The Case for the Affordable Care Act Repeal

Currently, the United States Senate is considering a replacement for the Affordable Care Act (ACA), also known as Obama Care. As of today, July 16, 2017, it doesn’t appear that the United States Senate has the votes required to pass a replacement, according to Senator Rand Paul. In this article, without debate of whether the ACA is fair or unjust, I will make the argument for a full repeal of the ACA by the United States Congress.

This brings us to the question of why I feel that the ACA should be repealed. I feel that government should be codified and administered at the lowest possible level to allow the people the greatest amount of representation in their laws and operations. If we ask ourselves, can the States codify and administer something similar to the ACA, I believe the answer is yes.

Is it logical for the Federal Government to build roads in towns? Likewise, does it make sense for towns to administer their own armies for their protection? That is a pretty easy answer in both cases, and the answer is no.

If the Federal government were to come in to build and maintain the roads of a town, there would likely be some very well constructed roads that would come with hefty price tags. Along with that, the citizens of the town would have very little say in how those roads were built. Also, those roads may not fit the needs of the people of the town. This is because the Federal government answers to the needs of the entire Republic and not the needs of the people of the town. In addition, it would also be tougher to identify price fixing and kickbacks by the towns because of the decreased insight into those operations administered by the Federal government.

If a town were to try to maintain a standing army, they simply would not have means of purchasing the necessary equipment for current day warfare. The town would also not have efficient coordination with the other standing armies of nearby towns for defense of the Republic from outside invasion. Our founders recognized those issues and designated the United States Congress to take care of those needs.

In Europe, countries codify and administer their own health and welfare systems. In most cases, the countries in Europe that are running their own health and welfare systems have similar or smaller population than many of our states. All things besides population being equal, this gives the European countries an advantage in efficiency when running their healthcare systems when compared to the Federal government administering the ACA. This, in turn, gives European countries a tax advantage and allows European companies to be more efficient than companies based in the United States because the European Companies will pay less taxes. In the short run most people won’t notice the disadvantages, but in the long run this can create some big disadvantages with businesses based in the United States.

With these reasons listed above, I argue that the ACA should be repealed by the United States Congress and each state should take charge in passing laws and administering something similar to the ACA if the people of that state desire it be so.

American Taxpayer Relief Act of 2012

I put together a presentation today about the American Taxpayer Relief Act of 2012. I wanted to share some highlights of the changes that occurred with this new regulation. The Act was signed into law by President Obama on Jan. 2, 2013. It prevented many of the tax hikes that were scheduled to go into effect this year and retain many favorable tax breaks that were scheduled to expire. It will also increase income taxes for some high-income individuals. Further, it extends a bunch of expired and expiring tax breaks for businesses and individuals.

Top tax rate increased to 39.6% from 35% for taxpayers making:
• $450,000 for joint filers and surviving spouses
• $425,000 for heads of household
• $400,000 for single filers
• $225,000 for married taxpayers filing separately

Raised the top rate for capital gains and dividends to 20% (up from 15%) for taxpayers making:
• $450,000 for joint filers and surviving spouses
• $425,000 for heads of household
• $400,000 for single filers
• $225,000 for married taxpayers filing separately

Also note that the 2010 Health Care Reconciliation Act includes an additional 3.8% tax on net investment income for joint filers and surviving spouses making $250,000 and single filers making $200,000.

Reinstated personal exemption phaseouts for higher income taxpayers. Under the Personal Exemption Phaseout, the total amount of exemptions that can be claimed by a taxpayer subject to the limitation is reduced by 2% for each $2,500 (or portion thereof) by which the taxpayer’s AGI exceeds the applicable threshold (Inflation adjusted)
• Applicable thresholds (Inflation adjusted for tax years after 2013)
• $300,000 for joint filers and a surviving spouse
• $275,000 for heads of household
• $250,000 for single filers
• $150,000 for married taxpayers filing separately

Extended for five years the following items that were originally enacted as part of the American Recovery and Investment Tax Act of 2009
• American Opportunity tax credit
– Permits eligible taxpayers to claim a credit equal to 100% of the first $2,000 of qualified tuition and related expenses, and 25% of the next $2,000 of qualified tuition and related expenses (for a maximum tax credit of $2,500 for the first four years of post-secondary education)
• Refundable child credit
– Eased rules for qualification
• Earned income tax credit
– Various changes related to higher EITC amounts for eligible taxpayers with three or more children
– Increased in threshold phaseout amounts for singles, surviving spouses, & heads of households

Retained $5 million exemption amount for estate and gift taxes with slight rate increases
• Prevented steep increases in estate, gift and generation-skipping transfer tax that were slated to occur for individuals dying and gifts made after 2012 by permanently keeping the exemption level at $5,000,000 (as indexed for inflation)

Permanently increased in the top estate & gift tax rate
• Rate increased from 35% to 40%

Extended and modified depreciation provisions
• Extended and modified the 50% bonus depreciation provisions for one year for qualified property placed in service before 2014

These are some of the more relevant items from the American Taxpayer Relief Act of 2012 which I wanted to highlight. If you have any additional comments or questions, please feel free to post a comment or contact me.

