1218 Moneytalk Show Summary - Bob Brinker Fan Club

PAYROLL TAX EXTENSION UPDATE

Brinker Comment: There is breaking news this weekend that House Speaker John Boehner has said that the Senate’s two-month payroll tax extension is dead on arrival because he believes employers need more certainty about taxes and he wants a deal closer to the one-year extension that the House passed. Bob noted that 2012 is an election year and during election years taxes are best minimized. The payroll tax cut lowers the worker’s share of Social Security payroll taxes to 4.2% from 6.2% and accounts for about $10 billion in revenue each month. That’s $120 billion of additional cash that goes into worker’s pockets over the year if the tax measure is passed for an entire calendar year. Bob pointed out that almost all of this money gets spent because of the consumer’s propensity to spend. Bob said he fully expects to see this pass for the entire year given that it is an election year.

Bob said he is in favor of the tax cut because we need all the tools possible to help grow our economy. We learned that the economy grew at a 2.0% rate in the third quarter which is growth, but not enough. We have an unemployment rate of 8.6% and while the private sector is tacking on jobs, the government sector continues to layoff workers month after month. That said, Bob believes we will could very well see the GDP put up a number above 2.0% in the fourth quarter of this year. Still, the economy is below trend in its growth and so it justifies economic stimulus in its purest form which is payroll tax reduction.

Kirk Here: See US Federal tax bracket rates for 2012 and US Federal tax bracket rates for 2011

SAFE MONEY FOR COLLEGE KID

Caller: This caller’s child is in college and inherited $150,000 from his grandfather. What should he do with it? Bob said he would use fully insured certificates of deposit until the child knows what they will need with their money, such as for the purchase of a house. No need to put that money at risk until the child has a better understanding of his or her future needs.

INFLATION BONDS

Caller: Even though the base rate is zero, the inflation rate is 3.0% which makes him think that it is better deal than some CDs even with the 3-month penalty. Bob said he didn’t have a problem with that and felt even with the penalty you are going to do better than most money funds. But the government has limited the amount you can buy to $10,000 a year. Bob noted that originally the base rates of I-Bonds when they first came out were as high as 3%, but today the base rates are close to zero. If you purchased I-Bonds back in the early days you definitely want to hold on to those.

Kirk Here: See Series I Bonds


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	Moneytalk Show Review December 18, 2011

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