May 31, 2012 Melissa is Now The Lead Partner On Many Engagements “Young men do not kill themselves by work. TOO MANY ELDERLY BUSINESSMEN DO. They do not know how to relax mentally. They cannot really play. Many of them worry too much. Often their family life suffers. Past middle-age-fathers, engrossed completely in their own activities, frequently haven’t adequate sympathy with their children’s natural love of fun, recreation, and pleasure. My advice to aging business commander-in-chief is to DIVERT MORE AND MORE MANAGERIAL DUTIES TO THEIR MOST CAPABLE ASSOCIATES and to devote themselves increasingly to the leisurely enjoyment of life and family made possible by release from the daily grind.” B.C. Forbes (1938). Having gone through tax season many of you may have wondered why you were having my partner, Melissa, asking most of the questions with me being brought in on a consulting basis. I believe the foregoing quote explains the reason. For too long I have done it all, accounting, tax, brokerage, money management, financial retirement and estate planning, legal and insurance matters. It is now time for me to step back and let the qualifying players from the bench enter the starting line-up. I am not going anywhere, but I may be more useful in a relief (or consulting status) for accounting and tax matters. For now I will still be the starting team on the other lines of business while the bench strength is being developed. More Canaries Chicago’s Mayor Says Pensions Are Breaking His City Illinois’ pension bill has risen 400% in the past five years and consumed the entire increase from last year’s individual and corporate tax hikes. The pension funds are projected to be out of money within 10 years. The increase in pension costs has caused a $9 billion backlog of unpaid state bills and Chicago’s mayor is warning that Chicago’s property taxes could rise 150% over the next 3 years due to retirement costs as well as increasing class sizes to 55 students. The mayor further said, “costs associated with maintaining the retirement system has come to a point that you cannot do the basic things that you need to do as a city in providing for your residents - whether that’s garbage collection, recycling, areas of public safety - and maintain those obligations.” The cause? Illinois teachers pay almost nothing towards pensions and can retire at age 60 with a pension equal to 65% of their final salary plus 3% annual compounded cost of living increase; courtesy of the taxpayers. No wonder, Illinois businesses are moving out. No wonder, by a three to one margin voters favor reducing pension benefit over paying higher taxes. Wall Street Journal 5/30/12 p. A12. Blue State Blues Which states are in the worst financial condition? By and large, the ones where the Democrats rule. They are: State Debt per capita 46. New Jersey $3,621 47. California $1,805 48. Connecticut $4,490 49. Illinois $1,877 50. New York $2,921 The five most fiscally fit states are more of a mix with Utah, Nebraska and Texas being red and New Hampshire and Virginia, being purple: State Debt per capita 1. Utah $447 2. New Hampshire $525 3. Nebraska $ 17 4. Texas $520 5. Virginia $782 The financial ranking was part of a recent Forbes report on the global debt bomb. The political affiliation data was compiled by Gallup. Democratic states struggle more than Republican ones due to strong unions and bigger public programs. Unions, in general, have more influences in Democratic states (not to say this is bad) but where they are strong you have bigger demands for social services and coalitions with construction companies, road builders and others that push up debt says the professor emeritus of political studies and public affairs at the University of Illinois’ Center for State Policy & Leadership. Forbes 3/29/10 p. 34. Raise S Corp Taxes? If the Senate Democrats get their way, there will be a self-employment tax of 15.3% on all profits if 75% or more of the income is attributable to 3 or fewer shareholders. Senate Republicans blocked this twice. Kiplinger Tax Letter 5/25/12. If this happens, please contact us to see if it is advisable to break your S Corp election. 3.8% Medicare Surtax is Coming in 2013 and it hits more than individuals. It will also might apply to trusts and estates with undistributed net investment income. If you have such a trust or estate you may want to have us review your situation to see if it will apply. Be advised, the IRS has yet to issue detailed regulations on the scope of the surtax. Kiplinger Newsletter 5/25/12. As always, if you have any questions about these or any other matters, do not hesitate to call us. Remember, We’re Here For You!