Opinions about Current Events

California

2010-11-20T07:16:00.000-08:00

Fox News just reported that California’s’ unemployment system has no money and that the State has already borrowed $9 Billion from the Federal Government in order to continue to pay these benefits (bailout?). Moreover, that it has a structural deficit of $20 Billion (meaning that their budget is, for all practical purposes, permanently out of balance by that amount).

Their credit rating is the worst of any of the 50 States. Their high school drop out rate is 32% despite having one of the most expensive systems in the Country.

Considering this they just elected a liberal Democratic Governor Brown, and Representative Boxer. Where do they get off? When will they get serious?

It appears that they expect the Feds to continue to bail them out.

I don’t know about you but I say NO. I do not want to be a part of providing them with money to waste on their Liberal ways.

If we are not careful the rest of the Country will look like California sooner then you may think. Let’s all study California in order not to repeat her mistakes.

For more see the following article:

The American Dream Waking People Up And Getting Them To Realize That The American Dream Is Quickly Becoming The American Nightmare

Taxes as a Percentage of GDP

2010-11-10T12:54:00.000-08:00

TThe Federal Government collects taxes which historically amount to 20% to 25% of gross domestic product (GDP). GDP is the value of all products and services produced and sold during a particular period. I have for many years thought that total taxes, after considering local ones, amount to closer to 50% of income.

I just found this link which will allow you to see the spending, as a percentage of GDP, of the Federal government as well as for State and local governments.

It supports my belief. That is that State and local taxes also amount to between 20 and 25% of their respective GDP’s.

Thus, on average, once you pay your Federal income taxes, your State income taxes, your State and local sales taxes and your property taxes etc., you have spent about one half of what you earn (your GDP).

Considering that about half of working people do not pay any Federal Income taxes at all it would be fair to say that many of us pay considerably more than half our income for taxes of various kinds.

It is too bad that the politicians spend this money like drunken sailors. If they would view these funds as they do their own they would not want to waste it. But they do not view the public’s money in that way but as a source of funds to further their power hungry gold digging ways.

I just heard David Stockman (budget director under President Reagan) say that in the last 30 years the size of the US economy has tripled while spending is 14 times higher. That means that spending has out paced revenue growth by almost 5 to 1.

If you or I managed our household in that manner we would have long ago been bankrupt. The big difference is that you and I cannot print our own money. And the Feds cannot do it forever either. It cannot last!

Rick Adamson
11/7/2010he Federal Government collects taxes which historically amount to 20% to 25% of gross domestic product (GDP). GDP is the value of all products and services produced and sold during a particular period. I have for many years thought that total taxes, after considering local ones, amount to closer to 50% of income.

I just found this which will allow you to see the spending, as a percentage of GDP, of the Federal government as well as for State and local governments.

It supports my belief. That is that State and local taxes also amount to between 20 and 25% of their respective GDP’s.

Thus, on average, once you pay your Federal income taxes, your State income taxes, your State and local sales taxes and your property taxes etc., you have spent about one half of what you earn (your GDP).

Considering that about half of working people do not pay any Federal Income taxes at all it would be fair to say that many of us pay considerably more than half our income for taxes of various kinds.

It is too bad that the politicians spend this money like drunken sailors. If they would view these funds as they do their own they would not want to waste it. But they do not view the public’s money in that way but as a source of funds to further their power hungry gold digging ways.

I just heard David Stockman (budget director under President Reagan) say that in the last 30 years the size of the US economy has tripled while spending is 14 times higher. That means that spending has out paced revenue growth by almost 5 to 1.

If you or I managed our household in that manner we would have long ago been bankrupt. The big difference is that you and I cannot print our own money. And the Feds cannot do it forever either. It cannot last!

Rick Adamson
11/7/2010The Federal Government collects taxes which historically amount to 20% to 25% of gross domestic product (GDP). GDP is the value of all products and services produced and sold during a particular period. I have for many years thought that total taxes, after considering local ones, amount to closer to 50% of income.

I just found this which will allow you to see the spending, as a percentage of GDP, of the Federal government as well as for State and local governments.

It supports my belief. That is that State and local taxes also amount to between 20 and 25% of their respective GDP’s.

Thus, on average, once you pay your Federal income taxes, your State income taxes, your State and local sales taxes and your property taxes etc., you have spent about one half of what you earn (your GDP).

Considering that about half of working people do not pay any Federal Income taxes at all it would be fair to say that many of us pay considerably more than half our income for taxes of various kinds.

It is too bad that the politicians spend this money like drunken sailors. If they would view these funds as they do their own they would not want to waste it. But they do not view the public’s money in that way but as a source of funds to further their power hungry gold digging ways.

I just heard David Stockman (budget director under President Reagan) say that in the last 30 years the size of the US economy has tripled while spending is 14 times higher. That means that spending has out paced revenue growth by almost 5 to 1.

If you or I managed our household in that manner we would have long ago been bankrupt. The big difference is that you and I cannot print our own money. And the Feds cannot do it forever either. It cannot last!

Rick Adamson
11/7/2010

Obama and Economy

2010-09-22T13:04:00.000-07:00

I must admit that I am astonished at President Obama’s lack of understanding of economics and business. He seems to believe that he can (or should be able to) manage all things from the oval office.

His omnipotent personality causes him to get involved in things he has no business doing, e.g. his comments about not going to Las Vegas resulted in the cancellation of 400 conventions in the city according to Nevada Governor, what business is it of his whether a Mosque is built in Manhattan?, calling the police stupid for arresting a belligerent College professor, opposing Arizona’s new Immigration Law (before reading it), whereby people are just trying to protect themselves because the Feds will not.

He should just quit babbling and get out of the way.

He is currently acting out of desperation (due to the upcoming election) to do something (anything) to stimulate the economy. The problem is a lack of demand and he cannot do much about that domestic demand. He has proposed giving business additional write-offs for research and development and for purchased equipment. There is also a tax credit provision on the books for hiring employees.

