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What Does the Fiscal Cliff Deal Do to My Taxes?

Brandon Moseley

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By Brandon Moseley
Alabama Political Reporter

Most people who supported President Obama also supported his war on the high achievers in this country.  Polls showed consistently that his war on “millionaires and billionaires” played well with the voting public.  Of course in the real world you can’t expand government entirely on the backs of the “millionaires and billionaires” and the billions in new taxes that were passed by both Houses of Congress in the fiscal cliff deal will hit almost everyone in the country.

An estimated 77% of households in this country just got a tax increase.  Granted it is a better deal for most than going over the fiscal cliff would have been, but higher taxes will mean strained budgets and some households (whether they know it yet or not) will be pushed into bankruptcy and foreclosure due (in part) to the massive tax increase that was passed by the Senate on Monday and the House on Tuesday.

Most significant for most Americans is that the Social Security Tax Holiday that President Obama passed in his first term was allowed to sunset.  That is a 2% tax increase for low and middle wage earners and cumulatively it is a massive tax increase on the American people.  The 2013 FICA limit is $113,700 so if you make $113,700 or more your FICA tax increase was $2274, but even that part time guy at the burger place who just makes $10,000 a year and doesn’t make enough to pay federal income taxes can expect to pay $200 more in FICA taxes.

It is our understanding at press time that individuals who make more than $200,000 or $250,000 for a household will no longer be able to itemize their deductions.  For higher earners there will no longer be a tax benefit for carrying a mortgage on a big new house or donating to their Church or favorite charity this year.

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In addition to the fiscal cliff deal, Obamacare starts to go into effect in 2013.

Individuals who make more than $200,000 filing individually or ($250,000) as a household will now get hit with a new 3.8% surtax on their capital gains, dividend, derivatives, and commodity trading income.   Under certain cases this would also apply to income in annuities and trusts and as of press time we are unsure as to whether or not it applies to rental income.

The 159 pages of new rules for just this section of Obamacare won’t be finalized until April.  Then we will have to adjust our understanding of them as tax courts make rulings on real world cases.  This new surtax will be calculated based on the MAGI (Modified Adjusted Gross Income number (line 37 on the 1040) NOT the classic taxable income number on (line 43 of a 1040).

Of course if you are in that $200,000+ for an individual or $250,000 for a household income tax bracket your Medicare payroll tax will jump from 2.9% to 3.8% starting this year and unlike FICA that does not ever cap out.

President Obama delivered on his campaign promise to make the rich pay more in taxes with his fiscal cliff deal.  Americans who make more than $400,000 in 2013 will see their income tax rate jump from a 2012 rate of 35% to a new rate of 39.6%. For joint return filers that threshold would be $450,000. The deal also raises that estate tax rate from 35% to 40%, but would keep the current estate tax threshold of $five million.

Of course the Senate still not passed any budget in over three years and the fiscal cliff deal did little to address sequestration, tax reform, entitlement reform, or balance the budget so it is very likely that more taxes will be raised through either higher rates or fewer deductions and tax credits in future legislation.

These rules are very very new are still in the process of being written in their final form and our understanding of all of them is still very limited.  For actual tax planning or estate planning advice please consult with your financial advisor, CPA, tax preparer, or money coach.

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Efforts underway to reestablish BCA as unifying voice for all businesses

Bill Britt

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With the changes at the Business Council of Alabama come a once in a generation opportunity to rebuild a, “stronger BCA and a better Alabama,” as stated by Alabama Power Company’s CEO, Mark Crosswhite, in announcing new leadership and governance for the floundering business organization.

Those business leaders who joined Crosswhite in the struggle to save BCA credit his quiet strength and unwavering resolve in what one insider calls, “The most important political coup in a decade.”

The primary goal moving forward is to reestablish BCA as the unified voice for business, according to insiders.

But first, the challenging work of cleaning up the mess left behind by former President and CEO Billy Canary must be addressed.

