Tax Incentives for Charity Proposed

Senator Rick Santorum (R-PA) and Representative Mel Blont (R-MO) announced introduction of the CARE (Charity, Recovery and Empowerment) Act of 2005. As in previous efforts, the bill allows nonitemizers to deduct some contributions, allows tax-free contributions from IRAs and similar retirement accounts, increases corporate charitable ceiling to 20% and provided for matching savings accounts to encourage asset building among low-income workers. Santorum indicates that there is bipartisan support (such as Joe Lieberman) for the bill and has taken some controversial faith-based charities provisions out of this iteration. Santorum also mentioned that some not-for-profit reforms may be attached, but he and Senator Grassley have been in talks about finding a middle ground, thus reforms may be less extensitive than previously proposed.

It should be fairly clear from previous posts that I am a big fan of the charitable/nonprofit sector as a means of improving social concerns such as poverty. Therefore, although I would like to know more details, CARE sounds like an interesting and promising legislation.

Tax Reform in the Air

Vice Chair John Breaux of the President's Tax Reform Commission, indicated that the Commission will report recommendations by the end of next month and that these recommendations could be included in next year's State of the Union. The President may have four options to choose between as part of the recommendation. A separate group, the Committee for Economic Development (CED), made their own tax reform proposal yesterday. The CED proposal would eliminate certain tax expenditures, integrate the corporate and individual income taxes and eliminate the alternative minimum tax. The CED, citing dramatic spending increases in recent years, would also institute a 10% VAT.

In a separate Tax Analysts article, House Minority Whip Steny Hoyer (Md) suggested that eliminating the AMT was not necessary as part of the reconciliation bill as he continued Democratic criticism of the legislation. Hoyer's comments were somewhat surprising; the dividend and capital gain part of the legislation has been controversial for a while, but there is significant bipartisan support for extending certain business tax incentives and considerable bipartisan support for eliminating the AMT, which is increasingly considered a middle-class as well as upper-income menace.

Caveat Saver: Watch Your Back on 529 Savings Plans

College savings plans, unlike retirement plans, did not qualify for tax-free distribution for those affected by Katrina. As the Forbes article points out; however, this is hardly the biggest landmine those attracted by the tax benefits of Section 529 accounts. Present investment in such plans involves over 7.5 million accounts and $72 billion.

Major concerns include poor disclosure, overly aggressive sales pitches and fees both high and hidden. Investments are equally split between low-cost investment houses such as TIAA-CREF and Vanguard and broker houses with higher fees such as Edward Jones and Charles Schwab. Analysts complain that it is virtually impossible to compare college savings plans. The Municipal Securities Rulemaking Board (MSRB), associated with the SEC, has proposed rules requiring more disclosure of alternatives, but trade organizations such as the Securities Industry Association, consider the MSRB proposals unworkable. At present, since the securities are considered to be governmental rather than private, the SEC can only go after fraudulent sales pitches, not those that are merely misleading or overly zealous.

Certainly it is understandable that parents would want to be able to finance at least part of their child[ren]'s education; likewise it is prudent to plan ahead and to take advantage of legitimate tax breaks. Given the "wild West" nature of these savings plans, however, I recommend either using an alternative (usually taxable) vehicle or using a low-cost investment organization that one presently deals with and trusts.

Weekly goals

As I approach the four month mark, I state my goals for the upcoming months: (1) At least eight topical posts per week (posts like this, Carnival announcements and occasional family, political, religious, sports-oriented or weather-oriented posts don't count), (2) at least two posts per week for accounting, for personal finance and for taxation, (3) applying at least every other week for the Carnival of Personal Finance or Carnival of the Capitalists. I may not accomplish these goals each week, but hope to hit close to ten weeks per quarter (13 weeks) for goal one and 5-6 Carnival submissions per quarter for goal two. Eventually, I also hope to return to best of blogs and calendar features and perhaps start a feature reviewing accounting literature, such as Journal of Accountancy, Strategic Finance or similar practitioner-oriented journals.

