Tag: Tax Reform

A BAT In The Belfry

Ever wonder where that saying came from?

Surprisingly, belfry does not come from bell, and early belfries did not contain bells at all. Belfry comes from berfrey, a medieval term for a wooden tower used in sieges. The structure could be rolled up to a fortification wall so that warriors hidden inside could storm the battlements. Over time, the term was applied to other types of shelters and towers, many of which had bells in them. Through association, people began spelling berfrey as bellfrey, then as belfrey and later belfry. On a more metaphorical note, someone who has “bats in the belfry” is crazy or eccentric. This phrase is responsible for the use of bats for “crazy” (“Are you completely bats?”) and the occasional use of belfry for “head” (“He’s not quite right in the belfry”).

Now that has absolutely nothing to do with the post what so ever…..but now you know.

Trump is about to start his assault on tax reform and one of those items we need to watch for is a “border tax”…….

With an ObamaCare alternative off the table for now, the White House is turning its attention to a new initiative, the first fundamental overhaul of the tax code in 30 years. Intense lobbying already is underway, with one of the most contentious issues the idea of a “border adjustment tax,” or BAT. Here’s where things stand:

  • The border tax would effectively levy a tax on products coming into the US and give tax breaks to companies sending products abroad. Proponents say it would protect US jobs, while opponents say it would raise prices of everyday goods for many Americans. See a primer at CNN.
  • As you might expect, companies such as Boeing, Merck, and Dow Chemical that export many of their products are big fans of the BAT, while heavy importers such as retailers Walmart and Target oppose it because they say it would drive up their prices, reports the Atlantic.
  • A huge ad war is unfolding. The National Retail Federation, for example, is running ads against the BAT, like this parody of an infomercial.
  • Paul Ryan and House Republican leaders are pushing for the BAT, but their Senate counterparts generally oppose it, reports the the Washington Post. Conservative Tom Cotton, for instance, called it “a theory wrapped in a speculation inside a guess,” in this op-ed at USA Today. In a possible hint of compromise, the Post notes that Treasury chief Steven Mnuchin has suggested that some products or industries could be exempt, without offering details.
  • President Trump himself sounded skeptical of the tax initially but might be warming up. “Anytime I hear border adjustment, I don’t love it,” he told the Wall Street Journal in January. In February, however, he told Reuters that it “could lead to a lot more jobs,” and on Sunday, Reince Priebus said Trump thought a border tax could even “the playing field between our country” and others, per Fox News.
  • The success of the BAT hinges on the economic premise that it would strengthen the US dollar, though there’s a fair amount of skepticism about that, notes Business Insider. A more in-depth analysis, which takes note of “significant confusion and uncertainty” about how exchange rates might respond, is at Real Clear Economics.
  • The European Union might sue if a border tax goes into effect, reports dw.com. Canada isn’t a fan, either, notes Fortune.
  • More broadly, the GOP’s failure to repeal ObamaCare complicates tax reform, because Republicans were relying on savings from the ACA’s elimination as part of their calculations. The New York Times delves into the thorny legislative consequences, which mean that Republicans might have to work more closely with Democrats.

Your produce is about to become more expensive….to start……

Let the debate begin!

Someone Explain ‘Loopholes”!

We hear the GOP talk about closing loopholes…….we also hear Obama and the boyz speak on the need to close tax loopholes……well it seems we have bi-partisan deal working, right?

I recently did a three part series about “Rates or Reform?  In these post I listed the most common tax deductions for the individual, small businesses and large corporations and then I asked if any of those would be acceptable to eliminate……NONE of them will be touched…….so with that said……what are these loopholes that both parties are saying that need to be closed?

I say that closing loopholes will not do anything to help the budget……it is a con job or at best just code for corporate tax reform…..where NO loopholes get closed, rather corporations just get more help with the avoidance of paying taxes…and then there is one LARGE loophole that should be included but will not be for the obvious reason…..

