http://www.washingtonpost.com/wp-dyn/content/article/2010/03/05/AR2010030502974.html?hpid%3Dtopnews

For an eye-opening look at the U.S. and world debt landscape, below are two very useful interactive links to evaluate worldwide and U.S. public debt loads now and in the past.

http://buttonwood.economist.com/content/gdc

http://www.usgovernmentspending.com/federal_debt_chart.html

Current record levels do not bode well for interest rates and financial stability.

California’s $20 billion budget deficit and long history of high taxes, unfunded pension obligations and massive entitlement plans has creditors worried.  Recent debt downgrades and political gridlock will likely drive up future borrowing costs:

http://www.huffingtonpost.com/2010/03/01/californias-debt-now-risk_n_481058.html

http://www.treasurer.ca.gov/

To save some of your hard-earned taxes, check out tax planning strategies at: www.blakechristian.com

Also, for daily tax and financial updates, please follow me: http://twitter.com/taxcredits_CPA

December 9, 2009 (Wed.) – 9:30-11:00 PST – Bureau of National Affairs (BNA) will be conducting a national webinar which will provide participants with an overview of the dramatic decrease in state revenues and what this means for business and personal taxpayers. 

In addition to discussing the steepest drop in state revenues in 50 years, we will be focusing on the business and personal impact of the California tax overhaul proposed by the Commission for the 21st Century Economy last month.

As detailed in posts earlier this month, the proposal includes elimination of corporate income taxes, a reduction of personal tax rates to 6.5%, reduction of sales tax rates, and the introduction of a controversial Business Net Receipts Tax (BNRT).

View a 5 minute CNN (Local) interview summarizing the new California tax proposal : 

http://hcvt.com/media.aspx

Sign up for a December 9th Bureau of National Affairs (BNA) webinar (9:30 – 11:00 PST) exploring the Commission’s California Tax Proposal:

http://tmstore.bna.com/Conferences.aspx

 Following is the California Chamber of Commerce Coalition letter summarizing the open issues related to the BNRT provisions.

The bottom line:  the Commission did a thorough job exploring options to overhaul California’s flawed and antiquated tax system; however, more analysis is still needed to fully evaluate how the BNRT will impact the pricing of Calif0rnia goods and services and how the new tax will trickle through the California economy and will the net effect help or hurt economic development and job creation.

Following is Cal Chamber’s Tax Committee’s analysis of the BNRT provisions: 

