- Category: Opinion
- Published on Tuesday, 12 January 2016 21:04
- Written by Jim Bardwell
January Consumer Tips from the Independent Bankers Assoc. of Texas
AUSTIN, Texas — With 2016 already upon us, tax season will be here before you know it. There are several things you can start doing today to make April 15, 2016 as easy as possible. The Internal Revenue Service (IRS) expects to receive at least 150 million individual income tax returns this year. Listed below are tips to help make filing your taxes a painless experience.
Organization is Key
The first step to filing your taxes is to gather the necessary forms. While you should get a W-2 from each workplace where you’ve received a salary and a variety of other government forms—including 1099 for interest earned and 1098 for mortgage interest paid—in early February, you can start now by gathering records of deductible expenses from throughout the year. Creating a file for all tax-related documentation will help come crunch time.
Use the Free File Program
The IRS offers the Free File program available at IRS.gov every year. This program opens for taxpayers in mid-January, and it provides two options. The first option is brand-name software, provided by IRS commercial partners, that is available to individuals and families with incomes of less than $60,000. The second option, which is available to all income levels and is especially helpful to those who are comfortable completing their own return, is the online fillable forms. This is the electronic version of IRS paper forms.
Deduct, Deduct, Deduct
Taxpayers often overlook deductions, which is the equivalent of giving away money. Many people are familiar with the child and dependent care credit that can be claimed if you’ve paid a provider to care for a dependent while you’ve either worked or looked for a job, but there are quite a few others. Additional credits include charitable contributions paid through payroll deductions when employees retain pay stubs as proof; job search expenses for costs such as travel and resume printing; and the earned income tax credit for families with lower incomes.
Beware of Scammers
Scam artists and unethical tax preparers come out in droves during tax season. The IRS will never email you to ask for confidential financial information so be aware this is a phishing scheme. Additionally, steer clear of tax preparers who earn commission based on the size of your refund. This is incentive to inaccurately fill out forms, which puts you at risk with the IRS. Always ensure your tax preparer guarantees to pay penalties resulting from filing errors.
Pass on Tax Refund Loans
While some tax preparers may offer tax refund loans or other immediate refund programs, you won’t get your refund that much quicker. Plus, these providers skim a percentage of your return off the top for the convenience of getting your refund a few days sooner. The IRS expects to issue more than 90 percent of refunds within 21 days. To ensure the expediency of your tax refund, electronically file your refund and choose direct deposit. The IRS reports that more than three out of four refund recipients will go this route. For comparison, paper returns will take a minimum of seven weeks for refunds to be issued.
Lastly, remember that under the Affordable Care Act, individuals and families will face fines if they did not have health insurance in 2015. These fines will increase every year and are already much higher than 2014, so make health insurance a priority.
If April 15 comes around and you’re still not prepared to submit your tax return, you can file for an extension. Particularly if you expect to receive a return, it is important to be thorough in your documentation. If you need more time, the IRS will give you six more months—until October 15—to finish filing if you complete the 4868 form by April 15.
The information above is provided with the understanding that the association is not engaged in rendering specific legal, accounting or other professional services. This information is intended to be a helpful guide. If expert assistance is required, the services of a professional person should be sought.
- Category: Opinion
- Published on Tuesday, 12 January 2016 20:43
- Written by Jim Bardwell
Exporting Oil: It’s Time
By Dr. Ray Perryman
In a development that seemed highly unlikely as recently as a few months ago, Congress and the Administration have made it legal to export crude oil from the United States. For 40 years, it had been illegal to export crude except in certain very limited cases, primarily to Canada. While refined products (gasoline and other fuels, for the most part) were legal to sell into world markets, US companies could not export crude oil without a special license which was hard (or impossible) to get.