Tax on the sale of a personal residence?

I have always been interested in the housing market since the bubble in the last decade.  Recently, some reports have house prices in certain areas starting to increase again.  With increased house prices, this brings a question that hasn’t been popular lately.  Is there tax on the sale of a personal residence?

The below video from the IRS explains the federal tax implications and where to get additional information.  Keep in mind that state tax laws may vary regarding the tax on the sale of a personal residence.

Becoming an accountant

Career choices can be challenging.  I was faced with this challenge some years ago.  After considering many different ideas, I decided to be an accountant.

I knew that I wanted to do something in business from an early age.  After graduating high school I took a few classes at the local community college, but I quickly learned I wasn’t yet ready for college.

A few years passed along with a few different jobs.  I tried my hand at retail, window washing, construction, and automotive parts.  Although each job offered a great learning experience, none of them were the career I was looking for.

One day while having a conversation with my manager at that time, I told him that I was thinking about going to school for business.  He suggested that I should look into getting a degree in accounting.

After that conversation, a recent experience attempting to complete a tax return by hand and a little research, I came to a decision.  I found a rewarding career that I felt could help others.

The next 5 1/2 years were a challenging time for me.  Most of the time I worked full time while attending school at night.  I didn’t have much free time in my life, and during my fourth year of school, I somehow fit a wedding and a honeymoon into my spring break.

During my last year of school, I went on multiple interviews to find my job.  My focus was public accounting.  In my opinion, public accounting was the pinnacle of accounting. It was the specific job that the accounting classes best prepared me for.

Along with getting a couple of internships before I graduated, I was able to land a job at a well respected public accounting firm in my community.  I was scheduled to start right after school.

Graduation came and went.  With it, I had accomplished the toughest challenge of my life.  It was an accomplishment that I never imagined myself capable of and yet it felt like it came and went with relative ease.

I began working about three weeks after graduation.  In between graduating and starting work, my wife Danielle and I had our first child, Caitlyn.

I spent the next few years learning accounting and learning to be father.  They both had their challenges, but I could say that each may have prepared me for the other.

A few years has passed since that time and life has grown a bit more calm.  A new house, another baby, a CPA license and memories that will last forever.  If I had to do it all over, I wouldn’t change a thing.  I have a career that I enjoy and a wonderful family that I love.  If I had any advice to give, it would be to pick a career first then focus on the path that will get you there.  For me, it was becoming an accountant.

The Olney Family

Mitt Romney’s Tax Plan (Part 2)

With the election coming up next Tuesday, I wanted to research some of Mitt Romney’s tax plan.

According to www.MittRomney.com, Mitt Romney will push to:
• Make permanent, across-the-board 20 percent cut in marginal rates
• Maintain current tax rates on interest, dividends, and capital gains
• Eliminate taxes for taxpayers with AGI below $200,000 on interest, dividends, and capital gains
• Eliminate the Death Tax
• Repeal the Alternative Minimum Tax (AMT)

Yesterday I looked at making permanent, across-the-board 20% cut in marginal rates and found some inconsistencies. Today I want to look at maintaining current tax rates on interest, dividends, and capital gains.

The expiration in the Bush tax cuts slated for two months from now would increase the maximum long-term capital gain rate from 15% to 20%; and increase in the maximum rate applicable to qualified dividends from 15% to 39.6%. Interest would also increase with ordinary income tax rates.

A capital gain is the amount by which an asset’s selling price exceeds its initial purchase price in which a tax is assessed. I don’t think the increase in capital gains from 15% to 20% would have many ripples throughout the economy. I believe the biggest effect has already been realized due assets already being sold in anticipation of the increase in capital gains tax. Sale of Lucasfilms and 100’s of millions of savings anyone?

Dividends are a taxable payment declared by a company’s board of directors and given to its shareholders out of the company’s current or retained earnings, usually quarterly. They are divided into two categories for taxation: Qualified and Ordinary. Qualified dividends are dividends from domestic corporations and certain qualified foreign corporations which are currently taxed the special rate of 15%. Qualified dividends incentivize individuals and businesses to invest in the U.S. Ordinary dividends are all other dividends currently taxed at ordinary rates of between 0-35% depending on other factors.

Dividends are unique because they are generally profits of C-Corporation that have already been taxed up to a marginal rate of 39% or possibly 35% overall. Once they are received as a dividend by the individual, they are again taxed by at least 15% at 2012 levels. This means that $1 of profit is chopped to possibly .61 cents at the corporate level and then chopped to between .52 and .40 cents at the personal level. If our government increases tax on dividends even more, I think it only hurts what is in my opinion as the already limited incentive that exists.

All in all, I don’t see an increase in capital gains and interest as the end of the world. What I do think is that an increase in qualified capital gains from 15% to a maximum of 39.6% could be devastating to our economy and job creation. Because of what I have explained, I strongly support Mitt Romney’s Tax Plan to maintain current tax rates dividends, both ordinary and qualified.

Romney and Ryan