During restructuring conferences, it was discovered that recently at Canary’s direction $1.6 million was taken from BCA’s reserve account and spent.

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Individuals close to the operation say that Canary and his people stonewalled, lied and hid information about BCA’s finances and day-to-day operations from its executive committee and members.

“They lied to everybody,” said an individual with knowledge of BCA’s operations under Canary, who asked not to be identified for this report. “They even lied to each other, so I guess you could say they were equal opportunity liars.”

Those lies kept many BCA members in the dark about the serious problems facing the group. They also kept Canary in power.

Crosswhite, who was selected to chair BCA’s new Executive Committee, has already tasked a member of the group with examining the organization’s finances to see what else might have been hidden during Canary’s tenure.

BCA’s new bylaws democratize the organization with an 11 member Executive Committee comprised of leaders from small, medium and large business entities.

Committee members say never again will BCA operate like an Eastern European oligarchy with Canary acting as supreme chieftain.

Under BCA’s new canons of operation, the president and CEO, as well as the chairman of the board, will answer to the Executive Committee.

Along with uncovering the actual state of BCA’s financial affairs will come a personnel and program review.

“Canary’s acolytes will need to go,” says a highly placed individual. “This is not a good time to have Billy Canary as a character reference on your resume.” Also on the chopping block will be programs like BEA, which was created as a quasi-education association that primarily worked to undermine public education.

For nearly 10 years, BCA has served as handmaiden to a Triumvirate consisting of Canary, former Gov. Bob Riley and then-Republican Party Chair and later House Speaker Mike Hubbard.

It is widely believed that Riley, Canary and Hubbard used BCA and the Republican Party as a way to control state government to enrich themselves. Their plans came undone like so many before them because they couldn’t master their greed and avarice according to those who once traveled with them. Hubbard is now a convicted felon, Canary is trying to build a lobbying group in Montgomery and Riley is marginalized with only a handful of loyalists remaining in the Gov. Kay Ivey administration.

Now comes the hard work of rebuilding BCA as an organization that represents businesses both large and small and not just the special interests of a few.

Those who participated in the effort to reclaim BCA believe the organization can be a force for good that represents both what is best in Alabama’s business community and also the state as a whole.

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Chief of staff departs Senate president pro tem’s office

Chip Brownlee

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The Senate president pro tem’s chief of staff is leaving his role.

Philip Bryan, who has served as President Pro Tem Del Marsh’s chief of staff since 2011, is resigning his role as Marsh’s top aide to pursue a private sector job. His resignation is effective Aug. 31.

“Working under President Pro Tem Marsh and interacting with the members of the Alabama State Senate on a daily basis has been a highpoint of my career, and I will always value the experience, memories, and friendships that resulted from my service,” Bryan said.  “I leave the Pro Tem’s office with pride in the job we have done and deep appreciation for the opportunity that Sen. Marsh provided me.”

The president pro tem is one of the most powerful politicians in Montgomery, leading the Senate’s majority caucus. Since Gov. Bentley’s resignation and Gov. Kay Ivey’s move to the Governor’s Office, Marsh has also presided over the Senate in the absence of a lieutenant governor.

Marsh thanked Bryan for his service to the State Senate.

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“Philip has been an outstanding chief of staff and developed good and trusting relationships with senators on both sides of the aisle,” Marsh said.  “His service helped us make Alabama an even better place to live, work, and raise children.  While we will greatly miss his counsel, I know that he will bring enormous value to any position that he holds in the future.”

Before becoming Marsh’s chief of staff, Bryan was the communications director for the Alabama Republican Party for four years. He was a part of the group of Republican leaders who helped capture majorities in both chambers of the Legislature for the first time since Reconstruction.

A 1999 graduate of Auburn University with a degree in communications, Bryan is married to the former Brittany Woodham of Montgomery. They have one son.

Marsh has not announced who will succeed Bryan as his chief of staff.

