When You Don’t Pay Your Taxes

Paying taxes can be one of the more arduous responsibilities for those that earn income. While it might be tempting to not pay your taxes or you simply don’t have enough money to do so at the moment, there are some large legal and monetary ramifications for those that don’t pay their taxes on time. The following will provide in-depth details on what these consequences are.

You’ll Eventually Have to Pay More

Skipping one or two years of paying taxes because you just don’t feel like it is not something that will slip by the IRS. It’s important to note that this is different than situations where you file taxes and just aren’t able to pay all that you owe. Doing so will only serve to add to the amount that you eventually have to pay once you decide to pay your taxes again. While the standard deadline for filing taxes is April 15th, you can always choose to file Form 4868 as a means of asking for a 6 month extension on the due date for your taxes.

If this isn’t done, the penalties won’t involve anything like jail time, but you will be subjected to a large amount of fees the next time you do file. If you don’t file, you will eventually receive a letter from the IRS detailing the amount of taxes that you owe, complete with a penalty fee and an interest fee. Interest rate accrues over time and is set to the federal short-term rate, as well as an additional 3 percent in interest of what you owe.

Your Credit Score Could Be Affected

Once you have reached a certain amount of back taxes from not paying, generally around $10,000, a lien will be placed on the property you own, which is typically a house. A state tax lien could also be provided to you upon failing to pay state taxes. If this happens, the lien will appear on your credit report and will dramatically affect your credit score for the worse. While this doesn’t necessarily mean you won’t be able to get a loan, it does mean that the loan will likely have a high interest rate.

Your Monetary Livelihood Could Take a Big Hit

Though it’s difficult to go to jail unless the government deems that you are trying to defraud it, which doesn’t usually happen unless you’re rich, you will still face the possibility that your property will be seized or your wages garnished. Once you start to file again, any return you would have received will go straight to the IRS, while you will have to pay interest for any money you still owe. If you have to, try filing Form 9465 in order to settle on a monthly payment for the taxes you owe. This should only be done if you don’t have the ability to pay back the full amount of what you owe.

You’ll Waste Time Trying to Fix the Situation

Even if you’re quick to change your mind on paying your taxes and decide to do so, filing late will still bring with it a whole host of problems that typically requires a tax professional to properly fix. As such, this will invariably cost you time and money that could have been better used elsewhere.

Posted in Tax Law |

Economics of Valentine’s Day

According to a popular 2015 media news report, Americans spent $17.3 billion in 2014 on jewelry, flowers, candy and other Valentine’s Day gifts. In 2015, it was expected to rise to $19 billion. Interesting statistics on Valentine’s Day spending include:

  • The average amount spent is $142.31 by most individuals
  • $96.63 is the average expected to be spent on spouses or a significant other
  • Americans, age 35 to 44 will spend the most
  • Less than half the seniors over the age of 65 will celebrate Valentine’s Day

Facts and Figures of Valentine’s Day Spending

While the jump in spending for Valentine’s Day from 2014 to 2015 is just 2% higher, it does show that even in economically austere times, Valentine’s Day gifts are considered an important symbol of love and/or generosity. Interviews of average individuals by journalists show a slightly different attitude about this particular day. Single men, even those engaged or about to be, consider the expense of Valentine’s Day to be out of control. Single women feel it accentuates their lifestyle as devoid of romance.

The Best Economical Strategy for Valentine’s Day

The depth of expense on Valentine’s Day depends on individual financial resources. Those who feel the celebration of this day has become too commercialized may want to consider other strategies to reduce the economical burden without appearing too mercenary.

The best economical strategy for Valentine’s Day is to consider the recipient of the gift and their particular ideas about this day. For some spouses, a quiet evening together at home with a nice dinner and candlelight might be a better choice than spending $150 for a dozen red roses.

According to one major media source, a 50% hike in the price of roses can be expected on Valentine’s Day in 2015. Jewelry is another costly expense that ranks No. Two, in terms of most popular gifts. Jewelry prices rise 35% around Valentine’s Day. The strategy to use here is to determine if jewelry is necessary or the cost spent on jewelry could be better spent on a special, more memorable evening at a favorite restaurant, concert or other event.

Candy is the other pricey gift most popular on Valentine’s Day. It ranks No. 3 among most popular gifts. Chocolates, ornately packaged, are the top choice. Imported and hand turned chocolates can cost nearly $50 for a single box.

Single is Better on Valentine’s Day

For spouses and those with significant others, the aura of expectation of Valentine’s Day gifts can be quite costly.

