Talking Shop Blog

Yesterday morning, American John Isner won a first round match at Wimbledon after an 11 hour, 5 minute marathon match that spanned 3 days.

Not to be outdone, this morning House and Senate lawmakers approved a sweeping financial overhaul bill, after their 20 hour marathon session that ended at 5:39 a.m. this morning.

We’d like to tell you all about the agreement, but we can’t.

Lawmakers can’t either.

As Senator Chris Dodd (D-Conn) said this morning:

 “No one will know until this is actually in place how it works…It took a crisis to bring us to the point where we could actually get this job done.”

Dodd, as chairman of the Senate Banking Committee, led the financial overhaul efforts in the Senate.

But he’s not quite sure how this whole thing will work.

Of course that brings us to Rahm Emanuel’s infamous line:

 “You never want a serious crisis to go to waste”…

We’re still following the tax extenders bill (H.R. 4213), which would extend unemployment benefits and some popular tax breaks that expired last year.

The bill also includes some unpopular tax provisions, including the “carried interest” provisions and the proposed extension of self employment tax on certain professional services companies.

We hear the latest version circulating among Senate Democrats scales back the carried interest rules that would apply to some family owned investment partnerships. 

Stay tuned.

On another front,  the Department of Labor’s Employee Benefits Security Administration has just posted information on the preexisting condition exclusions, lifetime and annual limits, rescissions and patient protections under the Affordable Care Act.

You can find a comprehensive Fact Sheet at

http://www.healthreform.gov/newsroom/new_patients_bill_of_rights.html

Last week I was in Washington D.C. for a business conference. Politics is everywhere inside the Beltway.

Even on a cab ride to a Ruth Chris Steak House.

The cabbie was from Bhutan, a small Himalayan country bordered by India and China. Turns out he passed the CPA exam and has a degree from George Washington University.

Somehow we got onto the topic of the new health care reform bill. He told me that Bhutan has free health care for everyone.

Of course there’s no free ride. Whether it’s a cab ride or a visit to your local doctor.

Someone’s paying the bill.

Bhutan does have universal health care according to various websites I checked out when I got back home.

Bhutan also has the usual array of corporate and personal income taxes, property taxes, sales taxes, vehicle taxes, licenses, fees and more. Just like us.

They don’t have a value added tax (VAT). But they’re thinking about it.

See Bhutan has a budget deficit, just like us. And the government of Bhutan is planning on replacing their sales tax with a VAT to address their budget problems.

“VAT is increasingly been seen as a better alternative to the sales tax,” said the Bhutan Finance Secretary, Lam Dorji

( http://www.businessbhutan.bt/?p=1103 ).

Of course that “better alternative” means higher taxes: “An official of the finance ministry said VAT would help close down the budgetary deficit gap of Bhutan.”

There may be universal health care, but there’s no such thing as free health care.

Someone’s paying the bill.

Looking for higher returns on your fixed income investments? Me too.

I’ve been checking out government bonds across the globe.

A 10-year Australian bond is yielding about 5.4%, which isn’t bad.

Head south of our border and you can find some higher returns.

A 30-year Mexico Government International Bond is at 5.80% according to Bondsonline.com . Go further south and a 30 year Brazilian Government International Bond yields 5.87%. ( http://www.bondsonline.com/Todays_Market/ )

Of course, there are risks in investing in international bonds, including geo-political, social and economic issues, to name a few.

So you need to do your homework before you invest.

And is there anyone better at risk assessment than the U.S. Central Intelligence Agency?

That’s right, the CIA.

You can find a wealth of information from the CIA’s World Factbook page at:

https://www.cia.gov/library/publications/the-world-factbook/index.html

Select a country and you’ll find useful economic information on GDP, labor force, inflation, household income, public debt, industrial production and much more.

They even have a Kid’s Page where the youngsters can play games, solve puzzles and learn all about the CIA ( https://www.cia.gov/kids-page/index.html ).

Of course, adults can play the games too.

On Friday, the federal debt stood at over $13 trillion.

Make that $13,041,405, 343,973.44 according to the Treasury Department’s “Debt to the Penny” website.

( http://www.treasurydirect.gov/NP/BPDLogin?application=np )

Then on Saturday President Obama asked Congress for $50 billion in “emergency aid” for state and local governments, noting that the money is needed to avoid “massive layoffs of teachers, police and firefighters.”

There’s no “revenue offset” to the President’s request, which means it’s unfunded.

Add the new debt to the existing debt and it looks like this:

$13,041,405,343,973.40

        50,000,000,000.00

$13,091,405,343,973.40

Not surprising, the request was met with mixed reactions from both sides of the aisle, amid rising concerns about the growing deficits.

House Majority Leader, Steny Hoyer (D-Md.) said “I think there is spending fatigue.”

It’s about time.

And let’s hope it stays that way for a while.

We wonder about a few of the provisions in the tax extenders bill.

Like this one:

“Commerce Department study on job losses . The bill requires the Commerce Department to submit a report to Congress on job losses in New England, Mid-Atlantic and Midwest states over the past 20 years. The Commerce Department would study what role the off-shoring of manufacturing has played in job losses, and would be required to submit recommendations on how to attract industries and jobs to the regions. This proposal is estimated to have no cost.”

How can a mandate like this not cost anything to prepare?

A 20 year analysis covering 25 states?

Imagine the number of government workers needed to work on the project, both staff and management.

Maybe they’re thinking there’s no cost because the people who would do the work are already on the payroll.

But that implies those workers would have the time to do the work without putting in overtime.

If that’s the case, then we already have too many government workers.

That’s called excess capacity in our world.

Luca Pacioli is often called “the Father of Accounting” for his 1494 book on double-entry accounting.

And for over 500 hundred years since, tax accountants and auditors have debated this Renaissance question:

What’s tougher to understand? Tax Law or GAAP (Generally Accepted Accounting Principles).

I thought the Infernal Revenue Code won. Hands down.

But last week I asked one of my audit partners a simple question about accounting for a business acquisition.

He/she, who shall remain anonymous, gave me this:

“Well, let’s start with this basic question: just exactly what is a “business?”

“See a business consists of inputs and processes applied to those inputs that have the ability to create outputs.”

“And GAAP says this about that.”

Input.  Any economic resource that creates, or has the ability to create, outputs when one or more processes are applied to it.

Process. Any system, standard, protocol, convention, or rule that when applied to an input or output, creates or has the ability to create outputs. 

Output. The result of inputs and processes applied to those inputs that provide or have the ability to provide a return in the form of dividends, lower costs, or other economic benefits directly to investors or other owners, members, or participants.”

Right.