Georgia Income Tax Returns Are Being Processed And Accepted Despite IRS Delay

The Internal Revenue Service announced on January 20 that they will not accept e-filed or paper returns from a select group of taxpayers until mid-February due to changes to the 2010 Federal Internal Revenue Code. However, the Georgia Department of Revenue announced today it is accepting and processing Georgia income tax returns that are e-filed via the joint IRS e-file system.

The affected taxpayers who e-file their Georgia income tax return only will have the return accepted and processed without delay. All paper filed Georgia income tax returns will also be accepted.

The IRS announcement affects all 1040 filers with a Schedule A, among others. For more information on the affected taxpayers, please see the IRS press release which can be accessed here:

http://www.irs.ustreas.gov/newsroom/article/0,,id=234736,00.html?portlet=7

States Set to Go On Bankruptcy Bonanza

Insolvency talks underway with Obama administration

The most important question for 2011 may be just emerging on the national policy scene: How many states will declare bankruptcy this year?

It would be a first-time ever event, but the New York Times has already reported that state policy makers, congressional leaders and officials in the Obama administration are already involved in behind-the-scenes discussions regarding whether declaring bankruptcy may be the only solution available to states with budget crises that cannot be resolved any other way.

"Beyond their short-term budget gaps, some states have deep structural problems, like insolvent pension funds, that are diverting money from essential public services like education and health care," Mary Williams Walsh wrote in the Times. "Some members of Congress fear that it is just a matter of time before a state seeks a bailout, says bankruptcy lawyers who have been consulted by congressional aides."

Still, it is doubtful the federal government will bail out near-bankrupt states, despite the severe cutbacks in public welfare services the state budgetary crises are causing.

Federal bailouts of the states would amount to nationalizing the states and could produce a constitutional crisis, especially if the federal government assumes as it usually assumes that the federal government has a right to control whatever the federal government pays for.

By pursuing bankruptcy, a state could seek to get out of contractual agreements to pay public employee pensions the state may no longer be able to afford.

"Bankruptcy could permit a state to alter its contractual promises to retirees, which are often protected by state constitutions, and it could provide an alternative to a no-strings bailout," Walsh noted.

Inevitably, states declaring bankruptcy could send major shocks through the municipal bond markets, with the unfortunate result that borrowing costs for all state and local governments may escalate dramatically.

The problem is that state governments, unlike the federal government, cannot simply print money.

New Jersey public employee crisis

In December, the State of New Jersey disclosed that the unfunded pension liability for state government employees grew from $45.8 billion to $53.9 billion in 2009, an increase of 18 percent.

New Jersey public employee pension funds currently cover some 800,000 workers in seven different pension funds covering a wide range of government employees, including teachers, police officers, firefighters, judges and bureaucrats.

The Philadelphia Inquirer reported that New Jersey residents have the largest unfunded pension liabilities in the nation.

New Jersey pension funds now have only 62 percent of the funds necessary to pay future promised obligations, down from 66 percent the year before.

To put this in perspective, pension experts generally recommend that state pensions should be funded to at least 80 percent of their current and future obligations.

New Jersey also has an unfunded obligation of $66.8 billion for health-care costs, in addition to the $53.9 billion unfunded pension liability.

Again, to put this in perspective, the entire state budget for New Jersey this year is $29.4 billion.

Gov. Christie recommended a wide range of changes for New Jersey public employment pensions, including rolling back benefits by as much as 9 percent, increasing the retirement age for teachers from 62 to 65, and requiring all state employees to contribute 8.5 percent of their salaries to the state pension system, instead of the 3 percent some public employees now pay.

Still, even these changes might not be enough to make a meaningful dent on the state's unfunded pension obligations.

State budget crisis faces nation in 2011

Last October, the Center on Budget and Policy Priorities reported that to balance their 2011 budgets, states had to address fiscal year 2011 gaps totaling an estimated $125 billion, or 19 percent of budgets in 46 states.

State tax revenues were 8.4 percent lower in fiscal year 2009 than in 2008, and an additional 3.1 percent lower in 2010, reflecting the worst recession since the 1930s.

"States will continue to struggle to find the revenue needed to support critical public services for a number of years, threatening hundreds of thousands of jobs," the Center reported.

The Center sees no diminishment in budget problems in 2012.

Already 39 states have projected budget gaps that are expected to total $112 billion for fiscal year 2012, a budget gap that is expected to grow to approximately $140 billion once all states have submitted their 2010 estimates. Even worse, the federal aid to the states provided by the February 2009 American Recovery and Reinvestment Act and to a smaller extent in the August 2010 jobs bill, estimated at $60 billion in 2011, is expected to decline to $6 billion in 2012.

"Taking all these factors into account, it is reasonable to expect that for 2012, shortfalls are likely to exceed $140 billion with only $6 billion in federal Recovery Act dollars remaining available," the report concluded.


