The recent election of Barack Obama along with a strong Democrat Congress has led to much hand ringing regarding taxes being raised.
The question is whether this will actually happen in 2009.
2008 was the year of the economic meltdown.
Housing was a mess.
Banks failed.
The Great Depression, Part II, was even mentioned as a possibility.
Countries around the world felt the impact.
One, Iceland, even went effectively bankrupt.
All and all, we haven't seen a year like 2008 in a long time.
2009 is shaping up to be another rough year as well.
The problem once again is in the housing market.
Subprime loans may be a done deal for the most part, but a vast number of adjustable rate mortgages are supposed to reset in 2009.
With home values down pretty much across the board, homeowners face the prospects of making high payments on homes with little or no equity.
As many as 1 in 7 homeowners may currently be upside down, which means a brisk year in the foreclosure market.
More foreclosures means more bank problems and, well, pretty much 2008 all over again.
So, what does all this mean in relation to taxes? Will President Obama and a Democratic Congress raise taxes? The most likely answer is that taxes will be cut, not raised in 2009.
How can this be? The answer is found in the solution to the economic meltdown, specifically at the Federal Reserve Bank.
To try to get the finance markets moving, the Fed has put upwards of $8 trillion into the financial markets.
More importantly, it has lowered the overnight borrowing rate for banks to an unheard of 0 to .
25 percent - effectively free money.
This "free money" poses a problem, however.
The Fed cannot lower the rates any more.
You can't go below zero! Even worse, we've come to find the lower rates and $8 trillion in the market has had no appreciable effect other than to perhaps slow down the meltdown.
All of this leads to a situation where President Obama walks into an unenviable position.
The big economic hope is to spur spending.
This means putting money in people's hands.
This means fighting unemployment by spurring business activity.
In short, this means less tax, but more programs to spur activity.
The federal government will not raise taxes, they will cut them to spur economic activity in 2009.
You can take this prediction to the bank - if it still exists! The one area where you will see tax increases is on the state level.
States like California are horribly run and the loss of revenues from the economic slowdown has predictably caught them with their pants down.
The only option they have to counter this is to raise taxes.
So, don't worry too much about the Feds in 2009, but keep a lookout for what your state is up to.
The question is whether this will actually happen in 2009.
2008 was the year of the economic meltdown.
Housing was a mess.
Banks failed.
The Great Depression, Part II, was even mentioned as a possibility.
Countries around the world felt the impact.
One, Iceland, even went effectively bankrupt.
All and all, we haven't seen a year like 2008 in a long time.
2009 is shaping up to be another rough year as well.
The problem once again is in the housing market.
Subprime loans may be a done deal for the most part, but a vast number of adjustable rate mortgages are supposed to reset in 2009.
With home values down pretty much across the board, homeowners face the prospects of making high payments on homes with little or no equity.
As many as 1 in 7 homeowners may currently be upside down, which means a brisk year in the foreclosure market.
More foreclosures means more bank problems and, well, pretty much 2008 all over again.
So, what does all this mean in relation to taxes? Will President Obama and a Democratic Congress raise taxes? The most likely answer is that taxes will be cut, not raised in 2009.
How can this be? The answer is found in the solution to the economic meltdown, specifically at the Federal Reserve Bank.
To try to get the finance markets moving, the Fed has put upwards of $8 trillion into the financial markets.
More importantly, it has lowered the overnight borrowing rate for banks to an unheard of 0 to .
25 percent - effectively free money.
This "free money" poses a problem, however.
The Fed cannot lower the rates any more.
You can't go below zero! Even worse, we've come to find the lower rates and $8 trillion in the market has had no appreciable effect other than to perhaps slow down the meltdown.
All of this leads to a situation where President Obama walks into an unenviable position.
The big economic hope is to spur spending.
This means putting money in people's hands.
This means fighting unemployment by spurring business activity.
In short, this means less tax, but more programs to spur activity.
The federal government will not raise taxes, they will cut them to spur economic activity in 2009.
You can take this prediction to the bank - if it still exists! The one area where you will see tax increases is on the state level.
States like California are horribly run and the loss of revenues from the economic slowdown has predictably caught them with their pants down.
The only option they have to counter this is to raise taxes.
So, don't worry too much about the Feds in 2009, but keep a lookout for what your state is up to.
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