Wealth & Risk Management Blog

William Byrnes (Texas A&M) tax & compliance articles

Posts Tagged ‘Economic’

Could QE2 Spawn 70s Style Stagflation?

Posted by William Byrnes on April 13, 2011


The Federal Reserve may consider downsizing its original plan to purchase $600 billion in Treasury bonds over fear that inflation could be driven to dangerous levels by the revitalized economy.  Quantitative easing—the purchase of Treasuries by the central bank—is intended to raise the price of Treasuries, which should lower long-term interest rates and provide banks with cash to lend to their customers. The expectation is that lower long-term rates will encourage home refis and boost corporate investments and expansion, which, it is hoped, will created new jobs.  Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of quantitative easing in Advisor’s Journal, see Fed to Purchase $600 Billion in Treasuries in Move to Stimulate Economy (CC 10-94).

 

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In Recovery Again: U.S. Taxpayers Face Trouble?

Posted by William Byrnes on April 10, 2011


Why is this Topic Important to Wealth Managers? This topic discusses the Recovery Act spending and its effects on the national economy.  It provides wealth managers with indicators and information to help clients better understand the use of government (taxpayer) funds and their allocation as a result of the financial crisis and ensuing financial recovery.

The American Recovery and Reinvestment Act of 2009, enacted February 2009,[1] was designed to put Americans back to work and combat the largest downturn in the economy since the Great Depression.  Through the Recovery Act, Congress allocated funds in three ways.  The single largest part of the Act —more than one-third of it, or $288 billion— was tax cuts.  Ninety-five percent of taxpayers have seen taxes go down as a result of the Act. [2]

The second-largest part or $244 billion — just under a third — was direct relief to state governments and individuals. This funding helped state governments avoid laying off teachers, firefighters and police officers and prevented states’ budget gaps from growing wider. On an individual level, the Act ensured those hardest hit by the recession received extended unemployment insurance, health coverage, and food assistance.

The remaining third or $275 billion of the Recovery Act financed the largest investment in roads since the creation of the Interstate Highway system; construction projects at military bases, ports, bridges and tunnels; overdue Superfund cleanups; clean energy projects; improvements in outdated rural water systems; upgrades to overburdened mass transit and rail systems; and much more.

The $787 billion (in total) economic Recovery plan included provisions, in sum, designed to (1) create and save jobs, (2) spur economic activity and invest in long-term economic growth, and (3) foster unprecedented levels of accountability and transparency in government spending.

The Recovery Act was intended to provide a short-term jump start to the economy, but many of the projects funded by Recovery money, especially infrastructure improvements, are expected to benefit economic growth for many years. Thus, the Recovery Act’s longer-term economic investment goals include:

  • Initiating a process to computerize health records to reduce medical errors and save on health-care costs
  • Investing in the domestic renewable energy industry
  • Weatherizing 75 percent of federal buildings and more than one million homes
  • Increasing college affordability for seven million students by funding a shortfall in Pell Grants, raising the maximum grant level by $500, and providing a higher education tax cut to nearly four million students
  • Cutting taxes for 129 million working households by providing an $800 “Making Work Pay” tax credit
  • Expanding the Child Tax Credit [3]

Has the Recovery Act worked? Read the analysis at AdvisorFYI

 

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The Recession: Over or America’s Lost Decade?

Posted by William Byrnes on January 12, 2011


Some economists are reporting that the recession is officially over.

Others are less optimistic, suggesting that the recession could last into 2012. And with unemployment numbers hovering around 10 percent, median household income falling, and foreclosures mounting, the most important part of any potential recovery, the public, is still cynical.

What if even the most cynical predictions for the world economy are underestimating the length of the path to recovery?

One economist is predicting that the current recession could last until 2018.  Read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of the economic downturn in Advisor’s Journal, see Fed to Purchase $600 Billion in Treasuries in Move to Stimulate Economy (CC 10-94).

 

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Wealth Managers Plan Under Uncertain Tax Conditions

Posted by William Byrnes on September 17, 2010


Why is this Topic Important to Wealth Managers? Provides discussion on current situation of federal tax “stand-off” as it relates to clients’ planning objectives.  Gives insight into market participants current choices in dealing with the Tax Cut dilemma.

Congress’ inaction is causing concern for many high net worth taxpayers. Clint Stretch, managing principal of tax policy at Deloitte Tax LLP in Washington says, “uncertainty over taxes means some individuals are ‘vulnerable to hysteria’ ”. And that some financial advisers are urging clients into “unnecessary or unwise transactions.” [1] With “[a]n estimated 315,000 U.S. taxpayers earn more than $1 million, according to the Joint Committee on Taxation”, it leaves a lot of room for opportunity and error.

Read the analysis at AdvisorFYI

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Bush Tax Cuts Linger Long After Sunset

Posted by William Byrnes on September 16, 2010


Why is this Topic Important to Wealth Managers? Provides an overview of how the pending tax cut provisions will affect the national economy and your clients as a part of it.  Discusses generally the relationship between tax and Congressional budget as they relate to the taxpayer burdens.

In the face of bailouts, new legislation and regulation, and a stalling economy, one area, taxes, is certainly being discussed among the public scuttlebutt.  Specifically, the Bush Era Tax Cuts are the center of attention because they will sunset or expire, without further legislative action by the end of this year.

Read the full analysis at AdvisorFYI

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