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NEWS SOURCES | ARCHIVES OF PAST MONTHS

Recent Economic News

Inflation Fears - Govexec.com 3/23/05
"The Federal Reserve nudged interest rates higher, as expected, but signaled for the first time in more than four years that it is concerned with inflation," the Wall Street Journal reports. "The shift in tone raises the prospect that the Fed could accelerate the pace of rate increases, though not just yet." "Wholesale price increases for February came in roughly in line with Wall Street expectations Tuesday, tempering inflation concerns," CNN/Money reports. "The Producer Price Index, the government's key measure of wholesale prices, rose 0.4 percent in February, compared to the 0.3 percent increase seen in January. Economists surveyed by Briefing.com had forecast a 0.3 percent rise in February." The central bank's top policymaking committee announced its action and released a statement interpreted by many analysts as a warning that interest rates might rise more sharply and quickly than they had anticipated. "Pressures on inflation have picked up in recent months and pricing power is more evident," the statement said, referring to rising costs for energy, materials and employee benefits and the ability of more businesses to raise consumer prices. Washington Post

Social Security Update - Govexec.com 3/11/05
According to a Washington Post survey of senators, Bush's "bid to add individual accounts to Social Security faces such formidable opposition in the Senate that its supporters may be unable to bring it to a vote," the Washington Post reports. "An overwhelming majority of Democratic senators said they will oppose, under any circumstances, Bush's plan to allow younger workers to divert a portion of their Social Security payroll taxes into individual investment accounts that would follow them into retirement. A few others said they will not support such accounts if they require substantial government borrowing."

Greenspan Warns About Deficits - Govexec.com 3/11/05
In prepared remarks to the Council on Foreign Relations in New York, Federal Reserve Chairman Alan Greenspan said Thursday "that future budget deficits pose a bigger risk to the economy than record trade imbalances and the country's extremely low savings rate," AP reports. "In a wide-ranging speech, Greenspan said he believed the United States' flexible economy would be able to deal with current concerns over trade and savings."

Fed Warns of Unsustainable Deficits - GovExec 3/3/05
Federal Reserve Chairman Alan Greenspan warned Wednesday that "the nation faces a future of economic stagnation, rising interest rates and budgetary crisis unless Congress takes major steps to cut deficit spending," the Washington Times reports. "In his most stark assessment of the consequences of 'unsustainable' budget deficits that hit $412 billion last year, the Fed chairman told the House Budget Committee that Congress will not be able to 'grow out of the deficit' and that the only solution is to cut spending, curb Social Security and Medicare benefits and possibly even raise taxes a little or allow some tax cuts to expire."

Greenspan: Fix Social Security, Medicare - 3/02/05 CNN Money
Fed chief says growth of benefit programs, if not addressed, could make budget problems worse. Federal Reserve Chairman Alan Greenspan told Congress Wednesday that the economy is growing at a reasonably good pace, but that the nation must tackle its budget deficits, primarily through spending restraint. He also urged the House Budget Committee to swiftly address the problems facing Social Security and Medicare, saying that delay will only make the country's budget problems worse. "Addressing the government's own imbalances will require scrutiny of both spending and taxes," Greenspan said.

Healthcare Spending - 2/24/05 NY Times
The Bush administration predicted Wednesday that government would account for nearly half of all the nation's health care spending by 2014. Further, it said, total health spending will double in a decade, to $3.6 trillion in 2014 from $1.8 trillion last year, while gross domestic product, the total output of goods and services, grows more slowly. As a result, health spending will constitute 18.7 percent of the economy by 2014, up from an estimated 15.4 percent last year, the administration said.

Economy In Good Shape - 2/16/05 NY Times
Federal Reserve Chairman Alan Greenspan told Congress on Wednesday that the economic expansion rolled into the new year at a respectable pace and that inflation -- while not an immediate threat -- is something policy-makers must continue to guard against.
Greenspan, delivering the Fed's twice-a-year economic outlook to lawmakers, struck a fairly positive tone about the economy, which had been mired in a midyear lull last year and has since improved.
"All told, the economy seems to have entered 2005 expanding at a reasonably good pace, with inflation and inflation expectations well-anchored,'' Greenspan said in prepared testimony before the Senate Banking Committee.

