Jeff completed the data analysis, presentation, and consulting for the transaction between EC Infosystems, Inc. and VertexOne.
US Tax Policy A Flash Discussion
Tax policy in the United States is in a current state of confusion. For there to be coherent US tax policy there must be a level of agreed upon government spending. During the period of 1998 to 2009 state revenue was on the decline since tax policy law is latent. As the shift of retail sales became more prevalent on the internet state sales tax revenue declined. As of 2019 many states now tax online internet sales; this enactment has decreased state budget deficits or led to state budget surpluses from 2010 to 2019. In the early 1970’s the administration enacted revenue sharing laws for all states with the Federal government. The revenue sharing program contributed to state shortfalls in revenue during the 1998 to 2009 period, although this is not the only reason for decreased tax receipts as a percentage of GDP in nominal terms.
At the present time state sales tax revenue has recovered. However, budget deficits remain at the Federal level due to multiple tax cuts without the proper spending cuts. It appears that society does not want a reduction in the level of government spending. As a result of the tax reductions we are left with soaring deficits. If society deems the level of government should be where it currently is at, then tax cuts do not make for good tax policy unless spending is reduced. The last time the Federal budget was balanced was in the latter half of the 1990’s. It does appear that government spending must be in a relevant range of around $3.25 trillion dollars per fiscal year. Current tax revenue is around $3.25 trillion dollars per year. Although current spending is $3.25 trillion plus the $1.0 trillion deficit, or $4.25 trillion. However, there seems to be no way to cut $1 trillion from domestic spending. Keep in mind that we are running $1 trillion-dollar deficits in 2019/2020. Also, note that social security and Medicare do not contribute to the Federal deficit because they are self-funded and not included in domestic spending; never mind the fact that the OASDI program is not taking in enough money to cover outlays in the out years, that is a separate issue. As per the data published by the Bureau of Economic Analysis the average historical percentage of GDP for tax receipts is about 17.5%.
Until there is the political will, trust and understanding among the Executive and Legislative branches of government the budget will not be balanced. Consequently, there is a point where our currency value, interest rates and foreign and domestic policy will no longer serve the constituency; folks we are there now! In conclusion, voters must educate themselves on this important matter, otherwise we will all suffer the consequences; not to mention the suffering that lies ahead for our children. Below is my analysis of the numbers taken from the Bureau of Economic Analysis www.bea.gov
2018 Tax Revenue $3.25 Trillion.
2018 GDP $20.580 Trillion
Percentage of tax revenue to GDP: 3.25/20.58 = 15.79% of GDP
2018 Tax revenue $3.25 Trillion
2019 Budget Deficit $1 Trillion
Tax Receipts plus deficit is the current collection needed ($1 plus $3.25=$4.25), so $4.25/$20.58 = 20.7% receipts required as a percentage of GDP. The current deficit is $1/$20.58 = 4.6% of GDP. This is too high for our economy since we are running a deficit. Conclusion: 15.79% may be too low and 20.7% too high for tax revenue as a percentage of GDP. If the optimum tax revenue is approximately 17.5% of GDP for an acceptable level of government in historical context, then we need some combination of spending cuts and tax increases.
Source: Bureau of Economic Analysis: https://www.bea.gov/
By Jeffrey Waks, Accountant and Financial Analyst
October 8, 2018
Accounting Staff and Senior Staff Support Positions
Accounting Staff and Senior Staff Support Positions
Accountants in mid-level staff support positions must continue to reinvent themselves in order to provide meaningful data analysis to the management they support. As software systems have evolved, many companies found themselves investing in software over a decade ago with the advent of Y2K. As a result of competitive cost pressures, organizations may not have the opportunity to keep pace with the investing cycle. Consequently, these companies are unable to take advantage of new economies of scale from the latest software features.
However mid-level staff must play an important role to enable the organizations to keep pace with competition. Mid-level staff can do this by utilizing data mining tools such as Excel, Access, Domo, Crystal Reports and other report writing and data mining tools. By utilizing data mining tools staff can come up with advanced ways to look at complex data outside of the accounting system when these accounting systems do not provide the data in the format required by management. Staff can set up queries, pivots, VLOOKUP’s, If then, and sumif equation’s in order to accommodate analysis for decision making that moves beyond the confinements of the organizations accounting software system. This becomes especially true if nomenclature of master file level data changes and cannot accommodate analysis by your traditional accounting system. There may also be industry, customer and vendor changes in requirements that cause companies to work outside their accounting software systems. For these reasons it is very wise for staff accounting personnel to keep pace with the innovative data mining tools and methodologies available in the market place, in order to provide meaningful data analysis to top level and mid-level management.
This process of educating mid-level staff is also very important to Management. Management must make sure its workforce is well trained, aware of these issues, and how to deal with them. Solutions for such outcomes are simple education, mentoring and collaboration. Knowledge workers must share and be encouraged to share capabilities with each other in order to raise the knowledge level of all staff. Corporate Human Resources and Executive level staff must engage in this process in order to achieve their desired results to remain competitive in today’s ever changing business environment.
By Jeffrey Waks, Accountant and Financial Analyst
March 2, 2016
Technology Trends In Accounting and Financial Analysis
Technology Trends in Accounting and Financial Analysis
Current trends in the Accounting and Finance profession are affecting organizations and professionals alike. With the evolution of technology in software, artificial intelligence, storage and cloud computing a skills gap is possible to experience.