These types of incentives will not work because businesses will not respond until there is a demand for their products or services. They will not hire people in order to get a tax credit if there is nothing for the employee to do. They will not buy equipment just to get the write-off if they do not need the equipment.

One way to stimulate demand is to encourage companies to export products. What about some incentives/tax breaks in this regard? This would allow business to be more competitive (reducing their selling prices) and result in more exports.

It should be noted that the countries with the best economies at the present time are exporting countries like China, India, Germany and Japan.

Stimulating demand domestically is very difficult and it probably will take a long time to recover because people have been so badly burned.

I think the best thing Mr. Obama could do is to reduce the uncertainly about government policy and let the private sector take care of itself. This could be done by making the Bush Tax cuts permanent, stop all talk about raising any taxes (cap and trade, taxes on companies operating outside of the country, eliminating the Bush Tax cuts and higher taxes on oil and gas companies).

Let’s eliminate as mush uncertainly as possible and let the private sector move ahead.

Mr. Obama does not seem to understand that tax increases on companies do not hurt those companies because they just increase the price of their products. So, it forces the consumer to pay higher prices which further reduces demand. This is the opposite of what we now need.

I wish he would just get out of the way and let the economy recover naturally, because it cannot be done by Washington.

Rick Adamson

More on the Coming Tax Increases

2010-09-12T14:13:00.000-07:00

Some Thoughts About the Pending Tax Increases

The Democrats constantly refer to the Bush tax cuts as tax cuts for the rich. That is a lie. The majority of the tax reductions went to those in the not so rich category.

It has been reported that by letting the Bush tax cuts expire Government revenue would increase by $700 billion per year. It has also been reported that of that figure about 10 percent would come from those making over $250,000 per year.

That leaves 90 percent or $630 billion to be paid by the rest of us. So much for the promise of no new taxes on the middle class.

It, therefore, seems logical that if 90 percent of the tax increase (resulting from the expiration of the Bush tax cuts) will come from the not so rich then 90 percent of the tax reductions went to these same not so rich people in the first place. This proves that the Bush tax cuts were not only for the rich.

The Bush tax cuts were not such a bad idea. They removed the marriage penalty, increased the child tax credit, made the death tax much more reasonable and reduced the tax rates for everyone, among many other good things.

For example, it has been reported that almost 50 percent of taxpayers do not pay any income taxes. Thanks go to Bush not Obama. This percentage will go down if the Bush tax cuts are allowed to expire and cause more folks to pay tax.

If Obama is so hell bent on taxing the rich just make one simple change. Make the Bush tax cuts permanent and add a new tax bracket for income over 250,000—39.6. Stop.

In addition, in my personal opinion, the estate tax should be reinstituted for estates above $5,000,000 with a maximum rate of 35 percent.

As an aside, the problem with our deficit is not so much the tax cuts but the fact that Government spending increased so much. Spending increases have exceeded the effect of the tax cuts by nine times.

Lastly, we could just scrape the whole damn mess and put in the Fair Tax Plan. To read about that select the “A case for the Fair Tax Plan” post.

Rick Adamson, CPA

USA Today Article on Debt

2010-09-12T13:53:00.000-07:00

Check out this article:

http://www.usatoday.com/news/opinion/editorials/2010-05-06-editorial06_ST_N.htm

Here Comes Biggest Tax Hike in History

2010-07-30T14:43:00.000-07:00

Here Comes Biggest Tax Hike in History

“Tax Increases are Highly Contractionary” and “Our estimates suggest that a tax increase of 1 % of GDP reduces output over the next three years by nearly 3 %. The effect is highly significant." Christina Romer, Obama’s chief economic adviser.

When the calendar turns to 2011, the Bush tax cuts will expire; ObamaCare will rear its ugly tax-hungry head and massive new government regulations will be imposed.

For example, did you know that under the new health care bill – all real estate transactions will be subject to a 3.8% Sales Tax? The bulk of these new taxes don’t kick in until 2013 (presumably after Obama’s re-election). You can thank Nancy, Harry and Barack and your local Democrat Congressman for this one. If you sell your $400,000 home, there will be a $15,200 tax. This bill is set to screw the retiring generation who often downsize their homes. Is this “Hope & Change” great or what? We can vote the bums out in November and demand that they eliminate the bill or at the very least defund it. Then in 2012 repeal it. (Comment credited to Frank Bagrier of UBS)

For a detailed list of all of the tax provisions slated to change January 1, 2011 click this link: http://spreadsheets.google.com/ccc?key=0As-ofA03F4YBdGtUMXRqVnpCdHdVSW52bjF4WlhsOWc&hl=en&authkey=CNvAuvcJ

When this happens our time and money will no longer our own. We become more and more subservient to the Federal Government. This would not be so distasteful if our rulers were not such spendthrifts and incompetents. They cannot manage anything. They do not even try. It is just easier to let spending run wild and raise our taxes.

Some say that we have seen no tax increases under Obama. They say Obama, "gave 95 % of all Americans a tax cut." Factually, that’s right. But in reality the average worker only got $13 more per week in his or her pocket. Looks like Obama just barely made the cut. Just enough to be able to say he "cut" taxes.

If these jokers were honest they would stop promoting Obama's small tax cut and start warning you to get ready for 2011. When the taxpayer is hit with this massive increase in taxes and thousands of new regulations, their collective blood pressure is going to go sky high.

Taxpayers are about to experience the largest single tax increase in American history. Top federal tax rates are about to rise from 35 to 39.6 %. Every taxpayer, at every level, will see a rate increase. The bottom rates actually jump 50 % (from 10% to 15%).

Comment: It has been widely quoted that approximately 47% of American workers pay no income tax. While this is true, they have Bush to thank not Obama or the Democrats. The 47% is going to decrease when the Bush provisions expire
Unless, you die on or before midnight Dec. 31, 2010, inheritance taxes on estates over $1 million will increase from zero to 55 %. And dividend taxes jump from a flat 15 % to a maximum of 39.6 %, a 163 % increase. Taxes on capital gains will increase from a maximum of 15 % to a maximum of 20 % for individual taxpayers.

