Your Financial News Roundup
September 27, 2023
1. Economy: The WGA reached a deal with the AMPTP, ending the 5-month-long writer’s strike; while the government has less than a week left to avoid a partial shutdown.
2. Tech: Game of Thrones author George R.R. Martin is suing OpenAI for copyright infringement; meanwhile Tinder is charging select users $499 a month for premium features.
3. World: Fox News is getting a new CEO; and South Korea flexes its military muscle.
Personal Finance Concept [Part 9/10]: Debt Detox — Tax Debt
🎬 Labor – 1, Hollywood – 0: Backed by the Writers Guild of America (WGA), film and TV writers have reached a deal with the Alliance of Motion Picture and Television Producers (AMPTP) and studios (e.g., NBCUniversal, Warner Bros) — ending the ~150-day strike. The strike focused on setting guardrails for the use of AI and getting writers better wages from streamers like Netflix and Disney. While the WGA strike has ended, the SAG-AFTRA, the actor’s union, will continue to strike, further delaying TV and movie projects. The strikes have cost California’s economy over $5B+ to date. (Yahoo! News)
Our Take: Adding to recent union wins, this WGA deal helps writers regain livable wages and more job stability. It’ll inspire workers across the broader economy who have been hit hard by inflation to call for higher wages to recoup their purchasing power.
🔋 Reset Required: With less than a week left, the federal government could shut down (partially) due to a partisan clash over federal spending. The holdup is primarily driven by a small group of House Republicans called the Freedom Caucus who wants deep cuts. A partial shutdown would halt some government services and delay paychecks for some federal workers. But they would receive backpay once it ends, making it a political tool to force a conversation on reducing excessive government spending and borrowing. Goldman Sachs estimates the economy could contract 0.2% for each week the shutdown goes on. (CNBC)
Our Take: Federal spending has put the national debt at $33T and the interest on it will cost $800B+. This issue needs lawmakers’ review, but Speaker McCarthy’s lack of power, political division, and a potential impeachment of President Biden has halted debate. Fortunately, this shutdown may have limited impact on the economy as past shutdowns only froze 17% of federal spending.
🥷🏻 Theft at a Mass Scale: Game of Thrones author George R.R. Martin and other creative personalities are suing OpenAI for allegedly infringing on their copyrighted works in a “systematic theft on a mass scale” to train ChatGPT. A trade group called the Author’s Guild took the suit to federal court. This suit is similar to the one filed by comedian Sarah Silverman and joins calls from others who want AI firms to pay creators for their work. Creators, artists, and even programmers are filing more legal actions against AI companies for using their work without consent to train AI. Meanwhile, OpenAI says it respects authors’ rights and wants them to benefit from AI. (BBC)
Our Take: This is the latest move by creators filing legal actions against AI companies, expressing growing resentment and concern that AI will supplant human-made works. These suits raise important questions about property rights, the impact of AI on creatives, and the need for rules on how AI firms may use copyrighted works.
💖 $499 a Month to Find Love: Tinder is rolling out a $499 per month invite-only subscription, Tinder Select, for its top 1% of users. Select emulates The League’s business model, an exclusive dating app that uses a team of dating experts to match ambitious and career-minded singles. Tinder’s parent company, Match Group, had acquired the app last summer, which costs users up to $1,000 a week to use. With Select, subscribers will get increased visibility, be able to match with the “most sought after” profiles, and message people they haven’t matched with yet. (The Verge)
Our Take: Tinder Select is a strategic move by Tinder to monetize its platform further. However, the hefty price tag has received criticism for preying on people who are lonely and raised concerns about inclusivity.
🚶🏼♂️Walking Away From Controversy: Rupert Murdoch, the 92-year-old media mogul behind Fox News and its parent firm, News Corp., announced he will leave the board of both firms in November. His oldest son, Lachlan Murdoch, will become the sole chairman of News Corp and serve as Fox Corp.’s CEO. This decision comes after Fox had to settle with Dominion Voting Systems for $787.5M over defaming the company by accusing it of conspiring in the 2020 election. Lachlan will face challenges as his liberal-leaning siblings may try to sell their large stakes in News Corp to a third party. (CNBC)
Our Take: Rupert’s retirement could mark a significant shift in the media landscape as his influence was key to the rise of Fox News and in shaping the conservative political narrative. This transition occurs right before an election year and as online outlets gain traction — potentially impacting the direction of their content.
🇰🇷 South Korea Flexes Its Military Prowess: In a rare display of its military might, South Korea held a military parade in Seoul to mark the 75th Armed Forces Day. The event is a first for the nation since 2013 and occurred against the backdrop of rising tensions with North Korea. The parade and President Yoon Suk Yeol’s presence was designed to bolster domestic confidence in the country’s defense industry and issue a strong message to Pyeongyang about their nuclear pursuit. (CNN)
Our Take: North Korea has reportedly been seeking help from Russia to develop its nuclear arsenal, posing a major threat to South Korea and the rest of the world. As the situation escalates, the United States and its allies will need to figure out an alternative to sanctions to ease the tensions.
