September 30, 2012 California’s San Bernardino is Bankrupted San Bernardino, could not close a $45,800,000 budget shortfall and could not make the payroll this summer. With only $150,000 in the bank and rising public pension costs, which will consume 15% of the budget within 3 years, it filed for bankruptcy protection. This, despite the fact it cut its workforce by 20% in the past four years. Los Angeles Times 7/12/12. Senior Benefits Having reached “senior” status, I have started to look for “benefits.” Here are some items I have found so far. For 106 stores with Senior Discounts go to http://www.bradsdeals.com/blog/2011/06/28/stores-with-senior-discounts/ Military Benefits Since I am a retired US Coast Guard reservist, I started to look for discounts. I found that if you have a government issued Veteran’s Identification Card (mine is issued by Monmouth County) you could receive an Everyday 10% Military Discount at Lowe’s and Home Depot. If you do not have the card, you can obtain the discount at least four holidays during the year; you would have to show your DD214 as proof of discharge and service. Illinois Downgraded On August 28, 2012, Standards Poor’s downgraded Illinois bonds with a continuing negative outlook. Illinois has the worst rating of any state, other than California. The past five years have included $44 billion of deficits and $83 billion in unfunded pension liabilities. The politicians of Illinois are unfazed and increased personal income taxes by 67% and the corporate tax to 9.5%. WSJ 8/30/12 p. A14. Scranton Cut Workers’ Pay To Minimum Wage The mayor of Scranton temporarily cut the wages of police, firefighters, and others including himself to minimum wage stating the city had only $5,000 in the bank. The mayor said that once the immediate crisis was over, the workers would be paid their deferred pay. Scranton is one of about 20 cities across Pennsylvania operating under a state law for fiscally distressed municipalities. Others include Harrisburg, the state capital, and Pittsburg. Some trace Scranton’s woes to a state law that says cities must follow contract terms set by an arbitrator regardless of the city’s financial situation. The state Supreme Court ruled in the fall, that Scranton had to pay $30,000,000 in additional labor costs granted through arbitration. WSJ 7/10/12 p. A2. Oakland Angles For An Exit The city of Oakland, California has eliminated hundreds of jobs, cut salaries, and reduced library hours all to help ease the financial strain caused by the tepid economic growth and a housing downturn. Now, Bay Area city officials want out of an interest rate swap that costs the city $4,000,000 per year. Goldman Sachs, which developed the contract in 1998, has said it is willing to oblige if the city pay the firm $15,000,000 to terminate it. These derivatives are supposed to save governments money when interest rates rise, but have turned costly, as rates have sunk toward historic lows. Wall Street Journal 7/24/12 p. C3. Romney’s Tax Return And YOURS! Much has been said about the less than 15% tax rate that Governor Romney paid on his tax return. The Democrats have said it’s unfair. Let me explain how he did it and how I achieved the same results for my investment clients. First of all, Romney has not had any earned income for over 10 years; earned income is taxed at the approximately 40% top rate. His income is from capital gains and dividends, which is taxed at a 15% tax rate. The capital gains come from sales of securities and the special tax treatment for “carried interest” which is a benefit for those who invest in hedge funds (an investment I do not make for clients. Additionally, he then gives away 30% of his income to charity, an amount approximately 15 times the national average. What we do for taxable investment accounts such as individual or joint accounts is to invest in investments providing dividends, which is taxed at 15% until January 1, 2012 when the Bush tax cuts expire. The rate will then rise to the high marginal tax rate paid by individuals. We also invest in tax-deferred investments whereby clients receive cash income but are generally not taxed until the investment is sold, and then at a capital gains rate. So what is good for Romney is good for our clients! 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!