New Estate Tax Form Available from IRS

Form 706 for Decedants dying during 2005 is now available. Two significant features of the new form is the elimination of the state death tax credit line (this credit has been phased out with a deduction replacing it) and a new question asking whether the decedant received moneys from a generation-skipping transfer trust created after October 22, 1986 (the date where TRA 86 was signed into law) and, if so, whether there was a GST termination at death.

An Improved HMO Design?

Rushika Fernandopulle (RF) and Parnav Kothari (PK) recently founded Renainssance Health (RH) in Arlington, MA to attempt a creative approach to primary care. As part of a consulting job, RF had written a book titled Uninsured in America, which noted that although medicine itself had dramatically improved over the last century, delivery of health services and the financial aspects of medicine had not significantly changed (except, of course, for price level) during that time.

When RF and PK started their practice, they emphasized attempting to learn what clients/patients wanted from health care. As a result of this study, RH offers cellphone access to doctors, encouragement to self-monitor their health status and organized wellness plans. The doctors limit the number of patients seen to less than half those seen by a normal practice and charge a monthly fee based on age of the client/patient.
The monthly charge sticks in the craw of Harvard Pilgrim, a major insuror in that area.

It looks like the RH program may be an improvement on the HMO model for those who like HMOs. It will be interesting to know whether this approach spreads outside Massachusetts.

Carnivals of Capitalists and Personal Finance

The September 26 carnivals are up: the Capitalist link is in the title and the Personal Finance link is at right at Free Money Finance. Enjoy!

AICPA to Hold Women's Summit in Chicago

The AICPA will hold its first Women's Summit in Chicago on October 11. A primary goal of the conference is demonstrating the growth of women in the profession and to develop initiatives to allow more women to succeed. Sample sessions include: Overcoming Barriers to Women's Development and Advancement, Staff Retention: Retaining Your Best Employees and Mentoring With a Woman's Edge.

FAF Appoints DeSantis President

The Financial Accounting Foundation (FAF), which serves as the umbrella organization for the Financial Accounting Standards Board and Governmental Accounting Standards Board, appointed Robert DeSantis as President and COO. DeSantis primarily has worked in the telecommunications industry and has been an executive with DSL, Tellium, Citizens Communications and GTE. A number of board members were also appointed or re-appointed, including FAF chairman Robert Denham and new member Rick Anderson.

Chairman of PCAOB Announces Impending Resignation

PCOAB Chairman William McDonough announced his retirement today, effective the sooner of November 30 or when a successor is in place. In his speech, McDonough cited the development of the PCAOB during his tenure and stated expectations that even greater accomplishments were ahead for the organization. His short-term plans appear to concentrate on serving on a number of boards of directors with possible future employment in upper corporate management.

Probably the biggest significance here is that the retirement falls less than a month since SEC Chief Accountant Nicolaisen retired and less than two months after Christopher Cox was approved as SEC Chairman by the US Senate. Hopefully, the discontinuity of leadership in these oversight agencies won't tempt anyone into trying to sneak something unethical past the government.

GAO, OMB Spar over Tax Expenditures

A GAO report issued a report today criticizing excessive growth in tax expenditures. Some observers believed that the report was timed to influence the President's Tax Reform Commission; the Office of Management and Budget was NOT impressed, calling the draft report "deeply flawed". The administration basically viewed the report as a back-door means to put pressure to raise taxes; on the other hand, the GAO says that the massive increase in tax expenditures, tripling in real dollars in the last three decades and approaching 3/4 of a trillion dollars, adds to the risk of long-term structural deficits.