Perhaps, single is better. Florists are claiming there’s been a rise in orders for black roses for those about to shed partners. Single is more economical on Valentine’s Day. It can be a wonderful day for singles to be good to themselves. Singles should use the day to treat themselves to things they may have wanted, but never got around to doing or buying. Singles can enjoy a quiet interlude at a luxury spa or plan a special dinner. Nothing precludes a single’s ability to lavish themselves on Valentine’s Day with a box of chocolates, flowers or a piece of jewelry in their price range. In effect, busy singles might arrive at the realization Valentine’s Day is not just a day for couples. It can be the one day singles celebrate being single.

http://time.com/3703157/valentines-day-single-is-better/

Posted in Economy |

The Advantages and Disadvantages of a Company Buyout

There may come a time when the management of one company considers giving a buyout offer to another company. There will probably be many advantages and disadvantages on both sides. Several things must be taken into consideration for this to be successful. The agreement should be structured so the needs of both companies are met. Neither side will get everything they want or be required to give up everything. All the pros and cons of a company buyout need to be carefully considered on both sides.

ADVANTAGE: Gaining New Products Or Technology

There are situations where an established company desires to purchase a smaller company that has developed a very promising new product or technology. This can quickly benefit each company. The smaller business will have access to more and better resources. It will also be able to offer its products or technology to a larger customer base. The larger business will be able to incorporate new products or technology into their existing product line. This can be done without paying to license the acquired company’s product or technology.

DISADVANTAGE: Increased Debt

It’s possible the larger company may have to borrow money to acquire the new company. This will change their debt structure and increase any loan payments on the books. This also can require a company to make drastic cuts in their expenses. It may require layoffs or selling another part of the business to remain profitable. The money a company uses to buyout a business also takes funds away from any in-house product development.

ADVANTAGE: Reduced Competition

When a business is able to purchase its competition, it is able to increase its profits. The buyout will provide them with an increased scale of economics. It will also eliminate the need to participate in a price war with the competition. This can have a positive impact on customers if they experience decreased prices for a company’s products or services. Less competition means a business can spend more time expanding.

DISADVANTAGE: Loss of Key Personnel

Company buyouts can be viewed as a time for founders or key personnel to leave for a new challenge or retirement. Depending on their contract with the business, they may sell their interest to the company or an outside business. It can be a challenge for a company to find individuals with the same level of knowledge and experience. This may cause a period of adjustment that could be hard on the business.

ADVANTAGE: Increased Efficiency

A buyout may do away with any areas of product or service duplication between businesses. This could lead to a raise in profits resulting from a decrease in expenses. The companies involved in the buyout will be able to compare their processes and choose the best one. The newly formed company will be able to get better prices for products, insurance and more. Office spaces and other working areas can be combined for additional cost savings.

DISADVANTAGE: Integration

It will take time to integrate the procedures and personnel of one company into another. The two companies may do similar things but have very opposite corporate cultures. Resistance to change is a very real thing in the business world. It has been known to cause serious problems. Unless there is a plan to address integration issues, it could take a long time and become costly. It could lead to a loss in productivity and have a negative impact on the newly formed business.

Posted in Buying or Selling a Business |

The Two Tiered Economy Emerging in the U.S.

Income inequality in the U.S. is continuing to expand, and the issue is beginning to attract widespread attention. Although the country’s economic recovery has prompted more discussion about the conspicuous income gap, it is really a continuation of a trend that existed before the recession. The trend is, however, growing undeniably stronger since the recovery. As these conditions persist, a two-tiered economy that shrinks the middle class is emerging.

The Privileges of Wealth

Many factors have contributed to the growing wealth gap, and they have created a powerful trajectory that will be difficult to alter. Privatization and the perpetuation of deregulation have stimulated income growth for the wealthiest sectors, and this has increasingly strengthened their influence over political and economic policies. Money, power and influence have naturally made it easier for the wealthy to advance their own interests.

To further widen the wealth gap, the outsourcing of jobs to nations offering cheap labor has driven profits to the wealthiest sectors, leaving workers at home scrambling for sources of income. Companies raking in record profits are also following a trend of holding cash rather than reinvesting it. This funnels incomes to shareholders in the short term, but it stagnates opportunities for the workforce and the economy.

The wealthiest sectors also have access to avenues of income that are closed to other segments of the population. The middle and working class families with their wealth tied to their home values suffered devastating losses in the recession, but affluent Americans with wealth invested in stocks, mutual funds and complex investment vehicles rebounded tremendously and continue to prosper.

Impact on the Middle Class

As the rich get richer and the poor get poorer, many members of the middle class find themselves sinking into the poorer classes. In an economy that requires money and influence to succeed, the declining wealth of the middle and poorer classes means fewer people have the opportunity to elevate their economic status. Higher education and financial investments, two of the major resources used for income improvement, are increasingly out of reach. The decline of income that perpetuates a deterioration of opportunities has become cyclical, and the solution is fast becoming a matter of debate among economists and policymakers.

