Battle of the Bilge

Spreading the Word

The article we ran back in December about the ‘Warning to Vets‘ email hoax has been picked up in part, with some further information given to the reporter, by Army.mil here. A short sampling of the article, including additional insight from VFW:

FORT SAM HOUSTON, Texas — An old e-mail lurking in the electronic cloud is making rounds again in a renewed attempt at phishing for veterans’ personal information.

“While the e-mail is not what it purports to be, the message lends itself to a much bigger issue of the exploitation of veterans using survivor benefits as a hook by financial services companies to get their business,” said Matthew Lofiego, Military Officers Association of America’s (MOAA) deputy director of the Member Service Center.

“There are so many organizations out there targeting veterans, offering them money and becoming the beneficiary of their benefits,” Lofiego said.

“Servicemembers and veterans need to be careful in this day in age,” said Jerry Manar, deputy director for Veterans of Foreign Wars, a non-profit service organization of combat veterans in the U.S.

“Many scams seem to offer something for very little money or for free. Once you’re involved with them they do a bait and switch and begin charging money for services,” Manar said, stressing residents of retirement and nursing homes are often targeted and particularly vulnerable.

“It is a growing problem, and one that MOAA is paying close attention to, especially the tactics being used,” Lofiego said.

Recently forwarded throughout the Army community and titled “Warning To Veterans,” the current version of the e-mail advises against using the services of an organization called Veterans Affairs Services and appears to come from Kevin Secor, Veterans Service Organizations liaison, Office of the Secretary of the Department of Veterans Affairs.

MOAA contacted the VA and VSO Liaison Kevin Secor to confirm. Lofiego said Secor stated that he never sent the message.

Representing MOAA

This morning, MOAA’s President, Vice Adm. Norb Ryan, Jr., USN (Ret), participated in a discussion on Fox News’ morning show “Fox & Friends” about military pay raises. Admiral Ryan carried the MOAA message of an increase in active duty pay from the 1.4% proposed amount to 1.9%.

The best quote, in response to a question regarding why there is resistance to this modest pay increase:

“This is a recommendation from the Pentagon and I happen to believe that the bean counters have taken over and they’ve forgotten Leadership 101 principles. Like I said, you have to have enough money for the weapons systems, but you have to have enough money for the only weapon system that has never let this country down: it’s people.”

View the full video here:

Take action and send your representatives in Congress a message via MOAA’s Action Center by clicking here and filling out the message.

Introduction

In a change of pace from the usual insidious messages that are forwarded around the internet, the email in question does not necessarily provide bad information, but it did not, as stated, originate from the Department of Veterans Affairs. MOAA contacted the VA and VSO Liaison Kevin Secor to confirm and he stated that he never sent the message. Other sources, including the Better Business Bureau, have confirmed that Michael Dougherty is a current staff attorney for DVA, but did not write this email and that the VA did not issue this warning. However, there is some wisdom to be gleaned from the apparently fake message.

The Email (one version)

WARNING TO VETERANS

Forwarded by Kevin Secor, VSO Liaison, Office of the Secretary of the Department of Veterans Affairs.

An organization called Veterans Affairs Services (VAS) is providing benefit and general information on VA and gathering personal information on veterans. This organization is not affiliated with VA in any way.

VAS may be gaining access to military personnel through their close resemblance to the VA name and seal. Our Legal Counsel has requested that we coordinate with DoD to inform military installations, particularly mobilization sites, of this group and their lack of affiliation or endorsement by VA to provide any services.

In addition, GC requests that if you have any examples of VAS acts that violate chapter 59 of Title 38 United States Code, such as VAS employees assisting veterans in the preparation and presentation of claims for benefits, please pass any additional information to Mr.Daugherty at the address below.

Michael G. Daugherty
Staff Attorney
Department of Veterans Affairs
Office of General Counsel (022G2)
810 Vermont Avenue, NW
Washington, DC 20420

Reality

As stated above, the message is not an official DVA release. As reported by the Better Business Bureau:

“Someone pretending to be an attorney with the U.S. Department of Veterans Affairs (VA) is sending an email to military veterans “warning” them against using the services of a group called Veterans Affairs Services. BBB Military Line, a complaint resource specialized for the military and their families, has received several inquiries about the email.”
…
“The BBB advises anyone who receives this email to not click on the link. You should never click on links in emails that are from unknown sources as they may contain viruses. Such viruses are typically designed to steal private information from your computer. Also, the VA advises veterans seeking the assistance of a VA-recognized service organization for purposes of submitting a claim for VA benefits to search at the General Counsel’s accreditation search page.”

Author’s Note: The Link referred to by the BBB has been omitted from this article and the only link in the example email is to the home page of VAS.

