Like much of the world, the area of federal taxes is just starting to undergo major changes. We strive to keep you abreast of the latest federal income tax changes.
The United States has been famous for kicking its financial obligations down the line to future generations. Well, the really bad news is we’ve reached the end of that line. The future is now and it is going to be painful. The debt ceiling negotiations in the summer of 2011 were just the first tiny step in dealing with the issue and you can see how big a boondoggle that was with the political “leaders” in Washington, D.C.
The truth of the matter with government finances is staggeringly scary. We owe about $14.4 trillion as I write this. This sounds like a lot until you realize we owe another $60 trillion plus and perhaps much more over the next 30 years. Yes, you read that right. By some estimates, we may owe as much as $120 trillion in total because of financial malfeasance. For instance, are you aware that Social Security has run an annual surplus for much of the last 50 years? Okay, so where is that money? Congress has been swiping it every year and giving the Social Security trust funds IOUs. Now that Social Security needs the money, the elected swine in Washington don’t have it. And people wonder why we are in trouble as a country.
So, what does any of this have to do with tax? Well, the current debate for dealing with the national debt problem falls into two basic camps. Tea Party advocates and conservative Republicans want no new taxes, but big spending cuts. Liberal Democrats want minimum cuts and big tax increases. Both parties are wrong. [I should mention I am a social moderate, but fiscal conservative for purposes of disclosure.] The only way to deal with the huge debt problems is for both events to occur – serious spending cuts and higher taxes. Ladies and Gentlemen, it is pain time.
There are 50 states in the Union and each goes about gouging…err, taxing its citizens differently. I live in California where taxes are… ridiculous. I am sure whatever state you live in has its own quarks. Regardless, we are not going to mention state taxes on this site much because we simply don’t have the manpower to do justice to what is occurring in all 50 states. Given this, nearly everything you find on the site will be tailored to federal income tax and federal business tax issues, so keep this in mind.
Depending on who you listen to, or more appropriately, what channel you are watching, the United States currently has either the highest tax rates in the world or the most lax corporate tax system around. Both statements are true. The United States currently has very high business tax rates. Having said that, only a fool ends up paying the full tax rate because there are so many loopholes and deductions that you can escape most of them. The classic example of this is General Electric who managed to make some $14 billion in profits in 2010 while paying $0 in taxes on the profit. The fact the company has a huge tax department loaded with tax lawyers and CPAs who used to work for the IRS hasn’t gone unnoticed.
Regardless, the business tax realm is going to change dramatically over the next decade. This is a huge potential revenue area for the government. From a national internet sales tax to perhaps a value added tax, you can expect the government to start going into this area regardless of who is in power. Then there will be the moves to slam shut the loopholes that make it possible for companies like GE to really get away without paying a single dollar in tax. We will keep you updated on the latest federal tax developments in this area.
Then there is the tax on us lowly peons. Yes, you and me. We don’t have a tax department full of former IRS employees. We don’t have our own lobbyist to get our elected officials to pay attention to us. You know what that means. It means we are going to get hammered by Uncle Sam. Think of a boy with a magnifying glass and an ant to get an idea of what is coming.
So, how will we lowly peons take a beating? The strategy is already starting to be formed and publicly so. There will be a move to “simplify” the income tax code. This simplification process will involve tax rates falling dramatically. Oh, there is only one small technical detail. Nearly all tax deductions and tax credits will be removed from the code. This means the mortgage interest deduction, for instance, will be eliminated. Ah, just what the housing market needs. The end result will be simplified tax code that reminds me of the old joke about the dream tax form of the IRS Commissioner. It would read,
“How much did you make this year?”
“Send it in.”
Hopefully you are laughing, but this is where we are headed. The government is desperate for revenues and there is no other choice than to raise taxes on pretty much everything and then invent a few new ones none of us have ever heard of. You can count on BusinessTaxRecovery.com to keep you updated on these events.