Taxable Talk

From Russ Fox, E.A., of Clayton Financial and Tax of Irvine, CA
All items below are for information only and are not meant as tax advice.
Please consult your own tax advisor to see how each item impacts your own situation.
Vox Blogoli 2.2: Whither the GOP
Hugh Hewitt asks, "Does the Senate GOP go McClellan or Grant if Harry Reid goes "Gingrich?" This is a lot more important than just pure politics, which is why I'm responding in a tax blog.

First, for the non-Civil War buffs, General McClellan was the first Union Commander of the Army of the Potomac, and was (at best) wishy-washy. General Grant, on the other hand, successfully led the Union and defeated the Confederacy. He might have been an alcoholic, and had other personal problems, but he knew how to lead.

Now, why is this important for tax policy? Let's assume that the judicial nominees make it out of the Judiciary Committee (a safe assumption), and come to a vote on the Senate Floor and the Democrats filibuster (another safe assumption). Now, Senate Majority Leader Bill Frist has said he will go nuclear: interpret the Senate rules so that judiciary votes cannot be filibustered. Senate Minority Leader Harry Reid has promised, if this occurs, to shut down the Senate. This, if it were to occur, would cause budgeting and tax issues to grind to a halt (which is why I'm interested).

I'm all for the nuclear option, if the Senate Democrats filibuster. In the long-term, this will work for the GOP. The Democrats will be seen (by most of the public) as the party that shut down government, caused benefits to vanish, etc. This will lead to the Democrats getting further marginalized. (Remember what happened when Newt Gingrich shut down the government back in the Clinton years?)

Unfortunately, that's not what I think will happen. No, I don't think the GOP will go McClellan; rather, I expect a compromise. The Democrats don't want the long-term damage. So the Democrats will say to the GOP, "We'll allow votes on half the nominees." And the Republicans will acquiesce. There are enough GOP Senators who don't want to disturb the "Gentleman's Club" of the Senate.

I don't think that's like General McClellan (although it's much more like McClellan than Grant). Unfortunately, I don't know any Generals best known for compromising. Probably a French general....
HSAs: Will California Conform
Health Savings Accounts (HSAs) are an excellent vehicle for saving money on health care and have tax advantages for your Federal tax returns. But California has yet to conform and, based on last year's experience, probably won't.

According to this article in the San Francisco Chronicle, State Senator Abel Maldonado has reintroduced legislation so that California conforms to Federal law. We'll hope that the bill passes (you can follow the progress here), but we're not holding our breath.
Flat Tax
Does anyone believe our tax system is fair and easy to comprehend? I'm a professional tax preparer, and there are sections of the Tax Code that I don't understand completely (when I run across such an issue, I get help).

Even though it would probably eliminate a good portion of my business, I'm in favor of a fair flat tax. So is Alabama's Richard Shelby who, according to this story in the Tuscaloosa News plans on reintroducing it in the Senate.

It's doa in Congress, at least for now.