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VAT: The Stop-Gap Solution?

A close look at the American budget deficit reveals disturbing facts. The future seems to be hurling towards a fiscal trap wherein there is no other recourse but to increase taxes or implement value-added tax (VAT). As a very unpopular issue though, no one wants to discuss taxes, particularly not when it’s their political careers on the line. There are several figures that had championed these initiatives though particularly Nancy Pelosi for VAT and Mike Huckabee for the replacement of income tax with levy.

However, on the whole, VAT and any increases in any type of tax remains as a favorite topic among think tanks and the academic community. The administration’s budget chief Peter Orszag has already dismissed these ideas as “popular with academics but not seriously considered by policy makers”. This isn’t necessarily good news for Americans.

Most people in the United States only have a vague idea of what it entails. And even if they learn more about it, they most likely wouldn’t want it because it goes against the current American model. It is more closely associated with the social democracies in Europe. This may no longer be an option though. The sheer largeness of the deficit in the economy makes it inevitable for the country to eventually adopt VAT.

Basically, VAT can be likened to the sales tax that is currently in place. However, if the sales tax is passed exclusively to the end-customer, the VAT puts a tax on everything used, whether products or service, during the production process. It is a tax on consumption.

One of its advantages is its virtual fraud-free feature. On the negative side, VAT is viewed as a regressive tax. Lower-earners tend to pay a larger percentage of their incomes into VAT compared to wealthier individuals. For this measure to become unnecessary, either one of these two need to occur: dramatically high growth rates or substantially decreased government spending.

The former is not likely to happen given the slow recovery. And the Obama administrated doesn’t seem keen on the latter if the new budget is any indication. With this being the case, it seems that VAT will really become America’s destiny.

Career Expectations for 2010

Having career problems is nothing new but the issue is exacerbated by the pressures from the economy and difficult business environment today. So people who are discontented with their job and how their career is going are instead counting themselves lucky that they’re not one of the millions that fall under the unemployed category.

Whatever your situation is right now, there is still comfort in knowing what the future has in store. In 2010, industry experts predict that the following will happen:

Wild Card – While everything looks on track economically, changes in critical industry such as oil and gas can change things quickly. If energy prices increases sharply this year, business and consumer spending will be affected. In turn, pay freezes and hiring freezes are likely to occur.

Expansion in Some Industries – The same fields that held stable during the recession will expand in 2010. Some industries include education, healthcare, and technology. This may help raise the salaries of workers within these sectors.

It is also important to watch out for the average weekly work hour your employer requires from you. When the crisis hit, a lot of employers decided to work hours instead of laying-off people. If this is the case for you, watch out for a boost in your working hours. Once this happens, the company will soon increase your pay or start hiring again.

In the meantime, be sure to do what it takes to keep your job. This is because unless you have a highly in-demand technical skill, everyone is a lay-off target. Ensure that your position is cemented by “flying above radar.” Gone are the days when simply working hard and minding your own business is good enough. Now, visibility is the key. Excel in what you do and let others know that you’re good as well.

Obama Middle-Income Plans: Where Do You Fit In?

Previously, we talked about how America’s middle-class is becoming “extinct” due to debt, unemployment, and the financial crisis. Well, the Obama administration doesn’t want to go down without fighting. Several initiatives have been launched to bring peace of mind back to the middle and even lower-income segment.

These programs won’t actually do much for the unemployed and its contribution to the economy may be negligible. Whatever the case, it may be a beacon of hope for struggling American families who just about had it. Among the programs introduced during the State of the Union address include:

Cap on Student Debt

It is no secret that even professionals in a cushy job are struggling with student loan repayments. Student debt is a big problem because college graduates are burdened with thousands of dollars to be repaid as soon as they step out from school. Statistics suggest that two-thirds of American graduates carry an average student debt of $23,000. Obama’s plan seeks Congress’s approval to limit their monthly payment to 10% of their discretionary income.

Child Care Tax Credit

This type of tax credit is nothing new to the American public. But President Obama is encouraging Congress not only to expand the number of households covered but also to almost double the tax credit of individuals eligible for it. Under the proposal, households with an income of $85,000 or less annually can get 35% credit for their expenses (up from the current 20%). It may be the push that stay-at-home parents have been hoping for. The child care tax credit will encourage them to join the labor market again.

Automatic IRA Deposit

Employers who don’t have a retirement program in place can start individual retirement account for each of their workers. Small businesses and their employees will be the main beneficiary of this initiative. Making it easier to contribute will be a bonus for people who currently don’t have money for retirement.

Must-Have’s for New Homes

With millions of Americans traumatized by the dramatic decrease in value of their homes, most are now willing to strip their new abodes of popular features from the yesterdays. For example, home theaters used to be a must-have. But right now, it is discarded in favor of smaller homes that fit changing consumer lifestyle. According to Heather McCune from the Bassenian Lagoni Architects, “The future isn’t something we’re 100% sure about…The answer for most home buyers is authenticity.”

For most American home buyers, this will mean buying smaller homes. Carol Lavender from the Lavender Design Group thinks that large kitchens, old-fashioned bathrooms, and wine grottos will become popular today. “It’s all about family togetherness – casual living, entertainment, and flexible spaces.” In this regard, the must-haves for homes include the following:

Energy-Efficient Appliance

With “green” being the byword right now, energy-efficient home is a must. This means that everything from the windows, insulation, and appliances will be scrutinized for the energy they save. The shift in attitude doesn’t mean that home buyers prefer synthetic or recycled materials though because there are good alternatives in the market.

Large Kitchens

Since most people spend a lot of time in the kitchen, it is almost a given that they would be willing to spend money on this. In fact, the tough times illustrates just how important the kitchen is. It is a place where home owners create, experiment, and have fun. Homes that contain large kitchens with an island can hold its value better than others.

Office/Study Area

A place where you can think, analyze, and strategize is important for working professionals. So it is no surprise that the office/study area is given preference when a homeowner is asked to choose between a home theater and this area. Some people even opt for a smaller dining room just to have an office/study space.

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