Iowa lawmakers approve major government overhaul

City of Industry, CA DES MOINES, Iowa (AP) — The Iowa House has unanimously approved the largest restructuring of state government in more than two decades, a package designed to save millions of dollars and begin to close a yawning budget shortfall. All 95 lawmakers on Monday voted in favor of the measure after two days of debating the fine print. It is expected to save $124 million in state spending, according to the state’s Legislative Services Agency. One of the measure’s main supporters said the House would continue to look for ways to cut spending. “We’re not done,” said Rep. Mary Mascher, D-Iowa City. “It isn’t going to take us 25 years to look at this again.”

Iowa faces a $341 million budget shortfall in next year’s budget, and the Senate already has approved a slightly smaller package that they say would cut $118 million from the budget. [Read the full article] {loadposition in-article}

The tax code is almost always in a state of flux, but the current environment seems particularly up for grabs. Several of the Bush-era tax breaks, including currently low dividend tax rates, were extended through this year but are set to expire thereafter. The estate-tax picture is also murky. Although there is no estate tax in 2010, some tax watchers think Congress could reinstate the estate tax and give the IRS the discretion to “claw back” taxes that should’ve been paid but weren’t.

Given all the uncertainty, it’s tempting to put asset location–or the process of putting tax-efficient investments in taxable accounts while saving less tax-friendly investments for tax-sheltered accounts–into the “Why bother?” column. But that would be a mistake. Although the specifics may change, the broad-brush concepts behind asset location–for example, maxing out your tax-sheltered accounts and stashing tax-inefficient investments inside them–will still hold up. [Read the full article]

It’s hard to get ahead with Uncle Sam stretching out his hand every time you earn a few extra bucks. While paying what you owe is the patriotic way, it’s always nice to owe less rather than more. Here are some of the best (and strictly legal) ways to reduce your taxable income but still satisfy Uncle Sam when he comes knocking.

1. Take advantage of perks at work. If your employer offers a dependent care spending account or a health-care spending account, the dollars you sock away in the programs are deducted from your pre-tax pay.

Sometimes enrollment times are limited, so check with your human resources department to determine when you’re eligible. Familiarize yourself with what qualifies as a reimbursable expense. [Read the full article]

Building your own business is a common American dream, but not an easy one. According to the U.S. Small Business Administration, about half of small businesses fail within the first five years. That hard truth gives you even more good reasons not to start your business with money you’ve borrowed from your retirement savings. Granted, your 401(k) may be your best source of funds. But borrowing during tough times has its own dangers.

If your business doesn’t work out, you could lose all those savings altogether. Even if it does pay off, you may have been able to earn more by leaving that money alone. Let’s say that in your 401(k), you grew a $10,000 nest egg into about $26,000 from age 40 to 50, at an average of 10% per year. Then, at age 50, you took that $26,000 and invested it in your business. (We’ll assume no penalties paid in this example; some people are able to avoid them.) After five years, the business is off the ground, and you get back $26,000 in cash. [Read the full article]

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