Here is a preview of what can be expected in the near future.
- Personal tax rates will rise to over 50% for all the workers.
- Corporate tax rates will increase and nothing bad will happen to corporations or their investors.
- Personal income taxes are simplified and within a few years most people will be able to prepare their own taxes.
- The 10-year US Treasury rate will rise 40% next year and no one will notice and the five-year CD bank rates will not budge.
- The Chairman of the Federal Reserve will time his announcements so that they cause the most disruption in the stock and bond markets.
- Congress will vote against a law that will ban them from engaging in insider trading.
- Students with tuition loans will owe more money than the total of all credit card debt in the United States and they will pay triple the interest rate that the US government pays for its loans.
- The national debt of the United States will increase by 50% over the next five years.
- Congress will have a last-minute decision about shutting down the government as they argue over extending the US debt limit.
- The unfunded U.S. National Debt will rise to double the “National Debt”.
Here is the reality as it exists today. I repeated the questions with my answers.
1. Personal tax rates will increase to over 50% for all the workers.
It may not be the reality for all people who work, but right now someone earning $150,000 living in New York currently pays over 50% higher rate in income and payroll taxes. A self-employed person will pay a higher rate of more than 58%.
2. Corporate tax rates will increase and nothing bad will happen to corporations or their investors.
Well, in 2018, under the 2017 tax law, the corporate tax rate dropped by 40% (from 35% to 21%) and nothing special happened except the increase in share buybacks and dividends, so maybe with a modest increase, nothing too special will happen as well.
3. Personal income taxes are simplified and within a few years most people will be able to prepare their own taxes.
There is a trend toward more people preparing their individual tax returns themselves, but Congress and the IRS are working hard to reverse this trend. There is now a new Form K-2 and K-3 for owners of flow-through entities. Current K-1 forms have 21 pages of instructions and can be up to 30 pages. Even the simple W-2 payslip contains a whole page of confusing explanations with the smallest readable font. And if you own shares in a mutual fund with non-taxable or foreign income fuhgeddaboudit!
4. The 10-year US Treasury rate will rise 40% next year and no one will notice and the five-year CD bank rates will not budge.
The 10-year rate increased by 40% last year (from 1.72% to 2.41%) and there was no ripple effect on the increase in interest rates for bank account savers.
5. The Chairman of the Federal Reserve will time his announcements to cause the most disruption in the stock and bond markets.
Companies are prohibited from announcing news during the opening period of the stock market so as not to disrupt trading and stock prices. The Fed makes all its announcements at 2:00 p.m. timed to cause the biggest disruption in the markets. Uh?
6. Congress will vote against a law prohibiting members from engaging in insider trading.
It was rejected. Our elected representatives who make the laws are authorized to engage in insider trading.
7. Students with tuition loans will owe more money than the total of all credit card debt in the United States and they will pay triple the interest rate that the US government pays for its loans.
Student loan debt is $1.76 trillion, almost 70% more than credit card debt, which is $1.04 trillion. Additionally, student loan interest rates are around 7% and the US Treasury’s 10-year interest cost is around 2.4%. There is a terrible inequity here for students. And I don’t think that’s fair.
8. The national debt of the United States will increase by 50% over the next five years.
The national debt has increased by 50% over the past five years, from $20 trillion to $30 trillion, and all indications are that it will grow at a faster rate over the next five years.
9. Congress will have last-minute difficulties in shutting down the government due to the extension of the US debt limit.
It is so that the expenses for which they voted can be spent. The same old nonsense and dumb ego jockeying and completely wasting our tax money with every “fight” that is miraculously compromised at the last minute.
10. The unfunded national debt of the United States will increase to double the “national debt”.
The total national debt is about $30 trillion, and the unfunded Social Security and Medicare debt that no one talks about is over $55 trillion. Here is a link if you want to follow that: https://www.usdebtclock.org/
Sometimes I feel like we’re on a fool’s walk. Each answer to the questions is the reality. Nothing to joke here. Anyway, happy April Fool’s Day.
Needless to say, all opinions in this column are mine alone and do not reflect the opinions of anyone else.
Edward Mendlowitz, CPA, is a partner at WithumSmith+Brown, PC, CPA. He is on Accounting Today’s list of the 100 most influential people. He is the author of 24 books, including “How to Review Tax Returns”, co-authored with Andrew D. Mendlowitz, and “Managing Your Tax Season, Third Edition”. He also writes a blog twice a week dealing with the issues customers have with www.partners-network.com with the Pay-Less-Tax Man Blog for the bottom line. He is an adjunct professor in Fairleigh Dickinson University’s MBA program and teaches end-user applications of financial statements. Art of Accounting is an ongoing series where he shares autobiographical experiences with advice he hopes his colleagues can adopt. He welcomes practice management questions and can be reached at (732) 743-4582 or [email protected].