Broker Check

                                                                                                                                                        April 30, 2009

Presidential Numbers

            The Obamas reported about $2,700,000 in income for 2008 down from $4,100,000 in 2007.  Unfortunately for us, the income was not from a business or a job, rather it was from book sales.  Barack Obama, unlike most of us, has never had a real job.
            For people who have had a lot of income in the last couple of years the Obamas had relatively low investment income, about $19,000 in taxable interest income, $27,000 in dividends and $1,100 in capital gains.  The Obamas reveal by their investing, a profound ignorance of the free enterprise system and a predisposition to safety and security in their investments.
            The Bidens are more average in reporting income of about $269,000 with the primary source of income being their salaries.
           At least the Obamas reported higher than average donations of about 6.5% of their adjusted gross income and we were spared examples such as the Clintonian era revelations of how much Hillary valued the donation of Bill’s underwear and Al Gore’s $353 in total charitable contributions. Wall Street Journal 4/6/09 p. A3

Taxpayer Heroine

            Nina Olson heads the Taxpayer Advocate Service, an independent division within the IRS that is supposed to help taxpayers resolve complaints with the agency when those problems cannot be dealt with satisfactorily through normal channels.  Each year the Advocate must report on problem areas within the IRS that are in need of improvement.  This years submission, unusually blunt for a government agency, is a taxpayer’s delight.  "The most serious problem facing taxpayers is the complexity of the Internal Revenue Code-the only meaningful way to reduce these burdens (of compliance) is to simplify the tax code enormously."
           No one can cope anymore, "Individual taxpayers find the return preparation process so overwhelming that more than 80% pay transaction fees to help them file their returns."  The number of words in the code has grown by 2,300,000 since 2001.  In 2008 there were more than 500 changes to the tax code.  The Code has been amended 14,000 times since the mid 1980s.
           There are at least 16 incentives to encourage saving for retirement, again, with different parameters.
           The alternative minimum tax is an atrocity, in a class all its own.  It was enacted four decades ago to ensure that everyone pays income taxes, no matter what loopholes or deductions they might employ.  In 1970, only 20,000 high income filers were affected.  By 2010, the number will reach 33,000,000, with a substantial portion of the middle class affected.  The biggest trip wires for AMT (Alternative Minimum Tax) are family size (too many dependents) and living in a high tax state (NY, NJ, CA, MA).  In other words, if you have a lot of kids or you pay income taxes and real estate taxes in California, New Jersey or New York or a similarly greedy state you will fall into AMT quicksand.  Writes Olson, “Few people think having children or living in a high-tax state as a tax avoidance maneuver but under the unique logic of the AMT, that is how these actions are treated.”  Olson wants Congress to get rid of the AMT once and for all.
           The frustrated Nina Olson further recommended, “the tax laws should be simple enough so that most taxpayers can prepare their own returns without professional help, simple enough so that taxpayers can complete their tax liabilities on a single form and simple enough so that IRS telephone assistants can fully and accurately answer taxpayers’ questions… the tax system should incorporate a periodic review of the tax code- in short a sanity check.”
            Blunt enough?    Forbes 3/16/09 p.13

Financial Power Shifts from NY to DC

            As the nation’s most populous metro area feels Wall Street’s pain, the fourth biggest, DC, is barely sensing the recession.  Moody’s estimates Metro DC’s economy will grow 2.5% between mid 2008 and mid 2010, while Metro NY’s shrinks 4.2%.
            This has massive implications for job security, wage increases and the price of real estate.
           With NY, NYC, and NJ all looking to raise taxes and fees instead of cutting bloated bureaucracies and services as well as cutting legal graft and waste, the financial health of those of us who choose to stay does not look good.  Businessweek 3/2/09 p. 13

COBRA Subsidy Alert

            Workers let go after August 31, 2008 and before January 1, 2010 are allowed a 55% federal subsidy for COBRA coverage for up to 9 months.  Firms paying the subsidies up front will get them back by reducing payroll tax deposits.
            However, the subsidy will be recaptured as an additional tax on taxpayer tax returns for singles with AGI above $125,000 and marrieds over $250,000.  Therefore, high income, unemployed individuals may want to skip the subsidy and foot the bill themselves.  Kiplinger Tax Letter 3/6/09

            If you have any questions about the foregoing or any other financial matters, please call us.  If you want to read more, visit the AOHL Newsletter Archives at

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