October 14, 2009

 SUBJECT: CONCERNS REGARDING FINAL REPORT OF THE COMMISSION ON THE 21ST CENTURY ECONOMYThe below-listed coalition of employer organizations and businesses supports the recommendation by the Commission on the 21st Century Economy that its final report undergo much further analysis in the special session. In particular, a number of fundamental questions remain about the proposal to adopt a new, untested tax on business, the business net receipts tax (BNRT), to offset revenue losses from flattening the personal income tax and eliminating the corporate income tax and the state portion of the sales tax. st Century Economy in undertaking the difficult task of evaluating our tax system. We support the Commission recommendation of a stronger rainy day fund because we believe that volatility is primarily a spending problem rather than a revenue problem. We also applaud the Commission’s recognition that California’s high personal and corporate income tax rates and taxation of business inputs negatively impacts our economic growth and competitiveness. However, replacing these taxes with a new tax, absent a thorough understanding of its impacts, could have its own set of harmful consequences. Rate and deductions unknown.We are concerned that 1) no tax rate or rate cap is specified in the proposed legislative language, and 2) many questions remain about the nature of the proposed specific deductions. Without this information, businesses will be unable to calculate the impact of the proposed BNRT. Moreover, we are concerned that the proposal indicates the BNRT tax rate will be unknown and change from year to year during the proposed transition phase. This will create uncertainty that is unmanageable for businesses. In order for the Legislature to understand the impact of this tax on companies and industries, the proposal must settle on a precise rate. We believe it is wrong to establish a new tax on businesses that leaves them in the dark about the rate during a transition or any other period. Additionally, the report is ambiguous about who will set the tax rate; we believe this is a clearly legislative function and should not be delegated to an administrative body. No modeling of proposed BNRT rate.We are concerned about the risk that BNRT revenues may substantially deviate from the Commission’s projected estimates, and if so, whether future BNRT rate increases may be required, even exceeding the reputed four percent cap. Because the proposed BNRT base is extremely broad, even a slight rate change could result in significant additional tax liability for companies. Conversely, there appears to be no mechanism to adjust the rate if this tax generates far more revenue than anticipated. Thus, we believe a crucial part of the Legislature’s analysis should be to conduct independent modeling of the BNRT both backward and forward over several economic cycles (about ten years) to determine the ability of the BNRT to generate revenue and stem volatility. Insufficient evidence that BNRT better than our current taxes.We are concerned about the lack of discussion regarding why the BNRT is a preferable tax policy to the current tax system, which is based either on profits, such as the personal and corporate income taxes, or is passed through as a tax on consumption, like the sales tax. By contrast, the BNRT may be imposed upon companies even when they are losing money, and cannot be passed on as a transactions tax. We are concerned that there is insufficient data that such tax burden shift will meet the goal of stemming volatility, let alone the goals of bolstering California’s economy and competitiveness. Danger that BNRT creates winners and losers.We are concerned about the potentially adverse impact of the BNRT on specific economic sectors and that winners and losers will be created. For example, businesses with low profit margins and high employee expenses presumably would be especially hard-hit, as would companies in a loss position. Additionally, it appears the BNRT may shift more of the tax burden onto small businesses, since many are organized as sole proprietors, limited liability companies, Subchapter S corporations, and partnerships, among others, and pay taxes under the personal income tax system. Thus, they would not benefit from elimination of the corporate income tax. BNRT is a tax on employees.As proposed by the Commission, the BNRT would not allow any deductions for the cost of employees, which would mean the BNRT amounts to a tax on employees. We are concerned this will kill California jobs by motivating companies to outsource jobs to other states and nations. Harm to startups.We believe there is a danger that the BNRT will be especially harmful to startups companies, since many could exceed the miniscule small business exemption threshold (for example, because employee costs are not deductible) and consequently still have to pay significant taxes though they have earned no or minimal profits. No other state would do that. California would go from being a start-up incubator to a start-up mortuary. California goods priced out of national and global markets.We are concerned the BNRT will undermine California’s ability to compete with other states and countries if the cost of exported California goods and services becomes substantially higher than those products, such as software, offered by other states and countries. Additionally, the cost of doing business would increase for Californians, due to higher prices for purchases of other business services, such as advertising, accounting and janitorial services. Harm to small businesses and consumers because of services tax.The Commission states that one of the purposes of the BNRT is to expand the tax base to include services. Of course, California services businesses pay all manner of income, payroll, sales, property and excise taxes, so we are concerned that an additional tax on services businesses will kill jobs in industries such as dry-cleaning and auto repair because the new tax will be difficult to pass on as a transactions tax and, if it is passed on, will result in a nearly four percent price jump for consumers. The small business exemption threshold is quite low, so will reflect a relatively narrow segment of the small business universe. Revenues from federal government and out-of-state companies questionable.We are concerned that the cited $6.8 billion in revenues anticipated to be generated from federal deductions and out-of-state companies rests upon unreliable assumptions. Sales taxes paid by businesses are currently deductible from federal taxes and federal income tax liability will increase for taxpayers whose state income taxes are reduced. Moreover, application of the economic presence test to BNRT to create nexus with out-of-state companies is not supported by current case law precedent and could thus be subject to immediate court challenge. And to the extent the BNRT is embedded in the price of goods and services that are “exported” to other states and offshore, this price premium may make these products and services less competitive, which would reduce the overall economic benefit to the state.

TO: Members of the California State Legislature

FROM: Below-Listed Coalition of Employer Organizations and Businesses

We appreciate the efforts of the Commission on the 21

For example, is it fair and equitable to impose a significant tax even when there is no income, as BNRT would do? The only other major tax similarly unfair was the property tax, which was the subject of a tax October 14, 2009 Page 2 of 4

revolt 30 years ago when it became unaffordable for major parts of California society. High inflation then exacerbated the perceived unfairness of the property tax, which could also be the case for a BNRT.

