Happy April 1st | accounting today
Here’s a preview of what to expect in the near future.
- Individual tax rates will rise to over 50% Everyone working people.
- Corporate tax rates will rise and nothing bad will happen to companies or their investors.
- Individual income taxes will be simplified and within a few years most people will be able to create their own taxes.
- The US 10-year Treasury rate will rise 40% next year and no one will notice, and banks’ 5-year CD rates will not budge.
- The Federal Reserve Chairman will time his announcements where they would cause the most disruption in stock and bond markets.
- Congress will reject a law banning them from engaging in insider trading.
- Students with student loans will owe more money than the sum of all credit card debt in the United States, and they would be paying three times the interest rate that the US government pays on their loans.
- The United States’ national debt will increase by 50% over the next five years.
- Congress will be daring at the last minute to shut down the government and argue about extending the US debt limit.
- The unsecured US national debt will grow to double the “national debt”.
Here is the reality as it exists today. I repeated the questions along with my answers.
1. Individual tax rates will be increased to over 50% Everyone working people.
This may not be the reality for Everyone Workers, but right now, a person living in New York City and earning $150,000 is currently paying a top rate of over 50% in income and payroll taxes. A self-employed person pays a top rate of over 58%.
2. Corporate tax rates will go up and nothing bad will happen to companies or their investors.
Well, in 2018, the corporate tax rate under the 2017 tax law fell 40% (from 35% to 21%) and nothing notable happened except for increased share buybacks and dividends, so maybe not much notable will happen even with a modest increase.
3. Individual income taxes will be simplified and within a few years most people will be able to set up their own taxes.
There is a trend for more people to file their own individual tax returns, but Congress and the IRS are working hard to reverse that trend. There is now a new Form K-2 and K-3 for pass-through unit owners. These K-1 forms have 21 pages of instructions and can contain up to 30 pages. Even the basic W-2 payslip has a full page of confusing explanations in the smallest legible font size. And if you own shares in a mutual fund with tax-free or foreign income, fuhgeddaboudit!
4. The US 10-year Treasury rate will rise 40% next year and no one will notice, and banks’ 5-year CD rates will not budge.
The 10-year interest rate rose 40% last year (from 1.72% to 2.41%) and there was no impact on higher interest rates for bank account savers.
5. The Federal Reserve Chairman will time his announcements where they would cause the greatest disruption in stock and bond markets.
Companies are not allowed to announce any news during the time the stock exchange is open, so as not to disrupt stock trading and prices. The Fed makes all of its announcements at 2:00 p.m., timed to cause the greatest disruption in markets. Moron?
6. Congress will reject a law banning members from engaging in insider trading.
This was rejected. Our elected representatives, who make the laws, are allowed to engage in insider stock trading.
7. Students with student loans will owe more money than the sum of all credit card debts in the United States and they would be paying three times the interest rate that the US government pays on their loans.
Student loan debt is $1.76 trillion, which is nearly 70% more than credit card debt, which is $1.04 trillion. Also, student loan interest rates are about 7% and the US Treasury’s 10-year interest cost is about 2.4%. There is a terrible injustice to students here. And I don’t think it’s fair.
8. The United States’ national debt will increase by 50% over the next five years.
The national debt has grown by 50% in the last five years, from $20 trillion to $30 trillion, and there are signs that it will increase even more over the next five years.
9. Congress will be daring at the last minute to shut down the government and argue about extending the US debt limit.
So that the expenses they voted for can be spent. Same old nonsense and stupid ego squabbling and the utter waste of our taxpayer dollars with each “fight” miraculously compromised at the last minute.
10. Unfunded US national debt will grow to double “national debt”.
The total national debt is about $30 trillion, and the unfunded Social Security and Medicare debt that nobody talks about is over $55 trillion. Here’s a link if you want to track this: https://www.usdebtclock.org/
Sometimes I feel like we’re on a fool’s ride. Every answer to the questions is reality. There is nothing to joke about here. Anyway, nice April Fool’s joke.
Of course, all opinions in this column are solely my own and do not reflect the views of others.
Edward Mendlowitz, CPA, is a partner at WithumSmith+Brown, PC, CPAs. He is included in Accounting Today’s 100 Most Influential People list. He is the author of 24 books, including How to Review Tax Returns, co-written with Andrew D. Mendlowitz, and Managing Your Tax Season, Third Edition. He also blogs twice a week addressing issues customers are having www.partners-network.com along with Pay-Less-Tax Man Blog for bottom line. He is an Associate Professor in the MBA program at Fairleigh Dickinson University, teaching end-user applications of financial reports. Art of Accounting is an ongoing series in which he shares autobiographical experiences with tips he hopes his peers can adopt. He welcomes practice management questions and can be reached at (732) 743-4582 or [email protected].