I guess I see merit to both sides here. The GAO has a legitimate, if undermade, point that growth in tax expenditures almost always means growth in tax code complexity and that tax incentives are a back-door form of federal spending. On the other hand, there is some evidence that (at least pre-Katrina) that tax cuts may indeed have been growing revenue fast enough to reduce the deficit (see "Revenge of the Laffer Curve" in the August archive) and that concern about tax expenditure growth would be more credible if there was more evidence that direct spending growth was in ANY sense being reined in.

Vacations: A New Line of Consulting for PWC?

Jay Henderson, Chicago managing partner for PriceWaterhouseCoopers, recently sent a memo to 1400 Chicago employees on how to vacation that deserves serious consideration by managers of all organizations. Many employees praised the memo for defining the balance between job and vacation. The memo has three major parts: (1) a commitment by supervisors to minimize interruptions during the vacation or changes of vacation dates once set; (2) a commitment to free oneself for the vacation during the scheduled days; (3) a plan for making sure everything stays on track while gone and for easing back into work when returning.

Looks to me like PWC has some potential in the vacation consulting business (question: if an audit client wants vacation consulting, does it fall out of favor with Sarbanes-Oxley provisions?) :) ;)

PCOAB comes to Boston (would Dave Loggins be impressed?)

The PCAOB is setting up a two-day conference at Boston October 20 and 21. The purpose would be to allow small public companies and their CPAs to learn more about board standards and to ask questions of board members. Members of small CPA firms, especially those with fewer than 20 public clients, would be eligible for continuing education credit for attending the seminar on the 20th.

Tax Help for Small Businesses

House Small Business Committee Chair Donald Manzullo (R-IL) has proposed a Small Business Tax Relief Act with the support of many small business interest groups and lawmakers on both sides of the aisle. Among provisions including are extension of the work opportunity and welfare-to-work tax credits, repeal of the alternative minimum tax, a standardized $2,500 home office deduction as well as keeping the $100,000 expensing deduction and allowing husband and wife businesses to be treated as sole proprietorships. New or extended tax breaks include a deduction for self-employed workers toward calculation of the self-employment tax, a long-term training credit for specialized occupations and a 15 year depreciation period on replacement roofs.

SEC Proposed Rule for 10-K, 10-Q and 404 Timeliness

The SEC has voted to require a 60-day (versus present 75) filing deadline for 10-Ks for "large accelerated" companies (>$700 million public float). 10-Q deadlines will remain with no one being required to report faster than 40 days. Furthermore, nonaccelerated domestic companies (public float under $75 million) and foreign private issuers have until July 15, 2007 year-ends (a one-year extension) to file Section 404 reports indicating compliance with Sarbanes-Oxley. This proposed rule will have a 30-day comment period and would not take effect until after the comment period.

LA State Treasurer: We Need a Big Four Auditor for Katrina Aid

Louisiana State Treasurer John Kennedy has called for his state to hire a Big Four auditor to review federal funding related to the Hurricane Katrina aid effort. Kennedy said that this is an opportunity for Louisiana to escape its reputation for fiscal corruption and that "checks and balances and rechecks and rebalances" are needed. The audit firm would work in conjunction with the Legislative Auditor and Inspector General.

Kennedy shows considerable foresight with this proposal and Louisiana state officals should consider this seriously. Moreover, other major federal spending, whether in AL, LA or MS from the hurricane, the Middle East for military efforts, nationwide for Social Security or for any other purposes, should be subject to similar scrutiny.

Tighter Rules Coming on Charitable Donations?

With some pressure from the IRS, Senate taxwriters are considering supplementing the recent rules changes on donations of automobiles with additional laws to restrict abuses of giving. The IRS has recently added to their charity-oriented staff after years of reducing resources devoted to charity (less than 1% of charities were audited in 2004). Areas of special emphasis appear to be donor-advised funds, private foundations (which already are more restricted than most not-for-profits), supporting organizations (especially those where donors control or have heavy influence), noncash contributions and conservation easements.