Teachers will no longer be allowed to deduct their out-of-pocket classroom expenses or the interest on their student loans. But worst, the "ObamaCare" taxes and regulations begin to kick in on Jan. 1.

Did you know that starting in 2011 (next year folks) Title IX Revenue Provisions- Subtitle A: Revenue Offset Provisions-(§ 9002) requires employers to include in the W-2 form of each employee the aggregate cost of applicable employer-sponsored group health coverage.

To see a list of recomendations you should consider between now and December 31, 2010 click on the following link: http://docs.google.com/document/edit?id=1sTCyqUXNxMPT5JOHD4vZrbsX0meAYvEdTBE6Lj_7DBI&hl=en&authkey=CNXTldAM

Rick Adamson

Website: http://adamsonhood.con

Blog: http://adamrick.blogspot.com/

713-956-6266

Declare Your Independence

2010-06-23T15:14:00.000-07:00

Following is an article by the President of the NRA published in the July 2010 edition of American Rifleman. It is, in my judgment, one of the best commentaries I have seen regarding our rights (and what is happening to them) as citizens of these United States.

Please do not be put off by the author’s position because regardless of your opinion of guns, this article expertly describes how we are being treated by politicians in a variety of areas affecting our daily lives.

While reading the article I was reminded of another piece I recently read. It talked about the fact that the world has never lacked for people who believed that they had a right to change others—if fact a demand for power over other people’s lives. It said that we have learned through sad experience that few people can be trusted with such power. In fact, it continued, the world’s painful history shows that these power-seeking people are usually persons we should never want to have as good human models and that we have learned that few people are safe judges of what others ought to be.

Let us make some real changes and get the Government off our backs. Let’s see if we can convince a new bunch of politicos to do their job (protect the people, the borders and our National interests and enforce the laws that are already on the books) and otherwise leave us alone. We do not need new laws we need the existing ones enforced.

Rick Adamson

OFFICIAL JOURNAL SPECIAL REPORT

president's column

By Ronald L. Schmeits, President

Declare Your Independence When You Vote Freedom First!

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness."

This month, 234 years ago, our country's Declaration of Independence made some of the most profound and powerful political statements ever expressed.

Yet today, for the sake of partisan gain, many in the political class are attacking the eternal truths that frame our nation's founding documents as outdated, even dangerous.

So in honor of Independence Day, let's revisit some of the ideals at the core of this country's experiment in self-governance to consider what they mean in 2010 America.

The Declaration of Independence severed the colonies' dependence upon England, but the idea of individual independence was central to the Founders’ thinking.

Being independent meant you were free to fend for yourself, trusted to exercise your freedoms and allowed to excel or fail as a result of your own decisions without interference.

Yet today, many politicians seem to want to make people less independent and more dependent upon government—for bailouts, buyouts and a variety of preferential treatments—and to provide for every need.

This is the opposite of what the Framers intended. Government should be dependent upon, and subject to—in the words of the Declaration of Independence—"the consent of the governed."

But when those roles are reversed— when politicians put the people in the position of being dependent upon and beholden to them—our freedoms invariably suffer.

That about the idea that government gets its authority from the people?

George Washington wrote, "The power under the Constitution will always be in the people." Indeed, our Constitution begins with the words "We the people."

Thomas Jefferson wrote, "Every government degenerates when trusted to the rulers of the people alone. The people themselves are its only safe depositories."

Yet today, many politicians are turning their backs on the people.

When politicians say one thing during their campaigns, but do the opposite after they're elected, that says they don't care what the people think or want. It's the same arrogance King George and Parliament expressed for American colonists in the 1700s.

When politicians take away your ability to make your own choices, that says they don't trust you with the freedom to make your own decisions.

We know better than you how you should live your life, they say. So they try to dictate everything from how you run your business to how much salt you have in your food.

We've seen politicians demonstrate all of these vices—elitist arrogance, distrust of freedom and disdain for the people—in the gun debate for decades.

They don't trust you to own or use a firearm safely or lawfully, so they seek to delay, diminish or deny your Right to Keep and Bear Arms.

To convince you to surrender your freedom, they promise you security. They say you don't need a gun because the police will always be there to protect you.

But as countless victims of crime through the ages could tell you, the promises of politicians didn't protect them any more than their own prayers and tears.

Sometimes you can't count on anyone but yourself. That's what independence means. In this case, the other side of the coin—being dependent—means being defenseless.

But you're not defenseless from arrogant politicians.

The sacred beauty and supreme genius of what the Founding Fathers built for us through the Declaration of Independence, the U.S. Constitution and our Bill of Rights is that we the people will always have the tools and ability to retain control of our country.

This year that ability will be demonstrated with your vote and the vote of every American who wants to be free.

The danger we face is that between 20 and 25 million American gun owners are not registered to vote.

So between now and Election Day, November 2, be like Paul Revere. Sound the alarm to freedom's faithful.

Spread the word to your family, friends, fellow parishioners, co-workers, neighbors and anyone who will listen.

Then get them to do what their freedom demands: Register to vote today. And on Election Day, Vote Freedom First!

Together, let's use our votes to restore to our country the purpose, promise and blessings of freedom that attended her birth 234 years ago this month.

Here are my requirements in order to vote for a candidate in November

2010-06-13T17:22:00.000-07:00

1. Term Limits. Send these folks home and let them get a job (if they can) after a couple of terms. Too many of the career politicians have never had a real job.

2. Balance the Budget.

3. Eliminate Congress’s Special Health Care & Retirement system (they can join the rest of us).

4. Adopt the Fair Tax (stop taxing earnings & wages, tax consumption).

5. Restore the Death Tax for estates greater than $10 million, Max 30%.

6. Stay out of State issues, as per the Constitution.

7. Eliminate Pork Barrel Spending.

8. Eliminate Revenue Sharing, Use Block grants at State level only or leave the money with the people to begin with.

9. Privatization of services, Governments do not need to build massive bureaucracies when the work can be done more economically by farming it out to private sources.

