May 31, 2009 Jack KempCapitalist for the Common Man Jack Kemp was among the most important Congressmen in U.S. history. He wasn’t powerful because he held a mighty post and he never served in a House majority. His influence sprang from the power of his ideas and from the sincerity and enthusiasm with which he spread them. It was unlikely that this son of a truck driver who was a celebrated quarterback with the Buffalo Bills would become a champion for the economic ideas that challenged the Keynesian orthodoxy of the 1970s. He mounted an insurgency within the Republican Party which for decades had been dominated by budget balancers who saw their fate as moderating and paying for liberal excess. Along with Senator Roth of Delaware (yes, of ROTH-IRA fame!), Kemp proposed a 30% across the board tax cut. The Democrats, who ran Congress, combined with old guard Republicans to defeat it during the Carter Presidency. Reagan liked what he saw and made Kemp-Roth his own and campaigned on it in 1980 and the proposal eventually became the basis for the 25% income tax cuts that finally took effect in 1983 and became the most successful domestic policy achievement of the modern era. The Dow which was 700 in 1967 and stayed that way for sixteen years until 1983 took off and went up 20 times until it reached over 14,000 in 2007 and the greatest accumulation of wealth in the history of man occurred. The Kemp-Reagan policy mix of lower taxes to lift incentives, sound money to break the 16% inflation of the Carter years and regulatory relief to unleash entrepreneurs, became the foundation for the prosperity of the 1980s and 1990s. Unlike many of today’s Republicans, Kemp’s populism was inclusive and he ventured into neighborhoods where Republicans too rarely tread. Kemp used to say he had showered with men that many of his fellow Republicans would not talk to. Kemp’s ideas and legacy continue to be relevant for today’s Republicans even if few of them seem to recognize it. The financial meltdown and recession have given President Obama a chance to revive a policy mix of higher spending and taxes, intrusive regulation and easy money. If those policies do not result in a sustainable expansion-and history argues that they won’t-then Americans will again be looking for other ideas. Wall Street Journal 5/4/09 p. A16 Ebayers Beware! Get ready for more information reporting via the issuing of 1099s. As the tax code continues to become more complex, the IRS cannot do enough audits of folks who are gaming the system. So, the result is a lot more paperwork. Already a done deal, basis reporting is scheduled to start for securities purchased after 2010. Once broker-dealers start notifying the IRS about their customers’ basis in stocks, bonds, mutual funds, options and other securities they sell, the IRS will fid it much easier to determine whether taxpayers are underreporting capital gains. Starting in 2011, credit and debit card issuers will have to give the IRS the names, addresses and Tax ID numbers of the merchants who use the cards. Paypal and other payment networks must also issue 1009s on payees who participate in more than 200 transactions and receive more that $20,000 a year. The IRS hopes to use the Paypal records to catch tax evaders who fail to report income from sales via Ebay, etc. The Kiplinger Tax Letter 3/20/09 Landlords Beware! Next on the list, Obama has proposed that all landlords, including those who rent out part of the home in which they live, will have to issue Form 1099s to service providers such as plumbers, painters and electricians. Obama’s Worst Jobs Killer was his announcement that he plans a major tax code overhaul. More than anything else, business needs a predictable environment if it is to create jobs. Changes to the regulatory environment and the tax code make it almost impossible for business to make investments. (But, tax lawyers and tax accountants will do well explaining the new laws and planning for the transition!) American businesses all over the world and foreign businesses operating in the U.S. will cut back on investments until Paul Volcker reports in early December, 2009 on what the changes will be. Most incredible is the fact he chose the middle of a deep recession to announce this overhaul. Who in their right mind is going to invest significantly in new plant, equipment, services, personnel or anything else when you cannot know how the tax code might penalize you? NY Post 4/12/09 p. 33 NY Tax Law Changes Affect Certain Estimated Tax Filers As a result of recent NY Tax Law changes, the personal income tax rates for 2009 have been increased if your New York taxable income is more than $200,000 and you are filing single or married filing separately, $250,000 if head of household, and $300,000 if married filing jointly. Additionally, if your New York adjusted gross income is more than $1,000,000 your New York itemized deductions are eliminated except for 50% of charitable contributions for federal purposes. According to New York, there will not be any penalty for any shortage in your April 15, 2009 payment that is attributable to the changes, provided that the shortage is included in your June 15, 2009 payment. New York State N-09-7 5/09 Please contact us if you think you will be affected. If you have any questions about the foregoing or any other financial matters, please call us. 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