Discussion:A Preview of Upcoming Tax Law Changes?

Simplify Tax Filings for Middle Class Americans: Obama and Biden will dramatically simplify tax filings so that millions of Americans will be able to do their taxes in less than five minutes. Obama and Biden will ensure that the IRS uses the information it already gets from banks and employers to give taxpayers the option of pre-filled tax forms to verify, sign and return. Experts estimate that the Obama-Biden proposal will save Americans up to 200 million total hours of work and aggravation and up to $2 billion in tax preparer fees.

Source: Obama's website http://change.gov/agenda/economy/

The rest of the page makes interesting reading too.

I will just keep my opinion to myself for right now.

Tom

I didn't realize you'd already mentioned this. I try to follow most discussions on this, and I searched for it before I posted, but I just missed it.

A number of folks have asked questions about the differences between the Obama / McCain plans, so I wanted to make sure everyone who might be interested in Obama's intent was aware of his www.change.gov website.

Why do I get the idea that events and not plans may control over the next 6 months?

Those quarterly numbers sounded awful for Ford and GM that I just heard on TV.

You'd have to have a whole lot of trust in those IRS computers to be signing any pre-filled return. Cough. Not to mention whatever else you might miss. But I have to tell you, this stuff is not new with Obama-Biden, it's been in the planning stages since Congress has an inflated view of the computer age.

For those practitioners that deal with higher end returns, cap gains, businesses, etc... it shouldn't have that much of an impact.

Look at the newspapers. I don't know any young people who buy newspapers. I will miss my newspaper! I do admit I don't look at them on a daily basis anymore.

Crow hits the bulls eye....was it Emerson who said 'Events are in the saddle.' Yesterday a client called about his first time MRD from his IRA. He turned 70.5 this year....I told him before he jumps that it could be the Treasury will permit postponement of withdrawls to stave the flow out of mutual funds.

As for tax ideas, for how many years have people run tor the presidency by holding up a post card and stating this is their vision of how returns should be filed.....was that not the idea of Steve Forbes....though his was for a flat tax?

David, I've mentioned it in a few threads. It got swallowed up with other thing, so no problem.

My objection to it, is the "Big Brother" aspect. Our benevolent government at it again.

Crow, here's some information I located about the Dems and 401(k) plans. Contrary to MSNBC reports, it's not an urban legend. There was a trial balloon recently floated by Democrat Congressman Jim McDermott:

[1] This is the guy who broke the story.

[2] This is an interview with a woman who testified before McDermott's committee. She is the professor responsible for the idea.

[3] This is an analysis from Bonnie Erbe, host of PBS Show "To the Contrary." FYI, she is a liberal Democrat. I only mention that because of what she writes about the idea.

This is absolutely a brain dead idea (just like the windfall profits tax: it didn't work in the 1970's, it won't work now). But this idea is so dumb the Democrats would be wise to act as if this never happened. Bonnie Erbe points out correctly McCain would have polled much better back in late October. It should never have gotten to the hearing stage. It should have been dismissed hat-out-of-hand.

If you think Social Security is run poorly, imagine this being administered by them.

This is going to be fun to watch if they continue down this road on 401(k)'s.

Tom

From the website 401k Help Center:

"The origin of the 401k may not be the most important story in American history. But more than 20 years after this popular retirement vehicle was created, the true story has yet to be told.

The most common 401k tale told by the media today is that one man, Ted Benna,1 received the idea as a divine inspiration; and then something of a miracle happened, namely, the Internal Revenue Service (IRS) approved his idea. The story goes that American business then followed this prophet into the 401k promised land.

The reality is that at least one-and perhaps several-large, public companies began working toward IRS approval as early as 1979. I know, because I led the 401k project for a well-known company-Johnson & Johnson (J&J)-that was among the first, if not the first, major company to decide to establish a 401k plan for its workers.

Ted Benna's small consulting firm reports that it was the first to use Sec. 401k of the Internal Revenue Code (IRC) to change its after-tax employee contributions to before-tax employee contributions. But Ted certainly was neither the only one aware of the possibilities of 401k nor the only one working toward making it a reality. Additionally, it's my belief that others played a more significant role in securing IRS support, and in helping to bring American business behind this new idea." 2 years ago Source(s): http://www.401khelpcenter.com/401k/white...

I've said this before on here. The 401(k) (a defined contribution plan) has been a disaster for the American worker. However, no one has really bothered to explain to the worker that it is a bad plan. Of course, with what's going on right now, they will get a good idea of the difference between defined contribution, and defined benefit!

The reason the big corporations wanted the 401(K) is that it got them out of the jam of providing a defined benefit for the worker (in other words, of providing a classic pension). With a defined contribution plan (401(k)), the worker is guaranteed nothing, it's up to his personal investment acumen, and the lousy, high fee mutual funds that most 401(k)s offer.

What happens under the 401(k) is that many workers end up with neither personal savings (i.e. savings outside of a tax favored account), nor sufficient retirement monies (bad investment knowledge and they can't keep their hands off the money).

