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Our on-line
newsletter bulletin now going on our seventh year!
Offering our clients and readers news items and headlines
often not covered by the mainstream media, articles of interest
regarding banking, economics, real estate, taxes, living or investing
abroad, plus much more. Finally, our very popular readers write
in section, with answers to some of the questions many of our readers
have - that no one else wants to answer truthfully, except us!
Want to See our Other Back Issues from 2002 - 2005?........Click Here
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Visit The Main Newsletter Section & Read Past Issues On-Line:
Dominican Republic Real Estate, Residency Filing, Banking and Interest Rates.
Panama Residency and Retirement. Naturalization and Dual Citizenship - Expatriate Issues.
Economics commentary, inflation, housing, stock markets and investing -
Plus a Whole Lot More !
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Our February 1, 2007 Newsletter Edition
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SANTO DOMINGO REAL ESTATE UPDATE:
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Periodically we try and let clients know what is going on in the local
real estate market in the greater metropolitan area of Santo Domingo
specifically. There are plenty of high priced golf course
projects going up in some of the resort areas, and they are quite nice,
but also quite costly in terms of the local market (and are primarily
marketed to foreigners). I am not knocking such places and if
that is what you want - by all means consider it. But for those
people looking for more reasonably priced options, here are properties
on the market in January 2007:
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New Construction In Arroyo Hondo - New Apartment building with
apartments ranging from 1,000 to 1,600 square feet (2 and 3 bedrooms),
private off street gated parking, imported ceramic tile starting at
US$65,000 (for the smaller apartments).
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In Arroyo Hondo - 1200 square foot apartment on ground floor in private
building, 2 bedrooms, private parking, maid quarters with
bathroom. Owner is asking the equivalent of US$79,500. Call
our office for inquires about this property.
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New Construction in Arroyo Hondo - 1300 to 1600 square foot apartments,
3-bedrooms, 2.5 bathrooms, covered parking, building gym facilities -
from US$114,000 to US$134,000.
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New Construction in Los Restauradores - 1200 and 1300 square foot
3-bedroom apartments, 2 bathrooms, 2 off street parking spaces - from
US$82,000 to US$88,000. One and two bedroom - 1150 square foot
apartments available for US$73,000 in same project.
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New Construction in Bella Vista - 1600 square foot luxury 3-bedroom, 2
and one half visitors bathroom, 2 covered parking spaces, formal
reception lobby with elevator, from US$147,000 to US$157,000.
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New Construction in Mirador Norte - 1700 square foot apartments, 3-bedrooms - 2.5 bathrooms, starting at US$128,000.
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Colina de Los Rios - Single Family Home with 2,800 square feet of
construction (2 levels), 4-bedrooms, 3.5 bathrooms, parking for 4 cars,
Patio and Garden - US$152,000.
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Under Construction in Arroyo Hondo - Single Family Home of 5,000 square
feet, 3-bedrooms, 3.5 bathrooms, terrace and patio, double garage,
marble floors US$209,000
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IN THE NEWS:
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CALM BEFORE THE STORM IN FEDERAL DEFICIT
By Greg Robb, Market Watch - Jan. 18, 2007
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Warning of serious consequences to the U.S. economy if plans are not
put in place to pay for the government's future spending obligations,
Federal Reserve chief Ben Bernanke urged Congress on Thursday to take
early and meaningful action to put the budget on a sustainable
path. Referring to official forecasts that project the budget
deficit to moderate over the next few years, Bernanke said this was
simply the calm before the storm for the deficit. A surge in tax
receipts pushed the deficit down to $248 billion in fiscal 2006 -- the
smallest gap in four years. But Bernanke said this number
presented a misleading picture because it doesn't capture long-term
government obligations. Spending on entitlement programs, such as
Social Security, Medicare and Medicaid, will begin to climb quickly
over the next decade as baby boomers retire, likely leading to rising
budget deficits and record levels of federal debt, he told the Senate
Budget Committee. By 2030, entitlement obligations will rise to
15% of gross domestic product, from roughly 8.5% in fiscal 2006,
according to the Congressional Budget Office. Congress must act
because economic growth alone is unlikely to solve the nation's
impending fiscal problems, Bernanke said. Without steps to reign
in entitlement spending, a vicious cycle may develop in which large
deficits lead to rapid growth in debt and interest payments, which in
turn would add to subsequent deficits, he said. The effects on
the U.S. economy would be severe, Bernanke said. If early and
meaningful action is not taken, the U.S. economy could be seriously
weakened, with future generations bearing much of the cost, Bernanke
said.
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http://www.marketwatch.com/news/story/
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EDITORS NOTES:
Well, he is not saying anything we do not already know, but at least he
is being honest. Will the politicians take heed? My guess
is probably not. One of my favorite quotes is: economic growth
alone is unlikely to solve the nation's impending fiscal
problems. Funny how they all whoop and holler when a GDP growth
rate of some number less than 2 percent is announced. Chinas
economy has been growing at 10 percent per year for the past twenty
years. The economic growth in the Dominican Republic is back up
to about the 8 percent range for 2006 and ditto for a number of other
markets. In any event, my take on this is that Bernanke is doing
the CMA disclaimer thing (cover my assets) and getting it down on
public record, so no one can come back later on and cite him for
negligence, when the you know what hits the you know what. Just
my opinion, I could be wrong.