What the Future Might Hold

Rather than a thriving economy creating a strong middle class, it is a strong middle class that ensures a thriving economy. Buying power from only one small segment of the population does not nurture a healthy economy, even if that small segment is wealthy. To flourish, an economy requires a robust middle class. When an economic system features a strong middle class, it has a broad sector of the population to spend money in ways that are productive for the economy as a whole.

Unless policy making begins to address the income gap, the population will have gradually less effective spending power. In this case, impaired growth for the entirety of the economy will be inevitable. An economic system that performs poorly is also linked to environmental decay, increased crime rates, and declining health of the people. History has not been kind to societies with significant economic stratification. For a rosier outlook, the opposing political ideologies currently responsible for policy making will have to acknowledge the causes of the wealth gap, and they will need to put aside the polarization that allows it to persist.

Posted in Economy |

President’s State of the Union Address and the Economy

On January 20th of 2015, President Barack Obama gave his traditional State of the Union speech to the nation. The speech covered a number of topics, ranging from education to immigration. His thoughts regarding the economy provided a number of statements and proposals:

Economic Recovery

Unlike previous occasions in which the President downplayed the improving economic numbers, in his recent speeches, he enumerated the individual data points indicating that the “shadow of the crisis has passed.” He touched these specific facts:

  • The national unemployment rate is now at 5.6 percent.
  • No sign of inflation threatens the economic picture
  • Gasoline prices are down to $2 per gallon, helping the recovery.
  • Consumer sentiment is improving as more people return to work.

Educational Access For New Jobs

To counteract stagnant wages that have beset the country, the President hopes to increase training that will help to prepare workers for better paying jobs in today’s highly technical workplace by offering free community college for students who keep a 2.5 grade point average and graduate on time.

Proposals To Boost the Middle Class

President Obama proposed legislation to require sick pay for the 43 million American workers who do not yet have it, noting that loss of wages during minor illnesses negatively impacts many American families’ financial stability and affects the health of workers across the nation. He also proposed tripling the child tax credit to $3,000, and increasing the federal minimum wage.

Increased Taxes on the Wealthy

One of the President’s proposals asks for a higher tax on long-term gains, such as stocks held for more than one year. In 2014, the maximum tax rate on these investments was 23.8 percent. The President would raise this rate to 28 percent. In addition, he would eliminate the step-up inheritance tax loophole that allows stocks that increase significantly in value to pass on to heirs without taxation of their increased value. However, capital gains of $100,000 for individuals and $200,000 would be tax-free.

Infrastructure Building and Repair

The nation’s infrastructure is in serious disrepair, and the President hopes to correct this problem with a comprehensive bill that would modernize ports, build high-speed rail systems and expand broadband connection to all cities. The President downplayed the building of the Keystone XL pipeline as a significant infrastructure project that would help to create more jobs for Americans.

Trade Policy

One area that President Obama is likely to get more support from the opposition party is on trade. He emphasized the importance of fast-tracking two trade deals that are currently under consideration, one involving the Pacific Rim countries and another involving countries around the Atlantic. Some secrecy surrounds the details of these trade deals, which has made them controversial even in the President’s own party.

The Republicans in Congress, who hold majority votes in both houses, are likely to be a stumbling block for implementation of many of these proposals. However, they may have to contend with significant public support of the programs that would help the vast majority of Americans.

http://www.slate.com/blogs/moneybox/2015/01/20/state_of_the_union_2015_obama_s_new_economic_agenda_is_progressivism_on.html

http://www.npr.org/blogs/itsallpolitics/2015/01/21/378706028/state-of-the-union-primer-what-president-obama-proposed

http://www.usatoday.com/story/money/2015/01/20/obama-tax-proposals/22064109

http://www.foxnews.com/politics/2015/01/21/obama-to-tout-middle-class-economics-in-state-union-address/

Posted in Economy, Tax Law |

Wages Flatline While Unemployment Goes Down

People in the workforce, particularly those who have come out of college in a time when the economy has been floundering, know what it is like to search for work under such conditions. In 2015, they are starting to see a ray of light, though that glow is larger in some fields than others, but they are not noticing all the benefits of a thriving economy yet.

Wages Continue to Flatline

When the economy is in a recession, people generally know that finding a job is going to be a challenging task, and they likely realize that the wages they receive are going to be lower than normal as well. However, as the economy starts to pick back up and positions open up in the marketplace, the workforce also expects that they are going to start making more money. However, in many fields, wages have not increased. The cost of living has though, and individuals are starting to wonder why they are not making more money and when the changes are going to end.

Nervous Businesses

Employees are not the only people who suffer from the economy is a mess; the owners of companies do as well. Therefore, many of them are nervous about the economy. While it is improving, it is still in a recovery state. They worry that if they begin to pay their employees more money, they will find themselves in a desperate situation if the economy starts to rapidly decline again. Once the economy overall, or at least their niche of the economy, has enjoyed a longer lasting level of stability, they may be more likely to increase wages.