The top 83 US-based companies now hold a massive $1.45 trillion offshore, parked in low-tax countries, after increasing those holdings by 14.4%—or $183 billion—just in the last year, reports Bloomberg. The leader in offshore profit parking is GE (owner of MSNBC), with $108 billion, up $6 billion from last year, followed by Pfizer with $73 billion. Tech giants Google, Apple, and Microsoft increased their non-US holdings by 34% last year and $75.2 billion over the past two years. Experts say the rise is due to US tax laws, which incentivize booking profits offshore, and estimate the total amount all US companies (not just the top 83) are keeping offshore could be $1.9 trillion. “The corporate system is broken and it’s broken primarily because of international,” says one professor of tax law. The United States is one of the few countries that applies its full 35% corporate tax rate to profits made by US-based companies’ overseas offices, but companies can defer paying taxes until they return those profits home. Congress is working on alternative tax strategies—such as levying a much smaller tax on accumulated earnings, whether repatriated or not—but for now, those stockpiles keep growing.

This is the sort of loopholes that should be in the mix…..but my guess is that they will skate like they always skate……any thoughts?

Does anyone have a good idea what is meant by the generalization of “closing loopholes”?

What About Those Pesky Corporate Tax Rates?

I am helping my readers understand what is going on with politics……..now that the “cliff” drama is finished and the “debt” drama begins again….there will be media all over the GOP and their desire to lower corporate tax rates….and the argument will be lower rates will create jobs…..yes, that magical subject that get people elected…..you know that issue that all politicians talk about and then do NOTHING to create them?  After all this is an issue that they love to taunt at every economic get together……..

Let’s be honest about the rates….yes they are high in the US….but once corporations use all their tax incentives it is quite low…..let’s look at a few things…….

  1. The federal corporate income tax rates were the highest in US history when the unemployment rates were the lowest in US history. From 1951, when the top marginal corporate income tax rate rose from 42% to 50.75%, to 1969, when rates peaked at 52.8%, the unemployment rate moved from 3.3% to 3.5%. From 1986 to 2011, when the top marginal corporate income tax rate declined from 46% to 35%, the unemployment rate increased from 7% to 8.9%.
  2. A “tax holiday” in 2004, which temporarily lowered the corporate income tax rate for companies that brought back cash stored overseas, resulted in companies cutting jobs. In 2004, Congress passed a repatriation tax holiday that allowed companies to bring back profits earned abroad at a 5% income tax rate instead of the top 35% rate. Fifteen of the companies that benefited the most from the tax holiday subsequently cut more than 20,000 net jobs.
  3. Companies hire employees because they need workers, not because of corporate income tax rates. According to a Nov. 15, 2011 blog post from billionaire Dallas Mavericks owner Mark Cuban, “you hire people because you need them. You don’t hire them because your taxes are lower.”   In a July 2011 survey of 53 prominent American economists, 65% said that lack of demand was the main reason why employers were not hiring new employees as compared to 27% who said that uncertainty about corporate taxation was the main reason.
  4. Complaints about high federal corporate income tax rates causing high employment are unfounded because loopholes and deductions enable many companies to pay less than the statutory rate. Of the 500 large cap companies (a market capitalization value of more than $10 billion) in the Standard & Poor (S&P) stock index, 115 paid a total corporate tax rate – federal and state combined – of less than 20% from 2006-2011, and 39 of those companies paid a rate of less than 10%.    General Electric, a multi-national corporation with net income of $14.16 billion, paid an effective tax rate of 7% in 2010.   A 2011 study comparing the effective tax rates of the 100 largest US multinationals to the 100 largest European Union [EU] multinationals during the period of 2001-2010 found that EU multinationals have a higher average effective tax rate despite having to pay a lower statutory rate.
  5. Corporate profits in the United States are the highest they have been in 61 years, yet the federal unemployment rate is higher than most of the rest of the developed world. In 2011, corporate profits made up 10% of US GDP, the highest percentage since 1950.   In 2011, the US unemployment rate was 8.9% compared to the OECD (Organisation of Economic Cooperation and Development) average of 8.2%.   Despite the highest corporate income tax in the world, corporate income tax revenue only brought the US federal government the equivalent of 1.2% of GDP in 2011 (the lowest percentage in recorded history), compared to the OECD average of 2.9% in 2010.
  6. Lowering the corporate tax rate raises the deficit, which hurts job creation. Lowering the federal corporate tax rate reduces the amount of money the US government receives in tax revenue, thus reducing federal government programs, investments, and job-creating opportunities. When the Tax Reform Act of 1986 reduced the top marginal rate from 46% to 34%, the federal deficit increased from $149.7 billion to $255 billion from 1987-1993.
  7. Complaints about high federal corporate income tax rates causing high unemployment are unfounded because corporations are sitting on record amounts of cash. As of Oct. 23, 2012, large companies listed in the S&P 500 are holding onto $1.5 trillion in cash (14% of their total value), the highest amount in American history.   This cash could, but is not, be used to hire more employees and lower the unemployment rate. President Obama, in a July 22, 2009 press conference, stated “there have been reports just over the last couple of days of… companies making record profits, right now. At a time when everybody’s getting hammered, they’re making record profits.”
  8. The US economy added 15 million jobs in the five years immediately following a large federal corporate income tax increase in 1993. The Omnibus Budget Reconciliation Act of 1993 added three new corporate tax brackets and increased the income tax rates for corporations making income over $10 million.   The US economy added more than 15 million jobs and grew at an average annual rate of 3.8% in the five years after the legislation was passed.