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HEDGE FUNDS FLEE TAX HAVEN IN VIRGIN ISLANDS, HOUNDED BY IRS
By Ryan J. Donmoyer - January 25, 2007
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At the Deep End Bar, a poolside grill in St. Croix just steps from the
Green Cay Marina, a handful of money managers and investors sip Cruzan
rum from a local distillery and reach for complimentary bug repellent
as dusk brings out the no-see-ums. Warren Mosler, who opened a
hedge fund firm in St. Croix five years ago, is having what's become
the usual conversation with people who were lured to the U.S. Virgin
Islands in 2001 by the prospect of legally cutting their tax bill by 90
percent. Almost half of the 49 funds that set up shop in the islands
have fled in the past two years. Mosler complains that hedge
funds were chased away by federal tax law changes and an Internal
Revenue Service that says it suspects rampant fraud by those that
signed up for the tax incentive. It's kind of like what happens
to a community when a big company or an army base pulls out but on a
smaller scale, says Mosler, a founding member and manager of the III
Funds, which manages $3.5 billion. He now advises the fund in
Christiansted, one of two Danish colonial settlements on St.
Croix. He's surveying the sparse happy-hour crowd. Unfortunately,
the fear is causing a case of running away from the police when you're
not guilty, he says. Mosler, 57, and two other hedge fund
managers -- Kevin Brandt, president of James River Capital Corp., and
Paul Saunders, the firm's chief executive officer -- bought and
renovated the Tamarind Reef Hotel four years ago in anticipation of an
influx of Wall Street money managers to the island, which is 1,100
miles (1,770 kilometers) southeast of Miami.
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The St. Croix finance boom never came. Instead, the U.S. Treasury
Department and U.S. Senator Charles Grassley of Iowa, the Republican
chairman of the Senate Finance Committee from 2001 to 2006, knocked it
out with a combination punch of regulation and legislation, Mosler
says. The U.S. government became alarmed in 2003 when someone
sent the Treasury Department an anonymous letter that included
marketing materials advertising the territory's economic program as a
tax dodge, Grassley says. Before our reforms, we had people
living in the United States and claiming Virgin Islands residency to
dodge their federal income taxes, Grassley says. It took a long
time to corral that horse and put it in the barn.
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http://www.bloomberg.com/
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EDITORS NOTES:
A reader sent in this article, and I appreciate all these kinds of
items that are sent to us. You can read the entire article
on-line, but the bottom line, this is all about taxes and a loophole
that existed in the US Virgin Islands allowing individual and corporate
clients to basically get away from the IRS. In other words, the
U.S.V.I does have its own tax authority, which has been over the years,
shall we say, a bit more user friendly. So, in the past, you
could establish residence (and often enough that meant not much more
than a P.O. Box and a bank account - and thus the turmoil of what
constitutes residency for tax purposes) and basically claim you were
under the rule or guise of that tax authority INSTEAD of the IRS (and
perhaps get some advantages in doing so). Of course, now because
of a supposed anonymous letter to the US Treasury, the gig is up as
they say. However, Senator Grassley says that people and
incorporated companies were doing this as a federal tax dodge, which is
not entirely accurate. Meaning, while it was true that taxes were
being paid to the USVI tax authority INSTEAD of the IRS - US Treasury,
the point is that taxes were still being paid to some US entity
somewhere (and still a US Territory none the less). Granted,
perhaps there was less taxation, lower tax rates or more liberal
allowances, but tax money was still flowing into the coffers of a US
territory (and much needed tax money I might add).
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It is interesting to note that the statistics indicate USVI residents
earn HALF the annual average per capita income of the US mainland
residents, and are ranked below the poorest state in the US as
well. In addition, The USVI government pension system is a
mess. US Virgin Islands Gov. John DeJongh Jr said recently
(January 2007) the territory's roughly US$1 billion (Euro773 million)
pension shortfall was the result of decades of government mismanagement
and described the three-island chain's fiscal health as precarious. He
calls a one billion shortfall in one of the poorest per capita income
territories of the US precarious? I call it broke (as in we
cannot afford to pay the telephone bill this month honey - kind of
broke). Crime and unemployment is rampant in the USVI, not to
mention violent crimes such as murder (new housing developments in the
USVI are basically walled and gated prison compounds, where inmates or
I should say homeowners, commit themselves voluntarily - - actually
they make a home purchase, to insulate themselves from the
crime). In fact, Puerto Rico and USVI have some of the worst
numbers, or better said, the highest violent crime rates, in the entire
Caribbean (and are both US territories). Would it not have been
better to create some kind of economic incentive, and yes, lower taxes,
for business people and well heeled individuals to relocate
there? As always, politicians love to throw the baby out with the
bath water. Senator Grassley is of course content that the horse
is back in the barn. Let us hope the poor horse has enough oats
and hay while he is locked up in there so he does not starve to death
(of course, I hope you realize that the horse he was talking about is
you, the average tax-payer). I have said it before and I will say
it again, they must be broke. How else can you explain beating up
and fighting with a small US territory for tax money? The US
Treasury must really be hard up (residents of Guam and the Marshall
Islands take heed).
