by | ARTICLES, GOVERNMENT, OBAMA, POLITICS, TAXES
The Washington Times reports that the IRS will not be able to finish their investigation regarding the targeting of Tea Party and other groups, until far after the 2014 elections:
“John Koskinen, the man President Obama tapped to clean up the embattled agency, also said it will take years to respond to all of the document requests from Congress. He told Congress that even complying with a subpoena for emails from just a handful of key employees couldn’t be done before the end of this year because it takes time to have attorneys delete protected taxpayer information”.
It is quite convenient that there will be no resolution to the IRS scandal before the midterm elections, especially on top of the new proposed IRS regulations regarding 501(c)4s.
The IRS is an agency that needs to clean house from top to bottom.
by | ARTICLES, OBAMA, OBAMACARE, POLITICS, TAXES
So, the tax that was supposed to hit high income earners now also can affect children under certain conditions involving investment. Taxpayers — take note!
The Weekly Standard discusses a newly clarified component of the Obamacare 3.8% Investment Surcharge Tax:
“Last Friday, the IRS published a tip on its website entitled “Tax Rules for Children with Investment Income.” Included is this note regarding the Net Investment Tax [emphasis added]:
Starting in 2013, a child whose tax is figured on Form 8615 may be subject to the Net Investment Income Tax. NIIT is a 3.8% tax on the lesser of either net investment income or the excess of the child’s modified adjusted gross income that is over a threshold amount”
by | ARTICLES, GOVERNMENT
The Wall Street Journal has run a couple of stories in recent months documenting the overreaching work of the FTC. In November, it ran a story describing how the FTC actually investigated whether The Music Teachers National Association was engaging in “anticompetitive practices”.
Because the non-profit, which had been in existence for years, did not have the financial resources to fight the investigation, the FTC laid out its conditions for continuation:
“It must, however, read a statement out loud at every future national MTNA event warning members against talking about prices or recruitment. It must send this statement to all 22,000 members and post it on its website. It must contact all of its 500-plus affiliates and get them to sign a compliance statement.
The association must also develop a sweeping antitrust compliance program that will require annual training of its state presidents on the potential crimes of robber-baron piano teachers. It must submit regular reports to the FTC and appoint an antitrust compliance officer.”
You can’t make this stuff up.
Then in January, the WSJ noted that the FTC won a victory over Apple with regard to the iPad.
The FTC maintains that the iPad apps did not clarify well enough that children could potentially access their parents money via a linked credit card on the iPad. So the FTC decided to go after Apple, the maker of the iPad.
A “class-action settlement didn’t require Apple to change its practices, while the FTC action requires the company to clearly disclose what consumers are authorizing when they enter their password. The FTC settlement also requires Apple to provide consumers with full refunds”.
So children were able to play games that their parents had chosen, and rack up money/debt through app purchases with a linked credit card that the parents had put on there — and that is the fault of Apple. Got it.
These recent FTC crusades are two prime examples of outrageous regulation and the stupidity of the FTC’s overwhelming overreach. If regulators have enough time to stick their noses in places that they don’t belong, or are just being meddlesome and counterproductive, then the Federal budgets for such regulation are clearly too large.
by | ARTICLES, TAX TIPS, TAXES
What is a phase out rule?
When a taxpayer nears an income limit to qualify for a tax credit, there is a gradual reduction of that tax credit. This is known as a phase out. Higher income earners need to be aware that phase outs will come into play as they file their taxes this year.
It is noted that “The last time we saw a phase-out rule for itemized deductions was back in 2009. Unfortunately, this phase-out provision has also been resurrected for 2013 and beyond.
As a result, you can potentially lose up to 80% of your 2013 write-offs for home mortgage interest, state and local income and property taxes, charitable contributions, and miscellaneous itemized deduction items (such as investment expenses and fees for tax advice and preparation).
Phase-out starts as the following AGI thresholds: $250,000 for singles, $300,000 for married joint-filing couples, $275,000 for heads of households, and $150,000 for married individuals who file separate returns.
More specifically, the total amount of your affected itemized deductions is reduced by 3% of the amount by which your AGI exceeds the threshold. However, the reduction cannot exceed 80% of the total affected deductions that you started off with.”
by | ARTICLES, ECONOMY, OBAMA, POLITICS
During Bob Beckel’s recent appearance on “Cashin In”, Bob stated that “Wall Street investment bankers should be in jail because they nearly threw this country into depression”. This statement is quite ridiculous. Since when is the economic cycle grounds for throwing people in jail?
Bob Beckel has absolutely no information that anybody from Wall Street who committed any wrongdoing has not already been appropriately prosecuted. There is no more evidence that any of these people should be in jail than there is evidence that the economic recession was caused by Bob Beckel and his statements on television. Bob Beckel’s cluelessness was further demonstrated by his comment that implied that he did not believe that executive compensation is reduced even when companies were losing money! Does he have no contact whatsoever with the economic world?
