A Better Deal for Delaware

SLOW GROWTH?: The Conference Board’s Index of Leading Economic Indicators was up +0.4% in the first half of 2007. Their report said that the Index “continues to suggest that the economy is likely to grow in the near term, albeit at a slow pace.” (See: http://www.conference-board.org/economics/bci/pressRelease_output.cfm?cid=1). Durable goods orders were up almost six percent, far stronger than had been forecast. The strongest sectors included commercial and military aircraft. This is a positive sign for longer-term economic growth.
New-home sales increased. At this point, even a neutral report would have been welcome, but the increase caught everyone by surprise. Still, new-home sales were about ten percent lower than they were a year ago.

THE MORTGAGE MARKET: I went to a seminar titled the “Mortgage Meltdown” this past week. It was put on by a mortgage broker I often refer people to. It was very well done. The bottom line seems to be that the mortgage industry just went too far. It became too easy to get a loan. Many who should have spent another year or two saving got loans before they were ready. In the past, price appreciation bailed these people out because they could refinance or sell and recover some equity. We are now in the midst of a “correction” in the mortgage markets which is impacting all markets.
Many of these mortgage lenders were in the business of reselling all of their mortgages immediately and turning around and lending more money. As the sources for purchasing mortgages, especially subprime and “Alt-A” mortgages have been drying up, these lenders have been closing their doors. Fortunately, one of the larger such lenders, Countrywide, seems to be in a position of surviving. Warren Buffet recently made some noise that he might invest in Countrywide, and that rumor alone sent the price of the stock in Countrywide up.

FORECLOSURES AND REAL ESTATE: A recent report from RealtyTrac, a real estate research firm, indicated that home foreclosure filings rose 9% in July and were up 93% over the same period last year. A total of 164,644 foreclosure filings were reported in June. Membership in the National Association of Realtors is expected to decline for the first time in a decade. The organization ended 2006 with 1.4 million members, almost double the 716,000 it had in 1997, but expects to close 2007 with 1.3 million, a drop of more than four percent.
Have a great week!
Doug MacGray

Douglas R. MacGray, J.D., C.F.P.
Senior Vice President, Financial Planning

In many ways, the economy is doing well. Unemployment, home ownership and inflation etc. say things are doing well but they could be doing much better if not for the onerous and complicated tax burden on small businesses and families.

Moms and Dads should pay attention to their families not the IRS

Small business people should serve their customers not the IRS.

read more:

from the NCPA

August 14, 2007
THE TWO-INCOME TAX TRAP
Despite recent plummets in bankruptcy numbers, scholars on the left argue that the drop is temporary and that rising bankruptcies will result from new stresses on American households, says Todd J. Zywicki, professor of law at George Mason University.
The left blames new expenses that strain the family budget, such as rising health-care costs and higher mortgage payments for increasingly expensive homes, leaving less discretionary income available to save and to meet other household expenses, and forcing mothers into the workforce. What they fail to mention, however is the role of taxes:
Overall, the typical family in the 2000s pays substantially more in taxes than the combined expenses of their mortgage, automobile and health insurance than in earlier periods.
And the change in the tax obligation between the two periods is substantially greater than the change in mortgage, automobile expenses and health-insurance costs combined.
This suggests that the most important change in the balance sheets of middle-class households over the past three decades is a dramatically higher tax burden caused by the progressive nature of the American tax system, says Zywicki:
In turn it follows that the most effective way of alleviating the household budget crunch would be to adopt lower and flatter tax rates that would reduce the government’s take.
Another possibility would eliminate the “secondary earner bias” in the tax system, which causes all of the wife’s income to effectively be taxed at a much higher marginal tax rate than the husband’s.
Lower and flatter marginal tax rates generally are not advocated by those who dominate the American legal academy today, says Zywicki. But for those who want to consider serious strategies for preventing bankruptcies, less money in Uncle Sam’s pockets may mean more money in ours.
Source: Todd J. Zywicki, “The Two-Income Tax Trap,” Wall Street Journal, August 14, 2007.
For text:
http://online.wsj.com/article/SB118705537958296783.html

For more on Taxes:

http://www.ncpa.org/sub/dpd/index.php?Article_Category=20

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