General Business
What are the chances we’ll have real tax reform and tax simplification next year?
Not very good.
That’s because politicians continue to use the tax code to influence behavior and help advance their policy goals.
On the one hand, the Administration and Congress both want “corporate tax reform.” Lower the rates – and broaden the base (eliminate deductions and credits).
On the other hand, proposals for new or expanded tax credits and deductions are introduced in Congress on a regular basis.
The latest example is President Obama’s 2013 Budget, which you can find at http://www.whitehouse.gov/omb/budget/Overview .
The proposal to increase the tax credit on Chevy Volts to $10,000 has received a lot of media attention. But there are many other tax incentives scattered throughout the proposed Budget, most in the name of “INVESTING IN OUR FUTURE.”
And there are numerous tax penalties, as some would call them, mostly in the name of “TAX FAIRNESS.”
Reasonable people on both sides can discuss how best to achieve sometimes conflicting policy goals.
But each time they use the Infernal Revenue Code, we get further and further away from real tax reform and tax simplification.
General Business
The extension of the payroll tax cut has been widely reported and President Obama is expected to sign the bill as soon as it reaches his in-box.
Earlier this week the Congressional Budget Office (CBO) “scored” the conference agreement as required by law.
The CBO estimates that the legislation would increase the deficit by $89.3 billion over the 2012-2022 time period.
Footnote B of the Report notes that the bill would cause “a reduction in off‐budget revenues credited to the Social Security trust funds. The bill also would transfer from the Treasury to the Social Security trust funds an amount equal to that off‐budget revenue loss. The off‐budget receipt would offset the lost revenue and, thus, Title I would have no net off‐budget effect.”
It really doesn’t matter whether it’s an “on‐budget deficit change” or an “off‐budget deficit change.”
The legislation just adds another $89.3 billion to the national debt.
You can find the CBO report, including Footnote B at http://www.cbo.gov/sites/default/files/cbofiles/attachments/hr3630_2.pdf .
General Business
Jake Tapper is the Senior White House Correspondent for ABC News.
He did a great job yesterday breaking down the Administration’s $ 3.8 Trillion budget proposal.
Tapper knocks off 8 zeros so the “family” budget looks like this:
Spending $38,000
Income $29,000
New Debt $ 9,000
Add the new debt to the family’s outstanding credit card debt of $153,000.
Yikes.
You can watch Tapper’s straight forward explanation at http://abcnews.go.com/blogs/politics/2012/02/what-if-obamas-budget-were-your-familys/
General Business
The Congressional Budget Office projects a $1.1 trillion federal budget deficit for fiscal year 2012 if current laws remain unchanged. And the national debt stands at $15.3 trillion and counting.
Most everyone agrees our country has a debt and deficit problem. And reasonable people have differing views on how to address the problem.
President Obama sent his 2013 budget plan to Congress today. The House passed their 2012 budget plan last April, and they’ll be doing the same for 2013 sometime this spring.
The Senate hasn’t passed a budget plan in over a 1,000 days and counting.
All of the plans have one thing in common – they only slow the increase in spending. It’s based on the concept of “baseline budgeting.”
Yesterday I heard a commentator explain the problem in a way that most of us can understand.
Say you went on a diet and your plan was to only gain 15 pounds over the next 12 months. If you only gained 10 pounds, you actually reduced your weight by 5 pounds.
That’s how baseline budgeting works.
To learn more about baseline budgeting check out http://en.wikipedia.org/wiki/Baseline_(budgeting)
General Business
The CIA’s World FactBook is one of my favorite online resources. We’ve written about it before in an article on global investing.
Thinking about a vacation to Belize and want to learn more about the country? You’ll find lots of useful information on topics ranging from climate and transportation to people and society, just to name a few.
Wonder what the CIA’s take is on the economy and debt crisis in Greece? You can find that as well.
And back to global investing.
Right now a 10-year Italian bond is yielding 5 ½ %, while a 10-year Spanish bond yields about 5 %.
A 5-year Portuguese bond is yielding almost 17 %, but read the World FactBook and you know why:
“Investors, however, continue to express concern about the government’s ability to achieve future budget deficit targets and obtain foreign financing to cover its sovereign debt obligations when the EU-IMF financing program expires in 2013”
You can find the CIA’s World Factbook at: https://www.cia.gov/library/publications/the-world-factbook/ .
Just select a country and you’ll find useful economic, political, geographic and other information.
And there’s the Kid’s Page at https://www.cia.gov/kids-page/index.html , where you can play games, solve puzzles and learn all about the CIA.
General Business
Illinois Congressman Aaron Schock made news last year when he was featured in a Men’s Health Magazine article. The fitness fanatic is known for his daily 5-mile run, strenuous work-outs and 6 pack abs.
Schock made news this week as he, along with Congressman Bobby Schilling, introduced a bill in Congress to exempt small business from the onerous 1099-K reporting requirements.