10. Adjust Government pay and pensions so that they do not exceed that of the average American worker.

11. Emphasize effective regulations. Not just more and more laws. We have enough laws but they are not enforced or exceptions are made for special interest groups.

12. Medicare is a great insurance program and I support it. But it should be needs based and the management of it should be farmed out to firms who know how to manage wastefully spending. The Feds have no experience in that regard.

Rick Adamson

Illustration of how the CDO bonds were manipulated

2010-06-08T10:56:00.000-07:00

The following link will take you to an article which will illustrate how the collaterized bond obligation (CDO) was manipulated. I suggest that you download in and print it in order to understand it.

http://docs.google.com/fileview?id=0B8-ofA03F4YBZjRiMWJmMTMtMWM2MS00MGM3LWJmOWItOWIzZmJmYzUxZGU0&hl=enYtNTI1NThhYTdiZTZh&hl=en

A Case for the Fair Tax Plan

2010-06-06T15:05:00.000-07:00

The fair tax plan is a consumption tax. It is not an income tax or a payroll tax. It is not a VAT tax. It is like a National sales tax. It applies to consumption not income. It would replace all taxes currently being taken from workers’ pay. Certain items like food and other necessities would be exempt so as not to over tax lower income people. Every workers' take home pay would increase considerably. It would also eliminate the corporate income tax, the self employment tax and essentially all other taxes based on income.

See http://www.fairtax.org/site/PageServer?pagename=about_main

Arthur Laffer, the famous economist, has estimated that a consumption tax of from 10 to 12 percent (applied to businesses and individuals) could replace all of the Federal Government’s revenue needs. It would be inherently simpler, eliminate to need for most IRS employees and be fairer (because workers are currently subsidizing the government for taxes not being paid by those involved in the underground economy). It would eliminate the need for millions of people to file annual income tax returns.

Following are a few of the problems with the current situation:

The IRS budget is $12.5 billion per year and it has 100,000 employees. It is the largest police force in the world.

Congress is constantly complaining about the so called “tax gap” which it estimates to be $345 billion each year. These are taxes that Congress thinks (although they really do not know) are due the Government but are unpaid.

The underground economy is estimated to be 13% of GDP by the Washington Times. This amounts to $1,625,000,000 in market activity that is untaxed. After all, the drug dealers and prostitutes spend money but the do not pay income taxes. They would pay a consumption tax.

It costs the American people and businesses $265 billion each year to attempt to comply with the IRS’s rules and regulations as well as up to 6 billion hours of labor to do so.

All of these problems would be eliminated by the Fair Tax plan.

Alexander Hamilton, the father of our constitution said:

“It is a signal advantage of taxes on articles of consumption, that they contain in their own nature a security against excess. . . . If duties are too high they lessen the consumption—the collection is eluded; and the product to the treasury is not so great as when they are confined within proper and moderate bounds. This forms a complete barrier against any material oppression of the citizens, by taxes of this class, and is itself a natural limitation of the power of imposing them.”

I think Mr. Hamilton would have supported the Fair Tax.

Government Employees make more than you do

2010-06-06T13:16:00.000-07:00

According to Fox News:

Twenty percent of all U.S. workers are on Government payrolls.

Benefits paid to non government workers amount to about $1.00 per hour and for government workers $1.50.

More union workers work for governments than any other place.

Government employees earn an average of $39.00 per hour whereas non government workers earn on average $27.00 per hour.

Unfunded pension liabilities of the various States is estimated to be between $1,000 billion and $3,000 billion according to the Financial Times.

Unfunded liabilities of the Federal Government are estimated to be $109,003,482,000,000, according to US debt clock.org. This is for Social Security and Medicare.

This cannot be sustained. The system is bankrupt. Government employee’s pay and pensions should be limited to an average of all workers.

Follow this link for more: http://www.thefreeenterprisenation.org/sp/landing/federal-employees-make-twice-as-much-as-you-do.aspx

Health Care Reform

2010-04-13T13:03:00.000-07:00

Here is a brief overview of the key tax changes affecting individuals and small businesses in the recently enacted health reform legislation. Please call our offices for details of how the new changes may affect your specific situation. We also encourage you to review The Kaiser Family Foundations’ excellent summaries of the Bill:

Summary of New Health Reform Law

Health Reform Implementation Timeline

Tax changes affecting individuals in the health reform legislation.

Individual mandate. The new law contains an “individual mandate”—a requirement that U.S. citizens and legal residents have qualifying health coverage or be subject to a tax penalty after 2013. Under the new law, those without qualifying health coverage will pay a tax penalty of the greater of: (a) $695 per year, up to a maximum of three times that amount ($2,085) per family, or (b) 2.5% of household income over the threshold amount of income required for income tax return filing. The penalty will be phased in according to the following schedule: $95 in 2014, $325 in 2015, and $695 in 2016 for the flat fee or 1.0% of taxable income in 2014, 2.0% of taxable income in 2015, and 2.5% of taxable income in 2016. Beginning after 2016, the penalty will be increased annually by a cost-of-living adjustment. Exemptions will be granted for financial hardship, religious objections, American Indians, those without coverage for less than three months, aliens not lawfully present in the U.S., incarcerated individuals, those for whom the lowest cost plan option exceeds 8% of household income, those with incomes below the tax filing threshold (in 2010 the threshold for taxpayers under age 65 is $9,350 for singles and $18,700 for couples), and those residing outside of the U.S.

Premium assistance tax credits for purchasing health insurance. The health care legislation provides tax credits to low and middle income individuals and families for the purchase of health insurance. Specifically, for tax years ending after 2013, the new law creates a refundable tax credit (the “premium assistance credit”) for eligible individuals and families who purchase health insurance through an Exchange. The premium assistance credit, which is refundable and payable in advance directly to the insurer, subsidizes the purchase of certain health insurance plans through an Exchange. Under the provision, an eligible individual enrolls in a plan offered through an Exchange and reports his or her income to the Exchange. Based on the information provided to the Exchange, the individual receives a premium assistance credit based on income and IRS pays the premium assistance credit amount directly to the insurance plan in which the individual is enrolled. The individual then pays to the plan in which he or she is enrolled the dollar difference between the premium assistance credit amount and the total premium charged for the plan. For employed individuals who purchase health insurance through an Exchange, the premium payments are made through payroll deductions.

