Taxes are going up! Are you going to run out of money?

By Jeffrey Brooks, CPA, CFP , MBA jeff@jbrookswa.com

Tax Planning and financial planning are even MORE Important than ever. We need to make choices to priortize our time and take care of our financial health. How much we spend and save are our responsibilities.

Saving for retirement is our responsibility because most people do not understand how much they should be spending to avoid running out of money in their senior years.

People are depending on social security and medicare to offset their spending.

I don’t think this is wise. I think Social Security and Medicare benefits will be reduced! These entitlement programs are the are the biggest part of our government’s spending and the U.S. is not raising enough revenues. Military spending will continue because we believe that we need to be the world’s policeman.

I recommend strongly that a comprehensive tax and financial plan should be mandatory for each of us!!

Without these tools we are “driving” blindly.

The tax rates have to increase because as Democrat Max Baucus stated “Deficits and debt are not just a spending problem,” Baucus said in a speech to the Bipartisan Policy Center, a think tank. “We simply don’t raise enough revenue.”

This article is from Reuters published on June 11, 2012
WASHINGTON, June 11 (Reuters) – The United States is on a “dangerous path” that could lead to a European-style fiscal crisis, the Senate’s top tax legislator warned on Monday, while calling for more tax revenue and ending corporate incentives to shift profits and jobs overseas.
Democrat Max Baucus urged fellow lawmakers to resolve by the end of 2012 a host of “crucial spending and tax decisions” that will arise immediately after the Nov. 6 presidential and congressional elections.
The remarks by the chairman of the Senate Finance Committee were short on specifics and did not lay out a clear working agenda, but they reflected growing urgency on Capitol Hill.
After the elections, a wave of fiscal issues will hit Congress, including the expiration of temporary tax cuts made under presidents George W. Bush and Barack Obama, huge budget cuts ordered last year, and what to do about various tax breaks.
Decisions on these and other questions will come at a time when the United States, struggling to grow out of a financial crisis and recession, has run federal budget deficits topping $1 trillion for three straight years and is on track for a fourth.
At the same time, protracted fiscal crises in Europe are casting a shadow over the sluggish U.S. economic recovery.
Action on a deficit-reduction plan and tax code overhaul has been put off over the last two years as Democrats and Republicans have been unable to overcome deep divisions, with Democrats seeking tax increases on the wealthy and Republicans focusing on domestic spending cuts without any tax increases.
“We’re on a dangerous path. If we don’t act, it could lead towards fiscal crisis, like some European countries,” Baucus said.
Obama, a Democrat, and lawmakers from both parties say they favor cleaning up the tax code in a broad overhaul, which most define as cutting marginal tax rates while trimming tax breaks that favor individual groups and industries.
Baucus said he has been in bipartisan talks to find a way forward on an end-of-the-year deal to avoid the fiscal cliff. Meetings are focused on two proposals with some bipartisan backing, including one recommended by the president’s fiscal commission, known as Simpson-Bowles.
While Simpson-Bowles failed to garner enough backing to trigger a congressional vote and Obama did not embrace it, comments by Baucus suggest it may be gaining new currency.
‘NO ESCAPE’
Echoing other Democrats’ views, Baucus said any tax code rewrite must raise revenue, a position that is at odds with the Republican negotiating stance. “Mathematically there is no escape,” Baucus said, without laying out any details.
Separately, former Republican House Speaker Dennis Hastert and former House Democratic Majority Leader Dick Gephardt called for a bipartisan deal on how much revenue the government should raise. After that, tax rates would be sketched in to fit the amount of revenues needed.
“Only after a framework has been set, Congress should debate the rates themselves,” they said in a Financial Times opinion column on Monday.
House Republicans have called for cutting individual and corporate rates from top rates of 35 percent to 25 percent.
Republicans are also backing a type of “fast-track” mechanism that could force action on tax reforms if Congress failed to act before a set deadline, though they are still working out the details.
Baucus said that option should be on the table.
The moderate Democrat from Montana has been holding hearings on tax reform for more than a year. He is up for re-election in 2014.
Several experts said they were encouraged that Baucus did not lay out clear markers, suggesting he is eager to forge a bipartisan deal. “People shouldn’t sit around making lists of what they would not do,” said Bill Thomas, former chairman of the House tax writing panel.
CORPORATE REFORM
A revamping of the code would also include big changes to corporate taxes.
The U.S. corporate system is known as a “worldwide” system, requiring companies to pay taxes on income earned abroad. Businesses back a “territorial” system where income earned outside the United States is free of U.S. tax.
Baucus noted that other countries “have shifted to territorial systems to keep their companies from moving overseas. And they have tougher rules against shifting profits overseas.”
He said that, under the worldwide system, “we have weakened protections against shifting income to tax havens.”
That cheered investment analyst Jim Lucier, who said it seemed Baucus is trying to find a middle ground on corporate taxes.
“I was actually very encouraged. He is clearly trying to straddle the differences,” Lucier said.
Jeff@jbrookswa.com

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About Jeffrey Brooks

Jeffrey Brooks, CPA, CFP, MBA since 1976 has specialized in helping clients save significant taxes, help businesses increase their cash flow, revenues and profits while increasing their control and satisfaction. Jeff and his accounting firm sincerely cares about the happiness of his clients.

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