It is quite clear that the major course of the recent meltdown was government activities creating an environment for making real estate loans that never should have been made. A short trip down memory lane through Youtube and the unconscionable congressional hearings moderated by Barney Frank, Maxine Waters, and Chris Dodd should be enough to remind Beckel of the real economic culprits.
It was all too obvious that when the Republicans tried to rein in this overextended lending policy of Fannie Mae and Freddie Mac they were viciously attacked as scare mongers and racists. For Bob Beckel to insist that unnamed Wall Street groups performed criminal activities in connection with this economic meltdown is incredibly irresponsible. From an evidentiary point of view, it is just as likely that Beckel committed criminal activities.
by | ARTICLES, CONSTITUTION, FREEDOM, GOVERNMENT, OBAMA, OBAMACARE, POLITICS
The extensive, substantive, and expensive Obamacare changes being made now on a regular basis by President Obama certainly appear to be an unconstitutional, if for no other reason than law changes of that magnitude seem clearly to be Congress’s domain. But the administration argues that these are just minor tweaks needed to ease the implementation of a vast new law. Let’s look at reality.
Government periodically changes tax rules through new legislation. Often, the new laws require clarification concerning how to interpret the law under certain conditions, and the law itself anticipates that the IRS will issue regulations, rulings, or procedures to assist in understanding the law. The President’s Obamacare changes have nothing to do with this, since the President is changing unambiguous, clearly understandable provisions of the law.
Often, especially when new laws reflect a major change from prior law, these new laws require a way to smooth the transition. So when President Clinton phased out exemptions and some deductions for high net-worth individuals, the law provided that only ⅓ of the disallowances would apply for the first year, ⅔ for the second year, and complete disallowances from the 3rd year forward. This is an example of a “transition rule”. It allowed for the substantial effects of the new law to be smoothly integrated into people’s tax lives.
As a CPA, I have to deal with the tax code side of things, and the process that happens with such tax changes is called the “transition rules”. Tedious as it may be, Congress spends a lot of time on these transition rules to get it right.
Having experienced major tax changes such as the 1986 IRC overhaul, and the Bush “tax cuts” of 2001 and 2003, I can say that the transition rules during these times were specific, onerous, and complicated. They particulars were negotiated by Congress down to every last period and exclamation point.
Everyone knows the transition rules are the province of Congress.
So for the President to come out and say that he has the universal right to make tax transition rules, it is laughable — and one of the biggest lies yet. If his advisors did not tell him it is Congress’s role to make transition rules, he should fire all of them for incompetence.
One of the most important things about transition rules is that Congress spends time negotiating in committee and on the floor, the revenue effect of those rules. They are complex and interwoven with the law and focus on the effects of implementing that law. An example might be for Congress to consider whether to make the pain of the law spread out over time, or implemented all at once.
It is absolutely irregular for President Obama to insert himself into law and play with the transition rules willy-nilly. As a CPA, I would demand to see his detailed analysis of the revenue effects of these changes. I am not confident that such an analysis exists.
It is absolutely critical to understand the problem that Obama creates: only Congress is allowed to appropriate revenue, not the President. Therefore, any transition rules changes made by Obama that wreak havoc on the budget lack the proper authority to appropriate extra revenue to cover the effect of such changes.
by | ARTICLES, ECONOMY, FREEDOM, GOVERNMENT, OBAMA, OBAMACARE
The recent revelation that the White House, congressional Democrats, and the CBO all now consider work to be a lifestyle choice reminds me of a scenario some years back with one of my clients.
There was a person who was getting a divorce, and the couple had 2 children. One of the discussions involved who was going to pay for the children’s college. The husband offered to pay 90% of the cost since he made substantially more money, leaving 10% as the wife’s portion to pay. This seemed to be a pretty fair offer.
The wife, on the other hand, did not agree that the offer was fair. Her rationale? If she ultimately got remarried down the road and decided to stay at home and not work, she would not be able to afford her 10% portion.
Understandably, the husband was taken aback. He said to her something along the lines of “you mean to tell me that you have a responsibility to take care of your children’s education, and because you have the chance not to work, then your children’s needs and your obligations somehow aren’t your responsibility anymore?”
The wife was understandably a little embarrassed, as she had never looked at it that way before.
Have you? We ought to have the moral compass not to insist that other people pay our bills for us.
This brings us back to Obamacare. It is not in any way morally acceptable, for those of us who are working, to subsidize people who prefer not to work and stay home and call it a “choice”.