VAS describes themselves as a ‘non-profit veterans service organization’ but they are not recognized as a chartered or non-chartered VSO. Check the full list of VSOs here. They are, however, registered as a charitable 501(c)(3) organization. MOAA has not had any formal dealings with VAS so we can not comment on their dealings with veterans or their legitimacy. The VAS shield can conceivably be seen as a ‘close resemblance’ of the VA’s, so the email is on base with that statement, as you can see here:

Compared to the seal of the VA:

However, the VAS site does contain the following language in their web wrapper:


While the email is not what it purports to be, the message lends itself to a much bigger issue of the exploitation of veterans using survivor benefits as a hook by financial services companies to get their business. It is a growing problem, and one that MOAA is paying close attention to, especially the tactics being used. Speaking with Lt Col. Shane Ostrom, USAF (Ret.), MOAA’s Deputy Director of Benefits Information, he stated:

“This marketing plan by financial firms is only getting worse and will continue. I had one MOAA member state they wanted him to start trusts where assets could be hidden appearing to be poor in order to qualify for VA benefits based on financial need. He said the plan was to move his assets into the trust and replace his current assets in the trust with annuities. There would be no reason for this except to generate high commissions for the financial firm.”

Another member of the MOAA benefits team, Mr. Phil Dyer, a CFP, also stressed the dangers of financial firms soliciting via VA survivor programs:

“At a time when major budgetary pressures are coming, these companies – while not advocating outright fraud (mostly) are trying to shoe-horn people into a benefit they might not otherwise qualify for while enriching them in the process and (potentially, depending on the state) dis-inheriting children/grandchildren depending on the annuity beneficiary requirements.”

In other words, be careful who you put your trust in when it comes to financial matters and veterans benefits. This email may be bogus, and VAS has not been implicated in any wrongdoing that we are aware of, but many companies out there have been trying to fleece the veterans community, or at least take advantage of it. The true warning to veterans that should be ringing through the web is the fragility of their earned benefits, from TRICARE and Tricare for Life, to retirement pay and continuing attacks on personnel costs by deficit hawks that have a way of disregarding the concepts of sacrifice and honoring promises. There is a war ahead of us, and we’ll need all hands on deck this next year and beyond to avoid the deep cuts that are being floated by the deficit commissions and congressional members.

Further Reading

MOAA’s Financial Frontlines blog recently ran a story about financial companies exploiting VA survivor benefits and using phone marketing to get their foot in the door. Read the entire story here.

Discussion

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Introduction

It has been rumored that President Obama’s finance team and Nancy Pelosi are in favor of passing a bill that would put a 1% tax on all banking transactions. The bill, known as H.R. 4646, proposes a 1% percent tax be put on all transactions to or from any financial institution; meaning if you deposit money into your checking account, withdraw money from your checking account, use your debit card to complete a transaction, or transfer money from your savings account to your checking account a 1% tax will be applied. But the email is grossly misleading and ultimately just plain wrong.

The Email (one version)

Subject: What a Christmas present from Washington!!!

H. R. 4646
I have gone into THOMAS (Library of Congress) and printed out and read all 15 pages of this bill which has been given the “Short Title” of “Debt Free America Act.” – Bill Halpin
It is the most socialistic thing I have ever read. Just think, if you deposit $5,000.00 into your checking account or savings account the bank has to take out 1% or $50.00 of that money and send it to Washington . Then, any checks or cash you take out of your bank they will deduct 1% from what is still in the bank and send it to Washington . Total put in the Bank $5,000.00. $100.00 of that you give to Washington . This bill, spells it out that everyone will pay the Government 1% of their gross income. Page 9 states the House and Senate shall convene not later than November 23, 2010 and Page 11 states the vote on passage shall occur not later than December 23, 2010.END THIS TO EVERYONE YOU KNOW AND EVERYONE NEEDS TO CONTACT THEIR CONGRESSMAN AND SENATOR AND TELL THEM TO VOTE NO ON THIS BILL.
If you don’t know who your Congressman or Senator is, go to Google, type in “(your state) Congressman email address”. When it comes up, click on “Complete E-mail address for Congress/House, Senate, Governors and get both e-mail and FAX info. The bill is HR-4646 introduced by US Rep Peter DeFazio D-Oregon and US Senator Tom Harkin D-Iowa. It is now in committee and will probably not be brought out until after the Nov. Elections. Suggest that you pass this along and also to your state senator and representative and US Congressman and Senators.

One percent transaction tax is proposed
President Obama’s finance team is recommending a transaction tax. His plan is to sneak it in after the November election to keep it under the radar. This is a 1% tax on all transactions at any financial institution I. E. Banks, Credit Unions, etc.. Any deposit you make, or move around within your account, I. E. Transfer to, will have a 1% tax charged. If your pay check or your social Security or whatever is direct deposit, 1% tax charged. If you hand carry a check in to deposit, 1% tax charged, If you take cash in to deposit, 1% tax charged. This is from the man who promised that if you make under $250,000 per year, you will not see one penny of new tax. Keep your eyes and ears open, you will be amazed at what you learn. Some will say aw … it’s just 1% –Remember once the tax is there they can raise it at will. This will ADD UP!