THE ECONOMY: SEVEN INDICATORS - From CNN Money (as of 3/01/05)

1. Trust Misuse. Unscrupulous promoters for years have urged taxpayers to transfer assets into trusts. Some trusts do not deliver the promised tax benefits, and the IRS is actively examining these arrangements. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering into a trust.
2. Frivolous Arguments. Promoters have been known to make the following outlandish claims in support of not paying taxes but all such arguments are false and have been thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law.
3. Return Preparer Fraud. Dishonest return preparers can cause many headaches for taxpayers who fall victim to their ploys. They attract new clients by promising large refunds. Taxpayers should choose carefully when hiring a tax preparer. The taxpayer is ultimately responsible for its accuracy.
4. Credit Counseling Agencies. Taxpayers should be careful with credit counseling organizations that claim they can fix credit ratings, push debt payment agreements or charge high fees, monthly service charges or mandatory "contributions" that may add to debt. Some of these tax-exempt organizations are charging debtors large fees, while providing little or no counseling.
5. "Claim of Right" Doctrine. In this scheme, a taxpayer files a return and attempts to take a deduction equal to the entire amount of his or her wages. The promoter advises the taxpayer to label the deduction as "a necessary expense for the production of income" or "compensation for personal services actually rendered." There is no basis in law that supports this.
6. "No Gain" Deduction. Similar to "Claim of Right," filers attempt to eliminate their entire adjusted gross income (AGI) by deducting it on Schedule A, labeling it "Other Miscellaneous Deductions" and attaches a statement to the return, referring to court documents and including the words "No Gain Realized." There is no basis in law that supports this.
7. Corporation Sole. Participants apply for incorporation under the pretext of being a "bishop" or "overseer" of a one-person, phony religious organization or society with the idea that this entitles the individual to exemption from federal income taxes as a nonprofit, religious organization. When used as intended, Corporation Sole statutes enable religious leaders to separate themselves legally from the control and ownership of church assets. But the rules have been twisted at seminars where taxpayers are charged fees of $1,000 or more and incorrectly told that Corporation Sole laws provide a "legal" way to escape paying federal income taxes, child support and other personal debts.
8. Identity Theft. Identity thieves have used stolen personal data to access financial accounts, run up charges on credit cards and apply for new loans. The IRS is aware of several identity theft scams involving taxes. In one case, fraudsters sent bank customers fictitious correspondence and IRS forms in an attempt to trick them into disclosing their personal financial data. In another, abusive tax preparers used clients' Social Security numbers and other information to file false tax returns without the clients' knowledge. Sometimes scammers pose as the IRS itself. The IRS does not use email to gather information. If taxpayers have any doubt whether a contact from the IRS is authentic, they can call 1-800-829-1040 to confirm it.
9. Abuse of Charitable Organizations and Deductions. The IRS has observed an increase in the use of tax-exempt organizations to improperly shield income or assets from taxation. This can include a "contribution" of a historic facade easement to a tax-exempt conservation organization.
10. Offshore Transactions. Despite a crackdown on the practice by the IRS and state tax agencies, individuals continue to try to avoid U.S. taxes by illegally hiding income in offshore bank and brokerage accounts or using offshore credit cards, wire transfers, foreign trusts, employee leasing schemes, private annuities or life insurance to do so.
11. Zero Return. Promoters instruct taxpayers to enter all zeros on their federal income tax filings. In a twist on this scheme, filers enter zero income, report their withholding and then write "nunc pro tunc" -- Latin for "now for then" -- on the return.
12. Employment Tax Evasion. The IRS has seen a number of illegal schemes that instruct employers not to withhold federal income tax or other employment taxes from wages paid to their employees. Employer participants can also be held responsible for back payments of employment taxes, plus penalties and interest.

Stranger Owned Life Insurance Policies (SOLI) Effectively Prohibited
Under state law, it is necessary to have an insurable interest to purchase insurance on an individual. Governments believe that insurance is intended to be purchased for the protection of family members, for business purposes or other key person reasons. It is generally believed that allowing insurance purchases by investors on unrelated individuals could lead to abuses. Therefore, stranger-owned life insurance (SOLI) is not permitted under state law.
In the Fiscal Year 2006 Revenue Proposals of the Bush Administration, there is a proposed provision that will effectively eliminate this version of SOLI as of February 8, 2005. The proposed provision would create an excise tax of 25% on the death benefit if a charity has owned the contract and transferred it to a private individual or other entity who does not have an insurable interest. In essence, the 25% tax on the proceeds will eliminate any potential for investors to produce a reasonable return, and charitable SOLI policies will experience a quick death.
GiftLaw 2/14/05

• Charitable gifts from IRAs to qualified charities.
• Increased deduction for gifts of food inventory.
• Reducing private foundation tax on net investment income to 1%.
• Allowing charitable trusts to sell assets with unrelated business taxable income and not lose their tax exempt status.
• Enabling subchapter S corporations to make charitable gifts and flow charitable deductions through to shareholders.

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Please note, individual financial circumstances will vary. The information on this site is meant as general information and does not represent legal or tax advice.. As with all tax and estate planning, please consult your attorney or estate specialist. All material is copyrighted and is for viewing purposes only. This News and Information section has been compiled by Future Focus.
Please report any problems to webmaster. Revised: April 5, 2005 6:04.