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As a tax professional I am constantly being questioned by many of my colleagues, peers, and friends concerning this stimulus package everyone keeps talking about. As many may already know, the bill was made law this past week and a lot of people have no clue what it does or how it affects us. Fear not, I have the perfect explanation, courtesy of an email my dad sent me earlier today.
Shortly after class, an economics student approaches his economics professor and says, “I don’t understand this stimulus bill. Can you explain it to me?”
The professor replied, “I don’t have any time to explain it at my office, but if you come over to my house on Saturday and help me with my weekend project, I’ll be glad to explain it to you.” The student agreed.
At the agreed-upon time, the student showed up at the professor’s house. The professor stated that the weekend project involved his backyard pool.
They both went out back to the pool, and the professor handed the student a bucket. Demonstrating with his own bucket, the professor said, “First, go over to the deep end, and fill your bucket with as much water as you can.” The student did as he was instructed.
The professor then continued, “Follow me over to the shallow end, and then dump all the water from your bucket into it.” The student was naturally confused, but did as he was told.
The professor then explained they were going to do this many more times, and began walking back to the deep end of the pool.
The confused student asked, “Excuse me, but why are we doing this?” The professor matter-of-factly stated that he was trying to make the shallow end much deeper.
The student didn’t think the economics professor was serious, but figured that he would find out the real story soon enough.
However, after the 6th trip between the shallow end and the deep end, the student began to become worried that his economics professor had gone mad. The student finally replied, “All we’re doing is wasting valuable time and effort on unproductive pursuits. Even worse, when this process is all over, everything will be at the same level it was before, so all you’ll really have accomplished is the destruction of what could have been truly productive action!”
The professor put down his bucket and replied with a smile, “Congratulations. You now understand the stimulus bill.”
So as you can see from the explanation it makes no sense. It is like a picture I once saw of Darth Vader using a water purifier to make sea water drinkable, it makes no sense…Darth Vader can’t drink water, and you cant pay debt by being in more debt…sorry all who read this previously, when I pasted the story, it was a bit mixed…
Keeping up with this blog is harder than I thought. Something about wanting the posts to be well written and having little time to do everything makes it so much harder than I expected. I have plenty to talk about, but so little time with which to work with. Tomorrow at work I should have some free time to get to blogging, in the mean time, here is a video I found, this should keep you entertained until I find something worth posting on and which I can find the time to invest research into. On a side note, before you watch the video, consider this piece of advice: You will not always know what it is you are doing, however, it is imperative that in all situations, whether you know what you are doing or not, that you surround yourself with people that do know what they are doing. Something my dad always taught me. Dale Carnegie is the man, consider reading his books…
On to the video:
“Gov. Rod Blagojevich was thrown out of office Thursday without a single lawmaker coming to his defense, brought down by a government-for-sale scandal that stretched from Chicago to Capitol Hill and turned the foul-mouthed politician into a national punchline.” – Yahoo
I think the title says it all.
So I have to say, inspite of the fact that I never was happy Obama became president, as a tax professional, I like where his plans are going for tax credits and the like. Obviously their are two sides to the coin and what might be beneficial to you and I, may not be so beneficial to the reduction of our budget deficit of infinity trillions of dollars.
So everyone knows, I am majoring in accounting and plan on gettting a Masters in Taxation. I work for a Liberty Tax Service, but consider myself to know more than the average tax professional. To put it in other words, I spend my free time going on a tax forum at About.com and posting responses to people’s questions. I also tend to read IRS publications and receive emails whenever tax laws are updated, yeah I am crazy.
Of course Obama’s tax laws are of the utmost importance to me, and recently doing some research on his latest act, The American Recovery and Reinvestment Act (HR 598), I was actually pleased with what I saw.
I obviously don’t want to go into any major detail because I could sit here and go on and on, however, I wanted to highlight the major changes that I found important.
Among some of the changes included increases to credits like the Hope Tax Credit, the Earned Income Credit, the new Homeowners Credit, the Child Tax Credit, and a few other things as well. I found these important as far as credits were concerned especially since one of them directly affects me. Obama wants to change the Hope Tax Credit (which is one of the educational credits given), and allow students to include the cost of books as qualifying expenses for the purpose of calculating the credit, in addition, he also wants to increase the credit and make 40% of it refundable, which to me is huge as this credit is nonrefundable and generally only benefits a person if they have any tax liability after all deductions have been taken.
One of the major tax changes that I especially enjoyed was the Marking Work Pay Tax Credit. With this credit, a person receives a $500 credit for the first 6.2% of earned income and this credit would either reduce the amount of FICA taxes withheld throughout the year, or appear as a refundable credit on the person’s tax return. The wording may seem a bit deceiving, like most tax laws do, but it would greatly benefit most people, as its phaseout doesn’t start until your Adjusted Gross Income reaches $75,000.
Other things like the revised Net Operating Loss Carryback rules are a big help for businesses. The new law would allow businesses to carryback 2008 and 2009 losses 5 years, rather than the current 2 year limit. What this does is allows companies that had profit in the years of 2003-2008, to reduce their previous profit with losses they may have seen as a result of the current economic downturn, which would in turn yield a refund to them, and a hefty one for most as the corporate tax brackets start at 15%.
Granted these are just some of the credits, but you get the idea, most of the changes are just like he said, help the middle to lower classes. Of course this is the positive side to the argument, because remember that every credit we receive is money the government doesn’t see in revenue, which you may not care to much about, however, that doesn’t help our deficit. We’ll save that conversation for another day. Below is the article with the information, in case you get bored… Oh and if anyone ever has any tax questions, I offer a free consultation if needed.
The cost of this new tax act you ask? A mere 550 billion dollars….chump change if you ask GM, Ford and Chrysler….
I was having a great day today until I came across this on the web. I know I said I would keep it to a minimum on the politics because of how pressed on time I have been with the tax season starting off, however, this picture made me want to swallow my own hand and proceed to beat my insides until I keeled over and died.
So let me see if I understand this correctly, a man who was impeached from office by a 114-1 vote, who was charged with conspiracy to commit mail and wire fraud and solicitation of bribery, is a public celebrity. So wait, all I need to do to get women and fame is to commit fraud to one of its highest degrees.
See this is what I spoke of in an earlier post with the flaw of our law. How is it that this man is not only making a case for himself and battling what he is truly guilty of, but is also acheiving celebrity like fame. I don’t understand how people are so blind and stupid that they condone such behavior.
I think the only thing worse would be if I heard on the news that some giant philanthropist donated a large some of money to Bernie Madoff, I think that may be the only thing worse than this picture.
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