The 2008 Election and Taxes

Filed in: Finance,Politics

Election ‘08 Taxes

Most of my life, politics hasn’t been a priority for me but as the economy craps the bed and America looks to be losing it’s competitive edge, I’m looking for change. America needs change and taxes will be an important part of my presidential vote. The October ’08 issue of Inc. Magazine had a great article breaking down each candidates tax proposals, Tax This; Tax That. Below are the key proposals for both candidates that Inc. Magazine has highlighted:

McCain
Key Proposals:

  • Extend the Bush tax cuts
  • Dramatically scale back the estate tax
  • Make permanent the Economic Stimulus Act’s more generous limits for expensing
  • Lower the corporate tax rate

Obama
Key Proposals:

  • Cut taxes for all but the richest 1 percent
  • Eliminate capital gains taxes for start-ups
  • Cut taxes for firms that add jobs in the U.S.
  • Close corporate loopholes and eliminate tax shelters

Both candidates are definitely looking to cut taxes, especially under the current conditions as the US faces a recession along with a worldwide economic slowdown.

Analyzing the proposals of both candidates, I feel that Obama’s plan would fare better for the middle class and America. Obama’s proposals includes a variety of tax credits like a $4,000 refundable credit against college tuition, extending the Earned Income Tax Credit to more low-income Americans and expanding the Child and Dependent Care Tax Credit. One proposal that really stood out to me was getting rid of income tax for seniors making less than $50,000 along with the other credits really looks like it will help the people that need it the most. With McCain’s proposal many American’s will also enjoy a cut in taxes but nothing really stood out to me.

Now down to business. How are these candidates going affect me and Pure Adapt, Inc. Here is a what Inc. Magazine highlighted for each candidate on business:

McCain
“As for the candidate’s business tax agenda, McCain would lower the top corporate income tax rate from 35 percent to 25 percent; he has also proposed, without offering specifics, measures that would expand the corporate income tax base. He has pledged to end preferential treatment for oil and gas companies and would establish a permanent research and development tax credit of 10 percent of wages spent on R&D. And for five years, businesses would be able to expense certain equipment purchases immediately. He also would make permanent the more generous limits for Section 179 expensing that were included in the recent stimulus package — a move that could be especially helpful for small businesses. On the other hand, he would repeal the Section 199 deduction for “domestic production activities,” a deduction meant to encourage businesses to keep jobs on U.S. soil. The deduction will reach 9 percent in 2010.

Obama
For businesses, Obama is proposing incentives to invest in small businesses and tax credits for small businesses that purchase health insurance for their employees. He would eliminate capital gains taxes for investors in start-ups and small businesses (terms that remain undefined by the campaign) and permanently resurrect the R&D credit for all companies.

Both set of proposals will help businesses in America but I like the cut of Obama’s jib a little more. I feel that Obama is focusing on small businesses slightly more than McCain. I am part of a small business of many in America which makes their tax proposals on business so important to me. I feel strongly that small business is a major make up of America and promoting small businesses will help America flourish again and push innovation to keep America strong.

Whether it’s Obama or McCain their proposals will surely help Americans financially. Either way both candidates need to cut government spending and live up their proposals. I am personally favoring the Obama and Biden ticket with their tax proposals that look to focus more on the middle and lower class and small business.

10/11/2008 Comments (1)

It’s Not a Bailout

Filed in: Finance

The financial crisis that we’re currently facing needs to be dealt with. It’s only going to get worst the longer we wait to take the necessary actions to contain this problem.

The thing I hate the most about what is currently going on is that everyone keeps calling it a “Bailout Package”. This is not a “Bailout”. There is something fundamentally wrong with our financial system that needs to be fixed. This is an Investment in America! Using the taxpayers money the government will be buying troubled assets that will make a return, that doesn’t sound like a bailout. Bill Gross from Pimco has even done the numbers which came out to 7-8% return for these assets, watch this video of Bill Gross on CNBC.

I’m all for free markets, but under the circumstances that we’re in from a plethora of actions taken in the past, intervention is absolutely necessary. I think it’s healthy to have contraction during an economic slow down when businesses fail or get bought out. This is survival of the fittest, but when you have only 2 investment banks left that may go under is a red flag that there is something wrong and action needs to be taken.

The “Investment in America Bill” did not pass the first time around in the House of Representatives and Dow Industrial Index spiraled down 770pts. It took a drop like that for people to think twice as the markets dwindled down through the rest of the week. Maybe if the media didn’t call it a bailout for Wall Street more people would understand that there was a problem that needed to be fixed.

The problem is that the credit markets are frozen right now. Financial institutions need the capital to start making money again. If we don’t do anything with the credit markets, things will only get worse. Banks can’t afford to lend money, then they can’t make money. No lending means people can’t borrow money for housing or cars. That means the housing market will continue it’s downward trend along with other industries. The economy will come to a halt and we’ll head into a recession, unemployment will increase and consumer confidence will be shattered. We’ve been in bad times in the recent past but we’ve always had credit to keep things going. Without credit you can see the chain of events that will lead us into a depression.