Complacent Employees

The owners are not the only ones responsible for the flatline of wages. In the past, asking for a raise was a fairly commonplace practice. If individuals felt that they had enough experience at the job or had been working there for a long time, they would ask for a raise. However, during the economic downturn, some of these requests were suddenly deemed unreasonable. Companies could not be expected to provide employees with raises when the businesses were threatened themselves. Employees have, in a number of fields, become used to this situation. If they were to speak to their employers about a possible wage increase in the future, then they may be more likely to get one. Other workers are afraid to leave their jobs because they remember how burdensome it was to find this one.

When Changes Will Come

Predicting exactly when wages are going to rise again is impossible. First of all, people have different opinions on the matter. Some believe that the current federal government is at-fault for the way wages currently are, so they often do not believe that a change will come into the power in the country shifts. The specific field is another reason predicting an exact moment of change is impossible. Different fields are doing better than others, so they will likely start to increase wages before fields that are still struggling to survive.

The hope is that all fields will start to increase their wages again in the near future. This hope is held by both employees and employers alike, and both parties need to work together to meet in the middle when it comes to this situation.

Posted in Economy |

The United States’ Strong Dollar

The terms weak dollar and strong dollar are used in the foreign exchange market to explain the relative value of United States currency when compared to other currencies on the market. One must look at the value of two or more particular currencies over a fixed period of time in order to accurately evaluate money in this way. If the dollar has a historically high exchange rate relative to its normal value when compared with another currency, it is considered to be strong. If the dollar has a low exchange rate relative to normal when compared with the value of another currency, the dollar is considered weak. When a currency is strong, it essentially means that investors trust that currency. They expect it to remain relatively stable and to retain its value. Strong currency is usually a sign of a healthy economy, but that is not always the case.

The Current Strength of the U.S. Dollar

The United States currently has what is referred to as a strong dollar. At the close of 2014, it was trading at its highest since 2009. Because it is strong against several major world currencies at a time when the country is still recovering from an unstable economy, the sudden rise in value took many people by surprise. Gas prices dropped significantly all across America during the first few weeks of 2015. This was the result of increased purchasing power. The dollar’s higher value meant being able to buy certain commodities for much cheaper than it could when the dollar was weak.

What contributed to the Rise of the U.S. Dollar?

Several factors explain the rise of the dollar’s strength. Unemployment is decreasing, retail sales are increasing, and more economic growth is expected. The return to normal interest rates by the Federal Reserve is also being pointed to as another major reason that explains why the U.S. dollar is regaining strength. As the American jobs market continues recovering, interest rates are expected to continue rising throughout 2015. Because the measure of dollar value is relative, another reason for the increased value is that other countries’ currencies have weakened. If the American economy continues improving, the dollar’s value is likely to keep gaining strength.

What Are the Upsides and Downsides of a Strong Dollar?

One benefit of having a strong dollar is that the price of certain highly desirable commodities drop. Oil prices in the United States tend to drop, sometimes quite significantly, when the dollar gains strength. This translates to lower prices at the gas pump. For people involved in Forex trading on the foreign exchange market, the upside of a strong dollar is being able to buy foreign currencies at a much more favorable rate than normal. However, there are plenty of downsides. One is that federal interest rates are likely to rise even more. Another downside is that companies that do a great deal of business in foreign markets are likely to be negatively affected. Their sales are likely to drop. Even if those companies’ sales continue at normal rates, their profits will still be lower. Weaker currencies can help a country regain balance after periods economic instability. Since the U.S. is still in the midst of a rebounding economy, not everyone is expecting the return of strong currency to be without its problems.

Posted in Economy |

The Affordable Care Act and Your Tax Return

The Affordable Care Act, known by many simply as Obamacare, is the new healthcare law that requires individuals to purchase health insurance on their own if they do not have insurance provided by an employer. Americans without employer-based insurance may qualify for tax credits that offset the costs of complying with this law. If you did not claim your credit in order to get reduced monthly premiums, you may receive a tax refund for any amount you did not already use. Alternatively, if you did not have health insurance for most of the year, you could face a penalty at tax time.

How the Affordable Care Act Affects Tax Refunds

The Affordable Care Act can affect your tax refund in two ways. People who opted not to get insurance at all may face a tax penalty. You might pay a reduced penalty if you were uninsured for only part of the year. The amount owed will depend on your income and the number of uninsured people in the household. This will be taken out of any tax refund that may be due.

If you had health insurance for at least 10 months of the year, you will not have to pay a penalty. You might actually receive a larger tax refund if you did not take advantage of reduced monthly premiums. If you chose not to claim the tax credit at the time you applied for insurance, you still might be able to claim this refundable credit on your tax return. The amount of the credit will depend on your income, your household size, and the cost of your marketplace premiums. If you did not get health insurance through the marketplace, your premiums may not qualify for the credit since only certain plans are available through the program.