There are other considerations that should be pointed out before this pack of crap is packaged and sold to the public…..

– Corporate profits are at record highs, while corporate taxes are at record lows. While the U.S. has a 35 percent corporate tax rate on paper, few corporations actually pay that, due to a proliferation of loopholes, deductions, and the widespread use of tax havens. In 2011, the last year for which data is available, the effective corporate tax rate fell to 12.1 percent, a forty-year low. The corporate tax used to track resonably well with corporate profits, but the two have become decoupled in recent years, with profits shooting up while corporate taxes as a share of the economy plummeted.

– Many of the biggest corporations pay no corporate income tax at all. As Citizens for Tax Justice has found, many of the biggest corporations have effective tax rates near zero. 26 major corporations paid no corporate income tax between 2008 and 2011, while making a collective $205 billion in profits.

– The GOP’s favorite corporate tax idea helps outsource jobs. Republicans love to promote a “territorial” corporate tax system, under which offshore profits made by U.S. companies are never taxed. (Currently, those profits are taxed when they are brought back to the U.S.) The Congressional Budget Office recently reported that such a plan results in “increasing incentives to shift business operations and reported income to countries with lower tax rates.”

– Corporate tax reform should raise revenue. Corporate taxes used to make up about one-third of federal revenue; now it makes up less than 9 percent. The U.S. used to raise about 5 percent of GDP in corporate tax revenue; now it raises below 2 percent. As former White House economist Jared Bernstein noted, “locking in these historically low revenue levels, either as a share of GDP, total receipts, or profits, would be yet another self-inflected wound.”

We will see lots of media coverage when this becomes a priority and depending on the news cycle…….this is one of those issues that will be obfuscated to the point that NO one knows what the truth is or should be……these that I offer may not be the absolute truth but some points that I found and wanted to pass on to you….hopefully it will ease the headaches that will be born trying to follow the antics coming from media and politicians……good luck……

Rates Or Reform? Part Three

This is the last of the series on the popular misconception that there will be some major tax reform of the code and the closing of loopholes….and this will add to the revenue of the country to get us out of the trouble we are in on the fiscal side of governing……that is right Batman, I said….MISCONCEPTION!

I have covered the taxes on individuals and those are safe…..part two was the taxes of the small businesses, the engine that drives our economy, at least that is the slogan of the day, and these deductions should be safe from tamper…….that leaves the larger corporations……let us now look at their major deductions and who they benefit……..