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THE DANGER IN CHINA'S MEXICAN PORT GRAB
Thursday, January 18, 2007
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A Chinese company closely aligned with Beijing is rapidly expanding its
Pacific port operations south of the American border. This is yet
another example of China's increasing global stranglehold on strategic
ports and sea-trade gateways. For Americans, there are important
security and national self-sufficiency implications. The Trumpet
has repeatedly warned about China's long-term strategy to control the
world's most strategic seaways. The U.S.-built Panama Canal, arguably
one of the world's most strategic waterways, is under Chinese control.
So too is Freeport in the Bahamas, which China developed into one of
the world's largest shipping terminals. China has also extended its
Caribbean sea-gate control in Ecuador, where China owns that nation's
only natural deep-water port. However, amid China's many overt
Latin American takeovers of strategic trade chokepoints and shipping
facilities, its rapidly growing presence in Mexico, America's next-door
neighbor, has gone largely unnoticed and underreported. There,
Hutchison Whampoa Ltd., the huge Chinese shipping conglomerate (which
also controls the ports on both ends of the Panama Canal and the other
above-mentioned facilities), controls several major ports, including
those in Manzanillo, Veracruz, Michoacan and two ports in
Ensenada. Mexican officials, as well as Hutchison Whampoa, are
also reportedly studying the feasibility of developing the sparsely
populated bay of Punta Colonet, which is 150 miles south of the U.S.
border, into a superport rivaling those of Los Angeles and Long
Beach. But of most immediate interest may be Whampoa's Pacific
port at Lazaro Cardenas, which is undergoing a massive expansion
involving a new specialized container terminal, set to become the
largest of its kind in Mexico. Lazaro Cardenas is also Mexico's deepest
port and upon completion of its expansion will be capable of handling
even the largest of container vessels. In economic terms, China's
Mexican port expansion could benefit U.S. consumers. First, the Mexican
ports are much lower-cost import locations than are Long Beach and Los
Angeles, which currently handle 80 percent of imports from Asia and 40
percent of all the cargo shipped into the United States. For example,
U.S. longshoremen in Long Beach and Los Angeles typically earn over
$100,000 per year; their Mexican counterparts may earn only $10,000.
Reduced port costs could be passed off to the consumer. (However, some
of this benefit probably would be negated eventually by the fact that
American-made goods would then have to compete with even less-expensive
imports.
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However, though consumers may benefit in the short term, there is a
very real negative ramification associated with increased imports
entering the U.S. through Mexican ports. By becoming more reliant
on Mexico to keep America's imports flowing, the U.S. subjects itself
to the increasing influence of yet another trade partner. Just as
Belarus, Poland and the Ukraine control the pipelines that bring much
of the oil and gas into the European Union, Mexican ports could
increasingly regulate a greater proportion of the goods that flow into
the U.S. It is like adding a middleman into the equation whom you now
have to keep happy. Moreover, China's inroads into Mexican port
operations are no accident. China has already taken control of vital
sea gates through which resources must travel into the U.S.--the Panama
Canal and Freeport, Bahamas. The greatest concentration of U.S. oil
refineries, terminals and storage facilities is in the Gulf of Mexico
region, which means that much of the oil must pass through the
Caribbean--a route now significantly controlled by China. In addition,
China is establishing a huge deep-water port in Gwadar, Pakistan, at
the entrance to the Persian Gulf. Thus, China's expansion of its
Mexican port operations is clearly part of a much larger strategy aimed
at gaining control over global trade routes--and giving it the
advantage in any future disputes.
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http://www.thetrumpet.com/
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EDITORS NOTES:
I try to read as much as possible and glean information from as many
different sources as possible also, as readers over the years can
attest to. I relate this to you because I found the above news
article and thought it to be interesting to say the least. Which
is to say, if you view the website where the article comes from, you
will see that it is dedicated to biblical end of the world kind of
rhetoric. However, that does not mean that I necessarily agree
with the theme of the site nor does it mean that the facts mentioned in
the article are untrue either, or the article itself of no value.
In other words, if you find some news items or articles from a
politically left leaning source, it does not mean the author is telling
you complete falsehoods, nor does it mean you are socialist
either. On the same token, getting information from right wing
sources does mean you are advocate of fascism either or that the
information is not valid. So, the point is, read as much as you
can from as many different sources as you can. Then pass all that
through the natural computer you have, also known as the human brain,
and get a true sense of what the heck is really going on as a result.
