Current Events

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taxes.jpgGood news on the horizon for business owners in Connecticut it seems!

I’ve read numerous places that the best way to become wealthy is to own your own business.

Well, I’ve done that, and while I have earned a lot of additional income over the years, there have always been drawbacks. In Connecticut, the biggest drawback has been the “Business Entity Tax”.

Back in March of 2003, out of the blue, right in the midst of tax season, I received a bill from the Secretary of State for $250 for a Business Entity Tax.

At first I had no idea what this was all about. I’d been in business for six years at that point and had never had to pay the state a dime since incorporating.

I sucked it up and paid it thinking it’d be a one-shot deal and chalked it up as one of those losses you have to classify as a “cost of doing business”.

In 2004, I got the bill again. That’s when I did some research and learned that it was a tax for the sake of a tax. Huge companies in the state like Aetna, Northeast Utilities, ESPN, and even the WWE have to pay the state $250 just for, well, existing.

But so do little guys like me – where, on occasion, $250 is more than we bring in any given month. Chump change for the big guys, but a huge expense for super small business.

One of those great examples where the little guy gets screwed by a flat tax.

With March fast approaching, I’ve budgeted out the expense for 2008, but the news today indicates that I may just be able to hold on to that income this year.

Lawmakers Seek To End Business Entity Tax
By JANICE PODSADA | The Hartford Courant
3:49 PM EST, January 17, 2008

The secretary of the state and a bipartisan group of state legislators said Thursday they will seek to abolish Connecticut’s annual $250 business entity tax during this year’s legislative session, which begins Feb. 6.

“This is an onerous tax. It’s really just a tax for existing,” Secretary of the State Susan Bysiewicz said. The tax was created six years ago as a stopgap measure to balance the state budget, she said.

“In 2002, we had a $96 million deficit. For the past four years we’ve had surpluses,” she said. “Before we get too used to this tax, let’s get rid of it.”

More than 118,000 businesses pay the annual business entity tax, which brings the state about $30 million a year. The amount represents about one-sixth of 1 percent of the state’s annual $18 billion budget. Bysiewicz said making up the $30 million difference should be relatively easy.

Republican policy makers attempted to abolish the tax last year, including the proposal as part of a budget amendment package. But it was defeated.

This year, abolishing the tax will be in a separate bill, which should increase the odds of its passage, both Democratic and Republican legislators said.

Small businesses, which create many new jobs, are unfairly burdened by the tax, said Bonnie Stewart, vice president of government affairs with the Connecticut Business & Industry Association.

Business registration fees are relatively low in Connecticut. For example, it costs $60 to register a limited liability company or limited liability partnership in the state. Corporations pay more. But at the end of the year businesses, regardless of size, must pay the $250 tax whether or not they made money or even launched their enterprise.

“I hear from many people who say they formed a company, but didn’t pursue it. And then they get this bill in the mail,” Bysiewicz said.

“While $250 may not seem like a lot, for our members, all of whom are small businesses, it can mean a month’s electricity bill or a month’s insurance,” Frank Alvarado, director of the New Haven and Willimantic offices of the Spanish American Merchants Association said.

“When we get that bill, it’s the one time we think about doing business in another state,” Theodore C. Hsu, owner of Horizon Services Co., a cleaning and supply business in East Hartford, told participants. “I talk to many other business owners, and they see this as being gouged. It stops their spirit.”

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When I first saw the headline, I thought to myself, “Can this be true? Could one of my childhood heroes be guilty of such a thing?”

But then I clicked the link and saw that it was just some thug football player in a strip club. Phew…

And I wonder how he got the nickname “Pacman”. He looks *nothing* like the real thing…

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Housing Slump HeadlineIt’s been a bit of a reality check for me adding my house to the assets calculation for my net worth updates.

For the longest time, I was thinking, “What housing slump?”, but now I see it first hand. Already this month, I’ve seen the value of my home drop 5-figures. Ouch.

It’s tough to get inspired when you see your assets dropping $12k in the span of a month through no action of your own. In fact, it kinda sucks.

It’s also a bit of an eye opener to see that my net worth is mostly dependent on the markets and not what I do with my paycheck. I guess I always knew that (based on my 401k fluctuations), but never really visualized it like I am now — probably because my home value is over 3 times as high as my 401k balance.

The good news is that that works on both sides — when the markets are up and housing prices are on the rise, I’ll see my net worth rising at the same rate it’s falling now. When those days return, well, wow, that will be *very* fulfilling.

For now though, I’m keeping my spirits up by concentrating on something I do have full control over — the liabilities.

So far this month, I’ve already knocked off another $1100 from my non-mortgage debt. And with 2 paychecks remaining this month, that news can only get better.

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Well, Christmas has come and gone and the days away from work are over now too.

I’d say it was a pretty successful Christmas this year. I think I made out better than my wife, but she may say otherwise.

Best of all, as far as I can tell, it’s 100% paid for already.

I can’t remember if that was the case last year — it may have been — but it feels great to be finishing out the year without any new bills hanging over us, no large expenditures on the horizon, and sizable cash reserves in both of our checking accounts just in case anything should come up.

Should be a good start for 2008…

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nyse.jpgJust when I thought I had the stock market figured out, well, yesterday happened.

