A Common Sense Fix for the Economy

On Dave Ramsey's website, he lists a 3 step plan to fix the current financial debacle. It involves much less in government involvement and the cost is estimated at $50 billion, compare that to $700 billion (yes I know the 700 isn't a true cost.) It basically has the government insure the bad mortgages rather than buying them. It places restrictions on the companies that seek insurance and provides some small relief to the consumer. The second step involves a change in accounting procedures but it's the third step that's the kicker. The capital gains tax needs to be removed completely! Overall it seems like a good plan...it at least appears on the surface to be better than a government wholesale purchase of mortgages. I don't want the
government to become the landlord of the land. Most importantly, he reminds us to pray. Pray for our leaders. Even those that we disagree with or dislike. They need wisdom and the Lord is wisdom. Sometimes (or is it a lot of times) we forget to do this, or if we do, its just so we can check it off our prayer list. Ask God for wisdom on our own behalf and then earnestly pray for our leaders, for wisdom, strength, and perseverance. Here is the complete plan and check out Dave's site.

"Years of bad decisions and stupid mistakes have created an economic nightmare in this country, but $700 billion in new debt is not the answer. As a tax-paying American citizen, I will not support any congressperson who votes to implement such a policy. Instead, I submit the following three steps:

Common Sense Plan

I. INSURANCE

A. Insure the subprime bonds/mortgages with an
underlying FHA-type insurance. Government-insured
and backed loans would have an instant market
all over the world, creating immediate and needed liquidity.

B. In order for a company to accept the government-backed insurance,
they must do two things:

1. Rewrite any mortgage that is more than three
months delinquent to a 6% fixed-rate mortgage.

a. Roll all back payments with no late fees or
legal costs into the balance. This brings homeowners
current and allows them a chance to keep their homes.

b. Cancel all prepayment penalties to encourage
refinancing or the sale of the property to pay off
the bad loan. In the event of foreclosure or short
sale, the borrower will not be held liable for any
deficit balance. FHA does this now, and that encourages
mortgage companies to go the extra mile while
working with the borrower—again limiting foreclosures
and ruined lives.

2. Cancel ALL golden parachutes of EXISTING
and FUTURE CEOs and executive team members as
long as the company holds these government-insured
bonds/mortgages. This keeps underperforming executives
from being paid when they don’t do their jobs.

C. This backstop will cost less than $50 billion—
a small fraction of the current proposal.




II. MARK TO MARKET

A. Remove mark to market accounting rules for two
years on only subprime Tier III bonds/mortgages.
This keeps companies from being forced to artificially
mark down bonds/mortgages below the value of the
underlying mortgages and real estate.

B. This move creates patience in the market and has
an immediate stabilizing effect on failing and
ailing banks—and it costs the taxpayer nothing.




III. CAPITAL GAINS TAX

A. Remove the capital gains tax completely. Investors
will flood the real estate and stock market in search
of tax-free profits, creating tremendous—and
immediate—liquidity in the markets. Again, this costs
the taxpayer nothing.

B. This move will be seen as a lightning rod politically
because many will say it is helping the rich. The
truth is the rich will benefit, but it will be their
money that stimulates the economy. This will enable
all Americans to have more stable jobs and retirement
investments that go up instead of down. This is not
a time for envy, and it’s not a time for politics.
It’s time for all of us, as Americans, to
stand up, speak out, and fix this mess."

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Tip on Financial Documents To Keep - And What To Toss

Tax time is over so we can all begin spring cleaning a little early and throw some of those papers away, right? Stop...put down the papers...walk away slowly... and read this Keep'em and Toss'em list from the Texas Society of Certified Public Accountants.

I would recommend keeping all backup documents for your tax return. Always ask your self, "could I prepare or justify my tax return without this particular document?" If the answer is no then don't trash it. Most say to keep documents for 7 years and then toss them which is probably safe enough. If you don't like having all those pesky paper files around then scan them and burn them to disk. Keep all your scan disks together and make a backup to keep off site. You can then destroy most documents needed for your tax preparation. Other documents you will need to keep the originals on file but I would still make scans of them and burn to disk for easy accessibility and backup in case of a disaster.

Keepers:

# Your will, living will and durable power of attorney.
# Life insurance policies, including policies with your

# employer.
# Insurance, and any death benefits that are due you as a veteran of the armed services.
# Retirement plan documents from your pension, profit sharing, 401(k), and IRAs, along with annual statements.
# Records of nondeductible contributions made to your employer-sponsored retirement savings plan or IRA.
# Separation and divorce documents.
# Real estate deeds, titles and property surveys.
# Military records.
# Tax returns and supporting data for at least the last seven years after the original return is filed.
# For investments, keep buy/sell trade confirmations to show when each security was bought and sold, the price you paid and commission charged.
# Dividend reinvesting statements (for seven years after you file your tax return showing a gain or loss( Receipts for major purchases like jewelry, furniture, etc.
# Receipts for items under warranty until the warranty expires.
# Pay stubs – until the end of the year when you compare the year end totals with the amounts shown on the W2 form you get from your employer.

Tossers:

# Receipts of bank deposits and ATM transactions – once you receive your bank statement and verify that the transactions were properly posted to your account.
# Canceled checks – save only those needed as support for tax purposes.
# Bills – once you’ve paid them and verified that the checks have been cashed.
# Monthly or quarterly brokerage statements – if your annual yearend statement summarizes all transactions made during the year.
# Credit checks on employees (even housekeepers and nannies) – in accordance with Fair and Accurate Credit Transactions Act.

The accountants' final tip: Always shred financial documents when they’re no longer needed, along with destroying pre-approved credit card offers.

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