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With that said, I have a few comments about the above article and how
it relates to some of the ideas or predictions we proposed in our first
newsletter of the year. Specifically I am of course referring to
the comments about downward pressure on wages as a goal or shall we
say, agenda. In the above article, the author points out that
U.S. longshoremen in Long Beach and Los Angeles typically earn over
$100,000 per year; their Mexican counterparts may earn only $10,000
(and that reduced port costs could be passed off to the
consumer). While most people, looking at things from a consumer's
viewpoint, will say that lower prices are a good idea, and I have to
naturally include myself in that group, there is another cost or side
to consider. Better stated, with every economic policy, or
political policy meant to result in some sort of economic benefit
somewhere or for someone, there is a down side (or we can say a COST,
sometimes hidden and sometimes not). What one has to decide is,
if the true cost is worth it, or as they say - if the juice is worth
the squeeze.
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Regarding this SPP issue, which is really interrelated quite directly
to the idea of a port facility in Mexico, Alex Segura, head of the
anti-illegal immigration group Utah Minuteman Project, says: It's to
create commerce - even at the price of community. I like that
quote but I will take it or expand upon it a bit further. It is
about commerce - but with the various costs involved socialized or
spread out to the taxpayers, with other parties gaining the economic
benefit while not being forced to absorb the costs of the
downside. Forget for just one moment the focus and tirade towards
China per say (in the above article) but rather sew into the overall
design, all of the other players or actors and issues involved.
Walmart, for example (in conjunction with Hutchison Whampoa, or in the
least, let us say that their common interests are aligned in this
Mexico Port expansion deal, in terms of the SPP initiative to open up
the borders for easier movement of goods coming out of that port),
wants this to happen. The stated benefits are supposedly lower
product costs for consumers because of lower labor and shipping costs
(US$100,000 for a US Teamster to driver a truck versus US$10,000 for
the Mexican equivalent) and quicker delivery in terms of the already
congested and clogged facilities at Long Beach, California. All
well and good, and perhaps all potentially true as well (but why not
spend the money and expand the facilities in Long Beach or some other
place along the California coast?). The beneficiary in all this
is obviously a company such as Walmart, not to mention the Mexican town
where this new facility will be established. However, if the
border with Mexico is essentially eliminated so a free and unfettered
movement of goods and people can occur, how will that impact other
areas? If illegal immigration already is placing a strain on
public school systems, hospitals and health care facilities and other
sectors NOW, what will be the case when 40 Million additional poor
people (hard working and probably honest persons looking for work and a
better life economically and not necessarily persons involved in any
anti-social behavior) have the opportunity to easily flood the
market? Who is going to pay for the added social costs, the
schools, the hospitals, and so on? US Corporations currently pay
some of the lowest tax rates in US history at the moment, so I doubt
Walmart (and corporations like them) will be picking up the tab.
It will be the consumers or better said, individual taxpayers in
California, Arizona, Texas and New Mexico (just to name a few closest
states that might be impacted) via increased sales taxes, increased
real estate taxes, not to mention new payroll deduction taxes for this
new government health care program proposed for California. In
addition, one can make the case in strict terms of dollars and cents,
that someone earning minimum wage is NOT able to contribute a share in
taxes or social insurance contributions equal to what they may be
taking out in benefits (public school costs, medical care programs,
etc.). Therefore, it is logical the balance or the shortfall will
come from everyone else, and most likely - that means you. Once
again - is the juice worth the squeeze? Maybe it is, and then
again maybe not. It all depends if you are the person (or entity)
benefiting or not, and that is really the bottom line.
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Stated clearly, lower US domestic wages plus higher taxes will equate
into a lower overall standard of living for most middle class citizens
in the US (and Canada) - and how can it not? This overall complex
of ideas or agendas aligns business (who naturally want lower costs and
higher profit margins, and correctly this should be the long term goal
of any business enterprise) with those who claim to want to equalize
economic divergences (politicians and anyone else that want to attempt
to eliminate or reduce poverty, or in the least, narrow the economic
gap between the so-called wealthier nations and poorer nations).
The idea to eliminate or reduce poverty in the poorer nations is noble
indeed, but where is the increased standard of living in these
countries going to come from? The partial answer is from a
reduced standard of living for citizens in the wealthier countries,
like water at a higher level in one glass flowing to make up the
difference in the other glass with less water until both are at a
medium or equal point relative to each other. There is no free
lunch in economics, or no magic formula that can miraculously create
wealth from pixie dust - everything is a trade off. But, it all
depends upon what side of the fence (or border) you are on, and if it
is a net benefit or net malady for you personally. However, no
one gets a free ride under a truly (and I stress the word truly) free
market capitalistic system whereas as socialism (corporate welfare
included) by contrast does advocate a free ride for some at the expense
of others - as the stated goal is to equalize the economic imbalances
directly by government decree or policies. All noble and
commendable, but is it FAIR?