The premium assistance credit will be available for individuals and families with incomes up to 400% of the federal poverty level ($43,320 for an individual or $88,200 for a family of four, using 2009 poverty level figures) that are not eligible for Medicaid, employer sponsored insurance, or other acceptable coverage. The credits will be available on a sliding scale basis.

Higher Medicare taxes on high-income taxpayers. High-income taxpayers will be subject to a tax increase on wages and a new levy on investments.

Higher Medicare payroll tax on wages. The Medicare payroll tax is the primary source of financing for Medicare's hospital insurance trust fund, which pays hospital bills for beneficiaries, who are 65 and older or disabled. Under current law, wages are subject to a 2.9% Medicare payroll tax. Workers and employers pay 1.45% each. Self-employed people pay both halves of the tax (but are allowed to deduct half of this amount for income tax purposes). Unlike the payroll tax for Social Security, which applies to earnings up to an annual ceiling ($106,800 for 2010), the Medicare tax is levied on all of a worker's wages without limit. Under the provisions of the new law, which take effect in 2013, most taxpayers will continue to pay the 1.45% Medicare hospital insurance tax, but single people earning more than $200,0000 and married couples earning more than $250,000 will be taxed at an additional 0.9% (2.35% in total) on the excess over those base amounts. Self-employed persons will pay 3.8% on earnings over the threshold.

Medicare payroll tax extended to investments. Under current law, the Medicare payroll tax only applies to wages. Beginning in 2013, a Medicare tax will, for the first time, be applied to investment income. A new 3.8% tax will be imposed on net investment income of single taxpayers with AGI above $200,000 and joint filers over $250,000. Net investment income is interest, dividends, royalties, rents, gross income from a trade or business involving passive activities, and net gain from disposition of property (other than property held in a trade or business). Net investment income is reduced by properly allocable deductions to such income. However, the new tax won't apply to income in tax-deferred retirement accounts such as 401(k) plans. Also, the new tax will apply only to income in excess of the $200,000/$250,000 thresholds. So if a couple earns $200,000 in wages and $100,000 in capital gains, $50,000 will be subject to the new tax.

Floor on medical expenses deduction raised from 7.5% of adjusted gross income (AGI) to 10%. Under current law, taxpayers can take an itemized deduction for unreimbursed medical expenses for regular income tax purposes only to the extent that those expenses exceed 7.5% of the taxpayer's AGI. The new law raises the floor beneath itemized medical expense deductions from 7.5% of AGI to 10%, effective for tax years beginning after Dec. 31, 2012. The AGI floor for individuals age 65 and older (and their spouses) will remain unchanged at 7.5% through 2016.

Limit reimbursement of over-the-counter medications from HSAs, FSAs, and MSAs.The new law excludes the costs for over-the-counter drugs not prescribed by a doctor from being reimbursed through a health reimbursement account (HRA) or health flexible savings accounts (FSAs) and from being reimbursed on a tax-free basis through a health savings account (HSA) or Archer Medical Savings Account (MSA), effective for tax years beginning after Dec. 31, 2010.

Increased penalties on nonqualified distributions from HSAs and Archer MSAs. The new law increases the tax on distributions from a health savings account or an Archer MSA that are not used for qualified medical expenses to 20% (from 10% for HSAs and from 15% for Archer MSAs) of the disbursed amount, effective for distributions made after Dec. 31, 2010.

Limit health flexible spending arrangements (FSAs) to $2,500. An FSA is one of a number of tax-advantaged financial accounts that can be set up through a cafeteria plan of an employer. An FSA allows an employee to set aside a portion of his or her earnings to pay for qualified expenses as established in the cafeteria plan, most commonly for medical expenses but often for dependent care or other expenses. Under current law, there is no limit on the amount of contributions to an FSA. Under the new law, however, allowable contributions to health FSAs will capped at $2,500 per year, effective for tax years beginning after Dec. 31, 2012. The dollar amount will be indexed for inflation after 2013.

Dependent coverage in employer health plans. Effective on Mar. 30, 2010, the new law extends the general exclusion for reimbursements for medical care expenses under an employer-provided accident or health plan to any child of an employee who has not attained age 27 as of the end of the tax year. This change is also intended to apply to the exclusion for employer-provided coverage under an accident or health plan for injuries or sickness for such a child. A parallel change is made for VEBAs and 401(h) accounts. Also, self-employed individuals are permitted to take a deduction for the health insurance costs of any child of the taxpayer who has not attained age 27 as of the end of the tax year.

Excise tax on indoor tanning services. The new law imposes a 10% excise tax on indoor tanning services. The tax, which will be paid by the individual on whom the tanning services are performed but collected and remitted by the person receiving payment for the tanning services, will take effect July 1, 2010.

Liberalized adoption credit and adoption assistance rules. For tax years beginning after Dec. 31, 2009, the adoption tax credit is increased by $1,000, made refundable, and extended through 2011. The adoption assistance exclusion is also increased by $1,000.

Tax changes affecting small businesses in the health reform legislation.

For owners of small businesses and their workers, the recently enacted health reform legislation has some key provisions to pay attention to. The major ones include: tax credits; excise taxes; and penalties. But whether a business will be affected by them depends on a variety of factors, such as the number of employees the business has. I'm writing to give you an overview of the provisions in the new law with the biggest impact on small business. Please call our offices for details of how the new changes may affect your specific business.

Tax credits to certain small employers that provide insurance. The new law provides small employers with a tax credit (i.e., a dollar-for-dollar reduction in tax) for nonelective contributions to purchase health insurance for their employees. The credit can offset an employer's regular tax or its alternative minimum tax (AMT) liability.