The original law banning oil exports was passed in the 1970s in response to the Arab oil embargo and the resulting massive jump in crude prices. This era also brought “double-nickel” speed limits, daylight savings time, and many other concessions. As the US economy dealt with fallout from the rapid rise in the cost of oil, the export ban was conceived as a way to preserve domestic oil supplies and limit future dependence on imported oil. Of course, the fact that you refine domestic crude and then ship it anywhere made the ban completely ineffective in achieving its stated purpose. Irrespective of its merits, however, for many years the ban was essentially a moot point. Oil production in the US was falling due to aging fields, and cost differentials strongly favored imports. Many regions around the world were able to produce oil far cheaper, and there simply wasn’t a market for comparatively expensive domestic oil.
Enter the shale boom. With evolving technologies allowing for more efficient exploration and fracking enabling the withdrawal of oil from shales, US production began to rise, going from 1.8 billion barrels produced in 2008 to almost 3.2 billion barrels in 2014. This increase far outstripped demand growth, putting downward pressure on prices. The West Texas Intermediate crude benchmark dropped from over $103 per barrel in July 2014 to $47 just six months later, and is well under $40 per barrel as I am writing. Production has leveled off, but given the nature of wells and the industry, it’s not yet dropping precipitously.
Given the surging supply, the price has fallen even more in the US than elsewhere, and there is a resulting incentive to export. Last fall, the House of Representatives passed a resolution which would remove export restrictions. President Obama indicated in a Statement of Administration Policy on October 7, 2015 that he strongly opposed and would likely veto the bill. However, in a rare cooperative effort, congressional leaders added a measure allowing oil exports to the massive $1.1 trillion spending bill (which also allows us to avoid a fiscal cliff for a while, but that’s a topic for another day). President Obama signed the spending measure, and the export ban was lifted. A ship full of crude from the Eagle Ford Shale left the Port of Corpus Christi a few days ago.
Industry experts predict that the ability to export will spur billions in investment and production which would otherwise not take place. Developing domestic reserves not only generates significant business activity, but also improves US energy security because a larger proportion of our energy needs can be met without reliance on imports. (Ironically, energy security has been an argument used in favor of keeping the ban, the idea being that the US is more secure with a larger supply of oil in the ground. However, in the event of a major catastrophe, producing wells are required to be able to access the resource, and drilling does not happen overnight. Better to develop the resource than have it and not be able to use it.)
The end of the US export ban is also good news for the energy security of our allies in that American crude can now be available to them. In addition, it’s difficult to argue for free trade and a level playing field globally with such a ban in place. Over time, if US supplies continue to develop thanks to the ability to export excess production, the power of other producing regions (many of which have interests very different from our own) is diluted.
Much has changed since the 1970s, and it was time to lift the export ban (even if had been effective before). There are some groups which may experience the downside of the change, but these artificial gains have been at the expense of efficiency and optimal resource allocation. Moreover, the positives outweigh these negative effects. As a major oil producing region, Texas stands to benefit from the change. Even so, don’t look for a huge bounce in drilling activity for a while. It helps to be able to sell into world markets and some of the spread between oil prices in the US and elsewhere will narrow (it already has, in fact), but until global supply and demand shifts so that worldwide prices begin to rise in earnest, the economic benefits of allowing exports will be muted. In essence, when there is too much everywhere, it doesn’t matter where you sell it. In more normal circumstances that will resume once global suppliers retrench and demand accelerates, domestic producers can expect prices $6-$7 per barrel higher than those with the ban in place. With improving technology and lower costs, the increment will have a profound long-term impact on prosperity.
Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com). He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.
- Category: Opinion
- Published on Friday, 21 August 2015 22:02
- Written by Jim Bardwell
“…and Justice for All”
Courts and the Economy
The founding principles of Western civilization rest on the premise that governments are created and financed collectively in order to provide services to society that cannot be easily obtained in the private sector. In any modern economy, these “public goods” span a diverse spectrum, including public health and safety, national defense, infrastructure, environmental protection, public education, and safety-net programs. In capitalist nations, the ability to protect property rights and enforce contracts is also an essential element of effective and sustainable governance.