Absent a full analysis of potential consequences of the BNRT and how it interacts with the other proposed tax changes, it will be impossible for businesses to determine its full implications. Based upon the information provided thus far, however, we have a number of serious concerns about the BNRT proposal which were not fully addressed in the final Commission report. The following are some of the key concerns that we believe should be included and addressed in the Legislature’s analysis:

October 14, 2009 Page 3 of 4

To conclude, we respectfully urge the Legislature to devote substantial time, without the pressure of any arbitrary deadlines, toward: 1) conducting a comprehensive analysis of the impact of replacing our current tax system with the BNRT on California jobs and the economy; and 2) providing businesses and other impacted sectors with the opportunity to review and respond to this analysis of a sufficiently detailed proposal before moving the recommendations in any manner in legislation.

We, in the California business community, strongly believe that, ultimately, the solution to California’s revenue problems will only come from robust economic growth and job creation. Therefore, we believe restoration of jobs and the economy, and the strengthening of California’s competitiveness, should be the top priorities in evaluation of California’s tax system. October 14, 2009 Page 4 of 4

Sincerely,

California Chamber of Commerce

American Council of Engineering Companies of California

American Fire Sprinkler Association – California Chapters

Apartment Association, California Southern Cities, Inc.

Associated Builders and Contractors of California

Association of California Life and Health Insurance Companies

Brawley Chamber of Commerce

Building Owners and Managers Association of California

California Aerospace Technology Association

California Apartment Association

California Automotive Wholesalers’ Association

California Bean Shippers Association

California Building Industry Association

California Business Properties Association

California Cable & Telecommunications Association

California Cattlemen’s Association

California Farm Bureau Federation

California Forestry Association

California Grain and Feed Association

California Grocers Association

California Hospital Association

California Hotel and Lodging Association

California Manufacturers and Technology Association

California Pear Growers Association

California Professional Association of Specialty Contractors

California Restaurant Association

California Retailers Association

California Seed Association

California Self Storage Association

California State Floral Association

California Taxpayers Association

California Warehouse Association

Commercial Real Estate Development Association CA Council

Council on State Taxation

El Centro Chamber of Commerce

Garden Grove Chamber of Commerce

International Council of Shopping Centers

Long Beach Area Chamber of Commerce

Lumber Association of California and Nevada

Messenger Courier Association of the Americas

Milpitas Chamber of Commerce

National Federation of Independent Business

Pacific Egg and Poultry Association

Pacific Merchant Shipping Association

Personal Insurance Federation of California

Redondo Beach Chamber of Commerce & Visitors Bureau

Santa Clara Chamber of Commerce and Convention-Visitors Bureau

Securities Industry and Financial Markets Association

South Bay Association of Chambers of Commerce

TechAmerica

Western Electrical Contractors Association

Western Manufactured Housing Communities Association

Western States Petroleum Association

Even if you have already filed your 2008 business or personal tax return it is not too late to get some of your prior taxes back.   If you have extended your 2008 returns – read on and make sure you are not overpaying your state and federal taxes – since most taxpayers do.

Please scan through this entire blog and the "Library" Section of this site to find hundreds of tax refund opportunities for businesses as well as individuals.

With tax developments at both the federal and state level, it is time to make sure that you pay no more than your fair share of the growing tax burden.   I'm sure you can put your hard earned dollars to more effective use than the government – so get educated on all the existing, legitimate tax breaks available to you and your business.

Nationally, over 20 percent of businesses have one or more locations that fall within a Location Based Investment Credit (LBIC) zone and of this eligible pool of businesses, less than 10 percent of these qualifying companies actually claim the benefits they are entitled to. As a result, CPAs, CFOs and tax directors have an excellent opportunity to dramatically increase shareholder value by taking advantage of the valuable tax incentives. Since the federal programs allow up to three years of amended return refunds and many states also allow retroactive benefit claims, immediate tax advantages can be secured along with favorable EPS impact.

These benefits range from $500 to $15,000 per employee, depending on the specific state and federal program.

In addition to these location-based credit programs, there are a number of federal programs which apply to virtually any business.  These programs include the Work Opportunity Tax Credit (WOTC) and the Welfare-to-Work (WtW) programs which can generate federal hiring credits ranging from $2,400 to $8,500 per qualified employees.  The 2009 federal Stimulus Package and California Budget Package expanded these programs even further.

These programs apply to a fairly wide range of employees, including many veterans, laid off/ unemployed candidates and those individuals with economic or medical challenges.

These programs are seldom accessed by taxpayers due to their unfamiliarity with the program specifics.   The significant tax reductions (including refunds) available under these programs should encourage every employer to start utilizing these state and federal programs immediately.