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And what about China? Are they really so evil, or just doing what
is best for their own interests, as any country should in terms of its
own citizens? Sure they are securing shipping facilities
worldwide to enhance their export capabilities, and why not? If
you were in charge of a country manufacturing say, 70 percent of the
world's consumer products, would you not do the same? The problem
with China is, they are not playing economic ball, or at least not by
the same rules as the US would like them to. First off, they are
challenging US hegemony, which is of course a capital crime in the
minds of the empire builders (Chavez, by the way, is not considered to
be evil because he is a socialist, he is rather evil because he is
giving them the finger. Otherwise, if that were not true, how do
you explain support and economic cooperation with other blatantly
communist nations? Vietnam is just one example). Second,
they are maintaining an artificially low currency exchange rate to keep
their labor costs low and they are barring or putting up trade barriers
for foreign companies who want to get access to their domestic markets
(exactly what the US did during the so-called industrial revolution in
order to build up their own domestic economy and keep out foreign
competition, which is what all developing markets should be doing,
either alone or in tandem with more EQUAL trading blocks or partners to
get the same benefit). China, despite being a socialist or
communist one party government dictatorship (in theory and politically)
could care less about world inequality (and the plight of the worlds
poor or shall we, proletariat classes). They want to sell stuff,
be the world's low cost producer and make money. In fact, one can
say, they are more capitalistic than the so-called capitalists (at
least in terms of the current economic system, politics being another
matter), and the previous capitalists more ideologically bent on world
utopian socialism ideals these days than the communist Chinese
(corporate welfare an especially favorite theme). Some switch -
eh? To quote Aretha Franklin - who is zooming who?
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In a nutshell, economics (or economic agendas) drive politics, and
politics drive or result in certain kinds of economic outcomes as
well. Knowing what is going on both politically and economically
allows you to figure out how these various events and trends will
affect you personally, and from there decide what to do about it.
In other words - is the juice worth the squeeze? And is the juice
one hundred percent all natural goodness, as the promotion says - or is
it really the Jim Jones version of Kool-Aid? Of course, it is not
so simple to ferret all this out, which is why you have to read and
look at everything. In addition, many things are interrelated or
interconnected economically in ways you never thought of.
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Here are some additional on-line articles to read. The first in
defense of, the second claiming the conspiracy theory nuts are running
rampant, and the third, a more middle of the road point of view.
Enjoy.
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THE TRUTH ABOUT CONSPIRACY THEORIES
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http://www.canadafreepress.com/2007/deweese011107.htm
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THERE ISN'T GOING TO BE A NORTH AMERICAN UNION
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http://www.humanevents.com/article.php?id=18859
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LAWMAKER ASSAILS TRADE ACCORD
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http://deseretnews.com/dn/view/0,1249,650223598,00.html
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FORD POSTS WORST LOSS IN ITS HISTORY: $12.7 BILLION
By Sarah A. Webster - Detroit Free Press - January 25, 2007
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Ford Motor Co. posted a net loss of $12.7 billion, or $6.79 a share, in
2006, the worst loss in the company's 103-year history. That tops
Ford's worst year on record, which was 1992, when the automaker posted
a $7.39-billion loss. It also tops General Motors Corp.'s $10.6-billion
loss in 2005. Ford's staggering, historic loss comes after the
company bled $5.8 billion, or $3.05 per share, during the last three
months of the year. That was on top of the $7 billion in losses through
September.
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http://www.freep.com/
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EDITORS NOTES:
How do you loose 12 Billion Dollars? Did some senior executive
have it stuffed in a duffle bag that he (or she) inadvertently left on
a public bus? Was the company grossly overcharged by the laundry
service that cleans the towels in the executive restroom? Poor
old Henry Ford must be scratching at his coffin to get out so he can
choke the grandkids now running the company. In any event, I am
reminded of that old slogan - so goes General Motors, so goes America
(or something like that, considering they supposedly lost 10 Billion
Dollars also). And of course we have Ben Bernanke who said very
recently: economic growth alone is unlikely to solve the nation's
impending fiscal problems. What economic growth? Is the chairman
of the Federal Reserve now warning us to buckle up?
.
Some people have said to me, you know that the economy is going well
because of the low interest rates and low costs for consumer goods in
the stores. Well, if that is what you believe, then here is
something to think about. I have noticed some recent
advertisements in the US from one major electronics store in
particular, offering no money down interest free financing until 2010
for large screen television purchases (three years away). If you
are a retail store, and the ONLY way you can get consumers to buy is by
allowing them walk off with your products in what amounts to no initial
payment - interest free lay-a-away - then I would say there is
something severely wrong with the economy. Getting back to Ford
and General Motors, they were giving the cars away, and still had
trouble. It has been estimated that Ford has lost US$2,000 on
every vehicle it sold, or should I say leased. How many American
consumers are out there living in over priced homes they do not own (no
money interest only mortgages), driving cars they really cannot afford
if via traditional car loan payments (lower monthly leases instead) and
buying stuff in department stores with money they do not have (credit
cards)? The latest new problem for US credit card issuers are
delinquency rates and debt among senior citizens, who are now running
personal credit card debt to cover monthly living expenses. This
was the generation that lived through the Great Depression, and a group
that were scared to death about living beyond their means
previously. Where is this going to end up?