The bill targets a new requirement for merchant card and third-party network payers to report the proceeds of payment card and third-party network transactions, such as credit and debit card transactions.
The Housing and Economic Recovery Act of 2008 requires the IRS to collect a 1099-K from third-party payment entities, such as credit card companies. The 1099-K will show all credit transactions within a merchant’s business for the year.
However, according to Schock and Schilling, the IRS is using the 1099-K to add extra burdens on small business by requiring them to reconcile this third party report with the business’s own internal numbers, which was not the original goal of the law.
Since many small businesses don’t have the resources to cross-reference and reconcile their own internal numbers with third-party numbers, the reconciliation requirement increases the accounting workload and costs for small businesses.
You can find out more about the “1099K Overreach Prevention Act “at http://schock.house.gov/News/DocumentSingle.aspx?DocumentID=277530
And to find out more about Schock’s fitness routine, check out http://www.menshealth.com/fitness/aaron-schock-fitness#axzz1lov6wwvx
General Business
Right now there’s not much happening on the legislative front, other than preliminary discussions on a likely payroll tax cut extension.
But the regulators are busy as ever, especially those working at the EPA and the Department of Health and Human Services.
At this writing, the EPA has 31 regulatory actions currently under review while HHS comes in second at 26.( http://www.reginfo.gov/public/jsp/Utilities/index.jsp ).
The Office of Management and Budget has a website where we can all track what the regulators are up to.
We keep tabs on tax regulations, so I’ve been checking out what the folks at the Department of Treasury are working on. Many of the projects are ones you’d expect to find, like regulations relating to the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Some other projects?
“Team Treasury” is working on “Proposed Revisions to the Beer Regulations.” The project is designed to ”revise brewery regulations to reduce the regulatory burden and streamline regulatory requirements.”
Sounds good to me.
And then there’s “Determination of Tax and Recordkeeping on Large Cigars.” Treasury says the priority on this project is ”Substantive, Nonsignificant.”
I’m not quite sure what that means.
Have a favorite agency or regulatory project that you want to check out? Just go to http://www.reginfo.gov/public/do/eAgendaMain. Select the agency at the bottom of the page and click the “Submit’ tab.
On the next screen, click on the “RIN” on the far right side to find out the details and who to contact if you have questions or comments.
General Business, Tax Planning
We’ve talked about “tax extenders” many times before. Those are the tax credits, deductions and exclusions that expire each year – but always get extended for another year.
The Infernal Revenue Code includes over 60 tax provisions that expired last year, including over 50 annual extenders.
Senate Finance Committee Chairman Max Baucus says it’s time to come up with a long term plan to address the continuing uncertainty caused by the tax extenders.
Baucus says “the lack of certainty about these tax extenders is bad for American families, bad for businesses looking to create jobs and bad for our economy.”
He also notes that “each day businesses do not know whether tax extenders will be in place means less American manufacturing, less production and fewer jobs.”
We couldn’t agree more.
Baucus also wants to address the extenders now – as part of the payroll tax extension debate. He doesn’t want to wait until after the election.
You can read more at http://finance.senate.gov/newsroom/chairman/release/?id=a12ea58b-4a3e-49a9-8025-820307b82a1d
General Business
Google “hidden taxes” and you get “about 63,300,000 results (in 0.17 seconds).”
Dictionary.com defines hidden taxes as “any tax paid by a manufacturer, supplier, or seller that is added on to the price the consumer pays.” Others define it more broadly to include things like inflation and the costs of regulatory compliance.
Last week the U.S. Department of Transportation issued new regulations that require airlines to include all mandatory taxes and fees in the advertised ticket price. Proponents say the new rules help consumers make better choices because of clearer pricing.
Opponents, including Spirit Airlines, say the new rules are intended to hide high federal taxes. Three carriers, including Spirit, Southwest and Allegiant, have filed a federal lawsuit to stop the new rules.
If you’d like to see the taxes separately stated, check out http://keepmyfareslow.org/ You’ll find out more about the new rules, and how you can contact your representative.
If you’re in favor of the new rules, just look for the best deals and enjoy your flight!
We report. You decide.
General Business
Illinois Governor Pat Quinn gives his State of the State Address on Wednesday and Illinois legislators return to Springfield next week.
Illinois officially has the worst funded pension system in the nation, with the State only funding 51% of its liabilities, according to the Pew Center. And Moody’s has downgraded Illinois debt to the lowest rating of any state.
Illinois Comptroller Judy Barr Topinka reports that the state has $8.5 billion in unpaid bills. The legislature will also need to put $6.9 billion into the pension systems in the next budget in order to meet its statutory requirement.
Not surprising, Illinois has dropped from 16th to 28th in the latest Tax Foundation “State Business Tax Climate Index”.
Looks like our legislators have their work cut out for them when they return next week.
You can find the Pew Center report at http://www.pewcenteronthestates.org/initiatives_detail.aspx?initiativeID=85899358839 .
The Tax Foundation Index is available at http://taxfoundation.org/research/show/22658.html