Finance Concept of the Week
Debt Detox [Part 9/10]: Tax Debt
Common types of debt and how to best tackle them
Every year, Uncle Sam comes knocking on the doors of hundreds of thousands of Americans to collect their debt (figuratively — the IRS will never call you). If you’re one of the unlucky ones, you may owe the IRS money for inaccurately reporting your taxes or insufficient tax payments. Whether by mistake or on purpose, owing the IRS can be a major headache, especially if they decide to place a lien on your assets or property.
How Tax Debt Works
You may accumulate tax debt for various reasons, such as failing to pay taxes by the filing deadline, inaccurately reporting your income, making errors in tax filings, or disputes with the IRS on the correct amount of taxes owed. When the IRS determines an individual or business owes more in taxes than what has been paid, they will send a letter in the mail indicating the amount owed, which then becomes tax debt.
This debt includes the original tax amount owed, plus any penalties, interest, or additional charges accrued over time. The IRS will continue to charge interest and penalize you on unpaid tax balances until you clear them. The longer you ignore your tax debt problem, the worse it will get.
Luckily, you have many options to reduce or eliminate the debt, including installment agreements, correcting a tax return, penalty abatement, or offers in compromise. For example, if you have never owed money before, you may qualify for a first-time abatement. Or, if you have a good explanation for why you didn’t file or pay your taxes, you may be able to get your penalties waived.
The most common option is an installment plan, where you can negotiate the repayment period, typically a few months to several years. When you make an installment plan, the IRS may also waive some penalties and costs. This plan is best for people who do not have the money upfront to pay off their debt.
Common Types of Tax Debt
- Income Tax Debt: This is the most common form of tax debt. It arises when an individual or business owes taxes on their income, including wages, self-employment income, rental income, dividends, and interest.
- Business Tax Debt: This includes taxes owed by businesses, such as corporate income tax, payroll taxes, sales taxes, and unpaid business property taxes.
- Payroll Tax Debt: When companies withhold payroll taxes (Social Security, Medicare, and income tax withholdings) from employees’ wages, but do not remit those funds to the IRS, they have payroll tax debt.
- Tax Lien Debt: The government can place a tax lien on a person’s property if they have unpaid taxes. The lien can be placed on assets like homes, vehicles, or bank accounts.
- Tax Levy Debt: In some instances, the government may seize an individual’s property to satisfy a tax debt. The IRS may garnish wages, levy bank accounts, or take control of assets.
Pros of Tax Debt
- Financial Relief Available: If you can’t pay your taxes in full, you may be able to delay collection for up to 180 days. During this period, you won’t owe the IRS money until the new payment date.
- Flexible Repayment Options: Depending on your financial situation, you may have different repayment options available. This can make your debt more manageable and allow you to pay off the balance over time.
- Opportunity For Negotiation: You can try to negotiate with tax authorities for a settlement, reduction of penalties, or an offer in compromise to settle the debt for less than the full amount owed.
Cons of Tax Debt
- Long-Term Financial Consequences: Tax debt is one of the worst forms of debt you can have because it incurs additional penalties and interest over time and can lead to your home or business assets getting seized. That can significantly increase the overall amount owed and linger for years.
- Negative Impact on Credit: Not paying off your tax debt or tax liens can hurt your credit, making it harder to secure loans or credit in the future. You may also end up with worse terms and conditions on new loan offerings.
- Stress and Anxiety: Dealing with tax debt can cause significant stress and anxiety because of the financial burden and potential consequences associated with unpaid taxes.
How to Manage Tax Debt
- Don’t panic or lie. Tax fraud is a felony. But, just because you owe the IRS debt, that doesn’t mean you’ve committed fraud. To successfully win a tax fraud case, the IRS needs to prove that you committed tax fraud willfully and intentionally. If this was an honest mistake, you can correct it.
- Understand your options. Familiarize yourself with the different options available to address tax debt. Confirm the amount owed and reach out to the IRS to discuss your situation and potential solutions.
- Seek professional assistance. If you are unsure of what to do and need help, consider reaching out to a tax professional, such as a tax advisor or tax attorney. They can provide guidance and support in negotiating with the tax authority and exploring the best options for you.
- Comply with agreed-upon terms. Once you have an agreement in place, ensure that you comply with the terms, whether it’s making regular payments or following any other terms of the arrangement.
What Else Is New?
- New Jersey Senator Bob Menendez will stay in his role, despite being indicted on corruption charges for the 2nd time. He and his wife are accused of taking hundreds of thousands in bribes in exchange for benefitting the Egyptian government and several businessmen.
- The Venezuelan government regained control of the Tocoron Penitentiary Center over the weekend. The prison was previously under the control of the criminal gang ‘Tren de Aragua,’ where inmates had built a swimming pool and restaurants inside.
- OpenAI could potentially boost its valuation from $29B to $80-90B in its next fundraising round.
- In 2022, GM CEO Mary Barra made $29M — 322X the median GM worker pay, while Stellantis CEO Carlos Tavares made $24.8M — 365X the average worker pay, and Ford CEO Jim Farley made $21M — 281X the median worker pay.
Personal Finance Resources
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