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…
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 year 2008, New Jersey holds the distinction of the state with both the highest property taxes per capita and the worst business tax climate in the nation, according to the Tax Foundation (note: report will download as a pdf). New Jersey residents also ranked highest in the nation last year with respect to state and local taxes as a percentage of income. New Jersey taxpayers paid a whopping 11.8% of income in state and local taxes, more than 2% above the national average.
Of course, this is nothing new for New Jersey. Residents have generally put up with higher taxes because of what they thought it bought them: some of the best schools in the country, for example. But in the midst of a bad economy, that has changed. New Jersey residents increasingly believe that higher taxes buy them very little (ask Robert Flach) except possibly more corruption.
Governor (for now) John Corzine became the first New Jersey governor to lose a re-election bid since 1993, when then Governor Jim Florio lost to an up and coming GOP challenger Christie Todd Whitman. Whitman, who made cutting taxes a priority in her campaign, later bit at an offer by President Bush clearly intended to knock her out of the public eye and into obscurity.
So what does that mean for New Jersey residents? Luckily for them, they can only go down from here.
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tax, New Jersey, Corzine, Christie, property taxes
This week, 157 House Democrats (which for math junkies like me, who want to know the actual percentage of House Dems who signed, it’s 62%) signed a letter which put House Speaker Nancy Pelosi (D-CA) on notice that an excise tax on high-cost health care insurance plans is not acceptable. Those who signed the letter believe the tax will hurt many middle class families.
So what exactly is the excise tax? Here’s the scoop: Max Baucus (D-MT) has proposed a 40% tax on so-called “Cadillac” employment-based health insurance plans. Currently, the proposal would define those high-cost plans as plans which exceed $8,000 for a single person or $21,000 for a family per year. The tax would apply to the amount over the cap. So, for example, a $10,000 plan for a single person would be subject to an excise tax of $800 (40% of the overage).
All taxes involve some kind of “and, if or but” and this one is no exception. The cap is raised for plans for workers in high-risk jobs and retirees over the age of 55. Those caps would be $9,850 for a single person and $26,000 for a family per year.
I was astonished to see those kinds of numbers. Those caps for health care benefits are equal to roughly twice the annual salary for minimum wage employees. Surely, those would be reserved for the top 1 or 2% of employees. Not so. The Joint Committee on Taxation has estimated that those caps would still affect 15% of employment-based health insurance plans in the first year alone. That’s a lot of taxpayers.
My gut is that if the excise tax does go forward, we’re going to see those caps go up significantly. But I also believe that if the cap goes away completely, everyone goes back to the table to start from (nearly) scratch. Paying for health care reform is a huge part of the bill and without that piece, it’s not going to move forward. In fact, President Obama has indicated that he will not sign a version of the bill which increases the deficit.
So all eyes on Pelosi to see what the response will be… I’ll keep you posted!
It was just a matter of time before Obama made a statement rebutting the suggestion from Geithner that a tax increase on the middle class was imminent. Apparently, a matter of time means less than a day.
Today, President Obama’s press secretary Robert Gibbs was quick to clarify that statements made over the weekend by Geithner did not reflect the president’s plans. Gibbs said this afternoon:
The president was clear during the campaign about his commitment on not raising taxes on middle-class families. I don’t think any economist would believe that, in the environment that we’re in, that raising taxes on middle-class families would make any sense.
Agreed (even though I’m not middle class).
When asked about comments made by Geither, Gibbs said, “They allowed themselves to get into a little hypothetical back-and-forth.” By using “they”, Gibbs was also referring to comments made by Larry Summers, director of the National Economic Council, who said on Sunday that he couldn’t guarantee that the middle class would escape a tax hike.
Gibbs was suggesting what many of us thought: that Geithner and Summers (who are not elected officials and do not make law) were essentially admitting that there’s no plan.
Am I allowed to say I told you so? According to my brothers, I’m pretty good at it…