Carnival Time

The Carnival of Capitalists can be found at http://www.willisms.com while the Carnival of Personal Finance can be found at http://www.optimizedliving.com. For a change, I am in the Carnival of the Capitalists this week with the "fat shoestring" post from last Thursday. The link in the title is to a relocated hosting schedule for the Carnival of Personal Finance; the Carnival of Capitalists schedule can still be found in a post from last Monday.

Small business blogging

Forbes names eight small business blogs that provide front-line reporting of business experiences and, in exceptional cases, even a degree of interactivity. Forbes also has previous lists from economics, marketing and technology.

Katrina Tax Relief--The House Version

Louisiana Ways and Means Committee members Jim McCrery (R) and William Jefferson (D) are sponsoring the Katrina Emergency Tax Relief Act which is expected to pass the House by a massive margin. Provisions include allowing affected taxpayers to calculate child credit and earned income credit based on 2004 income and to assure that dependency exemptions and child credits are not lost on the basis of temporary relocations. Forgiveness of indebtedness will be exempted from income and a $500 relocation deduction will be available to anyone providing rent-free housing to an evacuee for 60 days or more. Additionally, itemizers will be able to deduct 100% of casualty losses (presumably the 10% and $100 floors will be waived) and make tax-free withdrawals from certain retirement accounts (income from those accounts would be taxed on a three-year spread). Rebuilding provisions include a two-year work opportunity credit for hiring those living in damaged areas of the Gulf Coast, a five-year period to replace property without being taxed on insurance gains (question here: is WHERE one builds going to be an issue?) and qualification for first-time homebuyer mortgage rates through 2007. Charitable provisions include waiving 50% and phase-out of deduction provisions on individual cash donations and waiving the 10% corporate donation provision for donations made to Katrina relief efforts during 2005. Moreover, the charitable mileage rate will be raised to 70% of the business rate (question here: is this temporary or indefinite?). The Senate is considering similar but slightly different legislation; a conference committee will be needed at some point.

Starting a Business on a Shoestring (well, maybe a fat shoestring)

Mellody Hobson, ABC's personal finance advisor, recently interviewed four women who started their own business with no more than $5,000. Although the interview was designed for women entrepeuneurs, the advice, as often is the case, was also of value to men interested in starting a business. Those interviewed indicated that experience was very valuable; emphasized that chances of success would be much greater with full-time commitment; noted the importance of identifying sources of equity (possibilities listed included taking money from savings, borrowing from a bank or other financial institution, borrowing from friends, family or other familiar people or effectively "issuing shares" in the new business) and researching whether your business idea is viable. Financial concerns included "salary" expectations, the cost of health insurance and the value of an identifiable office. Not mentioned but worthy of consideration was joining civic groups and/or the chamber of commerce both for networking opportunities and support as well as getting feedback from family or mentors about their level of enthusiasm for success for the proposed business.

Another day of tax debate in Washington

While most of the nation's attention dwells either on relief efforts related to Hurricane Katrina or the confirmation hearings on John Roberts, tax issues have been very much present in the nation's capitol. In three separate posts, Tax Analysts looks at tax relief for hurricane victims, an appeal for a year-long holiday on a jet fuel tax and a reconciliation and extension bill. In regard to tax relief, the House is looking at several incentives for charitable contributions including an increased mileage rate. Other issues include expedited refunds for evacuees and ability to make tax-free withdrawals from certain retirement plans (like original IRAs). The request to suspend the jet fuel tax were made by industry leaders James May and Deborah McElroy in the presence of bankruptcies of Delta, Northwest and United. The leaders claimed that the tax was part of a 1993 compromise that was supposed to be short-lived. Comments from Republican Senators Grassley, Lott and McCain were not overly encouraging, however. Finally, in the face of Democratic scorn and the expensive rebuilding from Katrina, the $70 billion reconciliation bill is moving forward. Although there is general agreement that many of the expiring tax provisions should be extended, the Democrats want dividend and capital gain rate reduction provisions dropped.

