Thursday, April 15, 2010

The Daily Note - Speaking of Taxes, Part V: It's a Hat Trick

It's April 15th, do you know where you're taxes are? Most likely still being collected and counted. I wonder how they'll spin the fact that tax revenues will be lower than last year, despite the market recovery.

Many states will spin recovery because they have collected more tax revenue from increased taxation and the only solution they are contemplating is more of the same. You can read about the future tax plans for your state and while you're perusing that, consider the VAT tax in addition to it.

The spin has also begun with the publicity that retail sales are up. Well, I have news for you. Retail sales usually pick up this time of year for two psychological reasons: first, it's spring!Spring brings growth and renewed optimism and people just like to replace the winter dingy, locked-in feel. In other words, people just feel better with more light and flowers around. The second reason is the mis-named tax "refund". Which we all, once adjusting to reason, know that it is not a refund but an repaid interest free loan to your government. This so called refund along with tax credits allows people to feel they have more to spend. The trick is known by governments, and was used last year, when they reduced withholdings from your w-2 pay throughout 2009. Of course the less withholding ended in a surprise tax due situation for many, but most got less of a crunch because there was also a "making work pay" credit calculated into the return. If you do the math it's almost laughable, if it weren't so tragic that people always fall for the slight of hat trick: giving with one hand,while taking with the other.

So now that I succeeded in confusing and boring you, perhaps a little reprieve will help. Most of you think that tax freedom day arrived on April 9th, right? Well, the news said it, so rejoice and shop. Oh well, I tried. Sorry to again be bearer of some more bad news but the actual day is May 17th, adjusting to the deficit and interest owed on debt; the second longest period since WWII but take heart it is a full 4 days less than last year. So I guess we are truly in recovery.

OK, OK I'll stop and let you go out and party, just after this: States are already projecting another fiscal shortfall, despite of increased taxation, so get ready for further increases in just living your daily life. Cities and governments are increasing dues, fees and creating new ways of reaching into your pocket. Further, while the news is focusing on recovery and Federal taxation, State governments, while increasing taxes, have driven away many corporate and small businesses and are now in another crunch just this side of a crisis. Imagine what they are planning. Of course that leaves the Federal government who have just gifted a tax increase on your income and all future generations via a health-care bill which will increase you FICA and Medicare taxes not to mention pharmaceuticals, doctor care and medical equipment. Now, add on a VAT (Value Added Tax*)to your shopping bill!

But, "Wait!" you say, "aren't we supposed to spend our way into recovery and out of a deficit"? Oh, no, it's another hat trick!

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Happy Tea Party Day!

*EU collects a minimum of 15% maximum of 25% VAT tax

New World Encyclopedia
NCSL - National Conference of State Legislatures
Tax Foundation

Today's BlogPick Continue Earnings watch GOOG midday update looking for it to strike $600, $605 and give a chase after $BIDU. Earnings are key. Low side watch $587- $585 Good luck into earnings.

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