Late last night the House passed The Tax Relief Act with a surprisingly large bipartisan majority of 277-148. The bill has already passed the Senate and President Obama is expected to sign shortly.
More details of what is in the bill can be found on our McKonomics blog post from earlier this week. Please feel free to contact me or our firm to discuss year-end tax planning moves.
Recently I attended the Lancaster Chamber of Commerce’s Economic and Market Outlook. During the presentation, Linda Duessel, who is senior vice president, senior portfolio manager and market strategist at Pittsburgh-based Federated Investors shared her economic outlook and brought forth what I thought was a fairly realistic view of where our economy is headed. During her presentation she explained why she is very bullish on the stock market in the short term.
She pointed out 3 recent events that are very positive for the stock market in the short term:
1. The election results – the Republicans taking control of the House of Representatives will result in split government and historically the stock market responds well to gridlock.
2. The QE2 (Quantitative Easing) – the recent announcement by the Federal Reserve to purchase $600 Billion of debt. (Not sure what QE2 is, click this link to watch my video blog post on the subject.)
Obama and the Republicans have reached a compromise on the Bush Tax Cuts. However this deal has not been endorsed by the Democrats in the House and therefore it has not passed. It is expected that some form of the below bullet points will be passed before year end. However, many expect that a further compromise on the rate and/or the exemption threshold of the estate tax will need to be made in order to get the votes needed to pass.
The current plan extends Bush-era income tax rates for all taxpayers for two years, extends unemployment compensation for thirteen months, cuts payroll taxes for one year, sets new estate tax rates and fixes the alternative minimum tax. Here is a summary of the proposed plan:
Continue reading "A Compromise on the Bush Tax Cuts, But Will it Pass?" »
I have been getting a lot of questions about the recent quantitative easing by the Federal Reserve Chairman Ben Bernanke. In order to properly explain this difficult concept, I felt like I needed to draw on my white board. I hope this video clip helps you to better understand this complex, but significant topic.
If you find this useful, please feel free to share with others and as always I welcome your feedback.
Last night was a huge and historical night for Republicans, but what does it mean? Will we see massive changes in Washington? Will key pieces of Health Care be repealed? Will the economy suddenly get better? The answer of course is no, but with split government we should get a good bit of gridlock. The business community certainly needs a chance to catch its collective breath and absorb all the massive changes that happened the past two years, and this gridlock should be a positive.
As I started to put together a list of what this election means, I stumbled upon an excellent bullet point summary by Kiplinger. I found their list to be spot on with my thoughts. If you desire to read the article, here is the link.
Here is a rundown of what this election means to you:
Two things my blog readers seem to always like, pretty charts and posts regarding Gov’t spending/tax updates. Well today is your lucky day!
The good folks at MyBankTracker have created a very cool chart that shows just how our government spends our tax dollars. This chart shows the areas of spending, discretionary and mandatory. What is key to note here is that our mandatory spending is almost twice what our discretionary spending is. That means when it comes time to cut spending, so much of our budget is fixed and not able to be cut without some major changes (i.e. social security, medicare…). Click here to view a larger version.
One thing is certain, we may need a chainsaw to fix this problem and not a scalpel.
It was 20 months ago that congress “speed rushed” the $787 billion stimulus package through congress with a goal of creating jobs. In fact, several in Washington told us that unemployment would not exceed 8% if this was passed. Well, how effectively was the money spent?
If you base the result simply on unemployment, not very well. As everyone knows, the U-3 unemployment is currently at 9.6% (and the less publicized U-6 underemployment is at 17.1%) and many jobs were lost in the months after the bill was passed. But let’s suppose we give them the benefit of the doubt that the recession was worse than they knew (I know, but just go with me on this). How well did the stimulus money work at “creating” jobs?
Continue reading "Did the $787 Billion Stimulus Package Create Jobs?" »
I get this question a lot and my standard answer is, “If I knew that, I would be a very rich man.” In all seriousness, it is difficult to predict and no one knows what will happen. However, in trying to read the tea leaves, it would seem the answer is yes it is coming and probably in the not too distant future.
On Friday, our Federal Reserve Chairman Ben Bernanke gave a speech and openly discussed that inflation at less than 2% is too low and why the Fed must encourage greater inflation to reduce our huge jobless rate. "Inflation is running at rates that are too low relative to the levels that the (Fed Open Market) Committee judges to be most consistent with the Federal Reserve's dual mandate in the longer run," he said. That dual mandate is to maintain stable prices and low unemployment.
With the U-6 unemployment rate at 17.1% the Fed is clearly concerned about jobs and the short term pain associated with it. We currently are in a flat or deflationary period – meaning the price of goods and services are falling or staying flat. The problem with low inflation or deflation is that it is not just a sign of a weak economy. It can actually make a weak economy even weaker.
Many have different opinions on whether this is a good idea, if the rich deserve a tax break, if they are paying their fair share… All of this talk reminds me of a cute little tax fable that was given to me many years ago and I thought now was a good time to share.As most everyone has heard, the Bush tax cuts are set to expire on December 31, 2010. If nothing is done a huge tax increase will be placed upon the highest income earning Americans.
I was having lunch with one of my friends last week, and the conversation turned to the government’s recent round of tax cuts. “I’m opposed to those tax cuts,” my progressive friend declared, “because they benefit the rich. The rich get much more money back than ordinary taxpayers like you and I, and that’s not fair.”
“But the rich pay more in the first place,” I argued, “so it stands to reason that they’d get more money back.” I could tell that my friend was unimpressed by this meager argument. So, let’s put tax cuts in terms everyone can understand.
Continue reading "Bush Tax Cuts Set to Expire – Should They? A Tax Fable to Enlighten" »
In preparation for my upcoming discussion group about Thriving in the New Normal, I have been doing some thinking, reading and collecting of ideas for ways to improve corporate performance. According to the 2010 U.S. Bank Small Business Survey, nearly 90 percent of small business owners across the nation say the economy is still in a slump and 75 percent expect the recession to continue into next year.
If there is a new normal and consumer spending has been reset for the next few years (or more), what can organizations do? Maybe it's time to take a good look at your company's operations with an eye toward giving it a tune up. Think in terms of striking a careful balance between cost cutting, new spending and improving operational efficiency.
Focus on the fundamentals by answering some performance questions like these:
