Posts Tagged 'property'

Back to Our Roots

Shock: Mitt Romney is quickly falling out of favor with the GOP.

Ok, I’m not really shocked.  In fact while I thought Romney was going to win, it wasn’t what I was predicting when he won the nomination.  In fact, I wrote back in March on Whitehouse12.com that when it came down to it, the election would not be about the economy.  Turns out, I was right.

With a mixture of QE Infinity, a suspect September jobs report, and unemployment applications surprisingly falling (because California failed to report their numbers on time), the argument on the economy became relatively dampened just in time for the election.  Toss in pure media malpractice in their coverage on Benghazi and Sandy, where there was simply the latest in a string of incompetencies by this administration, and come election day Romney’s success as a businessman did not put him over the edge in voters minds.

What did put Obama over the edge was perception.  Obama was the candidate with your lady parts on his mind, and not in a dirty way.  He was the one who didn’t put women in binders, whatever that means.  But he was the one who is making it so that our nation stops killing sick people.  He is the one who cares so much about the poor and middle class, despite taxing them through Obamacare.  And of course, his strategy of divide and conquer worked.  Obama is the President of blacks, Hispanics, women, students, the poor, the middle class, Hollywood, and so on.  Romney’s one failed attempt at divide and conquer was announcing that he was not the guy for the 47%.  Somehow that was less successful than Obama’s strategy.

The Republican establishment has 2012 all figured out.  If only we offered our version of the Dream Act, rewarding young illegal immigrants for good behavior.  If only we were less rigid about what we believed and sounded more like Democrats.  The fact is, we did ok with moderates.  Moderates don’t win elections.  The only reason we keep having it drilled into our heads that they do is because pandering to moderates is a great way to lose conservative votes.

Now, Republicans have an opportunity to communicate with the country.  The Fiscal Cliff should teach the country a few very important lessons.  All the tax hikes in the world won’t solve our deficit problem.  Tax hikes on the rich will hurt the economy, but they won’t cover even one major pork bill.  The problem is spending.  We are spending ourselves broke and not even taxes on the rich can close the gap.

But instead, the lesson coming out of the fiscal cliff is that we all need to do our fair share.  Those of us who make more should pay far more.  Forget deficits and budgets and all that wonky stuff.  If you are rich, you didn’t build that.  It’s time for you to suffer like we are all suffering so that we can all share in this wonderful suffering that is America.  Somehow this is the message that is resonating, and it is probably because we have no Newt Gingrich in Congress to stand up and call the whole concept ridiculous.

Conservatism is not about shared suffering.  It is about freedom and opportunity.  It is about striving for so much freedom and opportunity that poverty becomes a choice.  It is about a people who tell the government what it can and can’t do, not the other way around.  It’s about personal responsibility and the ability to choose whether or not to buy your neighbor the things he or she needs and wants.

Conservatism is about fair, simple taxes.  It is about states rights.  It is about limited foreign engagement only when our national security is at risk.  It is about the right to drink beer and shoot off fireworks in your back yard.  It is about the right to teach your kids the Bible or worship however you want.  It is about the right to live, pursue happiness, own property, earn your way through school and get a job you love.  The outcomes are not guaranteed, but the right to pursue the outcomes are.

This is a message that would resonate.  Freedom gets people to the polls.  The problem is that too many moderate Republicans are so worried about governing that they forget their primary responsibility: to uphold the constitutional protections against their attempts to govern.  We are a nation of individuals governed by states and united under one constitution.  A party that runs on a conservative constitutionalist platform will win.

Debunking Obama’s Business Tax Break

Obama is touting a new business deduction that could save companies up to $200 billion dollars.  The tax break will allow businesses to expense capital property and equipment 100% right away instead of depreciating them up to 39 years.  However, this plan will have limited effects until the fourth quarter of 2011.  Here is why:

Just like the Healthcare credit, this business deduction will only reach a very limited range of companies.  While Obama is heralding it as a small business tax break, small businesses already can expense equipment and some capital improvements through Section 179 deductions.  In fact, they can expense up to $250,000 in 2010.  Most small businesses will never purchase that much new equipment in one year.  So already this break for 2010 is only for medium to large businesses.  In 2011, this business tax break will act simply as an extension after Obama let’s the Section 179 provision expire.

What Section 179 does not cover is the physical building and most capital improvements to the building itself.  That is where this tax break may actually be effective for small businesses.  However, Obama runs into another snag here that most tax professionals and analysts miss.  In order to take losses in your business, you have to have basis.  In other words, you can only take out of your company what you put into it or make in the process of carrying on business.  If you borrow $100,000 from the bank and put it into your company, and then spend it all without making any money, you cannot deduct that $100,000 until you have built up basis in your company.

Most building property and significant improvements are purchased through outside financing on the small business scale.  This means that most small businesses will not be able to take the losses from this tax deduction until they are able to build up basis in the company.  In fact, companies who choose to take this deduction and then take distributions out of the company in excess of their basis will face double taxation.

The final nail in the coffin for this tax break for 2010 is that many tax advisers are telling business owners to put off capital investments until 2011 when the Bush tax cuts expire and rates go up.  Many small businesses make capital purchases and take advantage of 179 expensing in the fourth quarter as part of their year end tax planning.  This year, many businesses are planning on putting those purchases off until next year when the deduction can save them an additional 3-8.4% in taxes.  By putting off property purchases until 2011 when Obama let’s taxes go up, small businesses can save tens of thousands of dollars.

In that sense, this tax break may be a good thing.  As businesses are losing tens of thousands with the expiring Bush tax cuts, maybe this will help save some jobs in 2011.  Don’t expect it to solve anything this year.


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