Broker Check

January 22, 1999

Happy New Year!

          The following tax rates and amounts are effective for 1999:

          1) OASDI rate remains at 6.2% but wage base rises to $72,600 from
          2) Medicare rate remains at 1.45% and there is no wage limit.
          3) The maximum retirement earnings one can earn before social security
              benefits will start to be withheld is $15,500, up from $14,500 for
              those ages 65 through 69, and $9,600, up from $9,120 for those under
              age 65. There is no limit on earnings for 70 and older.
          4) Personal exemptions rise to $2,750 from $2,700 and exemptions will
              begin to phase out at $189,950 of AGI for couples, instead of 
              $186,800. For singles, $126,600 up from $124,500.
          5) Standard deductions will increase to $7,200 for marrieds in ‘98, up from
              $7,100. For children age 14 who must file returns, it remains at $700.
              Can be as high as $4,300 if they have earned income, up from $4,250.
          6) Income tax rates for ‘99 are the same as 1998, 15%, 28%, 31%, 36%,
              39.6% but brackets have been adjusted for inflation.
          7) Federal unemployment Tax Rate (FUTA) remains at .8%.
          8) IRS interest rate on refunds remains at 8% and 9% on taxes owed .
          9) Alternative Minimum Tax rate remains at 26% on first $175,000 of
              income and 28% over that. More people will pay this since brackets and
              exemptions are not indexed and there are fewer deductions allowed.
        10) Back up withholding rate remains at 31%
        11) 401(k) pay-in limitation remains at $10,000.
        12) 403(b) contribution limit remains at $10,000.
        13) Maximum level of pay on which pay-ins to plans can be based upon
               remains at $160,000, with the maximum pay-in for profit sharing plans
               remaining at $24,000, for plans putting in the maximum 15%. No
               change to maximum money purchase plan pay-in of $39,000 
        14) Business meal and entertainment deductibility remains at 50%. Standard
               business mileage allowance remains at 32.5¢ per mile. Drops to 31¢ on
               April 1, 1999. 
         15) Self-employeds and owners of corporations can deduct 60% of 
               medical insurance premiums as an adjustment to arrive at adjusted gross
               income, up from 45% in 1998.
         16) Federal estate tax exemption rises to $650,000 from $625,000.
         17) New York State Disability Insurance employee percentage is .5% of
               wages but not more than 60¢ per week
         18) Threshold for deposit requirements increases from $500 to $1,000.
         19) Maximum amount of rapid depreciation for small businesses rises to
               $19,000, up from $18,500 in ‘98.
         20) Simplified per diem allowances are up slightly for ‘99.
         21) Parents get larger tax credits for children under 17, $500 per child up
               from $400 in 1998. Phaseout for marrieds with AGI exceeding
               $110,000 and single over $75,000.
         22) Phaseout for IRA deductions start at $51,000 and end at $61,000 for
               couples, an increase of $1,000.
         23) Converting to a Roth-IRA in 1999 is taxed in one year, no long
               eligible for 4 year spread.
         24) More interest on some education loans is deductible in ‘99, up to $1,500
         25) Eligible portion of long term care premium rises for 1999, up to $2,660
                for those age 70 and older, $2,210 between ages 60 and 70, $800
                between ages 50 and 60, $400 from 40 to 50 and $210 for age 40 and
                under, deductible as medical expenses. It is the age at the end of 1999
                that counts. Daily limits for payments is $190 for 1999. 
         26) Medicare Part B premium is $45.50, still less than 1995!
         27) Luxury car tax drops to 6% for autos costing over $36,000.

941 Error

          The fourth quarter Form 941 has a new look. A printer’s error caused it to be printed in red instead of black. No other changes, however!

Again, We Exceed our Expectations

          In my capacity as a money manager, my model portfolio is expected to achieve a 21% return per year on a  five  year average.   For 1998, it achieved 21.1% (several percentage points greater than the Dow Jones average).


          There will not be any action to fix social  security in  1999.  Congressional Democrats detect a chance to regain control in ‘00, especially the House. A social security fix  would rob them of the  key campaign issue that the  GOP  threatens social security.  In order  for  there to be a social security repair job,  Republicans and Democrats must find a way to work together first. This will be more difficult in the wake of the impeachment.

          Before taxes can be cut, social security must be repaired.

More Predictions

          There will be a short trial in the Senate but  it will be longer  than  Senators Lott and Daschle would like. The stock market will stall in late January on fear of a long trial. It will be a good time to buy since the gridlock on the political scene only serves to prevent the President from interfering in the economy.    After one  more year, we will be in an election year where,  traditionally, the President will  try to stimulate the economy to help his successor.    In this case,  Gore who is probably the most likely candidate to help him with his legal problems.

          Stock market will reach  10,000 by  the  millennium and  continue to surge thereafter.

          As always, if  you have any questions about these or any other matters, do not hesitate to call me.