We will start with the 10 top deductions……..in descending order……

10) Graduated Corporate Income
This policy places the first $50,000 of a corporation’s profit at a 15 percent tax rate, with higher profit levels garnering higher tax rates, until it tops out at 35 percent for taxable corporate income exceeding $335,000. The result is that an owner of a small corporation pays only 15 percent in taxes on the first $50,000 of profit, leaving more left over potentially for reinvestment and growth.
5-yr Cost to Government (2011-2015): $16.4 billion
Who benefits: Individuals that own small corporations.
9) Inventory Property Sales
Foreign income of American companies is taxed in the country in which it is generated, and the U.S. gives a tax credit for that amount in order to avoid double taxation. Some companies have accumulated a glut of such tax credits (the “inventory”), and in order to use them up, they artificially boost foreign income through a “title passage rule” that allows companies to allocate 50 percent of income from U.S. production sold in another country as income generated by that foreign country (the “property sales”).
5-yr Cost to Government: $16.7 billion
Who benefits: Multinationals with operations in high-tax foreign countries.
8) Research and Experimentation Tax Credit
Intended to spur research and development within companies, in its simplest form this break allows for a 20 percent tax credit for “qualified research expenses.” There are more complex applications, as well. Detractors complain that it is paying corporations to do research they would have done anyway.
5-yr Cost to Government: $29.8 billion
Who benefits: Pharmaceutical companies, high tech companies, engineers, agriculture conglomerates.

7) Deferred Taxes for Financial Firms on Certain Income Earned Overseas
Because most financial firms conduct their foreign operations as branches rather than as subsidiaries, as most companies in other industries do, they do not benefit from the tax breaks afforded to foreign subsidiaries. To compensate, this loophole enables financial firms to treat income from their foreign branches as if they were subsidiaries, along with all of the attendant tax benefits.
5-yr Cost to Government: $29.9 billion
Who benefits:Any financial firm with foreign operations.
6) Alcohol Fuel Credit
This is a tax credit for the production of alcohol-based fuel, most commonly ethanol, which is made from corn. The credit ranges from $0.39 to $0.60 per gallon. In theory, the credit is meant to encourage alternative forms of energy to imported oil. It is largely responsible for propping up the price of corn, and is extremely popular in corn-producing states like Iowa and Illinois.
5-yr Cost to Government: $32 billion
Who benefits:Food and agricultural conglomerates in the Midwest.

5) Credit for Low-Income Housing Investments
As you might expect, this one gives tax breaks to companies that develop low-income housing. It’s the rule that’s responsible for so many larger new developments setting aside 20 percent or 40 percent of their units for people whose income is well below the area’s median gross income.
5-yr Cost to Government: $34.5 billion
Who benefits: Real estate developers.
4) Accelerated Depreciation of Machinery and Equipment
This one allows companies to deduct for all of the depreciation of a piece of equipment at once (as opposed to over the, say, 20 years it actually takes the item to depreciate). This is the equivalent of the U.S. government giving the company an up-front, interest free loan. Congress recently made this expenditure temporarily even larger for 2011, to encourage investment in equipment.
5-yr Cost to Government: $51.7 billion
Who benefits: Airlines and manufacturers using large equipment that lasts many years.
3) Deduction for Domestic Manufacturing
This loophole enables a tax deduction for manufacturing activities conducted by American companies within the United States. It covers conventional manufacturers, but also extends to industries like software development and film production. The intent is to keep manufacturing from being outsourced.
5-yr Cost to Government: $58 billion
Who benefits: Any U.S. company that produces a product within U.S. borders.

2) Exclusion of Interest on State and Local Bonds
Companies (and individuals) do not pay federal income tax on interest from their investments in state and municipal bonds. What’s more, private companies can in some cases issue tax-free bonds of their own for projects that benefit the public, such as construction of an airport, stadium or hospital.
5-yr Cost to Government: $59.8 billion
Who benefits: High-income investors and corporations.
1) Deferral of Income from Controlled Foreign Corporations
Multinational companies can defer paying U.S. income taxes until they transfer overseas profits back to the United States, under this law. In practice, many companies leave much of their profits overseas indefinitely, thus paying only the tax in the relevant foreign country, which is likely far lower than the U.S. rate, and avoiding U.S. taxes permanently. The list of corporations enlisting this loophole is seemingly endless.
5-yr Cost to Government: $172.1 billion
Who benefits:Every multinational company.