FROM JEROME CORSI'S RED ALERT
By Dr. Jerome Corsi
(c) 2010 RedAlert.WND.com

Shared with permission

ABOUT THE AUTHOR: Jerome R. Corsi received a Ph.D. from Harvard University in political science in 1972. He is the author of the #1 New York Times bestselling books THE OBAMA NATION: LEFTIST POLITICS AND THE CULT OF PERSONALITY and the co-author of UNFIT FOR COMMAND: SWIFT BOAT VETERANS SPEAK OUT AGAINST JOHN KERRY. He is also the author of AMERICA FOR SALE, THE LATE GREAT U.S.A., and WHY ISRAEL CAN'T WAIT. Currently, Dr. Corsi is a Senior Managing Director in the Financial Services Group at Gilford Securities as well as a senior staff writer for WorldNetDaily.com.

ABOUT GILFORD SECURITIES: Gilford Securities, founded in 1979, is a full-service boutique investment firm headquartered in New York City providing an array of financial services to institutional and retail clients. From investment banking and equity research to retirement planning and wealth management services, our financial experts are prepared to accommodate the needs of investors. For more information about Gilford Securities please visit, Click Here: http://www.gilfordsecurities.com/financial-services-group.php

The views, opinions, positions or strategies expressed by the authors and those providing comments are theirs alone, and do not necessarily reflect Gilford Securities Incorporated's views, opinions, positions or strategies. Gilford Securities Incorporated makes no representations as to accuracy, completeness, currentness, suitability, or validity of any information expressed herein and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use.

ABOUT RED ALERT: Jerome Corsi's RED ALERT is your weekly, global financial strategies newsletter. Designed to be your guide to economic trends in the best of times and the worst of times, it is edited by New York Times best-selling author Jerome Corsi, Senior Managing Director of the Financial Services Group at Gilford Securities as well as a WND senior staff writer and columnist. For 25 years, Corsi worked with banks throughout the U.S. and the world developing financial services marketing companies to assist banks in establishing broker/dealers and insurance subsidiaries to provide financial planning products and services to their retail customers. Corsi developed three third-party financial services marketing firms that reached annual gross sales levels of $1 billion in annuities and equal volume in mutual funds. Corsi received his Ph.D. in political science from Harvard University in 1972.

Camp, Boustany Request Answers From Treasury Secretary Geithner on Tax Refund Pilot Program

Ways and Means Chairman Dave Camp (R-MI) and Oversight Subcommittee Chairman Charles Boustany (R-LA) sent a letter to Treasury Secretary Timothy Geithner inquiring about a pilot program the Department of Treasury (Treasury) announced on January 13, which would deliver tax refunds to 600,000 individuals through the distribution of pre-paid debit cards.

In the letter, the Chairmen outlined several concerns related to the pilot program, including fees that might be assessed on recipients who receive their tax refunds through a pre-paid debit card. As part of the Committee’s oversight jurisdiction relating to the activities of the Department of the Treasury and the Internal Revenue Service, Camp and Boustany requested Treasury provide information (by February 3) related to the pilot program, including how recipients of the pilot program were chosen, a copy of the program materials and an explanation of all of the fees and charges that will be incurred by some of taxpayers enrolled in the pilot program.

The full letter can be read here.

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Chairman Dave Camp (R-MI), Committee on Ways and Means Hearing on Fundamental Tax Reform

(Remarks as Prepared)

Ways and Means Chairman Dave Camp (R-MI) today delivered opening remarks at the Committee on Ways and Means Hearing on Fundamental Tax Reform. Below are excerpts, followed by the full remarks.

The Tax Code

“Clearly, the tax code is too complex, too costly, and takes too much time to comply with. All this adds more burdens on families and employers – making it more difficult to create jobs in this country.

“I am under no illusion that the task before us will be easy. To really reform the tax code in a way that lowers the tax rate, broadens the base, and promotes the competitiveness of American companies, we will need to make some tough choices.”

Tax Reform Requires Both Bipartisan Effort and a Conversation with American People
“I don’t think this can be, nor should it be, a partisan exercise. And it cannot happen just because one Chamber passes a bill. It will require the active participation of all Members of this Committee. It will require us to work with the Administration. And yes, we will even have to talk to the Senate.

“More importantly, we will talk to the American people – individuals, families, employers (large and small) – who are actually impacted by the laws we pass here in Washington.”

###

We meet today, in our first hearing of the 112th Congress, to begin what I expect will be a long discussion – and one that I hope will be bipartisan – on the need to reform our federal income tax system.

As I did on Tuesday, let me again extend my appreciation to the Ranking Member for agreeing to allow this hearing to move forward today, even though the Committee did not officially organize until two days ago.