When it was hinted that another rate drop was coming from the fed, there was much rejoicing and the markets went up.

When they cut the rate last month, things went up. Okay, I see a trend. Rate cuts hurt the savers, but makes the markets go up. A lightbulb went on for me. I’ve got a pretty good grip on how that works now.

But yesterday, they cut rates, and the markets went down. Way down. Personally, it hit me with a $1300 loss.

Apparently the rate cut they wanted (and received) wasn’t good enough. “Oh, I’m sorry, we should have cut it more than we did…”

Maybe I’m out of line here, but as far as I’m concerned, that’s just greedy.

In essense, investors took their ball and went home. Sigh…

A month ago, the State of Connecticut launched a plan to help the poor subprime borrowers out there. I was upset then.

Now, as I’m sure anyone reading this already knows since I’m a few days late, the Federal Government is following suit.

And yes, I’m still upset.

The lending companies gambled by lending money to people who couldn’t afford it. Subprime, adjustable rate, call it whatever you want. The fact is, they loaned money to people who couldn’t afford it. In a lot of ways, they deserve what they’re getting right now.

On the flip side, there are the borrowers. President Bush calls them homeowners. Homeowners who shouldn’t lose their homes. Homeowners we all should feel sorry for. Homeowners that people like you and me should bail out.

But that’s the thing. These “homeowners” took a gamble too. And you know what? They lost.

If the homeowners can’t afford the new adjusted rates, or weren’t wise enough refinance, well, they lost. If the mortgage companies made poor decisions and chose to loan large sums of money to people that they knew couldn’t afford it, well, they lost too. Plain and simple. Sucks to be them. Both of them.

But now the plan is for my tax money to go to bail these “suckers” out. Another blogger, I forget who, said that people who went the traditional 30-year fixed route should get some sort of tax credit or something. I couldn’t agree more.

I took out my loan in September of 2002. Just over 5 years ago — right when all of these “teaser-rates” started being advertised so heavily. I looked at it and knew that it was a gamble. A gamble not worth taking.

I pat myself on the back for my decision 5 years later. It *was* the correct move. But now, the carpet is being swept out from under me. I should have gone with an ARM. I’d have more money in my wallet today — and as the President is planning, for another 5 years to come.

We, who went the 30-year route, played by the rules, paid a little more on our mortgages, and then got screwed in the end. That’s messed up.

Further, this is just delaying things. Okay, fine, the folks in this situation may get another 5 years on their mortgage rates. But what then? It’s inevitable — they can’t afford their homes. Deep down, I hope finally get what they should have had coming this year.

I guess I just don’t like it when losers take advantage of the system and come out winners. But it seems that’s the ‘new’ American way…

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Mmm… Credit Crunch Bar!With all of the persistent news lately about how it will be harder and harder to borrow money, I’ve been really content with the fact that I’m well on my way to being out of debt and never really “borrowing” again.

But the deals from the various credit card companies that I hold accounts with have been getting sweeter and sweeter by the week.

Wait, I thought it was supposed to be harder to borrow money now? But the fed cut rates, so money should actually be cheaper to borrow, right?


I’m not going to try to figure it out — I don’t really care.

But with teaser rates of 0% through December 2008 already arriving in my mailbox, well, it makes my mouth water.

But then I look at my little chart and realize I’ll be debt free by then anyway and into the trash they go…

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Black FridayI think I took last year off, but in the past, I’ve always been in the parking lot of Walmart at 4:30 am waiting for the doors to open on the Friday after American Thanksgiving.

No, I don’t line up outside in a lawn chair with a thermos full of hot cocoa. In fact, I don’t line up at all. I sit in my nice warm car (with a can of coke) and walk in at a regular pace once they open the doors.

Not once, using this method, have I not been able to get my hands on one of their “specials”.

Sure, they only have 10 of the fancy televisions, or five of the laptops in stock at each store, but every year, I’ve been able to get to them before they’re gone. (Hint — they usually hide the “good” stuff in the aisles of the women’s clothing department).

The funny thing is, even with these opportunities, I’ve never bought anything from Walmart on Black Friday.

Part of it is that I’m a morning person anyway and it’s neat to have “company” for a change in the morning. I also think it has something to do with my tendancy to want to be “part of the excitement” — even if it’s not my own.

Anyway, with Thanksgiving rolling around next week, the Christmas season is nearly upon us and that means it’s time to start making plans to ensure that it’s a non-debt incurring event.

I remember last Christmas being pretty low key in our house. We’d just gotten married and the roof of our house had just been completed — though the payments for it had just begun. There just wasn’t any money around to splurge on the holidays.

This year, the situation is looking a lot different. I don’t forsee any huge expenditures in the near future. Maybe six-seven months down the road, but I’ll get to that later…

Christmas could be a big event this year — under the new budget, the money will be there, if needed, but I don’t think we’ll take advantage of the available cash. I’d have to ask my wife, but looking back, I didn’t have a problem with how Christmas went last year. No, there wasn’t a lot under the tree, but the payload of new socks is still holding strong today — and that’s good enough for me.

So, with that, it should be business as usual over the holidays in our battle to pay down debt.

Okay, fine, I want a Wii — but I know it will never get the use to justify the cost in our house.

Can You Dig It?


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