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Enough time has passed since the new President has taken office, appointing (most) of his new cabinet, and retaining some of the former people from the Bush Administration - some key slots are still open like FDA, but what’s a few people here or there who die of food borne illness ?
Everyone is talking taxes (a perpetual favorite subject since the founding fathers). We’ve polished up the crystal ball. So here goes our delving into the future.
The cost of government is not sustainable at current levels of taxation - therefore, expect major tax increases, like the American Clean Energy and Security Act (sound like a winner, but in reality is a tax grab). Nothing is sacred. We look for higher payroll taxes, energy taxes, personal income taxes, and corporate taxes.
Top personal income tax rates of 39.5 percent and a possible 2% penalty on top of that if you earn over $350,000.00. The plan to tax health benefits is still floating around.
There has been no “bump” in consumer spending from the stimulus package that gives most who get a paycheck about $10.00 a week more (not enough to offset higher gas prices). Credit is still tight. More Banks are failing. Latest round of bank failures are smaller banks who are hurting because of business closures. Georgia has had the highest number of bank failures. You can see Bank Closure the map here. Some experts predict as many as 6,000 banks will close in the next two (2) years.
U.S. Auto companies are back selling their cars for Zero percent financing. This is one of the main reasons the U.S. Auto industry is in the shape its in. The Bush and Obama administration bailed out GM and Chrysler with treasury dollars. The financing arms of ALL the U.S. Auto Makers were allowed to become Federally Chartered Banks, so they could borrow from the Fed (Reserve) “Window.” Now, GM is turning around and financing some of cars/trucks they make for zero percent. Sorry folks, you can’t sustain any business by loaning money for no interest return.
IRS pushing for new reporting of 1099’s. Look for greatly expanded reporting requirements for many business entities - those who rent vacation homes. Also look for tougher stance on “home business” enterprises that don’t make money.
Look for state unemployment agencies to tax Sub-S Corp officers (same goes for partnerships) on profits from their K-1’s. Cash strapped state unemployment funds need the bucks. Two U.S. Court’s Of Appeals in 2004 and 2005 ruled the profits from S-Corp’s and Partnerships are taxable for payroll tax purposes.
IRS is also looking at requiring corporations to be sent 1099’s. Corporations have long been exempt from 1099’s because of the sheer number of transactions generated. We already know that credit card companies will be required to send 1099’s to on-line sellers.
States and localities have been following Uncle Sam’s tax and spend, spend and tax policies for so long, they too are after every penny they can get. Instead of putting the breaks on spending, state and local governments have enjoyed the housing cost run-up because their property tax receipts skyrocketed. Yearly reassessments were the norm and cities and counties were spending bucks like it was falling out of the sky. States had great sales tax revenues. That’s a thing of the past and homeowners are now balking at property tax bills based on old assessments. The localities don’t want to spend the money to reassess because home values have dropped.
All in all, nobody will escape higher taxes, because government will be spreading the pain across the board, with some being hurt more than others.
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