Ilyce Glink Show Notes December 12, 2010
Tax Deal Reached, Interest Rates Jump
This was a big week for financial news, with the tax deal finally reached, interest rates jumping after a big bond selloff earlier in the week, and still no movement (really) on unemployment claims.
Tax Deal Reached
From our friends at the Georgia Association of Enrolled Agents
Thursday night, Senate Majority Leader Harry Reid (D-NV) released the tax bill to be taken up by the Senate and probably voted on tomorrow (Monday). The expansive tax bill includes the compromise reached by Congressional leaders and President Obama this week. The bill will temporarily extend the 2001 and 2003 tax cuts, keeping current rates for all income levels for an additional two years. Also of note are two year extensions (through 2012) of:
* current capital gains and dividend rates * the AMT "patch" (for 2010 and 2011) * the PEP repeal * the repeal of the Pease limitation * the third-child EITC * bonus depreciation * increased § 179 expensing provisions
A provision in the bill would set the estate tax exemption at $5 million per person and $10 million per couple with a top rate of 35% for the estate, gift, and generation skipping transfer taxes for two years, through 2012. The exemption amount would be indexed beginning in 2012. The estate tax rate would be retroactively effective January 1, 2010, although it allows for an exception for 2010 to choose no estate tax and a modified carryover basis for estates arising on or after January 1, 2010 and before January 1, 2011.
The deal includes allowing certain tax extenders that expired this year to continue through 2011, including credits for energy-efficient homes and appliances, deductions for school teachers, deduction of state and local sales taxes, limited tax-free distributions from IRAs and the research and development (R&D) credit.
The bill includes an extension for unemployment insurance up to 13 months. Probably more noteworthy, the bill includes a payroll tax rollback. Employees currently pay a 6.2% Social Security tax and self-employed individuals pay a 12.4% tax on wages up to $106,800. This provision lowers the tax by two percentage points (to 4.2% and 10.4% respectively).
READ MORE: Tax Breaks: What You’ll Keep and Lose
And, don’t forget to tune into our CHRISTMAS TAX SHOW next Sunday at 11am ET to get great tax advice and find out how the new tax deal will affect you!
The Stock Market is Up 45 Percent Since President Obama Took Office (55 percent for the S&P)
But is the underlying fundamental value really there? I think there are two ways to measure value: what someone will pay and whether corporate profits are up. Investors are paying a pretty penny for company stock these days, but corporate profits are at their highest level ever. The question is why are profits at record levels? Is it true business improvements, innovation and inspiration causing those profits? Or, are companies continuing to fudge the numbers?
Perhaps a little of each? Or, perhaps it’s just a Santa Clause Rally.
$9 Trillion lost in Home Value Since 2006
In a report released today, Zillow says US homes are expected to lose an additional 63 percent more in value this year over 2009-to the tune of $1.7 trillion.
This brings the total loss since the market peaked in June 2006 to $9 trillion. To put this in perspective, $9 trillion is:
12 times the cost of the war in Iraq
900 times the value of the most expensive home in the world
A little over 9 times the GDP of Australia.
Not surprisingly, the National Association of Realtors vigorously contests these numbers. They don’t want you thinking your home isn’t worth that much – or if you’re buying, they don’t want you thinking home values are still falling, or you won’t step up and buy a property. I’ll publish their rebuttal tomorrow on my CBS MoneyWatch.com Home Equity Blog.
READ MORE: Home Value Loss Reaches $9 Trillion
Unemployment Numbers Fall (A Little) To 421,000
Applications for jobless benefits decreased to 421,000, compared with the median forecast of economists surveyed by Bloomberg News for 425,000 new claims. Labor Department figures showed. The four-week moving average, a less-volatile measure, dropped to the lowest level in more than two years.
We asked this question this morning – Most people are spending less – not more this year. And if they are spending more, it’s only a little more.
What are you doing? Click here to find out what WSB listeners said..
This Week on the Equifax Personal Finance Blog
This Week on Ilyce’s CBS MoneyWatch.com Home Equity Blog
Is this where hyper-inflation begins?
It seems that 2010 was a far worse year for home values than 2009.
A baker’s dozen top remodeling trends for 2011.
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Have a great week. Please leave your questions and comments on the blog.