Small Corporations Dodge the SOX Internal Control Bullet until July 2007

Sources are reporting that the SEC is prepared to extend the compliance date on internal control rules included in Sarbanes--Oxley until July 2007. These rules have been criticized as overly costly for companies with capital less than $75 million. An advisory committee on small businesses is due to report findings by April 2006.

Leaving Education Tax Breaks on the Study Table

The GAO has concluded that over a quarter (many millions) of eligible American families failed to take educational tax incentives that they were entitled to during the last few years. A major concern is the complexity of the rules governing these provisions. Among the tax breaks in question are the Hope and Lifetime credits and a 2001 tax deduction for tuition. As a college faculty member, this obviously hits home. Many college students are struggling to make ends meet; they don't need to be missing out on legitimate credits or deductions.

Getting out from under Katrina Financially

Obviously, finding loved ones and getting food, water and safe shelter were the highest priorities for victims of Katrina; however, most victims (including those who got out before the storm) must deal with the financial impact of the storm. ABC news reporter Eileen Powell tells readers how to get records (or at least some records) back that the storm destroyed. For immediate cash needs, a partial insurance advance, an advance from employer or emergency funds from the Red Cross may be necessary until full insurance settlements or government aid becomes available. Ms. Powell also recommends preparing as best one can an inventory of property lost in the storm and subsequent flooding. Contacting relatives about pictures of the house prior to the storm may help in this process; additionally the IRS will provide Katrina victims with free copies of prior income tax returns. For more expensive items, the article suggests contacting kbb.com (Kelly Blue Book) to help determine value of automobile and the mortgage institution to get records related to their home. From an employment standpoint, it is a good idea to contact your pre-hurricane employer (especially if you worked for a national/multinational business or organization) to check on temporary employment opportunities elsewhere and to assure that health insurance is still available. Finally, as disgusting as it is to think about, some people see calamity as a money-making scheme. Make sure to deal with known, reliable parties in regard to insurance aid, loans and construction contracts.

Carnivals in Mid-September

As per usual the Carnivals (of the Capitalists and of Personal Finance) are up. My health insurance post from last Tuesday was included in Carnival of Personal Finance, my fifth inclusion in eight weeks. The Personal Finance link is in the title; for other links, the Carnival of the Capitalists link is (http://www.evelynrodriguez.typepad.com/); the Carnival of Personal Finance schedule is at (http: //www.consumerismcommentary.com/2005/06/19/
carnival_of_personal_finance_host_schedule) and the Carnival of the Capitalists host schedule is at (http://www.elhide.com/solo/cotc.htm).

P.S. The direct link to the Carnival of Personal Finance hosting schedule can be found in the title for this past Saturday's link update. Sorry I could not get it to work properly here!

In Memoriam

A reminder that almost 3,000 people lost their lives in a despicable set of plane hijackings/crashes four years ago. A truly awful thing for those like my brother who had birthdays or anniversaries ruined as well. Once again, sympathy to those who lost loved ones on that dreadful day; as well as those who have lost loved ones in the subsequent wars.

Tax Policy Icon Dies

Yale Professor Emeritus Boris Bittker (as cited also in Instapundit) died late this past week in Connecticut. I was first exposed to him in a tax law class in my doctoral coursework in Missouri; Dr. Bittker was one of the giants in tax policy (legal tax theory) along with Henry Simons, Stanley Surrey and others. My sympathy to Yale Law School and all those that Professor Bittker touched.

Links update

I just added three news links (Bloomberg, Fairmark and WebCPA) and one personal finance blog (Frugal for Life) to my links link/blogroll. Check 'em out!

P. S. I have also provided a direct link to the Carnival of Personal Finance hosting schedule in the title since I was unable to include in the Monday (September 12) posting of Carnivals.