Obviously, one of the most critical institutions required to secure this time-honored and proven framework for prosperity is an independent system of adequately staffed and funded courts. Public safety can only be sustained through a robust criminal justice system in which laws are properly enforced. Similarly, individuals and businesses cannot effectively make investments and transact commerce without a viable mechanism to provide confidence that assets and agreements will be properly recognized and preserved in a predictable and timely manner. This phenomenon dates at least to the Middle Ages, when the merchants of Florence developed a crude system of courts to facilitate the purchase and transport of wares from Nice. Then and now, contracts must be protected for commerce to flourish. During that same era, St. Thomas Aquinas wrote extensively about the proper way to determine a “just price” for goods and services, a concept that bears a remarkable similarity to the issues that the judiciary must now grapple with in many contexts.
By the time of the American Revolution, the fact that the king’s patronage controlled judgeships and affected court rulings was a primary grievance leading the colonies to seek independence. It is little wonder that the Declaration of Independence, the Constitution, and the Bill of Rights all focus extensive attention on the courts and the rule of law, and that the US Pledge of Allegiance concludes with “…and Justice for All.”
Every court system must evolve and expand to accommodate economic and demographic growth, as well as the changing nature and character of business activity. The sheer increase in people and production will in and of itself place more demands on the judiciary. This pattern is repeated and magnified as society grows more complex. For example, an economy driven by technology and intellectual property requires exponentially more judicial infrastructure resources than one based on agrarian production. Property rights, ownership, and contractual obligations are much simpler to define, interpret, and enforce for crops and livestock than for modern products embodying thousands of patents and trade secrets and which are subject to attack by electronic means. Illegal activity now encompasses cybercrime, multinational drug cartels, identity theft, and many other sophisticated elements of society that were unknown in the past.
Similarly, urbanization, the globalization of commerce, and greater concentration of business activity demand a more expansive and responsive system of courts. More people create the need for additional transportation and education infrastructure. Greater productivity requires enhanced utilities and communication capabilities. Correspondingly, a larger, more urbanized, and increasingly sophisticated global economy generates notable challenges in law enforcement and the protection of rights, thus compelling more robust judicial infrastructure. In short, economies can only prosper by (1) increasing the quantity and quality of productive resources or (2) using existing resources more efficiently. The court system is essential to both mechanisms.
Despite this undeniable reality, the infrastructure of justice has not automatically been well maintained. Many state and municipal courts throughout the country are woefully underfunded, a trend that appears to be intensifying.
Simultaneously, delays in filling vacancies in the Federal courts and the failure to expand the number of judgeships to keep pace with increases in the population and the level and sophistication of production processes are compromising the essential framework for social progress and prosperity. Just as a failure to maintain an adequate network of roads, bridges, rails, utilities, and communication to accommodate growing needs will limit prosperity, a lack of sufficient judicial infrastructure retards economic and individual potential and frustrates societal advancement.
One of the most significant representations of this phenomenon is reflected in the Federal courts presently serving the US District Court for the Eastern District of Texas (Eastern District), a region which stretches from refining and petrochemical complexes on the Gulf Coast to the technology corridor in the northern Metroplex. Caseloads have more than doubled since 2009, thanks in part to rapid population and economic growth in Collin and Denton counties. The inadequacy of judicial infrastructure in the Eastern District, which is among the most strained in the entire US, will predictably constrain economic growth over time. This outcome is unavoidable in the absence of corrective action.
On the other hand, investing in the judicial infrastructure can not only improve quality of life, but also enhance future prosperity by reducing uncertainties and time required to resolve business disputes. We recently studied the issue and found that filling the two positions now vacant in the Eastern District would add almost 78,200 jobs as of 2030 compared to a baseline situation reflecting current infrastructure. If the vacant positions are filled and two additional judges are added as recommended by the Court Administrator, the benefits would increase to approximately 148,400 net incremental jobs as of 2030. (The study is available for complimentary download on our website at www.perrymangroup.com.)