This really does suck. I’ve lost money myself along with many others, but how about those they are nearing retirement. They may have lost a good percentage of their funds as it looks like there weren’t many safe havens in the market, even in checking or savings accounts. Failure to act under the circumstances has probably cut the wealth of many individuals.

We can’t be playing the blame game cause it’s a combination of greedy lenders and overly optimistic borrowers taking on debt that doesn’t make sense with other factors that have gotten us into this mess. We can’t be harping on how we got to this point but instigate a solution to get out of it and learn from our mistakes. I hope it isn’t too late but there is an upside to the delay of the bill. There is probably more benefits to the taxpayers and they deserve it and I agree that there needs to be oversight of this government entity, CEO compensation regulation, and the taxpayer has to make out.

IT’S NOT A BAILOUT
IT’S AN INVESTMENT IN AMERICA

10/3/2008 Comments (0)

Government to the Rescue Again

Filed in: Finance

The government has stepped in again after a chain of bailouts that included companies like AIG, Fannie May, Freddie Mac, and others that totaled about $180 billion. This time a report has said that the federal government is going to create a government entity take on bad debt from banks . After this report broke the Dow rallied over 400 points. The market has been extremely volatile this past week as the Dow went down and up by hundreds of points, just the past two days down 400 points and up 400 points. Our markets are in crisis mode and it looks like the government needed to step in to settle things. The government has stepped in multiple times now and my question now is are we solving the fundamental flaws of our financial markets or just covering them up?

Here are my 2 cents on what’s going on:

  • I really hope we’re not covering up these problems and expect the government to step in every time there’s a crisis. There’s a problem with the system that needs to be fixed.
  • There’s going to be good and bad times but this may signal a great time to buy stocks. There are great stocks that have been beaten down for no reason other than fear that rules the market, like some tech stocks that don’t even work off credit for example.(aapl – 134.90, rimm – 98.18, msft -25.26)
  • The world markets look to be slowing and I think the US market was ahead in the slow down so the US should be the first to come out of the slump. If world markets slow I can also see money flow into the US markets.
  • There are great stocks out there and if you’re in it for the long term with a good company I think it will be ok.
  • If the recent dramatic drops show anything it may be a sign of a possible bottom. I’m not picking a bottom, but I personally think if you pick some good companies and buy in small portions there may be some very nice returns.
  • Energy prices have a gone down significantly that will help company expenses.
  • It sucks if you recently pulled your money out earlier this week cause you’re probably going to lose a lot of missing the rally that’s going on now. It was bad this week after Lehman Bros. filed bankruptcy and AIG announced it needed restructuring. It was really bad this week and I didn’t know what to do and really thought my portfolio had a chance to go to 0, but I thought I had to wait for pop before I get out.(DOW – 11,019.69 | Nasdaq – 2199.10 | S&P 500 – 1206.51)

These are my personal opinions and I’m in no way giving advice to anyone. If I’m right and buying stocks now may be very rewarding, but there are still many problems looming from the housing market and finding the future of energy. At some point the housing market has to turn around, banks will be lending money again, and our economy will be flourishing again. I really trust that the government needed to step in to prevent a catastrophe, as much as I don’t agree with it because there were obviously problems that were just overlooked that brought us to this crisis. When we see people taking out 50 year mortgages when they’re like 40 years old, why didn’t we see this crisis coming? Let’s not get into a the cycle of letting problems get out of control then beg for a government bailout.

09/19/2008 Comments (0)

I’m Bearish

Filed in: Entrepreneur,Finance

I don’t want to say it but I am bearish right now on the markets and economy. Right now there seems to be too many problems and unknowns.

I don’t think anyone likes the R word Recession, but we may already be in one. The most recent U.S. recession was from March 2001 – November 2001 defined by The National Bureau of Economic Research, or NBER. I don’t really have any memories of the effects of that recession, but if we do go into a recession I will be paying attention. As a business owner I am very interested on how it may affect me and my company. As an investor I don’t want to lose money in the stock market.

Reasons why I’m bearish:

  • The housing market still hasn’t bottomed
    • I think foreclosures will still be on the rise because people bought houses that they just can’t afford even as rates get lowered.
    • Home values decline will equal less spending using home equity
  • Credit problems still exist
    • It will still be hard to get credit
  • In the 4th Quarter, the economy grew at a measly 0.6%

I’m bearish but I think we will be in a stagnant economy and stock market more than anything. The fed is actively cutting rates with the global growth story, and an U.S. government stimulus plan will counter act the slowing economy. That’s why I’m leaning towards bear or sideways market and economy. Until some of those problems above become more clear I will be bearish.

If we are in a bear market right now, it sucks, I had a decent return in 2007 and I’ve lost in all in a mere 3 weeks to start this year. Patiently and optimistically I plan to capitalize off the stocks that have been oversold in the next few months. I hope to do the same with real estate market as I keep watching it fall and it may just be perfect timing for me at this point in my life.

Hopes to stimulate the economy the government will be giving a tax rebate, which I don’t think does anything because it will only look good for a quarter. Anyways I’m looking forward to the getting my tax rebate, but I really don’t know what I’m going to spend it on. I may spend some and use some for my bills.

What are you going to do with your tax rebate check?

01/31/2008 Comments (1)

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