Filing Taxes with the Affordable Care Act in Mind

Because the health tax credit can be used to pay for some out-of-pocket expenses in addition to deductibles, be sure to have all your financial information that relates to these health care costs with you when you file your tax return. You will need to know which health care plan you have and how much the premiums cost. You may also need information about your copayments and coinsurance.

If you file taxes yourself, most online tax programs will guide you through the process of reporting these costs and determining whether you qualify for the tax credit.
If your tax credit was paid directly to your insurance company to lower your monthly premiums, you likely received your total credit throughout the year. However, if you did not use the full amount you qualified for over the course of the year you might receive a partial refund to make up the difference.

The Affordable Care Act has created a few additional steps when filing taxes, so be sure you provide all related information accurately so that you can receive the full credit you might be due or pay the penalty you owe.

Posted in Tax Law |

2015 Tax Law Changes

Tax laws and regulations change from year-to-year. Learning what new tax laws have been created or what former ones have been revised is important for accurate tax returns. Here are five changes to tax regulations for 2015:

  1. IRA Limitation Rollovers
  2. In 2015, the maximum contribution that taxpayers will be able to make to a 401(k), 403(b) and 457 plan, as well as to the federal government’s Thrift Savings Plan, is $18,000. There’ll also be an increase of $6,000 on catch-up contributions for employees age 50 and older. Therefore, the limit will be capped at $24,000 for workers 50 and above.

  3. Roth IRA Contributions Higher Income Limits
  4. There’ll be an increase in how much you can contribute to your Roth IRA in 2015. It will be increased by $2,000 and will affect those with incomes of $116,000 or more but less than $131,000 for individuals ($183,000 or more but less than $193,000 for married partners). If you have both a traditional and a Roth IRA, the maximum contribution that you can make for both accounts is capped at $5,500 (or $6,500 if you’re 50 or older).

  5. IRA Contributors’ Higher Limits
  6. The maximum contribution for an IRA in 2015 for taxpayers under the age of 50 stays at $5,500. If you’re 50 and older, though, you can make an additional catch-up contribution of $1,000 for a total of $6,500. For people who aren’t employed and are on their spouse’s retirement plan, the tax deduction for their IRA contribution will not apply if they are listed as having a joint income of more than $183,000 but less than $193,000 in 2015.

  7. Higher Employer Plan Contribution Limits
  8. The new tax law will restrict you to only one IRA-to-IRA rollover within the year. It’ll also affect the limits on your contribution to the retirement plan you have through your employer. A second one would incur income tax on the rollover, an excess-contributions tax of 6% per year, and a 10% penalty for withdrawing early for as long as that rollover shows up in your IRA. This limits how you distribute all or part of your account to move it into a new IRA. There haven’t been any limitation changes made to trustee-to-trustee transfers between IRAs. There are also no limits on how many conversions you may make from traditional IRAs to Roth IRAs.

  9. Health Expense Accounts
  10. In 2015, changes are planned for how and when you can use your health flexible spending account, or FSA. Before, if you hadn’t used $500 of your FSA, you were able to roll that amount over to be used in the next plan year without restrictions. Now, if you contribute to your FSA in the year 2015, and at the end of 2014 you have a balance in your account and wish to carry over $500 of that balance into 2015, you’ll be considered ineligible to participate in a health expense account. This is a restriction that will be imposed in 2015, but that does not include FSAs that are used specifically for dental or dependent care.

Make sure you understand the restrictions and regulations regarding all of these changes to the tax laws for 2015, before making any financial moves.

Posted in Tax Law |

The If and the When of a Federal Reserve Interest Rate Hike

A great deal of speculation in both the media and the financial industry generally has centered on if and when the Federal Reserve Bank will raise interest rates. Speculation about this issue intensified after a meeting of the Federal Open Market Committee in mid-December 2014. The Federal Open Market Committee is involved in the process of determining Federal Reserve Bank interest rates.

Statement of Fed Chair Janet Yellen on Interest Rate Hike

Following the Federal Open Market Committee meeting, Fed Chair Janet Yellen was compelled to issue a statement addressing speculation regarding when (or even if) interest rates would rise. In her statement, the Fed Chair refused to provide a date certain when interest rates would rise.

The closest the Fed Chair came to making a prediction about when interest rates would climb over the nearly zero percent mark was to note that the issue would be revisited after “a couple” Federal Reserve Board meetings in 2015. When pressed for a more definitive estimate of when interest rates might increase, Yellen clarified only that the issue would be revisited after a couple Board meetings in 2015 and that “couple” means “two.”