Short-term Katrina-related Tax Breaks Coming

Senate Finance Committee sources indicate that Chairman Charles Grassley (R-IA) and ranking Minority Member Max Baucus (D-MT) apparently agree in principle on short-term tax breaks for those most affected by Hurricane Katrina. Among likely features would be provisions similar to those provided to NYC and DC taxpayers after the 9/11 attacks and a provision allowing contributions to Katrina-related charities to be deductible in 2005 even if made in early 2006--much the same as was done after the after-Christmas tsunami last year. The legislation could possibly include extensions of work opportunity and educational credits. Corresponding legislation in the House is at a more speculative point, but an emphasis there appears to be providing tax incentives for rebuilding homes, ports and energy-related infrastructure.

A particularly important aspect of the proposals are the rebuilding/work-opportunity and the educational provisions. As I see it, in the months ahead, the biggest potential problems will be disease (from wading in polluted waters and from decay of dead humans and animals), boredom/frustration from being unable to earn a living and lack of privacy. A rebuilding project (using the work opportunity and rebuilding incentives) can address many of the boredom issues, speed up relocation of evacuees from shelters to personal apartments or homes (addressing privacy) and potentially provide a starting point or renewal point for some evacuees in their work career. For others, the best choice will be to upgrade their human capital through education and the education incentives will help educational institutions cover the extra costs of providing education on the spur of the moment. Therefore, two of the three major issues are at least in part addressed.

FASB: Katrina not Extraordinary

Citing the frequency of hurricane in the Gulf Coast region, FASB has decided for now not to consider Katrina an extraordinary event. A similar ruling was made after the World Trade Center/Pentagon attacks in September 2001. A stunning decision, perhaps you can make a case that large businesses such as oil companies had contingency plans for such a disaster but smaller local companies with less opportunity to cover losses in other ways should (at least in my opinion) be able to take this outside the main part of the income statement.

Nicolaisen retires from SEC

SEC Chief Accountant Donald Nicolaisen announced his retirement as of October. Nicolaisen has been active in improving financial disclosure and attempting to rebuild confidence in financial reporting in the post-Enron era. Among Nicolaisen's specific accomplishments were building ties with the PCAOB to faciliate implementation of Sarbanes-Oxley, attempting to improve harmonization between the IASC and the FASB and piloting the use of XBRL (Extensible Business Reporting Language) for data reporting. XBRL allows users more flexibility to retrieve and analyze financial reports by means of electronic technology. New SEC Chair Christopher Cox praised Nicolaisen for his commitment to implementing Sarbanes-Oxley and protecting investor interests.

(Note: For more information on XBRL, see an August 6 post on this blog or, more specifically, the August issue of the Journal of Accountancy.

Katrina's Impact on Tax Discussions

Tax conferees throughout Washington are having to take Hurricane Katrina's blow into account in setting policy and potential law. In three separate posts Tax Analysts reports that the tax reform commission is deferring meetings until the fiscal consequences of Katrina are known, a Republican reconciliation bill has come under fire by Democrats claiming the tax cuts are untimely in the present crisis and Ways and Means Chair William Thomas says that it is too early to know if any tax provisions will be part of a Katrina-based stimulus package.

Full Plate of Fall Tax Legislation to Study

As the Senate returns in the aftermath of Katrina, the Senate Finance Committee faces a docket which includes estate tax reform, reconciliation of presently passed (in one house) legislation, technical corrections, piecemeal extensions of some prior tax cut provisions and new restrictions on tax-exempt organizations. Senate Majority Leader Frist and Finance Chairman Grassley have already quibbled on the estate tax and Grassley and House Ways and Means Chair Thomas do not see eye to eye on reconciling legislation with Grassley prefering a pragmatic "get it done now" approach and Thomas wanting more structural legislation. Speaking of Ways and Means, a spokeswoman indicated that the agenda had not been fully set there.

