Jan 29, 2011

Corporate taxes should be simplified and rate lowered, Obama says. But many loopholes have a powerful constituency ?


President Barack Obama's call to lower corporate tax rates is popular among business leaders and lawmakers from both parties. That support, however, won't be easy to maintain if the president ever gets specific about how to pay for the lower taxes.

Obama said in his State of the Union address that he wants to close corporate tax loopholes and use the additional revenue to lower corporate tax rates for the first time in 25 years — without adding to the budget deficit. The top corporate tax rate is 35 percent, among the highest in the industrialized world. However, federal tax laws are filled with so many credits, deductions and exemptions that few companies pay the top rate.

"Over the years, a parade of lobbyists has rigged the tax code to benefit particular companies and industries," Obama said in his speech Tuesday night. "Those with accountants or lawyers to work the system can end up paying no taxes at all. But all the rest are hit with one of the highest corporate tax rates in the world. It makes no sense. It has to change."

Meanwhile, key congressional Republicans said Wednesday that tax reform shouldn't be limited tocorporate taxes — individual income taxes should also be revamped.

Obama's goal is to create a simpler tax code that encourages sound business decisions rather than aggressivetax planning. As it stands now, businesses and individuals spend more than 6 billion hours a year working to comply with the tax code, according to the National Taxpayer Advocate, an independent watchdog within the Internal Revenue Service.

It will take a sustained effort by the administration, however, to forge a consensus with lawmakers on reshuffling corporate taxes in a way that is sure to create winners and losers. The "loopholes" Obama talked about in his speech are regarded as cherished, well-deserved tax breaks by many lawmakers in both parties.

"I'm asking Democrats and Republicans to simplify the system," Obama said. "Get rid of the loopholes. Level the playing field."

There are tax breaks for investing in new equipment and buildings, spending on research and development and investing overseas. There are tax breaks for the owners of NASCAR race tracks and movie production companies. There are tax breaks for oil, natural gas and coal companies, as well as the producers of alternative fuels.

In all, the tax code runs 3.8 million words.

"Most of those words are in there because somebody's lobbyist wanted them in there," said Howard Gleckman, a fellow at the Urban Institute and editor of TaxVox, a blog on tax issues. "Everybody likes their special interest tax break."

Obama called for eliminating billions in tax breaks for oil companies to help fund research on alternative energy. It was a replay of his budget request last year, when he asked Congress to increase taxes on oil and gas companies by a total of $36.5 billion over the next decade. Congress largely ignored the request.

Read more...Visit-http://www.csmonitor.com/Business/Latest-News-Wires/2011/0128/Corporate-taxes-Cut-rate-Sure.-But-loopholes

Jan 27, 2011

Mortgage rates remain attractively low

Mortgage interest rates remained in neutral again this week, changing only slightly compared with last week's levels.

The benchmark 30-year fixed-rate mortgage rose 1 basis point this week, to 4.95 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.4 discount and origination points. One year ago, the mortgage index was 5.15 percent; four weeks ago, it was 4.96 percent.

Read more: Mortgage analysis for Jan. 20 http://www.bankrate.com/finance/mortgages/mortgage-rates-remain-attractively-low.aspx#ixzz19IrBOrPd

Jan 23, 2011

Weekly update from Vanguard

According to Vanguard weekly report a lot of variables - from retail sales to industrial production—pointed to strengthening economic growth this week as consumer and producer prices continued an upward move. For the week ended January 14, the S&P 500 Index rose 1.7% to 1,293.24. The yield of the 10-year U.S. Treasury note increased 1 basis point to 3.35%.

Add to this the fact that the president is promoting exports to lift the economy and create jobs; this is going to help a lot. 

PrivoCorp provides contract processing services to lenders and brokers across the country.

Jan 18, 2011

2010 IRS Free File available now for eligible taxpayers

Starting Friday, eligible taxpayers can prepare and e-file federal tax returns for free through the IRS Free File program.

The USATODAY says,

This year, the program will be open to taxpayers with 2010 adjusted gross income of $58,000 or less, according to IRS senior executive David Williams.

Free File is a partnership between the IRS and private tax software providers that's designed to encourage more taxpayers to file returns electronically. Last year, 70% of individual tax returns were filed electronically,

Read more -Visit -http://www.usatoday.com/money/perfi/taxes/2011-01-14-freefile14_ST_N.htm

Jan 3, 2011

Should you stretch out a mortgage refinance?


* A mortgage refinance over the longest possible period frees up cash.
* Drawbacks include paying more interest, building less equity.
* Some people may not qualify for a refinance today.

When money is scarce, borrowers may benefit from turning conventional wisdom on its head and opting for a mortgage refinance over the longest possible period.

This can help lower monthly payments and free up hundreds of dollars each month for other obligations.

"If you're trying to stave off a short sale or foreclosure, extending your loan term will surely help make your mortgage payments affordable again," says Ritu Agrawal, co-founder of The Money Ladder, a personal financial advisory firm in Minneapolis.
Is it for you?
Agrawal acknowledges some drawbacks to opting for a longer loan.

"One is that you will pay more in interest over the life of the loan," she says. "Also, if you were to sell your home after a few years, you'd accumulate less equity than you would have under a 15-year or shorter-term mortgage."

But borrowers struggling to meet monthly financial obligations or facing foreclosure have far more pressing concerns than how much more they might pay or save over the life of the loan.

"Our clients who have experienced an adverse event, such as a layoff, divorce or a major medical expense, often seek to reduce their mortgage payments while they try to get their finances back on track," Agrawal says. "It's much better to have a longer-term mortgage than to risk losing your home or damaging your credit by making late payments."

Jay Dacey, a mortgage planner based in the Minneapolis area, also believes it can make sense to extend the mortgage term and reduce the monthly payment.

"Let's say life happens and you are stuck paying for a new furnace, car transmission or Junior's tuition bill," he says. "Having a 30-year term instead of 15 years lowers your monthly hurdle. You can always pay extra (from month to month), but never less."

Although many people equate being debt-free with wealth or security, Dacey calls that concept outdated.

"Just because your home is free and clear of mortgage debt doesn't mean you are wealthy," he says. "But having your assets compound and pay you dividends can build wealth."
Who qualifies?
While refinancing might be beneficial, not everyone will qualify. In the post-housing bubble period, credit is not always easy to obtain.

A borrower's credit score is important. As always, higher scores equate to lower interest rates and fees.

"You are in the driver's seat if you have a 740-plus score," says Dacey.

However, borrowers in the 620 to 660 range will tend to pay 2 percent to 3 percent more in fees or a 0.5 percent higher rate.

Read more: Should you stretch out a refinance?