April 24, 1995

History of Taxation

          Jewish history is a story of one continuous struggle against unjust taxation, from the confiscatory taxes of Pharoah down to those of Hitler. Gentiles were not the only oppressors. King Solomon levied heavy taxes to pay for his wives and glory and his son Rehoboan was so arbitrary he inspired another in an endless series of Jewish tax revolts. Indeed, Israel became a symbol thoughout the ancient world of resistence to unfair taxation. Its defiance offered hope to an overtaxed world but Israel paid dearly.

          The Babylonian Captivity began when Israel`s king repudiated his tax treaty with Babylon and ended when King Cyrus, an astute tax man decided he could extract more taxes from Jews in Jerusalem than in Babylon. That is why only a few of the Jews returned to Israel.

          The embattled Jews carried out against Imperial Rome, one of the longest tax rebellions in history, but one of the most unsuccessful, as their prophets had warned. Even the feast of Hanukkah is rooted in the struggle. As the documents that established peace testify, the central issue in the revolt of the Maccabbees was taxation.

          As in ancient times, and so for modern times as well, when to resist oppression and when to seek peace is a perennial question.

Tax Preparation Softwares Bug Out

          In a recent statement, Intuit, the maker of Quicken, the popular personal finance program, announced its tax preparation program, Macintax, includes an error in it which allows a tax return transmitted via electronic filing to be viewed, tampered with or deleted by other persons.

          Intuit also previously announced that its Turbotax and Macintax programs contained flaws that would create incorrect tax returns.

          Intuit`s main rival, Block Financial Software, which produces the program Tax Cut, also announced severe errors in their tax preparation software.

          Intuit has stated they will pay any penalties and interest caused by their program.

Connecticut Rescinds

          Effective July 1, 1996 the 6% Connecticut sales tax on individual income tax return preparation will be eliminated. A similar tax on business tax return preparation is repealed effective January 1, 1995.

Automobiles-lease or purchase?

          Deciding whether to lease or to finance the purchase of an automobile seems to be getting more difficult (when feasible, an outright purchase is almost always more advantageous than leasing). From a financial perspective, leasing has become more popular since the tax deductions for sales taxes and personal interest were eliminated. From a nonfinancial standpoint, leasing is usually easier because the lessor often handles details such as registration and personal property taxes.

          What`s the difference?

          The major difference between purchasing and leasing is the portion of the car`s useful life that is being purchased. If you buy a car, you are paying for its entire life. When you lease, you pay for only part of the car`s life, so the more the care depreciates over the lease term, the higher the monthly lease costs.
          There are two types of leases. In an open-end lease, which generally has lower monthly payuments, you effectively guarentee the car`s value at the end of the lease. If it is worth less than the value assumed in the lease, you must make up the difference. Because of the potential high unanticipated costs of open-end leases, they have been banned in several states. The more popular closed-end lease leaves the risk of recovering the car`s residual value with the lessor.
          You should approach a lease contract with care. The capitalized cost (an agreed-upon price that is generally below the suggested retail "sticker price," plus fees, taxes, etc.), residual value (the car`s end-of-lease value), interest rate ("money factor") and term are all negotiable. Other matters to consider include:

• Are there any end-of-lease charges or early termination charges?
• How much is the charge for additional mileage?
• Does the manufacturer`s warranty cover the entire lease term?
• How is "abnormal wear and tear" defined?
• Is it a "subvented lease" (i.e., subsidized by the manufacturer)?

          You also may find it very important to have what is referred to as "gap insurance." This covers any excess between the early lease termination amount and what the car is then worth in the event it is stolen or totally destroyed.

         Advantages of Leasing 
         Among the advantages of leasing:

• Up-Front Costs are Lower-Up-front lease costs usually include a security deposit (typically equal to one monthly payment) and the first month`s payment. For repeat customers, security deposits are sometimes waived.
• Lower Monthly Payments-Because you are paying only for the use of a car for a specified period, the monthly payments are generally less than those for financing the purchase of an entire car.
• Easier to Upgrade-With lower monthly payments, you may be able to lease a car that is more expensive than you can purchase.
• Less Difficulty in Disposing of the Car-Usually, you can simply return the car to the lessor at the end of the lease (or, but it at a pre-set price).
• Drive a New Car More Often-Most lease terms are for two or three years; the average car loan runs four or five years. Because most leased cars are fully warrantied for the term of the lease, maintenance costs may be lower.

          If you have any questions on these or any other matters, please do not hesitate to call us.