From the category archives:

politics

Who says that a little pressure doesn’t work these day? Singapore and Liechtenstein have both apparently decided that they wanted to be one of the cool kids after all. This week, both countries received word that they are slated to be removed from the dreaded gray list of the Organisation of Economic Cooperation and Development (OECD).

The gray list is a list of countries – more than 30 currently – who have made noise about increasing financial transparency but have not taken the necessary steps.

In the case of Singapore, it had publicly endorsed the transparency standard for tax purposes earlier in the year but had not signed the requisite number of financial agreements with other countries. It will hit the magic number *12* when it signs an Avoidance of Double Taxation Agreement or DTA with France this week. Singapore has also renegotiated agreements or signed new agreements with Mexico, Qatar, Norway, Austria, Australia, the Netherlands, UK, Denmark, New Zealand, Belgium and Bahrain.

Similarly, Liechtenstein has agreed two new treaties with Belgium and the Netherlands, respectively. Liechtenstein has also signed agreements with Germany, France, UK and the US. It is negotiating with Italy, Sweden and Norway.

The countries follow on the heels of Switzerland and Austria, which were removed from the grey list in September. This brings to 15 the number of countries which have been moved to the “substantially implemented” category since April 2009. The fallout from UBS is widely viewed to have contributed to the rush to be considered “mainstream.” The OECD is laughing all the way to the, er, transparent banks…

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As part of the continuing discussions about health care reform, the spectre of how to pay for it has risen again. Yeah, cause that’s how it apparently works in Congress. Much like college students, the plan is to figure out how to pay for all the binge-spending “later.”

So, with that in mind, consider this: Senate Majority Leader Harry Reid (D-NV) is seeking yet another source of funding for health care reform. This one would raise Medicare payroll taxes on couples who make more than $250,000 a year. Yep, these are the same folks that are likely getting hit with an increase in regular ol’ income taxes to pay for health care reform.

Reportedly, the increase would make up for concessions being made with respect to those Cadillac plans. If you believe the chatter, those thresholds may increase – to $8,500 for individuals and $23,000 for couples. The resulting gap will be narrowed by those increased Medicare payroll taxes.

The proposal isn’t much in terms of dollars. It would simply raise the payroll tax to 1.75% from 1.45% for individuals earning more than $200,000 a year and couples making more than $250,000. Popular for the middle class, sure, and for unions who have opposed the Cadillac tax plans.

But not so popular with high dollar wage earners who feel as though they’re being looked at to pay for, well, everything. Need a dollar? Jack up taxes on the wealthy. It’s just so easy.

But maybe – and I’m just throwing it out there – there’s not an endless pool of money out there. Maybe exerting pressure at every turn on high wage earners to make up the difference could have unintended consequences. John Goodman (not the actor who plays Roseanne’s husband but President of National Center for Policy Analysis) claims that the extra Medicare tax “takes money out of the system needed to create jobs.”

That’s not something to be taken lightly in this economy. And the GOP knows it. All of the Republicans in the Senate are opposed to the bill. To push it through and put the kibosh on Sen. Joseph Lieberman (I-CT), Sen. Reid needs the okay from everyone else. Everyone. I’m not sure he’ll get it. Just doing a little bit of math here… But Lieberman kind of counts as one of those “everyone else”, right?

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I just received a notice last week from my health insurance provider that rates at my office would be increasing an average of more than 25%. It’s not unexpected. Apparently, health insurance is one of the few industries which can regularly raise their prices by double digits each year without retribution.

But what is unexpected is that the increase is creeping us slowly towards what the Senate Finance Bill is calling a Cadillac plan. My bare bones little plan (no dental, no vision) now costs about $5,000 per year for individuals and $15,000 for families. And I happen to have one of the latter.

The Senate Finance Committee had proposed a 40% tax on the portion of insurance which exceeds $8,000 per year for individuals and $21,000 per year for families. If we get similar increases in our health care plans for the next two years, I’ll be extremely close to being at risk. God forbid we add dental (and I have three kids with crooked-y teethed parents so there’s no dispute that this will likely be a necessity at this point). Who knew that I had a Cadillac plan?