There you have the top 10 deductions for large corporations…….now which of those do you truly see on the chopping block for reform?
I have covered the tax deductions for the three sectors of the economy that would be included in any tax reform of the code……if these are sacred and safe just where will all the cash they promise the country could get with a logical reform of the tax code?
 I ask again….just where will this $1.6 trillion come from that is promised with the reform?  Does anyone see this as simple as the MSM would have us believe?

Rates Or Reform? Part Two

Yesterday’s post we saw that the reforming of the tax code will be the most logical answer in the search for revenue….and that the deductions and loopholes that apply to the individual will most likely not be part of the solution…….if not them, then whom?

The next sector to look at are the small businesses for answers to the reform questions.  Let’s look at the major deductions that are within the tax code…….

Allowable deductions include:

  • Employee wages and most employee benefits
  • Rent or lease payments
  • Interest on business loans
  • Real estate taxes on business property
  • State, local and foreign income taxes assessed to your business
  • Business insurance
  • Advertising and promotion costs
  • Employee education and training
  • Education to maintain or improve your own required business skills
  • Legal and professional fees
  • Utilities
  • Telephone costs
  • Office repairs

1. Start-up Cost Deductions

You can deduct up to $5,000 in start-up and $5,000 in organizational costs for the first year of business. These deductions apply to expenses paid or incurred after Oct. 22, 2004. The rules differ for expenses before that date or if your costs exceed $50,000. Expenses that are not deducted can be amortized over a 180-month period, which begins when you open your business. You can write off or amortize market research, advertising, employee training, business-related travel, legal advising and other costs.

2. Education Deductions

The IRS has strict guidelines for deducting educational expenses, so be sure to read Publication 970, “Business Deductions for Work-Related Education,” thoroughly. Generally, employers can deduct employee educational expenses if the courses maintain or improve job-related skills, or if employees need the education to continue in their current jobs. If you are self-employed, you can also write off some educational expenses. Transportation to and from the classes may be deductible. You can’t write off any educational expenses that train you in a new field, however.

3. Vehicle Deductions

Auto deductions are clearly delineated under IRS rules and tend to be among the more scrutinized items, so meticulous record-keeping is critical. You can deduct vehicle expenses either by the mile (for tax year 2006, the IRS allowed a deduction of 44.5 cents per mile driven for business purposes) or for actual expenses such as gasoline and maintenance. If you use your personal vehicle on the job, keep careful records about where you went and the nature of your business. You also can write off a newly purchased vehicle (even if it’s bought second-hand) in one deduction or through depreciation, which lets you write off parts of business equipment costs over several years.

The IRS stipulates that personal auto use cannot be written off as a business-related expense, so be sure to follow the guidelines in Publication 463. If your employees are using a business car for personal use, the IRS wants you to record the value in their W-2 forms or wages. For credits, keep an eye out for environmentally friendly IRS initiatives: You could receive up to $3,150 from the government if you have purchased a hybrid for your business since 2005. Check out Form 8910 for more details.

4. Equipment Deductions

Small businesses can take a single deduction of up to $108,000 for equipment purchased in 2006. The deduction falls under Section 179 of the tax code and is reduced if those equipment purchases exceeded $430,000. The deduction in prior years was only about $25,000; in 2007, it will rise to $112,000. As of now, however, the higher deductions are only good through 2009.The equipment doesn’t have to be new, as long as it’s newly purchased and will be used at least half of the time for your business. Equipment includes computers, machines, furniture, cars and a host of other necessities. Movable equipment generally counts; property does not. You will need to fill out Form 4562 to take the deduction. Businesses that choose not to take the immediate deduction can write off portions of their equipment purchases over several years through depreciation.