In addition to saving taxes, by hiring these economically challenged individuals, employers are contributing to their community.   Download Focusing on Unemployment 12.2008

Click here for my various 2009 CNN News Reports on the Stimulus Package, Tax and Economic Issues:      http://www.hcvt.com/media.aspx

Download 2009 AICPA Top 10 Tips for Tax Planning

Click below to see our proprietary tax credit software and save taxes in any state:

http://tax.cchgroup.com/FlashDemos/tzl/main.htm

See a video of our slick software that will tell you the hidden tax benefits for any address in the U.S.

Below are a number of links and articles that explain the state and federal program benefits:

http://www.cpa2biz.com/Content/media/PRODUCER_CONTENT/Newsletters/Articles_2008/CorpTax/EZstreet.jsp

Steering Tax Life on 'EZ' Street

With combined federal and state burdens often in the 40 percent range, a material reduction in a company's tax rate can produce significant savings.

http://www.cpa2biz.com/Content/media/PRODUCER_CONTENT/Newsletters/Articles_2008/CorpTax/Tax_Burden.jsp

State Tax Burden

More taxing than you might think. SALT in the wound?

Download Urban Success Mag Tax Break article

Urban Success Magazine Article (No Urban Legend Here – Tax Benefits are Real)

Download Hire a Hero 19May08

Hire a Veteran – Save Taxes While Changing a Life

Download 2009 AICPA Top 10 Tips for Tax Planning

Obama National Health Care Plan – More Taxes / Less Medicare Funding

http://online.wsj.com/article/SB123559630127675581.html

Following through on his campaign promise of raising taxes on the "wealthy", the Obama Administration will be rolling out their $318 BILLION tax hike including expiration of the Bush tax cuts and an increase in personal tax rates from 33% to 35% over the next few years.  In addition, a scale-back of home mortgage interest and contribution deductions are also anticipated under President Obama's proposal.   Not-for-Profit entities are suffering from the economy just like taxable businesses; therefore, this is an odd time to reduce the tax benefit for home mortgage deductions and reducing the incentive to support charitable organizations, which are typically very efficient in their operations. 

Another $316 BILLION of spending cuts tied to: i) reductions in government payments to private health-care providers supplying Medicare services and ii) other healthcare reductions are also planned.

These combined tax increases and spending cuts of $634 BILLION are designed to pay for President Obama's planned Single-Pay Medical Plan.

Download Obama Tax Hikes Feb 26 2009 WSJ

    ****************************************************************************************************************

The Fall of California 

Dennis Prager insightfully summarizes the steady decline of the California economy and identifies the architects of its demise.

Download California Destroyed by Left – Dennis Prager

Download CA Tax Rates article 12.2007

     Download EZ Press Release – Record Year for EZ, Long Beach Most Business Friendly

Businesses ranging from plane manufacturers, software developers, clean-energy/ green-tech, food producers, restaurants and professional service companies generated an estimated $78 million of California hiring and equipment tax credits.   These credits are a much needed benefit to mitigate the California corporate and individual tax rates – at up to 10.3% – are at the highest levels compared to other states.

With the skyrocketing unemployment, the California EZ program provides a significant incentive for businesses to hire local residents, veterans, and other economically or physically challenged workers.

The program allows employers to claim hiring credits of up to $12,500 per "qualified employee" per year.  Depending on the industry, a typical business will have 15% to 50% of their employees eligible for these program benefits.  Employees working in the Zone are also eligible for a personal-level tax credit of up to $525 per year.

In addition to the valuable hiring credit, employers are eligible for equipment tax credits up to 8.75% of the capitalized cost of manufacturing, processing, technology, and pollution and energy control equipment.

Employers can claim these credits for up to 4 prior years and secure refunds of prior year taxes.

Businesses should act quickly for 2008 filings since the city will be raising the $40 per employee vouchering fee to $60 per voucher beginning March 1, 2009.

For more information about the Long Beach EZ program as well as programs throughout California and the U.S., please read the following:

Download Urban Success Mag Tax Break article

Download Focusing on Unemployment 12.2008

Download CA Tax Rates article 12.2007

Download NTCG Brochure 10.2008

More information can be obtained at:

www.hcvt.com     or

www.ntcgtax.com