.
Of course, American corporations see the writing on the wall. Why
do you think they are so enamored with NAFTA, CAFTA and all the other
so-called free trade agreements? Why are they so hot and heavy to
get out, and move both manufacturing abroad PLUS domiciling in other
jurisdictions? They want to get into the Third World Countries,
or Emerging Markets, where the local economies are growing 6, 8 or 10
percent - because that is where the money is. They want
these free trade agreements as a ruse to get these countries to do away
with previous tariffs or customs duties on their products so they can
get in on the action (and take market share away from the local
manufacturers who will surely benefit from the growth). Certainly
it is true that many consumers in these markets do not have the same
amount of wealth or purchasing power as their counterparts in the US -
but they are not broke either and are growing in numbers (not to
mention economic clout). These so-called poor people have equity
because they have not gotten themselves tapped out with credit cards or
inventive mortgages either. The American consumer is broke,
tapped out, mortgaged out and otherwise out of economic gas.
Think about it. Also realize that consumer spending makes up
about 70 percent of the US economy (as opposed to other countries
whereby exports and not local consumer spending make up the bulk of
economic activity). Once the US consumer becomes really bummed
out - watch out.
.
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ALTERNATIVE MINIMUM TAX CAN BITE YOU: When you file your 2006 taxes, keep these AMT rules in mind - By Andrea Coombes, MarketWatch - Jan. 26, 2007
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If you say the tax code is complex you have to come up with another
word to describe the alternative minimum tax. Unfathomable
perhaps? Whatever you want to call this parallel tax code, an
increasing number of taxpayers are stuck in it. In 2006, about 3.5
million taxpayers fell prey to the alternative minimum tax, up from 1.3
million just five years earlier, according to the Tax Policy Center, a
joint venture of the Urban Institute and the Brookings Institution.
Since the AMT is not indexed to inflation, and thus threatens to
ensnare more middle-class taxpayers every year, we regularly play the
congressional game of pass the patch. That is, waiting for
Congress to enact an AMT patch, which sets higher exemption limits,
helping to keep the number of taxpayers caught in the system closer to
current levels. If for some reason Congress chooses to not play
the patch game in 2007, the number of taxpayers paying the AMT will
jump to more than 23 million, according to the Tax Policy Center. While
some in Congress are calling for reform, that's a difficult proposition
when you consider the billions in federal revenue the AMT brings in.
The alternative minimum tax is the poster child for tax-law complexity,
wrote Nina Olson, the national taxpayer advocate, in her annual report
to Congress in December. The National Taxpayer Advocate is an
independent IRS office created by Congress. The alternative
minimum tax topped Olson's list of 21 serious problems facing
taxpayers. While created in the late 1960s to target a small
group of wealthy Americans who had managed to avoid paying income tax,
today, the AMT is left to punish taxpayers for engaging in such classic
tax-avoidance behavior as having children or living in a high-tax
state, Olson wrote.
.
http://www.marketwatch.com/news/
.
EDITORS NOTE:
We highlighted this problem for you last year in one of our previous
newsletters, so once again, nothing new. However, I will almost
guarantee nothing will be done. They need the money, and this
problem is the perfect stealth way to get more income tax revenue
without lifting a finger (or imposing new income taxes). I
guarantee you that today's politicians will surely lay blame on the
previous politicians for the AMT issue, so it is a perfect political
item (they get more tax revenue and also get to blame someone else for
it). Regardless, taxes are going up for 20 Million MORE middle
class Americans - believe it.
.
.
COUNTY TAXES HIGH IN NATION
By Ray Finger - January 27, 2007
.
Chemung County is among the top 10 counties in the country that carry
the highest burden when property taxes are calculated as a percentage
of the value of homes. Chemung County is No. 10 and Steuben
County is No. 19 on the national list, according to 2005 data compiled
by the Tax Foundation, a nonpartisan tax research group based in
Washington, D.C. And nine of the top 10 counties are in upstate
New York. According to the information, property taxes in Chemung
represent 2.4 percent of a home's value, based on a median home value
of $78,600 and median property taxes of $1,902. In Steuben County,
property taxes are 2.3 percent of a home's value, based on a median
home value of $70,200 and median property taxes of $1,620. The
percentage becomes alarming because you're buying your house back every
25 years, said state Sen. George H. Winner Jr., R-Elmira. In
contrast is St. Bernard Parish in Louisiana, at the bottom of the list
at No. 775. Its property taxes represent 0.1 percent of a home's value,
based on median a home value of $48,394 and median property taxes of
$140. The percentage is calculated by dividing the median real
estate tax paid by the median home value on owner-occupied housing
units in a county as defined by the U.S. Census. The figure includes
all real-estate taxes -- municipal, school and county.
.
http://www.star-gazette.com/
.