5. Entertainment Deductions

The IRS doesn’t mind your mixing business with pleasure – within reason. You can deduct up to 50 percent of entertainment expenses for unreimbursed business meetings. The entertainment must be within a “clear business setting” (such as at a conference) or should immediately precede or follow a business meeting. If you are self-employed, the 50 percent deduction limit does not apply.

6. Travel Deductions

Unreimbursed travel expenses are tax-deductible. The IRS recommends keeping a log of your expenses and receipts. Transportation, (such as airfare) lodging and even dry cleaning can be deducted, and half of any business meals. You also can deduct expenses for business associates traveling with you. You can’t write off expenses for family members or friends if they accompany you, unless they are employees and are professionally involved in the business end of the trip, but it is fine to deduct your part of the trip if it is for business.

7. Software Deductions

Software normally must be written off over three years because it will serve your business for more than one year. Section 179, however, allows small businesses to fully deduct off-the-shelf software the year it is purchased, as long as it is used the same year.

8. Charitable Deductions

Partnerships, S corporations and limited liability companies all require that their members file the company’s taxes on their personal forms, including charitable donations. Donations are “passed through” members, like the organization’s income. C corporations are entitled to corporate deductions.

Individuals can deduct between 30 percent and 50 percent of their adjusted gross income to qualifying 501(c)(3)charities and foundations. Corporations can deduct up to 10 percent of their taxable income, according to the Better Business Bureau’s Wise Giving Alliance. If you want to contribute $250 or more and receive a deduction, you must have a letter from the organization verifying your donation.

If your business makes a non-cash donation, such as giving a car or a computer, figure out how much you can deduct. The deduction will decrease if you’ve already received a tax break for the donated property or if it has lost significant value. Check both Publication 551 and the Section 179 deduction.

9. Advertising Deductions

Advertising and promotions directly related to your business are deductible as miscellaneous expenses. See Publication 535 to write off advertising and other costs.

10. Legal and Professional Fee Deductions

Accountant and attorney fees are deductible as business expenses, but you cannot deduct professional fees for purchasing business assets such as equipment. Those charges are included as costs of the purchase. Sole proprietors can write off fees from tax professionals on Schedule C or Schedule C-EZ. For sole proprietors, any additional expenses can be deducted on Schedule A of your 1040.

Now there is a whole other post on who is a small business……..the official definition is any company with 500 or less employees……..will these be asked to close their business loopholes?

Hell, NO!  Dems will try to protect the “Mom and Pop” business and the Repubs will protect the larger ones……so these entities will be protecting from any loss of deductions……

Now we have eliminated the individual and his/her deductions and the small businesses that everyone believes is the engine of the economy, at least that is the slogan they want us to latch onto…….so…..who is left?

Part three will be tomorrow and will look at the large corporations and their loopholes…….

Rates Or Reform? Part One

What is it gonna be?  That my friends is the magical question………my grandfather use to say, “why write a book when a paragraph will do?”

Unfortunately this subject cannot be adequately explain in a paragraph……..so I tapped into the Russian writer in me (that means using more words than necessary to explain the situation)………

This subject needs a series to properly access the situation……

We are hearing a lot about this possible new found path to bi-partisanship……that tax reform could be that new awakening…..to that I say…..you are delusional!  Why so?

Dems want a change in rates…that is a continuing lower rate for us mere mortals and a higher rate for those people making $250,000 a year….we all know this has about as much chance of a compromise as me getting a shot at Megan Fox…….

And then there is the clap from the Repubs….that is that we need to reform the tax code and that will increase our revenue to the point that we should be solvent……there are some Dems that gives this approach a nod or that it is worth some discussion……

Okay, let us say that this is the road that the elected parasites want to travel…….now the question is……where will the reform of the tax code come from……from individuals?  Or maybe from business would be where to start?  A couple of excellent questions…..so let’s look at the things that would be inclusive……..

Let us begin this series with the individual………..