Twenty-five years ago, a Democratic House and a Republican Senate sent to the White House, and the President signed, landmark legislation known today in the tax world as “The 86 Act.”

That law, which marked the successful culmination of years of work, broadened the tax base and lowered tax rates. It remains the basis of our system of taxation.

But it is, in some sense, a shell of its former self.

In the intervening years, Members of Congress – from both sides of the aisle – have loaded the tax code with a dizzying array of credits, deductions, exclusions, and exemptions.

The late economist David Bradford once provided a tongue-in-cheek example to illustrate the concept of tax expenditures and why they are little more than disguised spending.

Bradford proposed to cut the defense budget for weapons procurement to zero, while creating a new Weapons Supply Tax Credit that could be claimed by defense contractors for appropriate weapons “donated” to the Pentagon.

Under this regime, it would appear to the untrained eye that both spending and taxes would be reduced, thus allowing elected officials to claim that government was “smaller.” But in reality, nothing would have changed. A spending program would still exist; it just would be cleverly disguised as a “tax cut”.

Bradford’s cautionary tale seems all too real to those who have parsed the tax code and its mysterious tax expenditures for congressionally blessed industries and activities, both big and small.

Regardless of the merits of any individual tax expenditure, the broader picture is not a pretty one.

The President’s deficit commission that I served on, along with the gentleman from Wisconsin, Mr. Ryan and the gentleman from California, Mr. Becerra, measured the impact of these expenditures in terms of higher tax rates. The Bowles-Simpson report makes clear that taxpayers foot the bill for those expenditures in the form of higher tax rates.

The Bowles-Simpson report called for eliminating all tax expenditures and would moved individual income tax rates to 8, 14, and 23 percent and dropped the corporate tax rate to just 26 percent. And if their plan used all of the higher revenue from eliminating tax expenditures to push down tax rates, those number rates would have been even lower.

As we will hear from Nina Olson, the Taxpayer Advocate, the impact of the changes to the tax code to create, expand, and extend these expenditures can be measured by the tens of thousands of additional pages added to the code or the thousands of changes enacted in the last decade alone.

Clearly, the tax code is too complex, too costly, and takes too much time to comply with. All this adds more burdens on families and employers – making it more difficult to create jobs in this country.

I am under no illusion that the task before us will be easy. To really reform the tax code in a way that lowers the tax rate, broadens the base, and promotes the competitiveness of American companies, we will need to make some tough choices.

I don’t think this can be, nor should it be, a partisan exercise. And it cannot happen just because one Chamber passes a bill. It will require the active participation of all Members of this Committee. It will require us to work with the Administration. And yes, we will even have to talk to the Senate.

More importantly, we will talk to the American people – individuals, families, employers (large and small) – who are actually impacted by the laws we pass here in Washington.

So, this is just the first hearing of many. I have asked our witnesses to confine their remarks at this first hearing to defining the problems of the current income tax system.

I look forward to hearing from many other witnesses, and working with all of you, as we undertake this enormous challenge. As we do so, we will have many further opportunities to consider various solutions. But today, our focus should be on making sure we begin to understand the scope of the challenge.

With that, I yield to my friend, the Ranking Member.
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Big U.S. Tax on Overseas Earnings Means Fewer Jobs Here, Finance Pros Say

/PRNewswire/ -- U.S. corporations are making fewer domestic hires and investing less in U.S. operations, due to cash trapped overseas, according to a recent survey from the Association for Financial Professionals (AFP). High U.S. corporate tax rates create an incentive for companies to leave cash abroad, often permanently.

In follow-up questions to AFP's recent 2011 Business Outlook Survey, 26% of respondents with operations abroad say that excessive U.S. corporate tax discourages their organization from bringing cash back to the U.S. and using it to invest in corporate growth in the form of new hires, capital investments, or research and development.

Proponents of the current tax rates on repatriated foreign earnings say the tax deters companies from making investments in non-U.S. operations and stems the flow of American-based jobs overseas, but AFP members indicate that this is not the case. Of those with non-U.S. operations responding to the survey, two-thirds indicate that the tax on repatriated foreign earnings at current rates has little to no impact on the decision to begin or continue operations outside of the U.S.

"Capital is mobile. Companies have choices about where to locate and where to invest," said Jim Kaitz, AFP's president and CEO. "For U.S. companies to grow domestic operations and make hires here, AFP believes that the current corporate tax regime must become competitive with that of other nations."

In a January 2011 policy statement, AFP said that U.S. companies should be permitted to repatriate foreign earnings at a tax rate that allows the U.S. to compete for investment of those earnings with other countries that tax those earnings at significantly lower rates. AFP recently delivered the same message to members of the 112th U.S. Congress, the White House and staff of the U.S. Treasury.

