Unreported: Unreported Devastating Effects of Alt-A crises

Yesterday I was speaking with a friend who works for the IRS in Orange County, CA. We started talking about what he sees coming through his office in Laguna Niguel. He has a unique position in that he sees both people from the north part of the county (Anaheim, Santa Ana, Buena Park, Cypress, etc.) and the more affluent south county (Laguna Niguel, Mission Viejo, Irvine, etc.).

We both agreed that The Big Trouble is just rounding the turn and heading straight at us (as a society). This is the financial disaster of South Orange County, CA.

When these South County people get foreclosed on, they have incredibly complex tax situations. And it is almost impossible to rebound with money in your pocket due to changes in the bankruptcy laws a few years ago. The small-business person uses credit cards and home loans to finance their businesses. For start-up or expansion, most small businesses are financed in just this low-tech way.

The problem, (as my friend literally sees many times a day) is we have created a set of tax rules so complicated that it is handcuffing, or about to, en masse the very people that create the majority of jobs in this country. When these folks get foreclosed on, they can’t get credit. And more importantly, in today’s system we have created, their tax bills are going to be incredibly high after they run the massively complex and expensive system to even get their taxes prepared.

The fear of this IRS agent is that we have created a system where the very people who create most of the jobs in this country are forced to the sidelines of the economy for several years.

We need to effect changes immediately or suffer dire consequences for years to come in the form of a sluggish economy.


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