TaxEsqBlog -by Ronald J. Cappuccio, J.D., LL.M.(Tax)

House Prices keep Declining The Case-Shiller Index of the housing industry showed a 19% year-over-year decline. The Case-Shiller report shows many regions have revisited 2002 prices. Some geographic areas are seeing prices going back to those in the year 2000.Real estate, on average, has declined by 32% from its second quarter 2006 highs. Some areas like Las Vegas and Phoenix, according to Case-Shiller, are off more than 50%!

Taxes are Killing the Economy The Stock Market has rallied since March 10. Is this a short term improvement in a Bear Market? Unless we see some positive progress in the real economy, the stock market cannot sustain the upward movement. The economy is lousy with construction at a low and many small businesses recording their worst year ever in 2008 continuing into 2009. One major reason the economy remains stalled is taxes are rising rapidly in individual states and the federal government to support government spending like drunken sailors. Amid all of the bailouts, the backstops, the guarantees, and the ongoing promises of aid, we are seeing a dramatic decline in federal and state government revenue (because of the bad economy). It is just worrisome to see more and more promises from the government against the backdrop of such a weakening economy! When will people learn that if you tax something you get less of it and if you subsidize something you get more of it? Let's stop mo...

Economic Stimulus Bill Hurt's Economy The Congressional Budget Office has reported the Economic Stimulus Bill pushed by Pres. Obama will actually hurt the US Economy and lower GDP in the long run: Most of the budgetary effects of the Senate legislation would occur over the next few years. Even if the fiscal stimulus persisted, however, the short-run effects on output that operate by increasing demand for goods and services would eventually fade away. In the long run, the economy produces close to its potential output on average, and that potential level is determined by the stock of productive capital, the supply of labor, and productivity. Short-run stimulative policies can affect long-run output by influencing those three factors, although such effects would generally be smaller than the short-run impact of those policies on demand. In contrast to its positive near-term macroeconomic effects, the Senate legislation would reduce output slightly in the long run, CBO estimates, as...

The Washignton Post reported on the International Economic Summit. The governments are "taking action" which means a government-induced economic disaster. If it is anything like the "help" of FDR's "New Deal" it will extend economic dislocations for far longer than a normal business cycle. Here are excerpts from the article : [T]he gathering in Washington of the nearly two dozen nations -- from every region of the world -- reflected the new balance of power emerging in the aftermath of a financial crisis that has devastated even well-run economies, a wrenching process that British Prime Minister Gordon Brown has dubbed "the birth pangs of this new global order." Under the plans outlined by the leaders, countries such as China, Brazil and India would gain greater roles and responsibilities as part of a restructuring of the international financial system, while European leaders won a commitment to new regulations and controls on banks, rating ...

Economist Robert Shiller (of the Case-Shiller Housing Index) announced his findings concerning housing price trends. He predicts the nationwide average price decline for homes will likely exceed the 30% decline that America experienced in the 1930's Great Depression. Since average price declines already are in the 20% range, the 30% benchmark is rapidly approaching. Some of the formerly "red-hot" markets are down 50% or more.

Today's new reported mortgage rates for 30-year fixed loans hit 6.75%. This is the highest level in almost a year. Further, “sub-prime” defaults and foreclosures both are at record highs. More than 15% of“sub-prime” adjustable loans are delinquent and 3.75% are in foreclosure. This bad news for real estate certainly is a leading indicator of an economic decline.