As we celebrate leaving 2009 behind, we necessarily turn towards 2010 and start considering what the future holds. For instance, what does the year hold on the tax front?
2009 was a unique year when it came to personal finance because of the unheard of tax relief given to taxpayers. There were obvious government efforts like the cash for clunkers program to rejuvenate the auto industry and the first-time homebuyer’s tax credit to do the same for housing. Then there were smaller things like the IRS allowing businesses to retroactively apply losses for up to five past years to gain big refunds. The goal of all these programs was to stabilize the economy and help us all survive a brutal period of time.
While the 2009 tax breaks were great, all things come to end in finance. 2010 is the year we will see this happen. Most programs are going to run out in the first quarter or half of the year and there will be no further extensions. Why? There simply can’t be. The government has tried to spend its way out of the economic mess, but all indications are we are nearing the point where borrowing is starting to become difficult. Many Americans are worried about our soaring national debt and devalued dollar and it now appears investors may be as well. This will necessarily lead to the government pulling back on tax incentives.
The other big tax event that seems primed to be implemented in 2010 is the internet sales tax. If the federal government has debt problems, nearly a third of all states are in massive trouble with California and Arizona leading the way. These states are getting pummeled as property tax revenue dries up with the housing debacle and are looking for new revenue sources. Most web businesses do not pay sales tax on their sales, which gives them an advantage over local brick and mortar shops.
Some states have already started trying to go after online sales tax. New York famously passed a law allowing for the recovery of it so long as the online business had a single affiliate sale in the state. Instead of garnering a tax windfall for the state, large entities like Amazon and Overstock simply terminated all their affiliates in the state! Still, this is a battle that will eventually lead to a universal online sales tax being implemented. Given the big shortfalls faced by many states, 2010 seems to be the year it comes to a head.
Vice taxes are also possibilities in 2010. Online poker seems peaked for a return with Barney Frank pushing it in exchange for a tax benefit. Other states are seriously considering expanded gambling options and even that funny grass smoked by hippies is on the ballot in some progressive states like California, Oregon and what have you. Will they pass? My crystal ball is a bit fuzzy, but it would seem that some will.
2010 is shaping up to be the year the bill comes due for all the efforts made by state and federal government to deal with the economic collapse. Practically speaking, that means fewer tax breaks and more incremental taxes wherever you look.