EDITORS NOTE:
So, nine of the top ten counties in the nation with the highest real
estate taxes are in New York State (and Upstate New York I might add,
where cows and apples run free and out number people - as opposed to
high priced and populated New York City). Somehow my mind wanders
back to those television commercials a few years back - do you
remember? You know, the one where different people - a NYC taxi
driver, even the current Governor at the time all sing in unison - I
Love New York.
.
.
GOVERNOR'S HEALTH CARE PLAN TAXES MEANING OF THE WORD - FEE
By Ken Garcia, The Examiner - January 27, 2007
.
SAN FRANCISCO - Gov. Arnold Schwarzenegger has made enough bad movies
in his career that you would think he'd know when he's been handed a
lousy script. For even his considerable charm, bravado and his
marketing-savvy staff are not enough to push the idea that the public
will be paying for his whopping pile of programs, including his $12
billion universal health care plan, with fees. When is a fee not
a tax? When it's packaged as part of an election-year promise.
Now, I realize that the governor won an easy campaign against
Democratic candidate Phil Angelides in part based on the challenger's
muddy idea to raise taxes. But that doesn't alter reality or make
soaking taxpayers for state services something that it's not. Our
celebrity governor may think he can sell fog in San Francisco and
sunshine in Los Angeles, but the last time I looked a levy was just
another term for tax, no matter how many special effects you throw into
the mix. This may be Schwarzenegger's biggest evasion since he filmed
Predator. He's certainly not the first politician to try to
circumvent the tax moniker, but unlike the elder George Bush, nobody is
even going to bother to read his lips. Universal health care may be a
good prescription for California, but residents of the Golden State are
not going to accept that a plan to charge employers, doctors and
hospitals to pay for the new system is a fee and not a tax. And you
know that Schwarzenegger is struggling with his pitch when he starts
referring to the payment plan as a loan. Does that mean the $12
billion loan will be refunded to us? At that rate, we might be able to
live off the interest. And maybe the state of California should be
refunding our property taxes -- I mean fees.
.
http://www.examiner.com/
.
.
TOLLS, TAXES AND TITLE FEES
By Summer Harlow - The News Journal - January 26, 2007
.
Gov. Ruth Ann Minner wants to double tolls on Del. 1, raise the gas tax
by a nickel a gallon and increase vehicle titling and registration fees
to cover a $1.5 billion transportation funding gap. And a
controversial option to lease I-95 to try to float the state's
cash-strapped transportation department remained on the table as Minner
released her proposed budget Thursday. In November 2005, a task
force revealed the state was $2.7 billion short of paying for all the
construction projects planned through 2012. Last week, though, the
administration said it excised $1.2 billion from the shortage, reducing
it to $1.5 billion.
.
http://www.delawareonline.com/
.
.
OFF TO A ROUGHT START: CITY BEGINS BUDGET PROCESS; EARLY PREDICTIONS POINT TO A TAX HIKE. By Jennifer Meyer of the Muscatine Journal January 26, 2007
.
MUSCATINE, Iowa -- Muscatine residents could see their overall city tax
levy increase by 3 percent under a proposed budget for fiscal year
2007-08 that includes few funds for expanding services. This has
been a very difficult process because we had to deal with problems we
haven't had to in a long time, City Administrator A.J. Johnson told the
Council during a budget overview meeting on Thursday.
.
http://www.muscatinejournal.com/articles/2007/01/26/news/
.
.
TAXING SEESAW PERPLEXES OWNER VEXED BY HIGH TAXES, LOW HOME PRICES. By John Gallagher - January 26, 2007
.
Back when Mark Avery was a bullpen warm-up catcher for the Detroit
Tigers, he could always spot a curveball. Today, he says he's getting
thrown a curve on his property tax bill. Avery of Rochester Hills
is one of many local homeowners who wonder why their property taxes
keep going up even as home values in metro Detroit and Michigan as a
whole have been going down. I got my tax bill in November, and I
looked at it and saw my assessment, and I said, Wait a second, they
think my house is worth a lot more than it is, he said earlier this
week. So I started to look into it. I'm like - You know what? This
doesn't make any sense. Avery, who worked in the Tigers' bullpen
in 1993 and now runs a baseball camp as well as his own real estate
business, isn't alone in wondering why tax bills and assessments seem
to be going in opposite directions. The National Association of
Realtors reported in November that prices of existing houses in metro
Detroit had dropped more dramatically -- 10.5% during the third quarter
of 2006 alone -- than in any other big urban market in the
nation. At the same time, the state gave local taxing authorities
permission last November to raise property taxes 3.7% to reflect a rise
in inflation. That was the highest annual increase since Michigan's
current property tax system took shape in 1994. As annual notices
of assessment changes get mailed out to homeowners in mid-February,
more residents may question what they're paying.
.
http://www.freep.com/
.
EDITORS NOTES:
From Delaware to Iowa to Michigan - Your taxes are going up (and in
many markets, housing values going down). We talked about this
being a new trend for 2007, so no sense in beating the drum any
further. These municipalities are broke, they need the money -
and can you guess where they are going to get it? In one of the
previous articles above - Muscatine, Iowa City Administrator A.J.
