Now that President Obama is officially in office, we want to keep you up to date on the changes that may be coming your way. Keep in mind that none of the below changes have become law yet and must be voted on by Congress. Details are not yet available; however, it is clear that if some of these items are enacted into law they will have a substantial impact on small business owners. Due to the large amount of these Policy Agenda Proposals, I will discuss them over several posts.

Increase the minimum wage: President Obama has proposed to raise the minimum wage to $9.50 per hour by 2011 and index it to inflation. I have never been a fan of the minimum wage. I think people should get paid what they are worth, not some arbitrary amount set by government. This will certainly result in an increase in cost to many businesses throughout the Country. I can only hope that it does not result in an increased number of jobs being shipped overseas where such requirements do not exist.

Making Work Pay tax cut: The details on this are very unclear. Supposedly, it would permanently cut taxes by $500 per person ($1,000 per family). I will keep you posted on this as I hear more details.

Tax cut for senior citizens: Eliminate all income taxation of seniors making less than $50,000.

Reverse certain Bush tax cuts. This proposal would reverse most of the tax cuts for the highest producing tax payers. The Obama proposal mentions the “wealthiest” taxpayers. Unfortunately, the policy makers do not understand that “wealthy” and “high income” are two totally separate things and that having a “high income” does not translate into having more cash for taxes. This will definitely have an adverse effect on many small businesses throughout the nation.

Welfare Credit Expansion. Apparantly “Change” does not mean that the government is going to stop telling the American people the truth. I wrote about this a few weeks ago, asking for then President-Elect Obama to come clean on this lie that the government has been dealing to the American people since 1975. Instead of coming clean and fixing the issue, President Obama has propose to expand the Earned Income Tax Credit (EITC, otherwise known as the Welfare Credit) so that full-time workers making minimum wage would get a benefit of more than three times what they can currently claim. Currently, the maximum benefit is $4,825. So, does this mean that they can get an additional $14,475 handed to them for doing nothing other than filing a tax return. Given the above request to increase minimum wage to $9.50, a full time employee eligible for this credit would earn $19,760 in wage, pay no income tax, and recieve a “refund” for more than $14,475 resulting in a total of $34,235. In addition, President Obama’s proposal calls for this benefit to be doubled if they are paying child support and it would also reduce the Welfare Credit (EITC) marriage penalty. As I stated in my prior post, I am not debating for or against welfare. I am simply debating against lieing to the American people about it.

This topic always gets me riled up, so I am going to stop now. I need to go blow off some steam. I will post some more on the upcoming policy agenda tomorrow – some of it good, some of it bad. In the meantime, if you have any questions about how these proposed changes may effect you – you know where to find us.

With the Presidential Inauguration only days away, I want to join a host of other Americans who are calling for President Elect Obama to end the Tax Code Lie once and for all.

Most Americans do not even know of these outrageous lies. Millions of Americans think that they receive big tax refunds, when they do not. Millions of Americans think that everyone pays some tax, when a third of all taxpayers pay no income tax – projected to increase to 44% under President-Elect Obama’s plan. The reason for this disparity in what people believe and what is actually true dates back to the initial passing of the Earned Income Tax Credit in 1975, and its massive expansion in 1990 and 1993.

Touted as one of the top anti-poverty programs in the country, the Earned Income Tax Credit is no more than a massive government welfare and wealth redistribution system – kept on the down-low from most Americans. It is not obvious because it isn’t called “welfare.” It is called a “tax refund.” I hate to tell Congress, but a refund is only a refund up to the amount that someone paid. Anything else, if NOT A REFUND, is welfare. Currently, taxpayers that paid no income tax (zero, zilch, nada) can receive a “refund” of up to $4,825. [Not a typo].

I am not here to argue whether these people need the money or whether or not the poor should be helped or anything related. My issue is simple. The government needs to stop lying to the American public by funneling these massive welfare payments through the tax code. If the welfare is needed, open up the debate on whether or not welfare is needed and stop hiding it in the tax code.

Also, the biggest area of tax fraud – by far – is related to the Earned Income Tax Credit. Approximately 1/3 of all returns containing an earned Income Tax Credit is flawed, resulting in billions of dollars in lost funds to the government (ultimately taxpayers). If someone wants these welfare payments, let them apply for welfare. Most of these people are already on food stamps and receive assistance already. Let the Department of Health & Human Services sort this out and let us actually see from a budgetary standpoint, the true cost of welfare in this country. What is the government hiding here?

President-Elect Obama has promised a vast expansion in refundable tax credits such as the earned income tax credit. Personally, I think it is time we stopped the lie. I am not against people who need help getting help, but I am against lying to Americans to get it done.

Oh….also, President-Elect Obama has promised big tax cuts for the poor. Just as the refunds are not refunds, these tax cuts are not tax cuts. They are welfare. If someone is already paying zero tax, they can’t get a tax cut. If they get more money back, it is because these “welfare” credits have been increased. Period. I do not know how the press lets the government keep getting away with this lie.

One more note, before all you Obama Lovers jump on my back, this lie has been going on during the Ford Era, the Reagan Era, the Bush I Era, the Clinton Era, and the Bush II Era. Obama did not start the lie, but in the essence of “change,” I think it is time he ended the lie.

Recently, the IRS published guidance on the new Tax Credit to Aid First-Time Homebuyers that was part of the Housing and Economic Recovery Act of 2008.

Below are some key points to know about the credit:

• This credit is available for a limited time. The buyer must purchase their home after April 8, 2008, and before July 1, 2009.
• As this is a tax credit (as opposed to a deduction), it reduced a taxpayer’s bill or increases a taxpayer’s refund dollar for dollar.
• The credit is “refundable.” This means that even if you owed no tax for the year, you still get the credit refunded to you. In essense, refundable credits allow many taxpayers to pay a “negative” amount of tax, many times receiving thousands of dollars in what is called a “refund” even though they paid nothing in.
• Unlike most other refundable credits, the Tax Credit to Aid First-Time Homebuyers must be paid back. For example, if you receive the maximum credit of $7,500, you would have to pay back $500 (1/15th of the amount) each year for the next 15 years.
• First-Time Homebuyer does not mean First-Time Homebuyer. What it really means is anyone who has not owned a main home (excluded rentals and vacation homes) for three years prior to the purchase can qualify for the credit.
• The credit is 10% of the purchase price of the home, with a maximum credit of $7,500 if single or married filing jointly.
• The credit is not available if your income is too high. Phaseouts start at $150,000 for married couples, and $75,000 for other taxpayers.

For all of the rules, please see IRS-2008-106.