August 2020 Newsletter
AUGUST 2020 CLIENT NEWSLETTER
First the good news.
The Corona Chinese virus appears to have made a pass and slowed down to a manageable level. This highly contagious virus has affected everybody in many ways. Now, our many clients who were afraid to leave their home may begin to go on with their lives. Social activities will be restricted and masks with social distancing will be the norm at least until the year is over. This is the new norm.
Good news from Congress.
A recent bill has passed to allow deductions for up to $300 for charitable contributions without itemizing. It will be treated the same as the school teacher credits for 2020 returns.
Good news from the California Secretary of State.
For our senior citizen drivers over 70. You now have an extra year from the expiration date (if from March to December 2020) to get your CDL license renewed. The SOS mentioned Covid-19 but I think it takes an extra year to find parking and get through the line in Temecula.
The IRS is in trouble again.
The IRS recently admitted that they have trailers full of unopened mail which contain payments relating to tax returns which were timely electronically filed. The process that recorded the tax return data has already been sending past due notices for the missing payments, most of which are in these trailers. At this time the 12 million pieces of unopened mail have resulted in millions of past due notices with attendant penalties which the IRS will need to reconcile by going back to the post date on the envelopes, after opening them. Let’s hope they are post dated.
California is now a third world country.
According to the Wall Street Journal article titled “California’s Green Blackouts.” This month there have been recurring electric energy brownouts and shutdowns of air conditioners because of continuous hot weather, after decommissioning the two nuclear power plants at San Onofre and some fairly new gas powered peaker plants throughout the state. The nuclear plants could have operated safely for many years at half-power but the State Energy Commission decided they didn’t like nuclear power, while the gas plants are also supposedly environmentally unfriendly because they aren’t clean renewable energy produced by windmills or solar. Governor Newsom said he remains “committed to radically changing the way we produce and consume energy.” True statement. Especially when the Governor waived the emission standards for privately held gasoline, natural gas, and diesel electricity generators to power up to replace some of the missing energy. “The solution,” as officially stated, “is to reduce electrical usage.”
Now the bad news from California.
Prop 15 is on the ballet for the fall and will destroy the original proposition 13 which limited property taxes. If you think the taxes on your house or property are not high enough, then go for it. Although it appears to affect only commercial real estate, the door will open and guess who ends paying for real estate taxes, the public users for everything we do. There is a companion Prop 19 which appears to lower taxes. Sadly, the attached financial economic report showed the opposite effect. Like the old switcheroo of the last election for a massive tax increase which had people voting no to become a yes vote by structuring the proposition to read backwards. The Attorney General had denied his wording is biased.
Because we have a proposed budget deficit of over $60,000,000,000 [billions] for the year in California, the land of the bear, there will be many new tax proposals in the fire. The first is a 25% increase in the maximum State income tax, which is now the highest in the Nation. Others will crawl out of the darkness of Sacramento political chambers after the comingelection. When I was a stockbroker I sold California Tobacco Bond securitized future settlements as interest tax-free bonds. This was the money allotted for 20 years due to the collective lawsuit loss of the tobacco companies to the States. Now it has been spent and we are paying interest on it as it amortizes.
Some tax info you might not be aware of: Because fees are not taxes requiring voter approval, there has been steady fee increases appearing in California over the past years. The nature of the fees are usually a twist in the law such as sales taxing a person on the full price of an item purchased in Costco, before applying the sale discount. Note that it is not priced net but shown at full price for tax purposes and the discount is shown separately. Then there are the other little sneaky taxes such as the 1% tax on lumber and wood products in addition to the sales taxes when you leave Home Depot. And when you buy a new car there is the tire fee-tax for “disposal” of all tires including the donut spare and a separate fee-tax on the lead balancing weight used because lead is bad for you. And there is the additional fee-tax when the garage takes the worn tire off the car, which is another disposal tax, in addition to the tax on the new replacement tire. But don’t forget the sales tax on shipping [postage] and handling of taxable items bought on line. Meanwhile, the new one dollar tax the State added to my business license fee has now increased to three dollars this year. And so it goes on and on.
More bad news from California
On July 30th, the California Senate voted 33-3 to create a commission to study the impact of Confederate States slavery before the Civil War affecting Californians and to award reparations for descendants. Since there is a Democratic Supermajority and Governor, whatever they decide may become law without a public vote.
Now the National bad news.
The shutdowns of businesses, all schools, low economic activity, and accompanying disruption of everyday life in America has wrought a terrible toll on the economy. Our national debt has gone from $21 trillion to over $30 and the numbers are still rolling. All the big states want the Feds to borrow money to bail their losses out by digging into the pockets of the small states that better manage their economies. This is to avoid borrowing more money to cure their own problems. This is simply redistribution of wealth on a national scale. No matter who wins the next election, there is a monster national debt, worse than at the end of WW II, to be paid with interest when due. To increase it any further after the recession would be a crime because it forces the debt on future generations. Tax increase proposals from both political parties is a certainty.
Yes, we still have insurance annuities. Our favorite has a 6% sign-up bonus and historically has averaged 6% as an indexed investment. Guaranteed earnings are less. No losses or fees ever. Proposals on request.
We still offer a free financial review of all your pensions, investments, and taxes, free of charge.
About Stocks, Bonds, & Taxes
Because most of our clients purchased our new book, attached is our first official review by a national reviewer. There have been two additional 5-star reviews but they didn’t comment in detail.
Thanks for the privilege of working with you this past year. As always, contact us immediately if you have any questions about your returns, receive a California correspondence form or a SC2000 inquiry letter from the IRS.
Best wishes to all.
Phil Chute, EA and Staff