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How the Bailout Affects You & Your Money

October 9, 2008

By Ken & Daria Dolan, Dolans.com

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Ken & Daria Dolan

Ken & Daria Dolan

For more than 20 years, Ken and Daria Dolan have been the trusted source for real money solutions for people just like you. And now, you can have unprecedented access to this wisdom through their new website, Dolans.com. They tell it like it is, and their message is clear: You have to take control of your money, and you don't have to be afraid. You can do it, and Ken and Daria are here to help.

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Since the bailout plan was signed into law, we've been flooded with questions about what this will mean for everyone who is not a major corporation, a fat cat CEO or a bank on the verge of failing.

Let's take a look at how this bailout will affect you and your wallet, as well as the new provisions that got added in the Senate version. There are some real doozies in there, and we've got the details on the pork they snuck into the bill.

Q: Am I going to have to pay higher taxes because of this bailout?

A: It's not just a $700 billion bailout plan. It's also $85 billion for AIG, $50 billion to stabilize money market mutual funds, plus untold billions to guarantee that Fannie Mae and Freddie Mac survive. The government has three ways to come up with this money—borrow it, cut spending or raise taxes. They'll probably have to do all three to come up with that kind of money, so get ready to start paying.

Q: But I thought there were tax breaks in the bailout bill.

A: There are three key tax breaks in the bill. It extends a number of renewal energy tax breaks for individuals and businesses, including a deduction for buying solar panels. It continues a host of other expiring tax breaks, including a credit to businesses to deduct research and development costs and the ability to deduct state and local sales taxes on your federal tax return.  The bill also extended Alternative Minimum Tax (AMT) relief for another year.

None of these are new tax breaks, and frankly, we don't see any way Uncle Sam is going to be able to pay for this bailout without raising taxes.

Q: We're paying for a tax break for wooden arrows?

A: Yes, there really is a provision to give a $6 million credit to manufacturers of wooden arrows, a sector that has been keeping all of us up at night, worrying. Seriously though, this bill is laden with PORK. It's business as usual in Washington, and the bill includes millions for auto racing tracks, small- to medium-sized film producers, corporations in American Samoa, rum producers in Puerto Rico and the Virgin Islands and fishermen and others who suffered from the Exxon Valdez oil spill in 1989. Get Daria's full report on the "Hidden Horrors of the House Bill" here.

Q: Will the volatility in the stock markets settle down?

A: Don't bet on it. We cannot say this strongly enough…