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YOUR BOTTOM LINE

Major Tax Cut Deal: What It Really Means For You; How to Slash That 2010 Tax Bill; Holiday Job Hunting; Charitable Gifts For Friends, Family & Neighborhoods; Budget Home Decorating; Holiday Tipping

Aired December 11, 2010 - 09:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


CHRISTINE ROMANS, HOST: How would you like $800 more in your pocket next year?

What a wild week in Washington means for you and your bottom line. The clock is ticking, 2011, just three weeks away. We have easy year-end tax moves that will have you thanking us next April 15. How you can make your neighborhood a better place this holiday season without spending a dime.

And Nate Berkus, yes, Oprah's designer, will be here to give you tips for decorating on a budget. YOUR BOTTOM LINE starts, right now.

A major tax cut deal dominates the conversation in Washington, but what will the almost $900 billion deal mean to you? Well, here's how it breaks down.

There's a payroll tax holiday in there that would affect every worker in America. For example, a worker making $40,000 would pocket that $800 I told you about. A worker making $70,000 would pocket about $1,400. Just for one year.

Now, if the tax cuts are extended, a family of four making $75,000 a year would pay taxes about $1,653, if they expired, that tax bill would be much higher.

Check out a couple aged 65 or higher making $121,000 a year. If the tax cuts are extended, their tax bill is $12,695; but should the tax cuts expire, their bill is almost $20,000.

Also in here, a college tuition tax credit. A tax credit extended for up to $2,500 if your kid goes to college.

Let's bring in CNN's deputy political director, Paul Steinhauser, and here in New York is Rick Newman, chief business correspondent for Rick Newman "U.S. News World Report."

Paul, without this deal, Larry Summers, the president's top economist says we risk a double-dip recession. Larry Summers and the White House trying desperately to sell a deal that is not popular with liberal Democrats.

PAUL STEINHAUSER, CNN DEPUTY POLITICAL DIRECTOR: Well, liberal Democrats, progressive Democrats are furious at this deal. Lawmakers from the president's own party pushing back at the White House saying the president caved, that he gave in too easily to Republicans. They're furious about a couple of things here.

First of all, and you just mentioned that, the Bush-era tax cuts that will be extended for the wealthiest Americans, they are furious at that. The president himself campaigned against that during the 2008 presidential election.

They're also very, very upset, maybe even more angry about the estate tax provisions now that are very generous for the wealthiest Americans.

And I think, finally, the other thing that liberal and progressive Democrats are upset with is they really weren't part of these negotiations the White House dealing mostly with Republicans. That's a sign of things to come.

Remember, the Republicans take over the House and they have a big coalition in the Senate come the beginning of the year -- Christine.

ROMANS: Rick, everyone talking, though, about how this is simulative, some people calling it a backdoor stimulus, some people calling it a front-door stimulus. Goldman Sachs saying they'll add a percentage point to economic growth next year.

Is it a good thing -- forget the politics, is it a good thing for the middle class?

RICK NEWMAN, CHIEF BUSINESS CORRESPONDENT, "U.S. NEWS WORLD REPORT": Yes, I was going to say forget the politics. And the implications are very, very significant.

I mean, as a stimulus package, it's way bigger than anybody was expecting, I mean, you know, a lot of people were thinking there wasn't going to be any stimulus at all out of Washington any time soon. And then we get this, which is, if you add up the numbers is as big or even bigger than the 2009 program which did help the economy a little bit, not as much as we wanted to, but it did.

And if you actually add one point of growth to the economy in 2011, that's a big deal, Christine. That means that unemployment will be much better than we've been expecting it to be. It means a lot of jobs will come back sooner and for everybody who has a job and feels like they survived the recession, they might be breathing heavy.

But if they feel like they survive, if this actually goes through and the economy grows at something close to four percent or even 3.5 percent in 2011, life might start to seem a little bit normal again with people thinking about maybe I'll get a raise this year, maybe I'll start angling for that promotion. Job security will improve quite a lot, so I think this could be very significant.

ROMANS: We know that people want to start moving forward again. I mean, that's clear. We also know, Paul, that this isn't paid for. That's part of the outrage from some folks, budget hawks, in particular, who see this and say, wait a minute, we saw a payroll tax holiday, that was supposed to be a sweetener for some fiscal discipline down the road, now we just have a pot full of sweeteners. And it's a little unclear, Paul, whether or not Americans support this deal, right?

STEINHAUSER: Yes, unclear.

Take a look at this brand new number from Gallup, out this week and asks specifically about that two-year extension of the Bush-era tax cuts for all Americans. Poll indicates that two-thirds of Americans, 66 percent, also say they support extending those tax cuts for all Americans for two years. And you can see right there, 66 percent also say they support extending those unemployment benefits for those long-term unemployed.

But most polling indicates, and there's a Bloomberg poll that came out this week that shows the same thing, most polling indicates that most Americans are against the extension of those tax cuts for the wealthiest Americans.

So polling here is across the board -- remember, Christine, this was the big issue or one of the big issues in the midterm elections, it hasn't gone away, it is still a huge issue right here in Washington and across the country.

ROMANS: All right, Rick Newman "U.S. News World Report," thanks, guys --

STEINHAUSER: Thank you.

NEWMAN: Thank you.

