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If you want to gain a better idea of why economics is sometimes referred to as the dismal science, then reference the 50 statistics about the U.S. economy highlighted on the Coalition of the Obvious (COTO) Report’s blog.

The blog is anti-corporation oriented and the statistics are one-sided, but each has a link to source or support material to corroborate, so the article provides a concise one-page summary of statistics and links.

Below is a sampling:

#1) According to the Tax Foundation’s Microsimulation Model, to erase the 2010 U.S. budget deficit, the U.S. Congress would have to multiply each tax rate by 2.4.  Thus, the 10 percent rate would be 24 percent, the 15 percent rate would be 36 percent, and the 35 percent rate would have to be 85 percent.

#15) 39.68 million Americans are now on food stamps, which represents a new all-time record.  But things look like they are going to get even worse.  The U.S. Department of Agriculture is forecasting that enrollment in the food stamp program will exceed 43 million Americans in 2011.

#25) In 2009, U.S. banks posted their sharpest decline in private lending since 1942.

#26) Defaults on apartment building mortgages held by U.S. banks climbed to a record 4.6 percent in the first quarter of 2010.  That was almost twice the level of a year earlier.

#33) In Pinellas and Pasco counties, which include St. Petersburg, Florida and the suburbs to the north, there are 34,000 open foreclosure cases.  Ten years ago, there were only about 4,000.

#43) There are now 8 counties in the state of California that have unemployment rates of over 20 percent.

#50) In 2010 the U.S. government is projected to issue almost as much new debt as the rest of the governments of the world combined.

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In the past few years, investors and tax payers have been victims of securities fraud from WorldCom and Enron, to Bernie Madoff and the shenanigans of Allied Capital.  Nevertheless, citizens continue to pay taxes to fund government regulators such as the Securities and Exchange Commission (SEC) to help mitigate or prevent such fraud.  However, there has been a growing scrutiny by investors and citizens regarding the competency of the SEC.  The SEC counters that it needs more funds from citizens to be effective.

Well, in December 2008, ProPublica noted an investigative report revealing unacceptable behavior and predilections of viewing felonious pornography by several SEC staff, including senior officials earning annual salaries of $222k. The report and blog went virtually unnoticed until a few months ago when the Washington Times wrote about the SEC’s porn problem and more recently several bloggers and organizations including the Wall Street Journal, Huffington Post, TechCrunch, and Gawker provided further details of the SEC’s illicit behaviors.

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www.DieBrokeBlog.com
The federal estate tax, also dubbed the “death tax” by some, will be repealed for 2010, at least as of this writing.  This means that wealth transferred upon death, regardless of amount, will incur zero federal taxes.  Or, expressed differently, wealth transfers won’t incur egregious double federal taxation (once when the wealth is earned and once when it is transferred).

In contrast, the applicable exclusion to a taxable estate tax was $2.0 million for 2006-2008 and $3.5 million in 2009.  Amounts above these values had a maximum tax rate of 45% to 46%.  Nevertheless, to paraphrase Ben Franklin, there’s nothing certain except death and taxes.  In this case, there is a lot of uncertainty regarding the permanence of the 2010 federal estate tax repeal.  

The primary concern is that Congress might revisit the topic early 2010 and reinstate the tax retroactively to Jan. 1.  Regardless, under current legislation, the estate tax will reappear in 2011 with a 55% rate and $1.0 million exclusion.

There are many blogs about this topic: Die Broke Blog discusses estate taxes in a broader context; Mish’s Global Economic Trend Analysis addresses some personal unintended consequences; and, Wallet Pop highlights historical changes since 2001.

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Top U.S. Federal marginal income tax rates.
Given the challenging economic climate, more businesses are incurring accounting losses.  A concern for some owners is whether they are permitted to offset losses with other sources of income. 

With regard to a member of a limited liability company (LLC), the general answer is yes, according to an article published by Crain’s Cleveland Business, written by Carl Grassi, president of law firm McDonald Hopkins LLC.

The author states “as a general rule, losses incurred by a business in which the taxpayer materially participates are deductible against other sources of income.”

To determine material participation, tax regulations provide seven tests, of which at least one must be met.  One test requires that the participant devote more than 500 hours to the business in the year.  Joe Kristan at accounting firm Roth & Company, PC provides a summary of the tests in everday language.

Onward to becoming more tax efficient.
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