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Wages soar to 11-year high in Alabama during July

Brandon Moseley

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Friday, Alabama Commerce Secretary Greg Canfield announced that, “Alabama Breaks Employment Record Again; 2.1+ Million People Working! Average Weekly Wages Highest in 11 Years.”

Alabama Governor Kay Ivey (R) announced on Twitter, “We’ve done it AGAIN Alabama! Check out the new #’s below.”

Alabama Department of Labor Secretary Fitzgerald Washington announced that Alabama has broken its employment record for the third month in a row. In July, 2,105,513 people were counted as employed, up from June’s count of 2,098,121, and up from July 2017’s count of 2,077,406, representing a yearly increase of 28,107.

In July, 90,987 people were counted as unemployed, compared to 89,302 in June and 89,858 in July 2017.

“We continue to break employment records in Alabama,” said Washington. “Nearly 30,000 more people are working now than they were last year. The message is clear, Alabama: we have jobs!”

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“Those jobs are coming with higher wages,” continued Washington. “We’ve seen wages increase both over the month and over the year. In fact, workers in Alabama are earning more weekly than they have in the past 11 years.”

Total private average weekly earnings rose to $830.55 in July, which is up from $815.97 in June, and up from $798.62 in July 2017.

Over the year, wage and salary employment increased by 22,200, with the biggest gains in the manufacturing sector (+8,300), the professional and business services sector (+6,700), and the leisure and hospitality sector (+5,200), among others.

The preliminary, seasonally adjusted unemployment rate for July is 4.1 percent, which is unchanged from June’s rate, and equal to July 2017’s rate. That unemployment is holding steady while the size of the workforce continues to grow shows that the booming economy is luring people back to the workforce who had been previously on the sidelines and not actively looking for work before. That is also a sign that labor availability should not curb potential future growth.

The counties with the lowest unemployment rates are: Shelby County at 3.1 percent, Cullman County at 3.5 percent, and Marshall, Elmore, and Baldwin Counties at 3.7 percent. The counties with the highest unemployment rates are: Wilcox County at 11.2 percent, Clarke County at 9.1 percent, and Perry County at 8.6 percent.

The major cities with the lowest unemployment rates are: Vestavia Hills at 2.7 percent, Hoover at 3.0 percent, and Homewood and Alabaster at 3.1 percent. The major cities with the highest unemployment rates are: Selma at 9.3 percent, Prichard at 8.8 percent, and Anniston at 6.0 percent.

Even with record jobs being created, Governor Ivey has also developed a plan to prepare 500,000 highly-skilled Alabamians for the workforce by 2025. A more qualified and capable workforce will give the state’s economic developers the opportunity to pursue employers in need of more skilled workers. The state hopes that rising skill levels will translate into more families bringing home more money and paying state income taxes and fewer families needing the state to provide costly benefits like Medicaid, free school lunches and other income assistance programs.

Governor Ivey is seeking her own four-year term as Governor. She faces Tuscaloosa Mayor Walter “Walt” Maddox (D) in the November 6 general election.

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Vaughn comments on Lipscomb ethics filing situation

Brandon Moseley

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Democrat House District 30 nominee, Jared Vaughn, recently commented on the controversy surrounding Republican nominee B. Craig Lipscomb. GOP opponent Robert McKay is asking a Gadsden court to remove Lipscomb from the ballot and appoint him as the GOP.

Vaughn told the Alabama Political Reporter in a statement, “I’ll start by saying that I just don’t see the difference between this situation and this one,” where Lana Gaskin Bellew was removed from the Republican primary runoff ballot for the Etowah County Commission in 2014 for not filing her Statement of Economic Interests form.

Lipscomb filed a 2016 statement when he qualified but missed the April 30 deadline for his 2017. Lipscomb did file on August 1, after he had defeated former Ashville Mayor Robert McKay in the Republican primary runoff.

Vaughn in addition to being the Democratic nominee for HD30 is also an attorney.