Johnson says: This has been a very difficult process because we had to
deal with problems we haven't had to in a long time. Is A.J.
saying that the new problem in Muscatine is really because the local
municipality is broke? Being broke is certainly a problem, and
does pose difficulties.
.
.
THE BUDGET DEFICIT: HOW MUCH ARE YOU WILLING TO PAY?
By Suzanne Adams - Miner Staff Writer - January 25, 2007
.
Everyone is talking about President Bush's State of the Union Address
and the Democrats' response. Political pundits and news stations across
the nation are interviewing senators and congressmen, former
presidents, political science professors and other bigwigs for their
opinions. There's nothing new about this. It's the typical media
response to the State of the Union address. But I guess what
disappoints me most is that I haven't heard a political pundit, a news
anchor or a reporter ask, How are we going to pay for all this without
raising taxes? I've heard pundits and senators pick apart the
success of the president's No Child Left Behind bill, his plans for
Social Security and health care. But no one has raised the issue of how
we are supposed to pay for these items without raising taxes. My
generation is currently paying and will be paying for the Social
Security and Medicare/Medicaid of the Baby Boomer generation. I have no
problem supporting my parents. After all, they supported me for more
than 20 years of my life. But what happens when I want to retire.
What happens if I need disability? There will also be money coming into
the Social Security fund from the next generation, but will it be
enough to provide the benefits and services my generation needs?
Also, my generation and the one preceding mine are much smaller in
population than the Baby Boomers. How are we supposed to provide the
services this generation needs without raising taxes? Many people
are already paying for medical care and services for their elderly
parents that Social Security and Medicare/Medicaid don't cover. That
trend is expected to continue. How are American's supposed to afford
paying higher taxes, care for their aging parents and children and pay
for college?
.
http://www.kingmandailyminer.com/
.
EDITORS NOTES:
They are going to raise taxes and probably cut benefits, or did those
politicians somehow forget to mention that? Funny how the devil
is always in those tiny little details hidden in the fine print.
The question is asked by the author of the article - How are American's
supposed to afford paying higher taxes, care for aging parents and
children and pay for college? The answer is they cannot afford it
and they will not be able to afford it - unless they leave.
Unless they move to Ecuador or Panama or the Dominican Republic or even
Armenia, they cannot afford it. That is why many of our clients
have done just that. The very best private health insurance for a
family or four will cost about US$150 per month in your new country
(for private dentists, doctors and private hospitals or clinics), a
live in maid will cost about US$300 per month (who also cooks), and the
tuition for one of the best private universities will cost about
US$1,000 per semester. In terms of housing, you can refer back to
the top of this newsletter.
.
READERS WRITE IN:
.
Hello, regarding your January 17th edition regarding Barahona. We
there is certainly hesitation in investors looking at the southwest for
development there are projects going up that range anywhere from
$100,000 to $300,000 already. They are taking advantage of the
diversified ecology of the area. I believe that within 1 year
this area will be the next haven for developers from Barahona to
Perdenales.
.
EDITORS REPLY:
Well, you could be correct. I have not been out and about in the
Barahona area myself for some time, but I have heard that there were
some residential projects being developed. However, I do think
part of the problem is that Punta Cana is getting the spotlight for the
moment, which is why many foreigners are not familiar with other parts
(and maybe even less expensive parts) of the country.
.
.
ANOTHER READER WRITES:
.
Dear Sir - I just read your article on real estate investment and
taxes. My background is in Social Policy and Social Work and I have
been saying the same thing for several years now regarding Housing to
income ratios in the San Francisco Bay Area. For instance, the
average home was approximately 40K in the early to mid 70s. A home mind
you not a condo or town house and the average family income was in the
low 20's. That is a 1 to 2 ratio. Today, the average family income in
the bay is about 45K and the average home is about 640K. That is over a
1 to 14 ratio. But no one seems to think anything is wrong with this
housing climate.
.
EDITORS REPLY:
I would say many people do think there is something very wrong, which
is why they are leaving (the rest who are asleep at the wheel, are
going to be in for a rude awakening). In the last newsletter we
highlighted the exponential increases in Americans renouncing US
citizenship abroad, primarily because of taxes. Of course, it is
a mixed gamut of issues that motivate people to expatriate including
cost of living, health care costs (see the previous articles we
highlighted whereby Americans are going to India and Thailand for
health care, because it is cheaper), education costs, and so on.
Basically I think you have two choices. Stay and pray, or decide
to live some place else. Which is to say, there are two ways to
maintain your standard of living - increase your income or cut your
monthly living expenses. Trying to increase your income is not so
easy to do, but relocating to some jurisdiction whereby the various
expenses are much less is certainly more tangible. It does not
take rocket science to figure out that you can sell your US$600,000 one
thousand square foot home (assuming you find a buyer), buy a two
thousand square foot home for one third of that amount in another
country and put the rest in the bank (to live off the interest).
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