1. Mortgage interest and property taxes.
You can deduct the mortgage interest (not the principal) that you pay on a loan secured by your primary residence or a second home. To claim the deduction, you must be obligated to pay the debt and you must actually make the payments. You can also deduct any taxes you pay on real estate you own that is not used for business. If you have a mortgage on the property, the annual mortgage statement (Form 1098) you receive from the bank should includeboth the amount you paid in real estate taxes for the year and the interest and points you paid for the year (your mortgage interest deduction).

2. Charitable donations.
You can deduct any cash or noncash contributions you make to a qualified nonprofit organization. You are supposed to have documentation for any cash contribution, including contributions under $250. For all noncash (property) contributions and cash contributions over $250, you must have a receipt or acknowledgement from the nonprofit organization. For noncash (property) contributions over $500, you have to file an extra form with your tax return, Form 8283, Noncash Charitable Contributions.

3. Medical expenses and health savings accounts.

You can deduct the amount of your medical and dental expenses that exceed a certain percentage of your adjusted gross income. For many years, the percentage was 7.5%. However, starting in 2013, this percentage goes up to 10% (except for people over 65 years old who are exempt from the increase until 2017). So starting in 2013, if your AGI is $100,000, you can deduct your medical expenses only if and to the extent they exceed $10,000. Eligible expenses include both health insurance premiums and out-of-pocket expenses not covered by insurance for both you and your dependents. Unless your medical expenses are substantial, however, your medical expenses will probably fall below the AGI percentage limitation, meaning you won’t be able to deduct anything.

If you have a qualified Health Savings Account (HSA), you can deduct your contributions to the account, and you don’t have to pay tax on any interest you earn from the account. To establish an HSA account, you must have a high-deductible health plan that qualifies under the HSA rules. You can use money in your HSA account to pay almost any kind of health-related expense.

4. Child and dependent care.

If you have to pay someone to care for your child (under 13) or a dependent needing care so that you can work or look for work, you may be able toclaim a tax credit for those expenses. The credit is a percentage of your eligible work-related child or dependent care expenses, ranging from 20% to 35%, depending on your income.There is a dollar limit on the amount of expenses for which you can claim the credit. The limit is $3,000 of the expenses paid in a year for one person, or $6,000 for two or more. You must reduce these dollar limits by the amount of any dependent care benefits provided by your employer that you exclude from your income.

5. 401(k) and IRA contributions.
If your employer offers a 401(k), it pays to maximize your contributions, especially if your employer matches them. For the 2012 tax year, the maximum contribution is $17,000. If you are 50 or older, you can contribute an extra $5,500 per year.

For IRAs, you can contribute $5,000 in 2012, and deduct that amount from your income. If you are 50 or older, you can contribute an extra $1,000.

6. Student loan interest.

You can deduct up to $2,500 in student loan interest payment per year, for the lifetime of the loan. There are income limits — you can’t take this deduction if you make more than $70,000 as a single person or $145,000 as a married couple.

7. Education expenses.
You can deduct $4,000 for tuition-related expenses, or you may qualify for the American Opportunity Tax Credit (AOTC; formerly the Hope and Lifetime Learning credits), which are also for education.

In addition, you can set up a Coverdell education savings account and contribute up to $2,000 per year. The amount you contribute isn’t deductible, but distributions from the account for payment of tuition are tax-free. You can also set up a state-sponsored college savings plan, known as a Section 529 plan, which allow tax-free withdrawals for qualifed college expenses.

8. Job expenses.

You can deduct education and training costs for your job if your employer doesn’t reimburse you for them (and if the education is for your current job, not to get a better job later). Job-hunting expenses, including mileage, are also deductible. If you’re a teacher, don’t forget to include teaching-related expenses for a small tax break.

9. Home office tax deduction.
If you use a portion of your home exclusively for business purposes, you may be able to deduct home costs related to that portion, such as a percentage of your insurance and repair costs, your mortgage or rent, and depreciation.

Of these deductions….can you see any of them being eliminated?  Can you really envision any of these deductions being eliminated from the tax code?

