December 1, 1993 Bull Market Boom! Most of you know that I am a student of economic and demographic trends. A major trend I see now is that the aging baby boomers (sadly, I am one) are starting to discover they must save for retirement and this at a time when interest rates are down. They have been burned by real estate since 1987 and do not want the current interest yields! The only place they can turn to is the stock market in order to get reasonable yields and appreciation. I think now is the beginning of a 15 year extension to the current Bull Market which will end only when the Boomers have retired and start to withdraw retirement funds instead of adding to them. Growth Stock Surge Increased tax rates will nudge taxpayers more to growth stocks offering the allure of future appreciation that would be taxed at only 28% and away from bonds and dividend stocks, where taxes are as high as 39.6% (60% in NYC). Are you listening Bill and Hillary? New Tax Filing for 1994-Form 945 Newly proposed regulations will separate both reporting and depositing of Federal employment taxes for payroll and nonpayroll items starting in 1994. Withheld "nonpayroll" taxes will no longer be reported quarterly on Form 941. Instead, they will be reported annually on a new Form 945, Annual Return of Withheld Federal Income Tax Deposit schedules would be separated beginning in 1996. The new rules are proposed to be effective for payments made after December 31, 1993. Taxes now reported quarterly on Form 941 would continue to be reported on that form, except for the following "nonpayroll" taxes that would be reported annually on new Form 945: backup withholding, voluntary withholding on annuities paid to individuals, withholding on pensions, annuities, IRAs and certain other deferred income, withholding on gambling winnings, and U.S. Armed Services retirement pay. Any taxpayer required to file a Form 945 for a calendar year would have to continue filing one for each subsequent year, whether or not it has a liability for the later year. Corn Products Doctrine Prevails Pushed by a recent unanimous decision against it in the Tax Court, the IRS has issued regulations that reverse its five-year old policy of characterizing losses from business hedges as capital losses which cannot be deducted against ordinary income. New temporary regulations now generally treat such losses as ordinary. To get the favorable tax treatment for losses on business hedges entered into after 1993, taxpayers will have to identify and keep records on hedge transactions. Under proposed regulations, gain or loss from business hedging transactions will have to be recognized when the corresponding item is recognized from the asset or liability being hedged. Watch Your Pockets! The current administration in Washington has a public relations ploy that will backfire one day. Al Gore is telling us that the Administration is going to "reinvent" government so as to reduce its size and save money. At the same time Bill and Hillary announce that as soon as possible the government will take over the entire U.S. health care system, one-seventh of the Gross National Product. So while Gore talks smaller government, the Clintons expand government on an unprecedented scale. One wants to cry out, "physician, heal thyself". However they may be disguising it, the Clintons propose to socialize medical care. It is almost impossible to imagine Thomas Jefferson turning totally away from personal ownership and personal responsibility and toward the monumental governmental power-grab that is being proposed. Benjamin Franklin would have mocked it! James Madison would have abjured it! It is foreign to our founding principles. It exalts big government at the expense of personal property, liberty and personal responsibility. Instead of being true to the American tradition, Drs. Clinton prescribe European-style statism at the very time when Europeans are turning away from it! There is an American style alternative-the Gramm Plan, but who has heard of it? How will we pay for this travesty? Increased taxes, oh yes, we will now call them increased premiums. Remember Al Gore`s reinvention of government-seems his plan is to turn government over to the unions! Now, that`s novel! The unions said they will accept reorganization but they will call the tune. The Clintons surrendered without a word. An Executive Order signed October 1, 1993 creates labor management councils in agencies and gives the unions the ability to block decisions they don`t like on matters such as whether and how to automate and which jobs are to be cut. It`s the Clinton pattern: Say one thing, do another. Good for Small Businesses Mayor Rudy Guiliani and Governor Christie Whitman. Congratulations To Pier Piccoli of Piccoli & Piccoli Media Marketing Enterprises, Inc. for finishing the New York City Marathon. We wish you a safe, healthy and happy holiday season as well as hope you finish your year-end tax planning before embarking on year two of the Clinton roller coaster. As always, if you have any questions about these or any other financial matters, please call me.