What we got during 2010 and 2011 were two years of slow growth, disappearing infrastructure, massive job losses and growing long term unemployment. My fear is that 2012 (unfortunately) will bring another year of slow growth and no help for the middle class.
In December, Congress ignored the need to vote on 20 extender tax laws (normally an annual event) as the political parties continued to play chicken with our economy. Two of those tax law casualties directly affect Washington state citizens: 1) We do not get to deduct our state sales taxes in 2012;
2) The $400 tax credit for any working taxpayer has not been renewed.
The fact that Congress has not dealt with these 2012 tax law issues is negligent. The result of that negligence leaves our economy in disarray because we do not know what the 2012 economic rule book contains until December. This is a very strange way to run a country that is in need of good leadership and economic stability.In the past, Congress has used the tax laws to destroy bad policy. In 1986, they stopped the real estate limited partnership industry from continuing to sell 2:1 or 4:1 tax loss shelters to middle and upper income taxpayers. Our economy today is in a long term recession because of funny money mortgages which caused our real estate market to collapse, our banks to go catatonic, and our construction industry is 30% of what it was 3 years ago. The mortgage regulation system has run us onto the rocks and Congress has abandoned the ship.
During the 1960s and 70s, Congress was creative and effective when they authorized the 7% investment tax credits on the purchase of new equipment. This tax law helped power a depressed economy into a vibrant growth economy and helped make US medium and small businesses stronger. The investment tax credits are now extinct and the current accelerated depreciation rules are shrinking. Let’s make our own lemonade:
To be a part of middle class America is still a good thing, but it is tough because many jobs have disappeared, wages, real estate, and pension values have all dropped by 25 to 60 percent and higher taxes are headed our way in 2013. The dilemma facing us is to determine the best “take charge” strategy while we are hoping for a return of a robust economy.Take charge of your future with your own pro-action plan;
1) If you are employed work to keep your job, make yourself even more effective for your employer. 2) If you are not employed, educate yourself to qualify for today’s job market.
3) Consider the assumption there are four jobs out there this month and you are the best person to fill the job. These jobs will most likely not find you because you are invisible. You need to learn were these jobs are going to appear because they will be filled without being advertised. If your information network of contacts and friendly allies uncover one or two of these jobs and you have the right stuff you have found today’s job market.
4) One of the techniques to apply #3 is to accept a job below what you really wanted and you may find there is an opening later where you will be the perfect candidate.
5) Another strategy is to build or buy your own business. We have a new business kit available for the asking. I have two January success business stories to share.
We are helping one client negotiate the purchase price and terms to buy a business that will double her current wage income. The cash purchase price will be close to 75% of the seller’s asking price. We will structure the purchase terms to minimize the sales tax and achieve the best tax impact. I expect her to be running that business by February 1st.
Another client has developed a nifty medical device using his sweat equity plus some angel financing to develop, manufacture, and distribute the device while still retaining majority control of the business ownership. The 2011 sales were in the $900,000 range and he is expecting larger sales in 2012. We will be preparing the 2011 Fiscal Year End (FYE) financial statement and corporate tax return to help the owner support the expected growth with second level of angel equity and or loans.
We have several clients that continue to have good job or business successes in 2011 and they fully expect to be continuing to make nice incomes during 2012. They do this with a combination of good positioning (some good luck always helps), but primarily because of hard work and delivering good service and high quality products on time.
My next blog will discuss why you need to build your own pension and I will include a ten minute pension quiz.