These are not going to be eliminated!  Why?  Dems will not want to involve the middle class in these solutions.

Then where will the reform come from and who will it effect?

Part 2 tomorrow.  Tune in to the continuing story of who gets the shaft and why.

It’s All About Income

The war of words has begun, well, it never really stopped, but it is heating up…..the magic word of the day is…..TAXES!

Obama is making his case for the rich to pay a higher rate (I refuse to succumb to the norm of labeling it)……Mitt is all over the taxes thing with his proposal of helping the well off and it will create jobs and revive the economy (trickle down does not work….period.) and the pundits dance!

Yes, I am one of those people that want EVERYONE to pay their share of this government…..my idea is simple…$0-$50,000–none, $50,001-$1 million–20%, $1 million-up–30%…I know that this will never happen but it is a more fair rate than anything anyone is offering now….

But let’s talk about it—there is one conserv pundit that says the same thing every time he is in front of the camera…..50% of all Americans pay NO taxes……apparently he and I have difference of opinion on the word “pay”…..if you work and draw a paycheck you will pay taxes!….they may get some or all back at the end of the year but they pay into the tax structure with every paycheck…..And the workers pay check is their ‘income’, right?

Wait!  Let us define ‘income’…….Revenues of an individual or legal entity.

Income is usually generated through sale of merchandise for profit as well as from salaries or commissions for the performance of services.

Now this is where I have a problem……..any and all income should be taxed at the given rate…..and that includes the capital gain stuff….in my opinion if money is made, no matter how, and the money goes into a bank account to be used by the person for stuff….then it is income, just like my check that goes into the bank for my use is income so is ALL cash that is gain by some form of employment…..so if it is income then it should be taxed at the going rate I posted previously.

We can have a smaller government without screwing the entire country because some guy wants to be the King On The Hill…….

Another GOP Tax Plan (YAWN)

Can you believe it?  The most interesting thing of the week is a tax plan…..sad state of news……

It is the silly season….that is election season…..and there is a wealth of people on the GOP side that want to be the nominee for the party come next November…….and each one of them has some sort of tax plan…..and all are about the same…….. tax cuts……but there are a couple that have plans that stand out…..Romney, the perceived nominee by many pundits, has a plan that has about the same amount of pages as War and Peace and then there is the famous Cain/Koch plan….the 999…..and now the bully of the pulpit, Rick Perry has released his long awaited plan that he will bump on with Cain’s plan.

Perry has a name for his plan….not as catchy as Plan 999….but a name anyway….it is called the “cut, balance and grow” plan……not to be confused with another plan that had a similar name…..this one is a flat tax….if you recall when Forbes ran for president about a century  ago (not really but it seems like that long)….it was a bust then and guess what?  It is a bust now!

“Cut, Balance and Grow strikes a major blow against the Washington-knows-best mindset. It takes money from spendthrift bureaucrats and returns it to families. It puts fewer job-killing regulations on employers and more restrictions on politicians. It gives more freedom to Americans to control their own destiny. And just as importantly, the Cut, Balance and Grow plan paves the way for the job creation, balanced budgets and fiscal responsibility we need to get America working again,” Perry writes.

The major points are…..It would reduce the corporate tax rate from 35 to 20 percent, eliminate taxes on dividends and many capital gains and essentially cap individual tax rates at 20 percent. Perry argues these tax cuts will spur economic growth by creating a more favorable environment for wealthy individuals and corporations to start or expand their businesses.

LOL…that means Laugh out Loud!  Just like all flat taxes it will benefit NO one but the wealthy….no matter the rhetoric….and the poor will get a f*cking that they shall never recovery from anytime soon.

TAX CUTS!  Wealthy get all the benefits!  The GOP has NO idea what to do about the economy other than throwing more money at the very people that caused the economic meltdown…..maybe we should starting looking for real economists to run the economy since there are very few economists in Congress….I think we could do better than the wimps we have now….

You know if the wealthy kicked in a buck every time the GOP used the term “Tax Cuts” we could be well on our way to solving the deficit.