“They are mistaken that he had the additional time because he was not an “official” and the form he had on file was for the prior year,” Vaughn stated. “From my understanding of a great deal of late night reading of applicable code sections and Attorney General’s opinions, it would be different if he were an incumbent. He would potentially be afforded some additional time once he received notice of the deficiency if that were the case. This is not the case for non-incumbents as the ethics laws of this state recognize that when you are merely a candidate rather than an official, that the process lends itself to a greater deal of having been abused historically. In recognizing such we passed laws that gave the people the ability to determine what a candidate’s potential conflicts of interest might be. In law school one of the first things you are taught is the difference between may and shall. It’s very clear that in 36-25-15 that it states as follows:
(a) Candidates at every level of government shall file a completed statement of economic interests for the previous calendar year with the State Ethics Commission simultaneously with the date such candidate files his or her qualifying papers with the appropriate election official or in the case of an independent candidate, the date the person complies with the requirements of Section 17-9-3 . Nothing in this section shall be deemed to require a second filing of the person’s statement of economic interests if a current statement of economic interests is on file with the commission.
(b) Each election official who receives a declaration of candidacy or petition to appear on the ballot for election from a candidate shall, within five days of the receipt, notify the commission of the name of the candidate, as defined in this chapter, and the date on which the person became a candidate. The commission shall, within five business days of receipt of such notification, notify the election official whether the candidate has complied with the provisions of this section.
(c) Other provisions of the law notwithstanding, if a candidate does not submit a statement of economic interests or when applicable, an amended statement of economic interests in accordance with the requirements of this chapter, the name of the person shall not appear on the ballot and the candidate shall be deemed not qualified as a candidate in that election. Notwithstanding the foregoing, the commission may, for good cause shown, allow the candidate an additional five days to file such statement of economic interests. If a candidate is deemed not qualified, the appropriate election official shall remove the name of the candidate from the ballot.”

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“The appropriate election officials have decided that SHALL means except if you’re a Republican and the people of House District 30 deserve better,” Vaughn added. “I’m not sure what they contend has changed since Ms. Bellew was removed from the ballot in 2014.”

McKay has asked the court to replace Lipscomb with himself.

“I further don’t believe that if Mr. Lipscomb is removed from the ballot that the Republican Party is under any obligation to fill the position with Mr. McKay,” Vaugh stated.

“The only thing I’m certain of in regard to the filling of the vacancy on the ballot is that they must do it prior to a certain number of days before the election on November 6th and that they are not allowed to fill the vacancy with Mr. Lipscomb,” Vaughn continued. “There’s good reason they can’t too. If they could do such, then they could proceed to have all of their candidates fail to file the required ethics filings, thus denying the people the ability to transparently know what any candidate’s economic interests are and consequently eliminating the entire purpose of the law in the first place. It would be different if he merely failed to file a copy with the Ethics Commission, which they aren’t attempting to say is the case here. If he had, like Pamela Cousins did, then maybe there is some possible argument to be made that he had complied with the spirit of the law and merely made an inadvertent mistake in an otherwise honest attempt to qualify as a candidate. That’s not the case here and they don’t maintain it to be either. Lipscomb failed to disclose his economic interests as required in 36-25-15 and did not remedy such prior to April 30th of this year and as such his name SHALL NOT appear on the ballot and he SHALL be deemed not qualified as a candidate in the election. If a candidate is deemed not qualified, the appropriate election official SHALL remove the name of the candidate from the ballot. Allowing the application of ethics laws to be politicized is a dangerous precedent to set and I’m hopeful that the outcome of the lawsuit filed against Lipscomb and the appropriate election officials makes that clear and preserves the legitimate intention of the ethics laws at issue.”

Etowah County Judge William Rhea will hear an emergency hearing on McKay’s suit in his courtroom on Wednesday at 10:00 am.

House District 30 is composed of parts of St. Clair and Etowah County.

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What Does the Fiscal Cliff Deal Do to My Taxes?

by Brandon Moseley Read Time: 3 min
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