Small business employers eligible for the credit. To qualify, a business must offer health insurance to its employees as part of their compensation and contribute at least half the total premium cost. The business must have no more than 25 full-time equivalent employees (“FTEs”), and the employees must have annual full-time equivalent wages that average no more than $50,000. However, the full amount of the credit is available only to an employer with 10 or fewer FTEs and whose employees have average annual full-time equivalent wages from the employer of less than $25,000.

Years the credit is available. The credit is initially available for any tax year beginning in 2010, 2011, 2012, or 2013. Qualifying health insurance for claiming the credit for this first phase of the credit is health insurance coverage purchased from an insurance company licensed under state law. For tax years beginning after 2013, the credit is only available to an eligible small employer that purchases health insurance coverage for its employees through a state exchange and is only available for two years. The maximum two-year coverage period does not take into account any tax years beginning in years before 2014. Thus, an eligible small employer could potentially qualify for this credit for six tax years, four years under the first phase and two years under the second phase.

Calculating the amount of the credit. For tax years beginning in 2010, 2011, 2012, or 2013, the credit is generally 35% (50% for tax years beginning after 2013) of the employer's nonelective contributions toward the employees' health insurance premiums. The credit phases out as firm-size and average wages increase.

Special rules. The employer is entitled to an ordinary and necessary business expense deduction equal to the amount of the employer contribution minus the dollar amount of the credit. For example, if an eligible small employer pays 100% of the cost of its employees' health insurance coverage and the amount of the tax credit is 50% of that cost (i.e., in tax years beginning after 2013), the employer can claim a deduction for the other 50% of the premium cost.

Self-employed individuals, including partners and sole proprietors, two percent shareholders of an S corporation, and five percent owners of the employer are not treated as employees for purposes of this credit. There is also a special rule to prevent sole proprietorships from receiving the credit for the owner and their family members. Thus, no credit is available for any contribution to the purchase of health insurance for these individuals and the individual is not taken into account in determining the number of full-time equivalent employees or average full-time equivalent wages.

Most small businesses exempted from penalties for not offering coverage to their employees. Although the new law imposes penalties on certain businesses for not providing coverage to their employees (so-called “pay or play”), most small businesses won't have to worry about this provision because employers with fewer than 50 employees aren't subject to the “pay or play” penalty. For businesses with at least 50 employees, the possible penalties vary depending on whether or not the employer offers health insurance to its employees. If it does not offer coverage and it has at least one full-time employee who receives a premium tax credit, the business will be assessed a fee of $2,000 per full-time employee, excluding the first 30 employees from the assessment. So, for example, an employer with 51 employees who doesn't offer health insurance to his employees will be subject to a penalty of $42,000 ($2,000 multiplied by 21). Employers with at least 50 employees that offer coverage but have at least one full-time employee receiving a premium tax credit will pay $3,000 for each employee receiving a premium credit (capped at the amount of the penalty that the employer would have been assessed for a failure to provide coverage, or $2,000 multiplied by the number of its full-time employees in excess of 30). These provisions take effect Jan. 1, 2014.

The “Cadillac tax” on high-cost health plans. The new law places an excise tax on high-cost employer-sponsored health coverage (often referred to as “Cadillac” health plans). This is a 40% excise tax on insurance companies, based on premiums that exceed certain amounts. The tax is not on employers themselves unless they are self-funded (this typically occurs at larger firms). However, it is expected that employers and workers will ultimately bear this tax in the form of higher premiums passed on by insurers.

Here are the specifics: The new tax, which applies for tax years beginning after Dec. 31, 2017, places a 40% nondeductible excise tax on insurance companies and plan administrators for any health coverage plan to the extent that the annual premium exceeds $10,200 for single coverage and $27,500 for family coverage. An additional threshold amount of $1,650 for single coverage and $3,450 for family coverage will apply for retired individuals age 55 and older and for plans that cover employees engaged in high risk professions. The tax will apply to self-insured plans and plans sold in the group market, but not to plans sold in the individual market (except for coverage eligible for the deduction for self-employed individuals). Stand-alone dental and vision plans will be disregarded in applying the tax. The dollar amount thresholds will be automatically increased if the inflation rate for group medical premiums between 2010 and 2018 is higher than projected. Employers with age and gender demographics that result in higher premiums could value the coverage provided to employees using the rates that would apply using a national risk pool. The excise tax will be levied at the insurer level. Employers will be required to aggregate the coverage subject to the limit and issue information returns for insurers indicating the amount subject to the excise tax.

I hope this information is helpful. If you would like more details about these provisions or any other aspect of the new law, please do not hesitate to call.

Rick Adamson, CPA

713-956-6266

What a CPA has to say about the new Healthcare law

2010-04-08T15:33:00.000-07:00

I recently received the following from a fellow CPA and I thought you might enjoy it.

Health Care for CPAs

Bruce Bialosky
Monday, April 05, 2010

As a politically involved person, I have often been asked why I became a CPA. My answer has always been clear and simple – the public policy of this country runs through the tax code and I wanted to understand that code. Never in my 35-year practice has anything validated that decision like the Patient Protection and Affordable Care Act. This is not health care reform; it is a full-employment act for CPAs.

In an era where Congress changes the tax law more frequently than a Hollywood actress gets Botox shots, nothing has ever come along like this behemoth. My tax service sent me a list of the Internal Revenue Code sections affected by the bill. It came to 22 pages (in small type), enumerating changes in 231 different Code sections. Of course, that’s before the bureaucrats and the IRS get their hands on this. Once you realize that the IRS will be adding 16,500 new agents to enforce our “Health Care” laws, you’ll begin to understand what this whole fight was about. It has very little to do with your health, and a lot to do with control of your life.

Let’s start with Obama’s big lie. It is absolutely indisputable that taxes are being raised on people whose income is below the magical figure of $250,000. The way it’s done is by reducing the medical-expense deduction. Currently, you’re allowed to deduct out-of-pocket medical expenses that exceed 7.5% of your income, but the new law changes that to 10%. This means if your income is $100,000, and you paid $10,000 in hospital bills, you will lose a $2,500 deduction and probably pay about $700 in additional taxes. In a country in which only 12% of health care expenses are paid by the individuals who actually receive the services, this increase will just encourage more people to shift those costs to third-party payers.