Since U.S. companies can choose when and if ever to repatriate earnings that are taxable in the U.S., the lost tax revenue is extremely low. In fact, a more favorable tax treatment might increase tax revenue in both the short- and long-term because companies would no longer have a strong incentive to avoid high U.S. taxes by reinvesting foreign earnings elsewhere. The likely inflow of capital to the U.S. could stimulate capital investment and hiring, contributing to economic recovery and long-term economic growth.

Reported estimates have U.S. corporations holding $1 trillion in cash and cash-like investments abroad.

AFP members, who are responsible for ensuring that their organizations have enough cash on hand to fund operations, are uniquely positioned to observe the cash flows of their organizations, and many of them are directly responsible for tax-related issues. Since they work in a wide range of industries and in both public and private organizations of varying sizes, their opinions reflect a broad corporate perspective that is both operational and strategic.

ABOUT THE SURVEY

From November 29 through December 10, 2010, the AFP surveyed U.S. financial professionals about current and expected business conditions in the U.S., then sent follow-up questions based upon policy issues, which included corporate tax issues for repatriated cash and floating NAV for money market funds. These two issues are the focus of the 2011 AFP Business Outlook Survey Policy Supplement. The original survey generated 808 responses from professionals holding a variety of financial positions within their organizations, including CFO, vice president of finance, treasurer and assistant treasurer. The results produce a margin of error of +/- 3.4 percent.

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Georgia Tax Reform Report a Taxpayer Protection Pledge Violation

Council on Tax Reform recommends net tax increase on Georgians

Today Americans for Tax Reform announced that a vote in favor of the recommendations of the 2010 Special Council on Tax Reform and Fairness for Georgians would violate the Taxpayer Protection Pledge, as it constitutes a net tax increase. 55 Georgia lawmakers, including Governor Nathan Deal, House Speaker David Ralston, and Senate Majority Leader Chip Rogers have signed the Pledge, a written promise to constituents to oppose and vote against or veto all tax increases.

While the Council proposes some pro-growth reforms, such as the gradual reduction of personal and corporate income tax rates, they are more than offset with net tax increases. The income tax reductions amount to roughly $750 million in savings for Georgians, but tax increases on groceries, tobacco, communications services, the Internet and other services approach $2 billion. ATR believes that tax reform is a noble goal, but not when it constitutes a net revenue increase for state government.

ATR President Grover Norquist issued the following statement:

“In its current form, last week’s tax reform proposal should be a non-starter for fiscal conservatives in the Georgia Legislature. While tax reform is indeed a laudable goal, it should not be presented in a way that increases the net burden on taxpayers and raises even more money for state government. Unfortunately, this report recommends just that.

“A significant reduction in marginal tax rates is long overdue in Georgia, which is wedged between two states – Tennessee and Florida – that levy no personal income tax at all. But if the goal is to use such reductions to mask bigger tax increases on groceries, tobacco, and a variety of services, it is not even worthy of a conversation.

“This is akin to shards of glass in a delicious crème brûlée. It is a bit of desirable tax reform ruined by an overall tax hike. Thankfully, Taxpayer Protection Pledge signers run state government in Georgia. Because they have taken tax increases definitively off the table, I am confident that we can move past this initial foray into tax reform and begin a serious conversation about reducing the size and scope of state government in Atlanta.”

Americans for Tax Reform is a non-partisan coalition of taxpayers and taxpayer groups who oppose all tax increases. For more information or to arrange an interview please contact John Kartch at (202) 785-0266 or by email at jkartch@atr.org.
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GBPI Releases New Fact Sheet: Income Tax Evens Out the Burden for Families

The Georgia Budget and Policy Institute (GBPI) released a fact sheet highlighting the attributes of the income tax that make it a good counterweight to sales taxes, especially for families.

The Special Council on Tax Reform and Fairness for Georgians meets today to finalize recommendations before state legislators return on Monday, Jan. 10. Those recommendations will go to a joint House and Senate committee, which will craft legislation for an up or down vote by legislators.

The Council is likely to recommend a shift from the income tax to the sales tax, based on a presentation by Chairman A.D. Frazier in December.

The income tax is an important mechanism for recognizing the different needs of families and vulnerable populations. For example, the income tax excludes a base amount of income per person to ensure we are not taxing the most basic level of income.

Each person in a four person family receives a personal exemption ($5,400 for the parents and $3,000 for each child). A single person receives a $2,700 personal exemption. Thus, a family of four earning $50,000 pays about $1,900 in state income taxes, compared to about $2,500 in income taxes for a single person earning $50,000. In contrast, the sales tax does not recognize that it takes a larger amount of income to provide for more people.

"The state income tax is a tool that allows us to balance some of the negative aspects of the sales tax," said Sarah Beth Gehl, deputy director of the Georgia Budget and Policy Institute. "A dramatic shift from income to sales tax will likely mean middle class families and vulnerable populations will foot more of the bill for state services."

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