Organizations must be progressive in pursuit of technology that helps experience economies of scale there by reducing costs in order to remain competitive. Accounting and Finance professionals must adapt to developing data mining, analysis and reporting techniques. Software tools such as Alteryx, Access, Excel, Report Writers and SQL applications are used extensively in organizations today. Accounting and Finance professionals who can utilize these tools will continue to add the value to organizations that will give them career opportunity and increasing wages. Data storage has enabled organizations to harness data banks with more and more detail. This data must be synthesized and analyzed in order to be utilized effectively. As a result, Accounting and Finance professionals are called upon to work with large data sets. Skills in analyzing large data sets are very valuable, allowing companies to make more informed decisions at a faster pace. Artificial Intelligence applications are allowing organizations to reduce head count. Accounting and Finance professionals can take advantage of this opportunity by understanding artificial intelligence applications and figuring out how to utilize and help implement these applications.
With the advent of software as a service, data storage; cloud computing has become the norm. Accounting and Finance professionals must educate themselves in cloud computing and analytics applications such as accounting ERP systems, Microsoft Office 365, and Google Applications in order to remain competitive and increase earnings potential. Many Accounting and Finance professionals are obtaining certifications in Financial Analysis, in order to take advantage of big data, software, storage and cloud computing technological advances.
By: Jeffrey Waks, Accountant and Financial Analyst
October 16, 2019
Social Security Solutions Made Simple
Social Security or the (OASDI) Old Aged Survivor Disability Insurance is comprised of two taxing components. The first tax component is the old aged portion which is a tax on wages of 6.2% on wages up to $137,700 in 2020. The second is Medicare which is a tax on wages of 1.45% with no wage limit. An additional 0.9% in Medicare taxes applies to individuals with annual earned income of more than $200,000, and $250,000 for married couples filing jointly. The employer matches these contributions at the exact same rate.
Do not let the government fool you; this program is funded by the US citizens tax paid and is NOT included in the annual Federal Budget Deficit. The Social Security trust fund is currently in deficit yet will receive enough general revenue transfers (financed annually by your taxes) to pay full benefits until 2034. Medicare’s trust fund will go belly up in 2026. By law, Social Security cannot contribute to the federal deficit, because it is required to pay benefits only from its trust funds. Those, in turn, are funded through the dedicated payroll tax of 12.4 percent of income, split evenly between employees and employers, levied on income. The program’s revenue and expenses are accounted for through two federal trust funds that have operated with large and growing surpluses in recent years, and they finished fiscal 2018 with an estimated $2.89 trillion. By law, Social Security must invest these surplus funds only in special-issue U.S. Treasury notes, which have the same full faith and credit guarantee as any other federal bond. The trust fund surplus will be drawn down as an aging population claims benefits, and as the U.S. fertility rate continues to decline, which means fewer workers are coming along to pay taxes into the system.
A second argument that Social Security contributes to deficits is related to the longer-run outlook of the program. The trust funds are projected to be exhausted in 2034; at that point, incoming revenue would be enough to continue paying only about 75 percent of promised benefits. We might or might not reach that point – we could eliminate much of this long-range shortfall by gradually increasing payroll taxes and raising the cap on covered income. I do not advocate the reduction of benefits by further increasing the full retirement.
The solutions to this regressive tax law are to reduce the tax rate from 6.2% to 2.2% and remove the cap on taxable wages of $137,700 to unlimited. Next is to increase the Medicare tax to a flat 1.75% with no limit and omit the .9% tax altogether. In addition, income from capital gains and dividends should be taxed at 1% for social security and 1% for Medicare up to gains of one million dollars indexed to the Chained CPI. Also, the government should include income from royalties in excess of one million dollars and tax the amount over at 1% each year. The effect on taxes of all US citizens would be a reduction in tax of up to $5,921 per year (6.2-2.2+.3+.9). In all likely hood, due to the regressive nature of the tax burden on those earning up to $137,700 per year is that this money would be spent in the economy. Due to the increase spending the multiplier principal would manifest itself by increasing GDP by some factor up to and greater than $5,921 per wage earner per year. The increase in consumer spending as compared to the stagnate return of surplus funds invested in special-issue U.S. Treasury notes which stays invested and therefore not spent would further increase GDP. As a result, the Social Security System and Medicare would be solvent for as far as the eye can fathom.
By transferring the money tied up in government investments at low returns to consumer spending would be a GDP increase that is completely factual. The increase GDP can be proven by taking the wage base and multiplying it by the tax rate as compared to the current tax revenue and rates found on the US Government web sites for Social Security and Medicare. Next all the individuals who do not have W2 wages who do not pay this tax would do so because capital gains and royalties would be taxed at 1%, a small price to pay for the systems solvency. Transferring this money to the consumer spending side is multiplier positive and economically expansionary monetarism, monetizing this pool of money. The increase in GDP would increase the wealth of all US citizens in all classes of income and assure Social Security and Medicare to all without placing a burden on those who make up to $137,700 per year. Those who earn more than $137,700 per year would have a tax decrease of the $5,921 offset by a small marginal increase in tax by taxing capital gains and royalties along with all wages over $137,700 per year. There would be a reduction in taxes to employers who mostly pay taxes on wages of less than $137,700 per year which is a new pool of money entering the economy. The business owner would then use the savings as desired further increasing the GDP due to spending and the multiplier principal, again monetizing the tax reduction.
In conclusion, this type of policy would satisfy the aristocracy and common house holds who are kept at bay by the aristocracy. This policy can be tested by using the numbers from the web sites of the Federal Reserve, Bureau of Economic Analysis, Social Security, Treasury Department and Bureau of Labor and Statistics. Feel free to do the math and test my conclusions on the following web sites:
By: Jeffrey Waks
Accountant and Financial Analyst
February 7, 2020