When Interest Rates Might Increase

On news of the delay in any potential increase in Fed interest rates, the stock market rallied. Indeed, the New York Stock Exchange rallied to record levels. Thus, in the final analysis, the decision to notch up Fed interest rates will be guided by the overall health of the U.S. economy. The state of the stock market as well as the real estate market represent two of the indicators that are used by the Fed in evaluating the needs for maintaining a virtually zeroed out interest rate.

If the current economic trajectory continues through the first quarter of 2015, at least a minimal increase in Federal Reserve interest rates might be expected in the second quarter of the year. With that said, the economy remains at least somewhat unsteady and no one, including the Fed Chair, is making any hard and fast prediction regarding when (or even if) Fed interest rates will increase during 2015.

Changes Associated with Interest Rates to Date

The Federal Reserve slashed interest rates to virtually zero percent at the peak of the “Great Recession,” in December 2008. Despite some discussion to increase interest rates since that point in time, the Fed has not raised them in an effort to stimulate the economy and aid in recovery from the Great Recession that commenced in 2008.

In addition to chopping interest rates to virtually nothing, the Fed also started what is called the quantitative easing program, or QE. In fact, the Fed ultimately embarked on three quantitative easing programs, aptly named QE I, QE II and QE III. The Fed brought quantitative easing to an end in October, 2008. The Federal Reserve Board concluded that the economy has stabilized to the point that this added infusion of money was no longer necessary. However, the decision was also made to keep interest rates essentially zeroed out into the foreseeable future.

Quantitative easing involves the Federal Reserve purchasing bonds as a means of pumping more money into the economy. Through all three quantitative easing programs, the Fed pumped approximately $4.5 trillion into the U.S. economy. Economists generally credit the slashing of Federal Reserve interest rates and the central bank’s QE programs as the primary reasons why the U.S. economy has rebounded to the extent that it has thus far.

Posted in Economy |

Spain’s Google Tax

Google shut down its Google News page in Spain on December 16 in response to a Spanish law that requires news aggregation sites to pay publishers for posted links to content. Instead of its usual news compilation, the Google News page in Spain displayed a message on Tuesday morning stating, “We’re incredibly sad to announce that, due to recent changes in Spanish law, we have removed Spanish publishers from Google News and closed Google News in Spain.” Google also indicated that it will remove Spanish publishers from all of its international news editions. The company runs over 70 international news sites in 35 languages.

What Spain’s “Google Tax” law requires

Earlier this year, the Spanish government passed an intellectual property law that requires Internet news compilers that post links and excerpts of news articles to pay a fee to the Association of Editors of Spanish Dailies, an organization that represents Spanish newspapers. Set to take effect in January 2015, the law is popularly known as the “Google tax.” The terms of the law provide that news aggregation services that fail to pay the fees as required can incur a fine of up to 600,000 euros, which is approximately $750,000 US. The law does not allow publishers to opt out of its terms nor offer their news content for free. Beyond the “Google tax,” Spain’s new law will also require websites to delete links to material that infringes upon copyright, whether or not the posting sites make monetary profits from the infringing links. Associated sites that provide hosting or payment processing services to copyright-infringing sites will also be subject to the law.

Uncertain legal details

The new Spanish law does not specify how much news aggregation sites must pay for content that they post. This will be decided in additional proceedings during the coming year in which the government and affected parties will take part. The law’s terms also do not definitively prescribe which types of article-linking sites would be subject to the fee requirements, leaving operators of social media sites questioning whether and to what extent the law applies to them. While Spain’s ministry of culture has stated that social media and their users would be exempt from paying the fee required by the new legislation, the law’s impact on social media sites with user-driven aggregation is currently uncertain.

Viewpoints for and against the law

As the Google shutdown loomed last week, the media publishers in Spain who lobbied for the passage of the law maintained their position that news content providers must be given fair compensation for their material when it is used by other parties. On the other side of the viewpoint divide, Google expressed the reasoning behind its Google News closure in Spain. Richard Gringras, the head of Google News, wrote in a recent blog post that because “Google News itself makes no money (we do not show any advertising on the site) this new approach is simply not sustainable.” Google and other critics of the law have also noted that news aggregation services provide a benefit by sending traffic to websites with linked content. The Google News shutdown in Spain seems to foreshadow further developments in this new zone of legal debate sparked by this new law.

Posted in Tax Law |

The Drop in Black Friday Spending

Why The Drop in Black Friday Spending This Year?

The Black Friday decline can be attributed to the economy improving and the changing shopping habits of consumers. According to the National Retail Federation (NRF) statistics there was an 11% drop in Black Friday spending in 2014. A survey conducted by the NRF for the Thanksgiving weekend indicated that 55.1% of holiday shoppers were expected to visit stores or shop online over the Thanksgiving weekend. Those numbers are down from last year’s 58.7%. The survey reports that the average Black Friday weekend shopper was expected to spend $380.95, down 6.4% from $407.02 last year. Total spending was expected to reach $50.9 million, down from 2013’s estimate of $54.4 billion.