Without additional judges, the current difficulties in the Eastern District and a number of other districts around the country will only become worse in the future, with caseloads rising, judges increasingly overworked, criminal and civil cases delayed, and people and businesses unable to resolve disputes in a predictable and efficient manner.
If a critically strained judicial infrastructure is not addressed, “…and Justice for All” -- citizens, businesses, and those who protect them -- will, over time, become less and less attainable. If this stressed infrastructure were to crack or collapse, the economic disruptions could be calamitous until a functioning and predictable system could be restored.
Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com).; He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.
- Category: Opinion
- Published on Tuesday, 25 August 2015 15:07
- Written by Jim Bardwell
Security of Social Security
This month marked the 80th anniversary of Social Security. President Franklin D. Roosevelt signed the Social Security Act into law in August 1935, with the goal of giving “some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age.”
Since that time, some $15.2 trillion in benefits have been paid. In June 2015, more than 64.7 million people received Social Security payments (including Supplemental Security Income). The majority of them (about 43.5 million) were age 65 or older, while 14.3 million were disabled (under age 65). A total of $72.7 billion dollars was paid out, with an average monthly benefit of $1,221.
Social Security came about in the midst of the Great Depression. After a decade of relatively sustained prosperity and optimism during the 1920s, the stock market collapsed in 1929. The next few years would bring a banking panic and a severe drought that turned the Great Plains into a “dust bowl.” Corporate bankruptcies, foreclosures, and closings combined to create unemployment rates in the 20%-30% range. Half of the persons age 65 and over were dependent on others for their support, with approximately one in six receiving public charity. Moreover, the combined calamity in equity markets and financial institutions had claimed most or all of the savings of many. The goal of Social Security was to assure that future generations of retirees would not face a fate of poverty and dependence.
Social Security was essentially a “pay-as-you-go” system at the outset, with collections from workers and employers used to make payments. From a conceptual standpoint, Social Security originally benefited from a phenomenon which has been called the “biological rate of interest,” with approximately 40 people working for every eligible recipient. Most people did not live to retirement age, and those that did had a relatively short life expectancy beyond that point. In addition, the vast majority of women did not work outside the home and were therefore not eligible for old-age benefits. Thus, the taxes could be kept very low (2% applied to low base income levels at the outset), and early recipients received an average rate of return of approximately 25% on their contributions.
Since those early days, much has changed, and many now worry (with good cause) about the program’s sustainability. Dependents and survivors were added to the program in 1939, and disability insurance was added in 1956. Benefit increases have occurred on many occasions, and payments are now indexed to the cost of living. (Medicare has also been implemented, but it relies on a separate tax levy.) The biggest changes, however, have been demographic and societal in nature.
Advances in medical technology have extended life expectancy considerably and will continue to do so in the future. The result is more people becoming beneficiaries and collecting payments for a longer period of time. The dynamics of the Baby Boom also are affecting both collections and payments. As the large Baby Boomer generation (those born in the high birth rate yeas from 1946 through 1964) entered the workforce, female participation in the workforce was also rising. The result was a large group of people to support retirees and others in the Social Security system.
However, the tide is now beginning to turn. The oldest Boomers began reaching retirement age in large numbers in 2011, and the fundamental demographics that made the system work initially will begin to accelerate in the opposite direction. Instead of 40 workers supporting each Social Security beneficiary, we may ultimately reach a level of only two workers per recipient.
The threats regarding future viability have led to periodic tweaking of the system. One of the most significant changes was to move away from the “pay-as-you-go” philosophy and begin accumulating surpluses each year into a trust fund. The fund has been growing for a number of years and now stands at about $2.8 trillion. Income into the program from Social Security taxes, income taxes on benefits and interest is estimated to total of $884 billion this year, while payments and administration are expected to total $859 billion, leading to another $25 billion into the trust fund. However, we are nearing the end of the surplus years.
