European Stars and Stripes (Newspaper) - February 24, 1993, Darmstadt, Hesse                                Emf f 1ars and of Elf to Money matters 3 i investors look to Lessen Impact of tax plan financial expert s first advice Don t panic Jcj attic new Yort 1 the Dusl Norm kicked up by president Clinton s economic plan is unlikely to a lie Mon. Leaving few Clear signals for peo ple seeking ways to be san the Impact of the administration t deficit cutting pro Gram on their personal finances still some things seem certain. The wealthy will be hit hardest. Investment decisions will become trickier. And Peor be should conserve Energy the Gaso  and Home heating kind As a Way of easing the pain of the new Energy tax experts also suggest saving your own Energy when pondering the Clinton plan which faces inevitable changes before passing through Congress. Don t panic said Stuart Kessler senior tax partner at Goldstein Golub Kessler & co. The Impact of the budget package on individuals looks like this taxes on Energy use and income for households earning $250,000 a year would Rise by about $10,000. Households earning about $80,000 would face a tax jump of about $560. For a family earning $45,000, taxes would Rise about $225. And for a family earning $25,000, taxes would go up about $25. Searching for a leak proof shelter from these increases May prove fruitless so be wary of salespeople pitching magical solutions. But there Are some valid strategy suggestions. More than any other group the presi Dent s plan would affect the investment decisions of those at the top income tax rate. It would Rise 5 percentage Points to 36 percent for individuals earning More than $115,000 in taxable income and for couples who earn $140,000 or More. The reason is that the top rate for Cap ital gains would remain 28 percent creating an Eyebrow raising spread Between investments that generate taxable in come like dividends and those that gain in value like growth stocks or real estate. A capital gain occurs when an investment rises in value and is sold it which Point the irs respectfully requests a portion of the Windfall. The spread Between the capital gains Tate and the personal Tai Rule is. Even More drastic for people earning $250,000 or More their to bilk would Rise to 39.6 percent with the proposed 10 percent surcharge or Quarter millionaire1 surtax As some now Call it. Here Are some strategies to consider one Clear Avenue for saving is to Start deflecting As much Money As possible into tax favored investments Ike employer sponsored. Retirement plans and individual retirement accounts. Experts unanimously agree that the economic plan also added new Luster to municipal Bonds. The vast majority Are tax exempt at the Federal level and Many Are also exempt from state and City taxes. But investors began scrambling last week to buy into municipal Bonds threat ening to skew the Market. They re Likely to become fairly overvalued said Michael Metz chief investment strategist for Oppenheimer & co. Another Oft cited strategy is to shift from investments that earn income that is taxable at the higher rates like cd Money markets and stocks that yield Reg ular dividends to stocks that pay Low or no dividends but hold out greater Promise of increasing in value. Any prof its on the Stock s Rise then would be tax Able at the lower capital gains rate. Mary Farrell an investment strategist at Paine Webber cited Procter & Gam ble co., coca cola and Pepsico inc. As examples of such growth stocks. Others recommend so called value stocks or Small capitalization stocks that Are Likely to grow in Price but not in dividend yields. The search for investments that offer capital gains father than income leads inevitably to real estate. With property prices Low the prospects for capital gains look Good. The president s program Calls for the highest estate tax rates to Rise from the current 50 percent to 55 percent for estates with More than $3 million and to 53 percent for estates with $2,5 million or More. One idea for escaping those top rates is irs consider Hafl new a a act to yet children if the fact a lower it rate Curry no a Stales that you a donate $10,000 a year 120,000 when your to Cwm pitches in to each of a Many relative and friends As you like before the a Tai tint applies you May be inclined to do to now Sid Samuel p Starr a tax partner with Coopers a Lybrand the new budget added a Carrot for people thinking of donating Art or various investment Van Isles that Nave risen in value. The provision makes All major gifts to nonprofit organizations like museums fully deductible at current Market value rather than at the Purchase Price which is usually lower. But remember that making Many contributions May invoke the alternative minimum tax rate which As its name suggests ensures that everyone pays some taxes. The amt currently 24 per cent will Rise if the president gets his Way to 28 percent for people with minimum taxable income above $175,000, and 26 percent for people below that Mark. The Energy tax is estimated to Cost the average family an additional $100 to $150 a year. While relatively Small it May prove onerous enough to prod people to reconsider some familiar ways to reduce Home heating costs and outlays at the pump install a setback thermostat which can reduce the temperature automatically when the House is empty. The devices Cost $30 to $100 