What caused the drop?

There are several reasons for the decline in shoppers and spending this year. Proper Insight and Analytics surveyed 4,631 consumers (with a margin of error of 1.5%). Their data showed that large retailers added new commercial shopping holidays, such as Gray Thursday, Small Business Saturday, and Cyber Monday, making it possible for shoppers to have more days to shop the holiday sales. This pulled some of the shopping crowds away from Black Friday.

A large percentage of shoppers surveyed said they specifically wanted to shop “Small Business Saturday” (with some cities calling this “Small Boxes Saturday”), a trend with consumers to spend their money in small businesses and to shop local. This pulled numbers and money away from the big box stores.

The decline in Black Friday shopping is the second annual drop in a row. This decline can be attributed, in part, to retailers changing-up the pre-holiday sales days. Target Corporation began its Black Friday sales on November 10th. Wal-Mart Stores, Inc. began its holiday promotions on November 1st. Shoppers now have multiple days to shop for the holidays. Black Friday has morphed into several consumer sale days and shoppers don’t have to miss out by not shopping on Black Friday, according to Elissa Margols, senior vice-president of Disney Store North America at Walt Disney Co. The company has 200 stores in the USA and began promoting online and in-store sales the Monday before Thanksgiving.

Brick-and-mortar retailers increased Web deals with promotions that included free shipping, price-matching online rivals (Such as Amazon.com Inc.) and rolling sales.

Retail trade goups said the number of people shopping over the four day weekend declined 5.2% from last year to 134 million. They suggest that even with improvements in the economy, decreasing joblessness, a rebounding housing market, and two quarters of strong economic growth, many consumers are being cautious and thrifty five years after the recession. Consumers are researching their purchases on the Web for best prices and have limited their impulse buying.

Loss of Enthusiasm

“The Thrill is Gone” for Black Friday shopping according to the Wall Street Journal. Data for Thanksgiving Thursday through Sunday for holiday shopping over the past 8 years was collected by the National Retail Federation. Statistics show that the average amount each shopper spent online in total on this weekend from 2006 to 2014 has declined each year from 2012 to 2014. However, 2009 was year of the lowest point in money spent by consumers. That was the height of the recession. There was a steady rise in sales from 2009 to 2012 until 2014 became the new low point.

Posted in Economy |

Economic Impact of the Immigration Reform

President Barack Obama has announced that he intends to take executive action to address a segment of the population of individuals that are in the United States illegally. The President’s plan is expected to impact approximately of 5 million of the estimated 11 million individuals who are present in the United States unlawfully.

The President’s Plan on Immigration

At the heart of the President’s immigration plan is to grant a reprieve to individuals who have been in the United States at least five years without legal authority. These people must have children who are citizens of the United States. In other words, while in the United States, these individuals have become the parents of children born in the country. In the alternative, these individuals can be parents of children who are illegal residents in the country as well. In other words, the heart of this initiative proposed by the President is to permit people illegally in the United States the ability to remain in the country without fear of deportation if they also have children in the United States.

If a person meets these basic requirements, he or she can then apply for relief. As part of the application process, a criminal background check is run. The individual must pass that background check in order to qualify to remain in the country.

Once the application process is completed, and the individual registers, he or she is able to remain in the country temporarily. As of this juncture, there is no precise time frame regarding how long an individual who qualifies and registers can remain in the United States. The reality is that Congress is able to pass legislation overturning the President’s initiative. The initiative is likely to be challenged in court for its constitutionality. In addition, a new President can reverse this initiative by Obama.

Potential Impact on Unemployment in the United States

There is a considerable amount of debate surrounding the impact the President’s immigrant initiative will have on the issue of unemployment in the United States. Some economists and others contend that it will cause an increase in the unemployment rate. They maintain that granting upwards of 5 million adults legal permission to me in the country will cause what may end up being a marked increase in the unemployment rate.

Not all economists and other analysts are in agreement with the idea that the President’s plan will increase unemployment. These individuals maintain that the bulk of the individuals likely to be impacted by the President’s plan are already working, albeit in a more closeted fashion. They argue that the initiative will have no appreciable impact on the U.S. unemployment rate.

Potential Impact on Average Wages in the United States

There is a concern that the President’s initiative may result in a negative impact on average wages in the United States. In other words, there is an argument being made that permitting upwards to 5 million foreign nationals the ability to work legally in the United States may result in employers engaging their services at rates of pay lower than what they might have otherwise offered. The theory is that these individuals will be willing to work for a lower rate of compensation when their status is legalized, causing an overall drop in average wages in the United States.

Posted in Economy |

What is Common Law?

