IRS RELEASES THE DIRTY DOZEN TAX SCAMS FOR 2012

Please check out the latest tax scams issued by the IRS: READ MORE

FEDERAL SUBSIDIES FUEL COLLEGE COSTS

Dr Gross is a professor of economics at Creighton University in Omaha, Nebraska.  He publishes a monthly Economic Trends Newsletter.  I found his comments regarding education costs quite interesting.  Note that at the end he asks at the end of the article if the government is creating another housing type bubble by their legislative actions?  

Federal Subsidies Fuel College Costs  Up 5 Times Inflation Rate

Since 1981, U.S. Bureau of Labor Statistics data show college tuition and fees have soared by 714.3 percent while all other items consumed by the average household increased by a more moderate 141.0 percent.

Reacting to this shocking trend, President Obama, in his State of the Union address, threatened higher educational institutes with sanctions if they continued to boost tuition at this alarming rate. Contrary to the President's rhetoric, the federal government, by increasing federal financial assistance by almost 20 percent since 2009, has been one of the chief culprits allowing colleges to shift a large share of rising costs to the taxpayer.

Moreover, the President boosted the federal "bailout" or subsidization of higher education by: 

1. Allowing borrowers to cap their student loan payments at 10 percent of discretionary income and waiving any loan balance remaining after 20 years.
2. Doubling the number of work-study jobs available.
3. Implementing the American Opportunity Tax Credit which provides up to $10,000 for four years of college. 
4. Asking Congress to subsidize record low student loan interest rates.  

Despite rapidly rising federal support, colleges have increased the share of courses taught by part-time faculty to 49 percent in 2009 from 34 percent in 1981. Furthermore, colleges raised average faculty salaries by a scant 2.7 percent per year over the past six years.  

During this same period of time, the growth rate in outlays for student services (e.g. athletics, counseling) was almost double that of expenditures for instruction.  

Data show that colleges have used federal government support to underwrite a disproportionate growth in funds for non-academic spending and a sharp increase in tuition and fees.There is a strong correlation over time between student and parent loan availability and rapidly rising tuitions.  

Similar to housing, the federal government is putting air in another bubble - this time it is higher education.  

LATEST ON THE PAYROLL TAX CUTS

(The Hill) -- TheHill.com reports House Speaker John Boehner said yesterday "that lawmakers have 'an agreement in principle' to extend the payroll tax cuts, unemployment benefits and the Medicare 'doc fix,' but cautioned that 'there are a lot of details that have yet to be worked out.'"  GOP leaders hope for "a House vote by the end of the week," but "some rank-and-file Republicans have decried the idea of adding $100 billion to the deficit."

To read more on this article: CLICK HERE

NEW HSA AMOUNTS FOR 2012

Here are the new HSA contribution limits for 2012:

• Contribution limit ~
• Family: $6,250
• Self: $3,100
• Catch up if over 55 ~
• Family: $1,000
• Self: $1,000
• Minimum deductible ~
• Family: $2,400
• Self: $1,200
• Max out of pocket ~
• Family: $12,000
• Self: $6,050

The catch up contribution can only be made by individuals who are at least 55 and are not yet enrolled in Medicare. Remember that starting in 2011 because of Obama Care over-the-counter medicines may not be reimbursed thru HSA.

MY DAD WAS WRONG

I remember when I was a high school student my dad told me that I had a choice as I selected a career.  I could work for the private sector or I could work for the government.  He said that the government workers were pretty much guaranteed that they would not lose their job and they had a really good pension plan but that was offset by the fact that they were not paid as well. 

Little did he know how things would change.  Now they have job security, a good pension and are paid better.

TheHill.com reports that "the Congressional Budget Office found Monday that federal workers are compensated 16% more than comparable private-sector workers on average. ... For those with only a high-school degree, workers earned 21% more and were given benefits worth 72% more than in the private sector."  For federal workers with a college degree, "wages were about the same but benefits were 46% better in the government."  According to the story, "President Obama's 2013 budget request, due to be sent to Congress on Feb. 13, will ask for a 0.5% cost-of-living raise for workers."

To read more of this article: READ MORE

GOOD TIMES FOR U.S. FARM ECONOMY

(Nebraska Radio Network) -- NebraskaRadioNetwork.com reports that Jason Henderson, Vice President of the Federal Reserve Bank of Kansas City, "believes the agricultural economy should stay in a growth period for at least another year."  Henderson credits high commodity prices, "the low value of the dollar, which is supporting U.S. agricultural exports overseas," as well as "growing incomes in global markets, especially developing countries."

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DIMINISHED DEPRECIATION INCENTIVES

To help a struggling economy, Congress has been using two incentives to encourage businesses to expend for capital equipment. Through 2011, new equipment (but not used) qualified for a 100% bonus depreciation deduction. But for calendar year 2012, the first-year bonus percentage drops to 50%, and for 2013 there is no bonus percentage. The 100% incentive for 2011 required that the asset must have been both legally acquired and placed in service by December 31, 2011.

The long-standing Section 179 first-year depreciation deduction was $500,000 for tax years beginning in 2011. But for a tax year beginning in 2012, this deduction is only $139,000. This first-year incentive deduction applies to both new and used assets, and is claimed before applying the 50% bonus for 2012.

As an illustration, assume that a farmer acquires $339,000 of various items of machinery and equipment during 2012. Up to $139,000 of Section 179 expense can be claimed, and that should be applied to used items rather than new equipment. That leaves the remaining $200,000 of cost to which the 50% bonus is applied for another $100,000 deduction (assuming this remaining $200,000 is all new equipment eligible for the percentage bonus). The remaining $100,000 is subject to the normal seven-year depreciation schedule. So, for this example under 2012 rules, there is $239,000 of first year deductions on total costs of $339,000.

The bonus depreciation provision applies to new acquisitions of assets that have a 20-year or shorter depreciation period. Consequently, farm machine sheds and shops, which are 20-year assets, qualify for bonus depreciation. If completed and placed in service during 2012, bonus depreciation applies to 50% of the cost with the remaining 50% depreciated over 20 years (1/2 year for the first year).

But note: There are some commentators that think that the President and Congress will go back to the $500,000 and 100% rules of 2011. I am watching for the upcoming debate on the 2% payroll tax for a hint of what Washington will do.