and pay for themselves in a year or less. Lower the water Heater temperature to no More than 120 degrees. Many Are set As High As 140 degrees. Invest in a tuneup for your air conditioner an expense that generally pays for itself in a year. Call your Utility. Many companies offer Home audits in which someone comes to your Home and works up a pro Gram of measures to Cut Energy consumption. This service is provided free by Many utilities. An overdue tuneup for your car and checking tire pressure regularly can improve gasoline mileage. Cutting the deficit accumulated Delict for the 1 994 through 1 997 if no change in the current policy is made minus $493 billion subtract Clinton s spending cuts of $247 billion subtract Clinton s tax increases of $246 billion plus $169 billion add Clinton s stimulus and investment package of $169 billion equals total Cut of $325 billion equals an accumulated deficit for the years 1994 through 1997 under the Clinton plan with a Totaj reduction of $325 billion numbers do not add up due to rounding a we. J. Castello old rules no longer hold on refinancing by the new York times the question of when and How to refinance a Mort Gage is racing More and More homeowners. Until the mid-1980s, there were widely accepted rules of thumb for estimating the appropriateness of a refinancing. They included the new rate must be at least 2 percentage Points lower than the old rate. You must remain in the Home for at least two More years. And you must have lived there at least two years. Now those rules Are gone with the wind. The major reason is the variety of mortgages available to people contemplating a refinancing. You used to traditionally refinance a 30-year fixed rate mortgage with another 30-year fixed rate Mort Gage said David Lereah chief economist of the Mort Gage Bankers of America. Now there is a varied menu of mortgage products out  among them arc Many kinds of adjustable rate Loans As Well As some esoteric kinds. There Are balloon Mort gages which Are amortized on a Long term basis yet have Short term maturities and there Are two step mortgages which have fixed rates for five to seven years and then convert to adjustable rates. Also some lenders have been offering refinancing without closing costs in recent years. With such Loans the mortgage rate is increased slightly to compensate for the absence of closing costs which otherwise might add from $1,000 to $5,000 to the Price of the mortgage. Thus the decision whether to refinance has become More subjective based on such goals As cutting monthly payments or reducing the term of the loan. Another consideration is the Market value of the Home. If the value of the property has been clobbered there in t much that can be done other than paying Down part of the mortgage debt or not refinancing said Allen Sinai chief economist at the Boston co. My advice is pay Down the debt and  in making a refinancing determination a time Frame evaluation comparing your current mortgage with a new mortgage is essential. As outlined in a refinance old for $3 by Ash associates department refi,1200 route 3, Butler . 07405all of the costs of a Retman ced mortgage Points lawyer services application fees and title search and insurance should first be totalled with 10 percent of the total added for mis Cellaneous expenses. Each Point is equal to 1 percent of the loan amount. The monthly payment for principal and interest on the refinanced mortgage is then subtracted from the higher payment on the existing mortgage. The differ ence is divided into the refinancing costs to determine the number of months it will take to recoup the costs. Joblessness to hang Tough business economists say Washington a even with a cent in 1994. News conference at which he u h boost from president Clinton s proposed although the rate declined to 7.1 per government stimulation of Job for nah n Asj year sma11 bus Ness has stimulus package the . Economy cent in Jamiar. Q million amp Vaccini Small and  a  a n counter for about two thirds of the wit a boost from president Clinton s proposed s ,. Won t grow fast enough to trim the unemployment rate by much this year economists said monday. The National association of business economists said a Survey of 35 prominent economic forecasters produced a Consen sus that the jobless rate would average 7 percent this year compared with 7.4 per cent in 1992, before tipping to 6.6 per cent. Although 7, cent in january 9 million americans still were actively seeking employment. Joseph w. Duncan the association president and vice president of Dun & Bradstreet corp., noted the Clinton package contains Money to retrain work ers whose jobs have been eliminated. What s missing in the package. Is How to get new jobs created he told a Small and intermediate sized businesses. Duncan said widespread restructuring among the Large Fortune 500 companies has Cut 4.2 million jobs in the last 12years. I Don t see any reason for that re structuring to Stop in the Short term he added of hat Means jobs growth Funda mentally has to come from intermediate sued companies and Small businesses in Small  d Andrea Tyson chief Ofa Council of economic advis ers on monday acknowledged that the current recovery was not producing enough new jobs. But she told Congress that the package would create an addio Nal 500,000 jobs during the next two in addition to what diced without it