BUT...you spend a long time explaining this before you float any plan. Just the mention of this definitely cost Obama some votes in my state. People are nervous as hell.

I think a lot of people out there would agree that the 401(k) is not doing the job, but that does not mean we necessarily go with this woman's plan.

[4] It's Ted Benna's version of events.

[5] Here's Herbert Whitehouse's version of events which Pink Pearl was referencing.

Now, there are always two sides to every story and I gather that in objectively looking at this, Whitehouse's version has some credibility.

Of course, one thing to point out in the legislative history: the time frame. The 401(k) came into existence under TRA of 1978, with the law going into effect January 1, 1980, I believe, with proposed regulations being finalized in 1981. The reason I say this it brings up something I have begun to tell people for several years: it is absolutely useless to blame a president for economic problems because: the economy goes in cycles (remember your Econ classes from college?) and 2)the President can propose legislation and but only Congress has the power to pass the legislation, including tax laws as we all know.

This is a great example. I hear so many people screaming that their 401(k) is in shambles and it's all President Bush's fault. Heck, you might as well blame Jimmy Carter, he signed the law as he was the President in 1978. It's just silly.

Now, getting back to this professor: the Democrats would be smart not to let this woman back near Capitol Hill. But I think McDermott will give her plan some more credence. It's absolutely dumb. I couldn't believe it when I heard about it.

I just want to say this: we are kidding ourselves if we think the next administration or this Congress won't be tied to special interest groups. Sorry folks, I hate to burst anyone's bubble and I know all of you are very sharp, but many people honestly think that once President Bush leaves so will special interest groups (honestly, some of my clients who should know better think so). No they won't, just a bunch of new ones walk in the door with their agenda.

Tom

I had a client call me (on election night!), he's also a friend, and tell me that the Dem's were going to tax his 401(k). This is how the public understood it. That there was going to be a tax assessed NOW.

Listening to the lady, this is not true. Anyone that presently has a 401(k) is grandfathered as to the treatment they would have recieved on the money in the plan before this proposed law would go into effect. Tax treatment on retirement for what these people had in their funds (and what they grows? tp) is exactly the same when they retire in the future.

Second, what is so terrible about her plan? Does anyone think that they have done better in the market for the past 10 years with their retirement moneyh? Very few have. Some have. Very few people who chunk their money in those horrid funds in 401(k)'s have done that well over the last 10 years. (Most of them are horrid mutual funds, a few might be ok). And let's not even talk about how much money the 401(k)'s have lost this year.

I heard on CNBC that the stock market has underperformed for the last 10 years.

The American people need to take seriously the investment warning: past performance is not a guarantee of future results.

And I can almost promise you, when we wipe the credit loving ways out of our economy we are not going to see the same (false) growth that we have seen since 1994. We've been in a man made debt bubble folks.

I think people really believe that things are going back to "normal" when 2009 is over. I am afraid they will see a seachange in the American economy instead. And goodbye to the historical return of U.S. stocks going forward. Not to say that some stocks might not do spectacularly well. Easy credit is dead, and false growth based on easy credit is dead, and hence expected returns on equities as a group are likely over, at least in this country.

I agree with you about the debt bubble. No question you are correct.

But, my problem with the plan is: 1) it's a disguised government entitlement program that Congress will treat like it does Social Security and the required 5% savings and the guaranteed interest of 3%. It's simply not going to be enough in 30 years for most people to really retire when you factor in cost of living adjustments and other outside forces. For example, what if a person becomes disabled and can no longer work? Can they get access to their money or do they have to wait? Also, what do you do about Social Security? This plan is short-sighted at best and will turn into the 4th rail of American politics as Social Security is the 3rd rail. It's just a bad idea right now and needs more thought.

I am not against government entitlements. I am for smart ones. There are many good government programs that work. My wife works on several research programs at CDC, that while are not considered entitlement programs in the classic sense, do help the poor and less fortunate. Some of her current research work helps asthma sufferers. So, while my writings sound "cold", it's not meant that way. I want to see our government be smart about it's choices. Too many times Congress is reactionary. It jumps willy-nilly into the next idea that comes along no matter how brain dead it might be. But Democrats Crow aren't alone. Republicans do just as many dumb things on their side of the aisle as well. (An old boss of mine was fond of telling the story of William Scott, Congressman from Virginia. He was judged to be the "dumbest Congressman" in 1974. Scott went out the next day and held a press conference to deny the claim.)

Warren Buffet wrote a great article last month in the NY Times editorial section about investing in this market currently. As I read this, I couldn't help but thinking how correct he is about the current market. Here it is:

[6]

Tom

So, how do you explain this to a consumer? Multi-billion dollar AIG can reform a contract whenver it wants, however, the consumer cannot ask a bankruptcy judge to reform the mortgage on the primary residence to more manageable terms. Shockingly however, the same judge is presently allowed to reform the mortgage on a vacation home.