Around 2019, the system is projected to begin to pay out more than it collects in income as Baby Boomers reach retirement and the growth rate of the workforce declines. Interest earnings will make up the shortfall for a few years, but then it will be necessary to dip into the principal balance of the trust fund. By 2034, the available funds are expected to be completely exhausted. Without the trust fund, amounts coming into the program fund only about 79% of benefits.
Needless to say, a more than 20% drop in social security payments is to be avoided. It is also clear that meaningful reform should be implemented sooner rather than later. What is more difficult is determining the nature of reform. Over time, various potential solutions have been debated ranging from partial privatization to higher taxes to more stringent income tests and even higher retirement ages. The ultimate solution will probably involve a combination of these and other measures. No solution will be easy, but every year we wait only makes the situation worse. We can only hope that bipartisan agreement in Washington can be reached well in advance of the crisis we all know is coming.
Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com). ; He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.
- Category: Opinion
- Published on Tuesday, 03 March 2015 19:23
- Written by Jim Bardwell
- Category: Opinion
- Published on Friday, 21 August 2015 22:07
- Written by Jim Bardwell
School used to be about learning and playing and growing.
It still is, but now there is a lot more at stake. Test scores rule districts, stress out kids, teachers and parents, and determine a school’s reputation. They also, to a degree, reflect the dedication of a system in helping students reach their potential.
What makes reaching that potential a gargantuan task in many cases is the fact that many students no longer come into the school speaking fluent English. Many have never had a book in their hands until they start school. Some, God bless their hearts, find their first genuinely attentive, concerned adult at school. A few kiddos, unfortunately have been taught entitlement at the expense of respect and their ability to learn. For a very few the discipline they receive at school will be their first. And the school is held accountable for educating them all.
It is easy to criticize schools and teachers, and without question that criticism is sometimes deserved. BUT, I have personally seen teachers spend hours they didn’t get paid for working with students. I have seen teachers and administrators provide food, clothing and guidance for kids who needed it more than they sometimes wanted it.
One of the toughest jobs in the world is to be a teacher or principal. An educator is responsible for ensuring that their students not only learn the curriculum, teachers have to make sure their students are safe, healthy, cared for and accountable. You know, what most families used to do.
Once upon a time many years ago I was teaching a World History class in a nearby district. When I lectured I walked the aisles and tried to engage the students. This day one of my students had his head down. I touched his shoulder and asked him to sit up. He leaped out of his desk at me.
At that point a Buckeye linebacker named Brent jumped between us and wrapped up my attacker. Later that linebacker played for Rice while my attacker eventually, I am sad to say, ended up in prison. Their home lives could not have been more different.
The linebacker’s family assumed he would go to college. The attacker’s family had him employed in the family drug dealing business.
‘Ed’ did not know who I was when he jumped at me. He did not know where he was. He was flying high on PCP, an hallucinatory drug.
I was one of two teachers this kid actually cared about. When he came down from that drug he was deeply apologetic. He was sincere.
That school year a coach and I worked hard to get ‘Ed’ into athletics. He was gifted athletically, smart and good looking. It didn’t matter. He had ‘easy money’ and the ‘respect’ that drugs and ‘power’ brought him.
One afternoon when I was alone in my room on my conference period ‘Ed’ ran into my room and into my arms and begged me to stay with him. He said that the police were coming to get him and he would not be back. He was right.
The principal frantically ran into my room and I reassured him it was okay. That ‘Ed’ wasn’t going anywhere and that I would stay with him. Before we left my room with the principal to wait on the police I pulled out a Living New Testament that I had in my desk and gave it to ‘Ed’.
Before he was sent to Huntsville he sent me the message that he was “reading that book” I gave him.
I never heard from him again.
I think of ‘Ed’ often and my heart breaks for what could have been.