohol abuse and alcoholism and to marginally reduce problem drinking." The argument echoes the idea of cigarette taxes helping pay for health care costs associated with smoking.

In his testimony, Jacobson also called for a ban on artificial trans fat and a reduction in sodium levels in food.

Any soda tax a proposal is unlikely to pass easily, as New York Governor David Paterson well knows. Paterson's proposed 18-percent tax on soft drinks died amid pressure from the industry and resistance among New Yorkers who didn't want to pay more for soda.

It would also, it should be noted, only pay for a tiny portion of the health care overhaul.

Susan Neely of the American Beverage Association, which represents Coca-Cola Co., PepsiCo Inc. and others, told the Wall Street Journal that the tax would hit poor Americans hardest and would not lower consumption.

"Taxes are not going to teach our children how to have a healthy lifestyle," she said. Neely said the industry backs programs to lower consumption of sugary drinks in schools.

GOP Govs Plan Tea Party Sequel

From Politico.com:

Hoping to recapture the grassroots energy of last month’s “tea parties,” Republican Govs. Mark Sanford of South Carolina and Rick Perry of Texas will host a tele-town hall Thursday that’s being dubbed “Tea Party 2.0.”

The Republican Governors

Association said it is expecting 30,000 people to participate in the town hall, which will take place roughly one month after the much-publicized anti-tax tea party rallies held in hundreds of locations across the country on April 15, the tax filing deadline.

Sanford and Perry will each speak for several minutes before opening up the town hall to up to an hour-long question and answer session.

RGA Executive Director Nick Ayers said that while the effort Thursday will be on a smaller scale than the April tea party rallies, it still represents “a great opportunity to mobilize that support.”

Both Perry and Sanford are favorites among the tax-averse tea party attendees.

Sanford, who attended a tea party in Charleston, gained national notice for his high-profile battle with the White House over his resistance to federal stimulus funds designated for his state. The fate of those funds remains undecided as Sanford continues to battle with state lawmakers over how much of the $350 million in funds allocated for South Carolina his state will accept.

Perry spoke at three tea parties across Texas and helped promote the rallies during numerous radio and television interviews prior to the events.

The Texas governor generated widespread publicity after endorsing a state House resolution reaffirming the state’s sovereignty, a veiled shot at the president’s stimulus package.

“I believe that our federal government has become oppressive in its size, its intrusion into the lives of our citizens, and its interference with the affairs of our state,” Perry said at the time.

Perry drew praise from the conservative media for the move, but was widely derided by the left for suggesting that Texas may consider seceding from the union in protest of the stimulus.

Ayers said both governors “heard the frustration” of the tea party attendees and “understand that our Republican governors are the best positioned to lead on these issues."

The RGA, Ayers said, is hoping to use the town hall as a springboard for organizing support and fundraising for key gubernatorial races this year in Virginia and New Jersey.

“We don’t have to wait until 2010 to send a message to Democrats in Washington that they are spending too much and borrowing too much,” he said. “We’ll have an opportunity to do that this year.”