Here’s the root of programs like Obamacare and welfare. A social safety net is supposed to be just that — a temporary hand-up, not a prolonged hand-out. A steady diet of benefits creates a disincentive to work. The decision not to work unfairly forces other people (who do work) to pay for the things that the benefit receipients should be paying for. With the expansion of programs such as food stamps, unemployment, and now healthcare, we are making it harder, if not impossible, to move out of that lower class rung.
by | ARTICLES, BUSINESS, ECONOMY, OBAMACARE, POLITICS
When Chuck Rocha, from the Center for National Policy, was a guest on Bulls and Bears last past weekend, he continued to spew out statistics that touted the economic benefits of Obamacare. His assertions were based on a Price Waterhouse report that indicated health care cost had come down 4%.
Of course, health care costs have not come down. If Mr. Rocha was referring to the fact that the rate of growth of health care spending has slowed (by a not really significant 4%), this trend started long before Obamacare. In fact, the Price Waterhouse Study lays out the reasons for the slowing growth, including individuals delaying treatments, individuals using the internet to find lower pricing, large employers finding ways to get cheaper alternatives for their employees – all specifically NOT RELATED to ObamaCare.
What’s worse, although Mr. Rocha acknowledges that this country does have a debt problem, he insists that it does not need to be dealt with currently. He espouses the clearly dangerous and uneducated view that unfunded costs of future promises are not a real liability.
He also claims that incentives to manufacturing are necessary to keep employment in this country, totally ignorant of its effect on free trade, which is really what is necessary to get the economy moving.
The frustrating part of the entire segment was that nobody on the show thought to contradict any of these assertions, which were patently and demonstrably false.
by | ARTICLES, BUSINESS, ECONOMY, OBAMACARE, POLITICS
Rick Ungar, the “Token Lefty”, usually comes very well prepared for his appearances on Forbes on Fox. But it is disappointing to watch when he regurgitates the same absolutely misleading statistics, despite the fact that he’s been corrected so many times before.
Mr. Ungar argues that the changes which President Obama continues to make to Obamacare are not a significantly harmful to the economy, since “the Obamacare mandate excludes 96% of businesses”.
One might ask: if Obamacare only affected 4% of businesses, how could it be such a major program? The answer is simple. Those 4% of businesses include the vast majority of employees in this country. Most businesses have zero to very few employees, with the total number of employees for all businesses that have 100 or fewer employees making up a relatively small number of the total employees in this country.
This statistic-fib is reminiscent of the exact same tactic that the Democrats were using when pushing to raise the income tax margins of the highest earners making above $250,000. Democrats continuously argued that “only 3% of all small businesses made above $250,000”, a seemingly low percentage.
What they purposely failed to disclose, however, is that that figure accounted for more than 50% of all small business income — most of which would be taxed at individual rates due to the structure of the company. So when the Democrats raised taxes on those upper income brackets, through the process of letting the tax cuts expire, they willfully and quietly were raising taxes on small businesses. Now, high earning non-corporate entities pay more in taxes (39.6%) than even their corporate counterparts (35%).
We have the same chicanery going on here. Nothing could be more intentionally misleading, for those who don’t know better, than Mr. Ungar’s statement that only 4% of businesses are affected by Obamacare. “It’s the number of employees, stupid”.
by | ARTICLES, BUSINESS, ECONOMY, POLITICS, TAXES
Democrat politicians and “economists” have found a wonderful populist issue for the the current election cycle – raising the minimum wage. The economists (including Krugman, Goolsbee, etc) make the argument that the most obvious, serious problem — loss of entry level jobs and non-hiring at new entry level positions — is not a significant factor, and they have even been able to marshal some studies to support this.
They then argue that the higher minimum wage puts more money into needy families and therefore strengthens the economy. This argument just happens to have a wonderful political effect for these Democrats: it makes them seem sensitive to the plight of the needy, while making Republicans look like shills for those greedy Republican businessmen who are only trying to squeeze every last dollar out of their poor employees.
Just one problem — the Democratic position is baloney, and the economists know it, because it is simple economics 101. No businessman would be willing to pay an employee more than the economic value of the employee.
Let’s assume that the rise in the minimum wage puts the cost of employee in excess of the value of that employee. The employer may then 1) terminate the employee (saving the excess of cost over productivity) or 2) buy equipment which, at that price, becomes cheaper than the employee.
But let’s say the employer keeps the employee, just paying him more for the same work he did before. The employer will then either a) earn a smaller return on his investment, reducing the amount he will be able to invest in the business in the future; b) he will raise his prices, which will maintain his profit margin, but will reduce his sales volume, or c) some combination of a) and b). In either case, economic growth of the economy will be hurt.
By citing narrow studies where short-term noise could easily hide the effects of small changes in the minimum wage, these political “faux-economists” are abusing economic appearances to serve a political end.
Furthermore having a national minimum wage when price and wage levels vary so markedly across the country is truly nonsensical.
The country will be better off when economists remain true to their profession.