"Here's a Nice Raise. Go Find Your Own Health Insurance"

The rapidly rising cost of healthcare has made health insurance outside the reach of many smaller businesses, as even raising co-payments or monthly premiums is not sufficient. Sometimes an employee may benefit, especially a younger employee with no chronic health problems or one who is married to someone with good health insurance. Nevertheless, this adds a risk factor to workers; since insurance groups are poorly organized in most cases; workers end up in the expensive individual insurance policy market. Obviously, this could be a real problem for older employees, workers with young children and those with chronic health concerns.

Entrepeneurs, take note--if you are good at networking, can handle some risk and have some negotiation skills, setting up a health insurance pool for workers without insurance from their employer could become a profitable business for you.

Indiana tries amnesty

Note: Try linking through title. If that does not work, there is a link available through www.tscpa.com. In any case, you will need Adobe Reader.

The state of Indiana (my native state and location of previous job) announced a tax amnesty plan from September 15 to November 15. Past-due taxes may be paid without penalties, collection fees or prosecution during that time period. Subsequent to that period, listing delinquent taxpayers risk substantial penalties.

I am sure that Indiana and other states, even though not directly affected by Katrina, are nervous about the potential of economic slowdown and subsequent decrease in tax revenue. Hopefully, Indiana will remember that tax amnesty is best done about every 50-100 years.

Best of Blogs--August 28-September 4

Almost certainly the last "Best of Blogs" for quite a while. Nevertheless, keep linking to the blogs at right; they offer good insights into accounting, personal finance and taxation.

AAO: Points out that more disclosure is needed regarding discount rates for pension plans. [2]

Footnoted: Summarizes some of the corporate donations for Hurricane Katrina relief. [1]

Consumerism: Offers insight as to whether gas stations are involved in price gouging. [1]

Financial Rounds: "Hedonomics" and expecting happy economic endings. [31]

Death and Taxes: A primer on mortgage fraud. [2]

Mauled Again: The fu[el]tility of price regulation. [29]

Taxing Times: The cost of "holidays" for gasoline taxes. [31]

Roth CPA: A review of IRS provisions for filing relief for victims of Hurricane Katrina. [4]

Tax Prof: Announcement of new IRS Revenue Agent positions. [5]

SEC Seeks to Aid Investors and Corporations Affected by Katrina

Chairman Chris Cox announced yesterday that businesses and investors in coastal Alabama, Mississippi and Louisiana (with New Orleans included, of course) will be aided by the SEC. In some cases, filing deadlines will be extended and the SEC pledged to work to encourage security representatives are availabe to the general public. Moreover, the SEC promised to vigorously pursue scams related to the available aid.

The "death" tax won't die

Senate Majority Leader Frist has called for legislation to eliminate the estate tax to be considered this fall. However, Senate Finance Chairman Grassley effectively has said that eliminating the estate tax has no chance and that he is working on a compromise that will raise the exempted amount to $4 million or more and probably reduce the top estate tax rate as well. Grassley's goal is to cut the estimated $300 billion revenue loss of eliminating the estate tax in half.

The cost of Katrina

This is one of a set of articles about Hurricane Katrina and the related flooding of New Orleans in Business Week. They appear to believe that the biggest impact to the economy will be from damage to the energy infrastructure. Without minimizing the impact on oil prices, in my mind a bigger impact is likely to come from clean-up costs (especially if they try to more or less fully rebuild New Orleans) and possible health-related costs (with all the people who have been wading through highly polluted and dangerous water--and at least some have consumed water out of desperation--I also predict a sizable disease outbreak among the stranded).

The impact of the hurricane cannot readily be understated. For better or worse (and there are legitimate military concerns with this course of action), I expect heavy demand to at least draw down troops from Iraq to help with the clean-up process. I hope that charitable appeals such as the one covered in the prior two posts bear fruit; in general, I believe that the nonprofit sector frequently is more efficient and compassionate than government bureaucrats.

Help Clean Up the Mess!

A reminder that nearly 750 blogs are promoting aid to those affected by Hurricane Katrina. See the post below for more information.