The Influence of Common Law

In the American court system, common law is also referred to as case law or precedent. It is a type of law that has been developed by using court decisions handed down by judges. This is very different than statutory law. This law is created by legislative bodies contained within a government or action from an executive branch.

History

Common law is the legal system that originated in England. It was adopted in the United States by the colonies. The phrase “common law” started being used during the 1100s. It was a legal system developed during the rule of Henry II of England. This was a time when law was based on cultural systems. Resolving disputes often involved local customs. The early English tribes all had their distinctive customs. Once the tribes came together and became organized, they needed to develop a common system of resolving disputes. At this time, it was essential a decision-maker view previous cases and how they had been decided. These legal decisions were used to establish legal traditions and guidelines. Some are still followed today.

Precedent

Common law is designed to bind future decisions to previously decided cases. Opposing parties often disagree which law applies to their case. A common law court would search past precedential decisions from similar courts for an answer. If a dispute has been previously resolved, the court is required to follow the reasoning used in the past case. The Latin term for this is asstare decisis. Should a judge determine the case they are addressing is different from all previous cases, they have the authority and obligation to create new law by making a new precedent. This decision will then become precedent and bind future court decisions.

Practice

When common law is practiced in its pure form, it becomes very complicated. One of the problems is that decisions are only binding in a specific jurisdiction. Within each jurisdiction are courts with different levels of authority. In most jurisdictions, the decisions of an appellate court are followed by lower courts in only their jurisdiction. Decisions based on the same set of case facts could provide a different result in a different jurisdiction.

Common Law Benefits

The wording of legislation is often written in very broad terms. Laws provide only the most general type of instruction on how to follow them. Common law provides a way for a court to carefully examine the specific facts of each case. The facts can be more accurately interpreted. This makes it easier to administer a law more in line with the intended result.

Politics

The court system and judges should not be influenced by politics. Common law makes it possible for a court to implement important legal reforms. These reforms may not be possible with legislators who are concerned with reelection. The courts are able to provide essential precedent without considering how it will impact of an election.

Legal Change

Common law is a way to provide legislative statutes when no legislative statute authority exists. When there is a need for adapting laws to meet a new situation, common law makes it possible. Changing or creating a new law with the legislative process takes time and will be influenced by politics. Initiating a precedent can provide an opportunity to address a legal situation so essential legislation can follow it. Common law is able to quickly address important changes in society.

Posted in General Law |

The Falling Gas Price

Everyone is enjoying the break in high prices at the gas pump. The questions on the minds of every consumer are why did the prices drop so fast and how long will it last? Prices are expected to fall an additional 10 to 15 cents per gallon before leveling off. Does this mean that it will begin the steady rise in price again? That is not necessarily how this will play out. The reasons behind the dramatic drop in price might signal a steady lowered rate, at least for the foreseeable future.

Why Gas Prices Dropped

Typically the price at the gas pump tends to jump when there is political unrest and civil wars going on in areas that produce large oil supplies. This is because the price of each barrel of oil tends to skyrocket due to disruptions in pumping or transport, but this has not been the case this time around.

The pain experienced of $4.00 and $5.00 per gallon gas prices in recent months has really driven down demand for petroleum based fuels. People have found a way to dramatically reduce the amount used. Domestic oil production by methods such as fracking has also had a large impact on availability. More oil at cheaper rates equals lower gas prices.

How Long Will Prices Stay Low?

The very nature of the price drop could signal a long-term comfortable rate, but it is somewhat dependent on people remaining firm in gas conservation modes of thinking. If the demand begins to spike it could start to climb in price again. If domestic oil production remains at current levels, or increases the prices could settle at the $3.50 per gallon mark nationwide for a long time to come.

Impact of Lower Gas Prices on the Economy

There have some economists that warn that constant lower prices will adversely affect the economy in areas that are oil dependent, but this is not necessarily the case. That might have been a concern in the past when there was more dependency on foreign oil resources, but the increase in domestic production means job security for those in the oil and gas industry. Unless there is an interruption in supply then the current levels of demand will keep the industry strong.

A lowered price in gas also means that people can get out and travel more to visit friends, family and take vacations that have been shelved since record high prices hit the market. That means more people will be on the roads shopping, eating in restaurants and staying at hotels. It could mean a definite surge in the economy that has not been seen in a few years.

Impact of Lower Gas Prices on the Environment

The lower prices may not mean the best outlook for the environment. Global warming concerns have never been more at the forefront of the public eye. At a time when carbon emissions could not have a more detrimental effect on the environment the cost of driving is going down. This means more petroleum products will be used and could add to the existing problem.

The price of gas at the pump may not get much lower than they are now, but the welcome break could not come at a better time. Maybe it is time to make plans to see everyone you have not been able to afford to see in a long time.

Posted in Economy |