Notwithstanding public options and other controversial parts of the health care reform bill, the real issue that remains of concern to many is how the plan is going to be paid for… In addition to the 40% tax on those Cadillac plans proposed by the Senate, the bill as recently passed by the House would impose a 5.4% income tax on individuals making more than $500,000 and joint filers making more than $1 million. If existing tax cuts expire in 2011, which appears increasingly likely, the top income tax rate would grow to 45% – a 10% increase.

But here’s a thought. In an increasingly dim economy, isn’t it a little scary to rely on higher taxes from top wage earners to foot the bill?

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Businesses Get Tax Break

November 9, 2009 · 1 comment

Don’t get too excited. It’s not a huge tax break – but it’s not a bad one either. A bill that was rushed through recently passed in Congress, known as The Worker, Homeownership and Business Assistance Act of 2009, will allow businesses to apply losses retroactively.

The bill, which was tacked onto the homebuyer’s credit extension/expansion, would allow businesses which suffered losses in 2008 or 2009 to retroactively apply those losses to any five years prior to 2008. Known as a “net-operating loss carryback” or “NOL carryback”, those losses could previously only be carried back for two years. It’s an expansion of the NOL provisions under the American Recovery and Reinvestment Act (ARRA).

There are some restrictions. The one that’s been getting the most press bars businesses which have accepted TARP money from utilizing the expanded NOL carryback. That is, of course, so that Congress appears to be taking a hard-line against those businesses (all while allowing them to engage in the same kinds of risky behaviors as before).

The expansion is estimated to cost just over $10 billion over 10 years. The homebuyer’s credit is estimated to cost about $10 billion over 10 months.

Is it just me, or does this feel very “Old MacDonald” all of the sudden?

Here, $10 billion, there $10 billion, everywhere $10 billion…

Apple Harvest At Lake Constance

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US Clashes With UK Over New Tax Proposal

8 November 2009

When it comes to economics, the US and UK tend to find themselves on the same page. A recent example is their consolidated front over the need for banking transparency – both countries took a tough approach with respect to the banking secrecy laws of in Switzerland and Luxembourg.
But this weekend, the US and the [...]

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Housing Credit Extended – What Else Is New?

5 November 2009

If you’re opposed to extending the first time homebuyer’s credit (I am), you’re probably in the minority. And you’re definitely not in the Senate. The Senate voted unanimously to approve the bill and the House is expected to follow suit (at least the approval bit).
Under the new law, the first time homebuyer’s credit [...]

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Maine Says No To Tax Cuts

5 November 2009

If you ask a Mainer about taxes, you’re liable to get an earful: Mainers have one of the highest tax burdens in the nation. Nonetheless, on election day, Maine voters turned down proposals to cut taxes.
In a slow economy, Maine voters were leery of a proposal that would result in cuts in services. [...]

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Surprise! NJ Doesn’t Like High Taxes

4 November 2009

Despite three campaign appearances by President Obama, Governor John Corzine lost his gubernatorial seat in New Jersey to GOP challenger Chris Christie last night. Exit polls showed that the top two concerns for New Jersey voters were the economy and the state’s high property taxes.
How high are those property taxes? For the [...]

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Homebuyer’s Extension To Cost…

30 October 2009

Get ready for it… $10.8 billion.
This is an estimate for the extension portion only – the initial credit cost just over $8 billion.
Call it welfare, a bailout, an “incentive plan” – I call it bad policy.

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First Time Homebuyer’s Credit Likely Expanded

29 October 2009

You know what they say in Congress, if it’s not broke (enough), keep trying until it is…
So, with that in mind, Senate Majority Leader Harry Reid (D-NV) has announced an extension of the first time homebuyer’s credit.
Despite evidence that the credit has been used inappropriately – and perhaps criminally – lawmakers have agreed to extend [...]

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