Then there is the familiar political trick; i.e., claiming that your taxes are not being raised, but at the same time increasing taxes on companies that sell things to you. Of course, those companies just pass the cost along to you. Under this “reform,” new fees and taxes are being imposed upon three medical industry groups: health insurers, medical device manufacturers, and pharmaceutical companies. The insidious objective here is not just to hide the real cost of this new plan, but to encourage exasperated Americans – who ultimately have to pay these rising costs – to view government-run health care more favorably.

What the bill mandates is utterly surreal. For example, there is a $2 billion annual tax imposed on medical device companies through 2017, increasing to $3 billion thereafter. Each of these firms must report their sales to the Treasury, who will then apportion the $2 billion tax amongst the various companies. Since no one knows exactly how many medical devices are sold in America, the companies haven’t the slightest clue what their cost per device will be. Let’s say 10 million are sold in the first year – that would mean a fee of $200 per device. But what if sales are driven down because of these higher costs (not to mention the real possibility that some of the companies will go out of business because of these huge new fees)? What if only 7 million devices were sold in the second year? The tax per device would now be $285. That would not only drive up the price of devices again, but – more importantly – it will profoundly discourage product innovation and investment because no one would be able to anticipate their gross production costs.

The elimination of one specific deduction has recently received a lot of media coverage. Companies that provided a prescription drug benefit to their retired employees were until now able to deduct 28% of the cost. It is estimated that this exemption saved taxpayers about $544 per person compared to the price of Medicare Part D for the same drug benefit. Now Congress has told corporations that you can pay the benefit, but you cannot deduct the costs, which is why all these large companies are taking massive loss write-offs. How long will it be before the companies stop providing this benefit? Believe me – when this happens, there will be a further outcry from the Left; the demagogues will point fingers at private industry; and, again the argument will be made for a totally government-run health system.

There’s also a new requirement that companies with 50 employees provide health insurance. What happens to the employer who has 48, then 49 employees? They have to decide whether to expand and be harnessed with the new costs and administrative requirements, or stop the growth of their company. Talk about a job-killing provision.

Nancy Pelosi stated that this bill would create 4 million new jobs – 400,000 in the first year alone. It’s pretty clear that these jobs will all be the new government employees necessary to oversee these mandates, and administrative employees needed by businesses to comply. Not one productive job will be created, but thousands – maybe tens of thousands – will be lost or shipped overseas. The people of India are already salivating. If you thought our health care system hindered our international competitiveness before, just wait until Health Care Reform is fully implemented.

The only saving grace is that the bill takes on a favorite constituency of the Democrats – Hollywood. The bill adds a 10% tax on tanning salons. No doubt, that should balance the budget.

http://townhall.com/columnists/BruceBialosky

The Congressional Budget Office's Economic Outlook 2010-2020

2010-03-28T09:16:00.000-07:00

If you would like to know what the Congressional Budget Office (the one which opines that the new healthcare legislation will reduce the deficit!) has to say about the economy over the next 10 years follow the link below.

In summary it says:

1. Over the next ten years spending for Social Security will exceed receipts from the payroll tax by over $700 Billion.

2. Medicare receipts will only cover 47 percent of expenditures over the next ten years leaving $4.1 Trillion to covered by general revenue sources

3. By 2020 80 percent of the entire US Government budget will be made up of spending on defense, Social Security, Medicare and Medicade and interest on the national debt.

http://www.pgpf.org/resources/CBO.pdf

Napolitano on Healthcare

2010-01-24T17:04:00.000-08:00

Here is a short video where Judge Andrew Napolitano gives his thoughts concerning the Constitutionality of the Federal Government regulating healthcare. It is very insightfull. I hope you enjoy it.

http://www.youtube.com/watch?v=7n2m-X7OIuY

Economy

2009-09-09T08:10:00.000-07:00

Here is an interesting link and discussion about the economy

http://www.telegraph.co.uk/finance/economics/6147211/Barack-Obama-accused-of-making-Depression-mistakes.html

Guess who really pays our taxes

2009-08-30T13:47:00.000-07:00

Check out this link:

http://www.american.com/archive/2007/november-december-magazine-contents/guess-who-really-pays-the-taxes/?searchterm=who%20pays%20%20taxes

Number of Americans paying no Income tax--43million

2009-08-30T13:13:00.000-07:00

If you want to know who is paying the Federal Income tax check this link.

http://www.taxfoundation.org/research/show/1410.html

Where is our stimulas money going?

2009-08-30T12:25:00.000-07:00

Want to know where your stimular money is going? Check out this link. http://www.hivegroup.com/stimulus/

Unfunded Debt in the U.S.

2009-08-30T11:57:00.000-07:00

Check out this calculator in order to get an idea of the level of debt we are incurring in the U.S.

http://www.usdebtclock.org/

Reasons for the financial collapse

2009-02-20T16:44:00.000-08:00

When one combines the mandates of the Community Reinvestment Act with high fuel prices and high food prices (due to large subsidies for the production of ethanol) it is no wonder that we are having so much trouble in the economy.

Conventional wisdom attributes the crisis to the collapse of housing prices and the sub prime mortgage market in the United States. This is not correct; these were themselves the consequence of another problem. The crisis' underlying cause was the combination of very low interest rates and unprecedented levels of liquidity. The low interest rates reflected the U.S. government's overly accommodating monetary policy after 9/11. (The U.S. Federal Reserve lowered the federal funds rate to nearly one percent in late 2001 and maintained it near that very low level for three years.)

