Tax Savings in a Recession

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The latest tax cutting bill from Congress reminds me of 2001. The Economic Stimulus Act is designed to hopefully jump start the economy by giving tax cuts to business owners and put some spending cash in the hands of consumers, just like in 2001. In 2001, the country was reeling from the change from dot com to dot bomb. Now, in 2008, the country is reeling from the change of real estate boom to real estate bust. Or rather, the fall out from the mortgage meltdown.

How does Congress react? Rebates and tax cuts! The same strategy we saw in 2001 is replayed again in 2008.

Now, the interesting thing to me is the discussion of whether there really is a recession. Like the old joke goes: It’s a recession if your neighbor loses his job and a depression if you lose your job.

In reality, a recession is a downturn in two consecutive quarters. Is it a recession? You bet! Does it mean the end of all civilization as we know it? Nope. Does it mean that you and your family are in for hard times? That’s hard to say.

There are a lot of businesses that are pretty recession proof. Some actually do better in a recession. My tax strategy business is one that does well in a downturn. I’ve been around through enough cycles that I’ve seen it before, but it still always surprises me. When there is easy money on the street, my savvy clients and potential clients are picking it up as fast as they can. They don’t want to be bothered with saving $20,000, $30,000 even $70,000 per year in taxes. They can just go make more money. Now, it’s a little harder to make easy money and so people are again paying attention to the money they waste in taxes each and every year.

I wonder, though, why people didn’t do it sooner. Just imagine if you were actually able to keep more the next time the next boom comes along. And, by the way, it’s coming. There is always a boom coming. This time I think I know what it’s going to be and I’m getting ready right now.

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