Not A Laffer
August 4th, 2010 categories: Rants & Riffs
Sorry to be political, but taxes directly and indirectly impact owners of Honolulu real estate. Since it looks like the Obama administration and Congress are going to allow our taxes to increase on January 1, 2011, I feel it is my duty to make my opposition known. In past posts, I have quoted the economist Arthur Laffer and today I quote his post at the Wall Street Journal online. Laffer starts his article with the following.
“Tax reduction thus sets off a process that can bring gains for everyone, gains won by marshalling resources that would otherwise stand idle—workers without jobs and farm and factory capacity without markets. Yet many taxpayers seemed prepared to deny the nation the fruits of tax reduction because they question the financial soundness of reducing taxes when the federal budget is already in deficit. Let me make clear why, in today’s economy, fiscal prudence and responsibility call for tax reduction even if it temporarily enlarged the federal deficit—why reducing taxes is the best way open to us to increase revenues.”—President John F. Kennedy,
Economic Report of the President, January 1963
President Kennedy understood that tax cuts spur the economy and leads to more money going to the government. Here is what I think he knew. 39.6% of $100 is $39.60. 25% of $200 is $50. By lowering taxes, economic activity grows and the taxable pie grows, thus a lower tax rate means more tax dollars for the feds. Our nation doesn’t have problem with have to little in the way of taxes, our problem is that we have a bunch of drunken sailors in Washington, DC, that are spending geometrically more money than they have.
Laffer writes the following.
“Anyone who is familiar with the historical data available from the IRS knows full well that raising income tax rates on the top 1% of income earners will most likely reduce the direct tax receipts from the now higher taxed income—even without considering the secondary tax revenue effects, all of which will be negative. And who on Earth wants higher tax rates on anyone if it means larger deficits?” CLICK HERE TO READ THE ENTIRE ARTICLE
In summary, its not too late, let your Senator, Congressman and the President know that they need to stop spending and to not allow our taxes to be increased in 2011.
If you would like to discuss your real estate needs, feel free to call me at 808-737-2093 or toll free at 877-737-2093. You can email me at keahi@lava.net.
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Tax Increase May Make 2010 A Better Year To Sell
July 27th, 2010 categories: The Market
Lost amidst the hubbub of health care reform and financial overhauls has been the fact that if the President and Congress don’t act, taxes rates will be going up. Ironically in the last week, the New Times and Wall Street Journal have both published articles concerning the looming battle.
“If no tax legislation is passed, all the major tax reductions passed under President George W. Bush in 2001 and 2003 will expire, with rates reverting overnight on Dec. 31. The top marginal income tax rate, for example, would go back to 39.6 percent from 35 percent now, with corresponding increases in rates for lower income brackets.” CLICK HERE TO READ THE ENTIRE NEW YORK TIMES ARTICLE
“Pressure is growing on the administration from a small number of Democratic lawmakers to extend all the Bush cuts, which include taxes on investment income and capital gains.” CLICK HERE TO READ THE ENTIRE WALL STREET JOURNAL ARTICLE
Given the majorities that the Democrats have in the house and senate, it is very possible that the Republicans will not have the votes to stop the automatic increase in taxes. If no extension of the current law is made the capital gains tax will raise from 15% to 20%. If you are thinking about selling a Honolulu house or condominium, by selling and closing in 2010 you should lock in the lower rate (providing the sneaky guys in DC don’t make a retroactive law). On a sale of $600,000, if the entire amount of the sale is capital gains, closing your sale in 2010 could save you $30,000!
Time is short! An average closing time is 45 days which means you would want have your property under contract by November 15th, at the latest! If you would like to investigate getting sold this year, call me at 808-398-3220.
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The Kooks Are Targeting Real Estate For Tax Increases!
February 8th, 2010 categories: Rants & Riffs, The Market
Every January Honolulu taxpayers should be very concerned because the Hawaii State Legislature goes into session. If you have been watching the news you might be aware that all levels of Government are experiencing revenue short falls. Rather than curbing spending, the majority of our elected officials are marching lockstep toward raising taxes to cure the problem they created. Today’s Pacific Business News is reporting that representative Rida Cabanilla is proposing to levy a new tax of 1% of any commercial or residential property sale.
“The proposed tax, which would take effect July 1 and sunset after five years, would be on the gross proceeds of a sale, minus a real estate salesperson’s commission and conveyance tax, and would apply to both commercial and residential properties.” CLICK HERE TO READ THE ENTIRE PACIFIC BUSINESS NEWS ARTICLE.
I am not going to bore you with all of the reasons that this proposal is bad for real estate and the Hawaiian economy. Unfortunately, Hawaii’s governmental officials are blind to the idea that they need to decrease spending first. Then they need to reduce taxes so those of us that work at expanding the economy and jobs, can help to grow the state out of economic doldrums. Think about it.
If you would like to discuss your real estate needs, feel free to call me at 808-737-2093 or toll free at 877-737-2093. You can email me at keahi@lava.net.
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Is Taxing The “Rich” The Answer?
May 18th, 2009 categories: Rants & Riffs
The Hawaii State Legislature raised the top income tax rate in Hawaii to 12% last week. News reports say that the increase gives Hawaii the highest state income tax rate in the Nation. The Governor vetoed the bill and our elected officials over-road her denial. This begs the question, is raising taxes on the wealthy going to improve our local economy? Today’s Wall Street Journal on-line had an excellent article that may hold the answer.
“Here’s the problem for states that want to pry more money out of the wallets of rich people. It never works because people, investment capital and businesses are mobile: They can leave tax-unfriendly states and move to tax-friendly states.”
CLICK HER TO READ THE WSJ ARTICLE
I know what your thinking, what does this have to do with Honolulu real estate? I think it could have a direct effect, at some point upper income individuals could say, “I love Hawaii, but it is not worth putting up with the tax burden!” At which point they pick a Sun Belt state that has a more favorable tax structure. They then take all of their marbles and expertise to benefit another state and guess what, Hawaii loses out! Real estate could be hurt by this movement as there could be fewer resident buyers for upper end homes.
Upper income individuals are generally the engines that drive job creation, private enterprise and prosperity. We can’t do anything about this tax increase until the next legislative session or maybe the next election, but it is time to “throw the bums out!”
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