Reality

As is the case with most internet rumors, there are truths and fallacies associated with the above claims. It is true that HR 4646 exists, it has been proposed to Congress and that the bill proposes that Congress convene no later than November 23 of this year and take a final vote no later than December 23. But the dates apply to all bills introduced during a session. Beyond those facts, the rest of the email is not accurate.

The bill was not proposed by U.S. representative Peter DeFazio and U.S. Senator Tom Harkin. It was first proposed by U.S. Representative Chaka Fattah (D-Pa) in 2009 as the “Transform America Transaction Fee”. Fattah has introduced similar bills throughout his career and his stated goal is to transform the federal income tax program. It is considered a ‘pet project’ of his that never gains any traction and has always, just as the current version of the bill has, died a quiet death in committee. A quick look at Representative Fattah’s bill introduction history will show you his lack of success in getting bills passed (14 introduced, 0 laws).

So why has this become an issue this year? We are in midterm election territory, and there is a bill number attached that people who don’t understand the legislative process may misinterpret as a possibility for movement. The use of “President Obama’s finance team” as the only source for Congress bypassing the legislative process and taking a bill languishing in committee without any cosponsors to the floor or attached to another bill is a pretty strong indicator that nobody in Washington is seriously considering this politically suicidal move.

Further Reading

Govtrack Bill
Snopes Page
Open Congress Bill
Rep Fattah Bill List

Discussion

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More Taxes from Health Care Reform?

The latest health care tax increase viral email to hit the web states that buried in the Health Care and Education Reconciliation Act of 2010 is a 3.8% real estate tax. While there is a 3.8% tax in section 1402 of the bill, it is not a tax on the overall sale of real estate (just profits) and there are several factors that are not mentioned that make it less likely to be a factor in average Americans’ future transactions than the email implies.

The Email

Under the new health care bill — did you know that all real estate transactions will be subject to a 3.8% Sales Tax? The bulk of these new taxes don’t kick in until 2013 (presumably after Obama’s re-election). You can thank Nancy, Harry and Barack and your local Democrat Congressman for this one. If you sell your $400,000 home, there will be a $15,200 tax. This bill is set to screw the retiring generation who often downsize their homes. Is this Hope & Change great or what? Does this stuff makes (sic) your November and 2012 votes more important?

Oh, you weren’t aware this was in the Obamacare bill? Guess what, you aren’t alone. There are more than a few members of Congress that aren’t aware of it either (result of clandestine midnight voting for huge bills they’ve never read). AND, there are a few other surprises lurking.

More Information

There is a 3.8% tax on investment income for couples that earn over $250,000 and individuals that earn over $200,000 that was included in the Health Care and Education Reconciliation Act of 2010 – Section 1402, which is titled ‘Unearned Income Medicare Contribution’. A summary of this bill can be found here.

Here is the pertinent text:

Section 1402. Unearned Income Medicare Contribution

Medicare contributions are modified to include net investment income by imposing a 3.8 percent tax on interest, dividends, annuities, royalties, rents, gross income from a trade or business involving passive activities, and net gain from the disposition of property above a threshold amount. The threshold amount is $200,000 for an individual and $250,000 for a married couples filing jointly. This is effective for taxable years beginning after December 31, 2012.

The full language of the bill can be found here.

Please note that this only applies to profits and is not exclusive to real estate property. It was included in the Health Care Reform bill in the form of a Medicare tax as a way to have the money generated contribute to the Medicare trust fund to help its future solvency.

Beyond the income threshold requirements, there are already a host of tax exemptions that cover profits on real estate sales. In most cases, individuals are not taxed on the first $250,000 ($500,000 for couples) in sales profit. Again, that is profit, not sales price. A list of those exemptions can be found here. So the email quote of “If you sell your $400,000 home, there will be a $15,200 tax”, which derives that tax figure from 3.8% of the sales price is flat out wrong.

For this provision to affect anyone they would have to be relatively wealthy and have made a significant profit on their real estate sale. With the real estate market the way it is, it is unlikely that the vast majority of Americans will see any tax increase from this provision.

Congressional Analysis

Mark Keightley of the Congressional Research Service has produced a five page analysis of the tax for Congress that goes into the technical explanations and includes seven example scenarios. However, the examples assume no tax credits or deductions, so the end result may not be equal to personal experiences. Click here for the report: The 3 8 Medicare Contribution Tax on Unearned Income Including Real Estate Transactions

Discussion

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