Th*nk*ng (Taxes) "This is a ticking time bomb."

by Fred Cederholm

I’ve been thinking about taxes. Actually, I’ve been thinking about changes that are coming in the next years, the Federal Government and the State of Illinois, the President and the Veep, the debt, the deficits, and bi-partisanship,. This year I said goodbye to my doing tax returns. Ok, I still do my own and my corporation, Questions, Inc; but I successfully relocated the tax filings for friends in Chicago. This was a break with the past as I had done these returns while I lived in the City and for the past 20 years.

Even though I am a CPA, I will now need to hold a special permit to do the returns I have done for years. This will require continuing professional education credits and passing a test each year. I just did not do enough returns to justify the time on these new requirements, or the expenses from them. I would need to get special software to do on-line filings as well particularly for investment transactions. What had been complicated and time consuming in the past was becoming even more so.

You see 2015 will greatly alter the nature of tax filings for the 2014 year — if things go according to Uncle $ugar’s plan that is… Assuming that the first phase of Obama Care goes into effect in 2014, all people will be required to have some form of health insurance coverage. Sure there will be many options and subsidized insurance plans for those whose income is low enough, but every household will need to demonstrate in their tax return for the year, that they have the requisite mandated policies. I have already decided that I will pay the fine for 2014, mainly because I will be eligible for Medicare in 2015. I just can’t see getting a bridge policy for the one year. Things could however change both as far as Obama Care is concerned and as far as Medicare eligibility is concerned as well. In this political environment, you just never know.

This will be the first time when the tax returns will become a mechanism for assessing fines because the public has not done something the Government wants. I shudder at the thought. In these coming years we shall see the fruits of all government management of the economy. On the other hand, we shall see also see the mismanagement coming to bear as well.

Over the weekend the tax filings for the President and Vice President were made public. The Obama’s paid $112,214 in Federal taxes on adjusted gross income of $608,611 while the Biden’s paid $87,851 in Federal taxes on income of $385,072. The Biden’s paid $13,531 to Delaware and $3,593 to Virginia. Illinois received $29,450 in taxes from the Obama’s. The President and First Lady contributed $150, 034 to thirty-three charities.

The Biden’s gave $7,190 to charity. The tax returns are available for review at the White House web site:

http://www.whitehouse.gov/blog/2013/04/12/president-obama-and-vice-president-biden-2012-tax-returns

The two major parties have been haggling over what each considers a “fair amount of tax since before the election. I don’t see any progress made to a bi-partisan agreement on what are to the core differences in the philosophies of the parties. Fiscal 2013 will be the first time the Federal budget has exceeded four trillion (that is $4,000,000,000,000 — which is a lot of scratch. Projected revenues are expected to be $1.2 trillion shy of this total which means that Uncle $ugar would normally have to borrow for the deficiency. Obama Care begins to show it head in 2014. The costs will be staggering.

In 2012 the Fed basically stopped borrowing from our foreign $ugardaddies which meant that the foreign sovereign stopped buying new treasury bills.

At least for now they continued to roll over what they have lent us as it matured. Any new borrowing (a few BILLION a day) was covered by the Federal Reserve printing the cash and holding the new T-Bills as investments. This is a ticking time bomb.

In Illinois, we still do not have a budget and the debt problems continue to grow. While no one is talking publicly in Springfield about any default, it is common knowledge that the Prairie State cannot cover everything. The question is which of the state’s creditors will be on the receiving end of any “sequestering.” My gut feeling is that all creditors will receive some form of “haircut.” The question will be a matter of how much scalp will be left showing when the legislature is finished “trimming.” The next elections will be less than two years away… hummm???

I’m Fred Cederholm and I’ve been thinking. You should be thinking, too.

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