Facing low yields, this liquidity naturally sought higher ones. One basic law of finance is that yields on loans are inversely proportional to credit quality: the stronger the borrower, the lower the yield, and vice versa. Huge amounts of capital thus flowed into the sub prime mortgage sector and toward weak borrowers of all types in the United States, in Europe, and, to a lesser extent, around the world. For example, the annual volume of U.S. sub prime and other securitized mortgages rose from a long-term average of approximately $100 billion to over $600 billion in 2005 and 2006. As with all financial bubbles, the lessons of history, including the long-term default rates on such poor credits, were ignored.

As a result of all that liquidity and the desire by investors for higher returns the investment banks in New York put additional pressure on lenders to provide more sub prime mortgages so that they could be sold to these investors and satisfy their need for higher yielding investments.

Unfortunately, many of these sub prime mortgages had interest rates that adjusted upward in 2005, 2006, 2007 and 2008 which resulted in increased monthly payments. At about the same time, gas and food prices were going through the roof. As a result, many people could no longer make their monthly mortgage payments and foreclosures began to increase. Home prices began to plummet as well for the same reasons.

In addition, Consumers began to reduce consumption due to higher mortgage commitments and higher gas and food prices, as well as due to being laid off by their companies as a result of higher costs and reduced sales. This affected all business activity in the Country including automobile purchases, retail purchases and other spending which was the beginning of a viscous downward cycle of just about everything in the economy.

This called into question the safety of the investment instruments (securitized mortgages) developed by the investment banks. Some of these instruments were held as investments and some were sold to the investors discussed earlier. As a result of the increase in foreclosures, etc., the investors and banks began to discount the value of the holdings on their books which reduced their earnings and lowered or stopped their lending to consumers, other banks and foreign Countries. This has been called the banking crisis.

Thus, the collapse of housing prices and the sub prime mortgage market did not cause the problem but rather exposed a problem that was brewing on Wall Street since 1999 when the sub prime market began to develop as a result of the Community Reinvestment Act. It should be noted that the sub prime markets were not regulated in the way the stock market is and therefore those participating in it did pretty much as they pleased.

Over the last several years efforts were made by many (including John McCain, George Bush and others) to warn Congress of the potential problems that were on the horizon but these warning were ignored.

In the beginning the investment banks would package these investment instruments (backed by mortgages) and the investors (including the investment banks) would buy and sell these instruments for a profit. They would purchase insurance on the instruments from entities like AIG, (an insurance company that the Government has bailed out to the tune of about $150 billion so far) so they did not have to worry much about what they were purchasing. They also increased the instruments' value on their books using Mark to Market accounting when they thought their value had increased. This would produce profit for the investor and bonuses for their executives. They also borrowed additional funds using these increased values in order to purchase even more of the very same investment instruments which resulted in leverage at some banks of 30 to 1 as compared to their original cost (for every $1 they owned they owed $30).

Thus the banking crisis resulted from the banks own greed and leverage and the Federal Government’s belief that every American should be able to purchase a home (Community Reinvestment Act) and its failure to regulate the buying and selling of securities that were developed by the banks to buy and sell the sub prime mortgages.

In conclusion, this current mess we find ourselves in was caused not buy our citizens but by our Federal Government and the investment banks in New York.

Notes:

In a 1995 congressional hearing on proposed changes to regulation of the Community Reinvestment Act William A. Niskanen, chair of the Cato Institute, criticized the proposed regulations for political favoritism, micromanagement by regulators and ignoring possible bank losses and soundness. He argued that the "primary long term effect" would be to contract the banking system and increase neighborhood dependence on "check cashing outlets and pawnshops." He recommended congress repeal the Act, stating that the 1994 repeal of interstate bank laws would help poor communities receive adequate credit.

In an article for the New York Post, economist Stan Liebowitz writes that the CRA encouraged a loosening of lending standards throughout the banking industry despite warnings of default. Banks were allowed to loan to consumers who were not credit worthy with "no verification of income or assets; little consideration of the applicant's ability to make payments; no down payment." He notes that the Fannie Mae Foundation singled out Countrywide Financial, whose commitment to low-income loans had grown to $600 billion by early 2003, as a "paragon" of a nondiscriminatory lender who works with community activists, following "the most flexible underwriting criteria permitted." The chief executive of Countrywide is said to have "bragged" that in order to approve minority applications, "lenders have had to stretch the rules a bit."

A recent Wall Street Journal editorial on the current housing crisis argued that "Washington is as deeply implicated in this meltdown as anyone on Wall Street" because politicians "promoted housing and easy credit". The editorial lists the CRA as as one of the subsidies and policies, and stated that it "compels banks to make loans to poor borrowers who often cannot repay them".

In a piece for CNN, Congressman Ron Paul, who serves on the United States House Committee on Financial Services, partially attributed the current "economic downturn" to the Community Reinvestment Act, charging it with "forcing banks to lend to people who normally would be rejected as bad credit risks."

Opinions about Current Events

California

The American Dream

Taxes as a Percentage of GDP

Obama and Economy

More on the Coming Tax Increases

USA Today Article on Debt

Here Comes Biggest Tax Hike in History

Here Comes Biggest Tax Hike in History

“Tax Increases are Highly Contractionary” and “Our estimates suggest that a tax increase of 1 % of GDP reduces output over the next three years by nearly 3 %. The effect is highly significant." Christina Romer, Obama’s chief economic adviser.

Did you know that starting in 2011 (next year folks) Title IX Revenue Provisions- Subtitle A: Revenue Offset Provisions-(§ 9002) requires employers to include in the W-2 form of each employee the aggregate cost of applicable employer-sponsored group health coverage.

Declare Your Independence

Here are my requirements in order to vote for a candidate in November

Illustration of how the CDO bonds were manipulated

A Case for the Fair Tax Plan

Government Employees make more than you do

Health Care Reform

Tax changes affecting individuals in the health reform legislation.

Tax changes affecting small businesses in the health reform legislation.

What a CPA has to say about the new Healthcare law

The Congressional Budget Office's Economic Outlook 2010-2020

Napolitano on Healthcare

Economy

Guess who really pays our taxes

Number of Americans paying no Income tax--43million

Where is our stimulas money going?

Unfunded Debt in the U.S.

Reasons for the financial collapse