ROMANS: -- for walking us through that. And it remains to be seen. We'll watch this space.

Now that we know what's going on in Washington, at least, let's get to something that you can control, because you cannot control that debate right now. How to slash your 2010 tax bill, but you only have three weeks to do it. So, yes, for all of us, it is tax time. Here to help Turbo Tax contributor, Vera Gibbons.

Number one, you say, this is the time, Vera, to be boosting your retirement account.

VERA GIBBONS, TURBO TAX CONTRIBUTOR: Yes, get in there. Get in there. I mean if you fund your 401(k), your 403-b, it's the easiest way to reduce your taxable income, your overall tax savings is going to be higher and your money is growing, tax deferred.

So this is a basic move, $16,500 is a maximum contribution limit. Or you can do $22,000 if your age 50 or over. And you should. Anywhere close to those windows, you've got a couple more weeks to ratchet up those contributions.

ROMANS: Also need to spend your benefit money, your FSA, your flexible spending accounts out there --

GIBBONS: Use it or lose it. You have to do it. Now, some deadlines are March 15, but some companies still go by the old deadline of December 31. So, find out when the deadline is and spend, spend, spend. You don't want to leave money in there, because if you do, you're going to forfeit that money.

So go out and buy some medications, go get some contact lenses, some band-aids, and this year, in particular, you really should think about getting the over-the-counter medications, because starting on January 1, 2011, you cannot use FSAs for non-prescription drugs.

ROMANS: You cannot use it for saline solution anymore after that. I mean, this is something I've factored in for years, my sort of tax-free benefit.

GIBBONS: There are some changes that are happening and that may deter people from actually signing up for the FSA, but we'll see.

ROMANS: But it is free money, so remember that. Also, you can take advantage of your tax credit. There's a lot of money out there, how do I get it?

GIBBONS: Now is the time if you want to make an energy-efficient move to your home, add some insulation, get energy-efficient doors, windows, whatever the case may be. You may be eligible for that 30 percent federal tax credit of up to $1,500, and as you very well know, a tax credit reduces your taxes dollar for dollar.

So, if your tax liability is $2,000 and you get a $1,500 tax credit, you're liable for just $500, so there is more information on this on Energystar.gov, if you want to see specifically how to apply for the credit, what items are eligible and of course, the Turbo Tax Web site is an excellent resource, as well, our blog.

ROMANS: OK. Great. Vera Gibbons, thank you so much. We're going to talk later in the program a little bit, folks, about tax deductions and how the government likes you to spend is money for a good cause and so we'll tell you more about that, especially how to give charities.

How to make your neighborhood a better place, in many cases without giving money at all. Next, a few simple ways to do good this holiday season without spending a penny.

(COMMERCIAL BREAK)

ROMANS: A little sliver of long overdue good news on jobs this week. Job openings in October were the highest in two years, at 3.4 million up from two million in September. That means there are now 4.4 job seekers for every job opening, the best since January 2009 and a sign for the newly unemployed, at least, that there may be some better opportunities out there for them.

Meanwhile, retailers hope you're feeling sufficiently better about the job market, but you'll spend more money. Two surveys this week show that impulse spending is up. And you're putting yourself on your Christmas shopping list, 57 percent of you say you're shopping for yours truly.

So, retailers want you to spend, but there's a solution for you. It's come to this. A wallet that squeezes shut if you don't have any money. MIT Scientists have invented the proverbial wallet that reacts to how much money you have.

Three versions. The Mother Bear that has a hinge that squeezes shut if you don't have enough money in your account. The Bumblebee buzzes whenever a bank processes your transactions. It's a little buzz for a trip to Starbucks, a bigger buzz for a larger transaction. And the Peacock actually expands and contracts in size depending on how much money you have available. Which wallet are you?

Well, we're right in the middle of what is annually the most spectacular display of economic activity there is -- American consumption or overconsumption on display, but with all of this getting, a question for you: How can we give and make our neighborhoods a better place, no matter your income or your budget?

In Atlanta, is our good friend and HLN personal finance anchor, Jen Westhoven -- Jen.

JEN WESTHOVEN, HLN PERSONAL FINANCE ANCHOR: Oh, good to see you, Christine. And really, you could add community service projects to your family's holiday to-do list. They're free. They always need help at soup kitchens, hospitals, nursing homes, at homeless shelters and you don't even need any experience to pitch in. You can find great local groups where you live that might need some help for the holidays. There are sites like VolunteerMatch.org or ServeNet.org. They can help you and they can help you find kid-friendly projects, as well.

Now, community service is a great way to spread some good will. It is also a really nice time to start family traditions of helping, as well.

ROMANS: And I like that idea, Jen, about of having it being a family tradition, because so much of this season is about getting, getting what's on your list, what do you want? What are clever ways to bring the family together?

WESTHOVEN Well, one is get your family together and clean out your closets. I mean, it may sound simple, but then everybody can say if they don't want that photo or sweater and you can donate anything that's in good condition to a good cause, your local Salvation Army or Goodwill. They're going to take everything from cloths, furniture, old movies, cooking pans, and you can get a receipt, it's tax deductible, so you're going to save money doing that too. And the more space you clean out in your closets, first of all, a little peace of mind, that's priceless --

ROMANS: All right, when you open the doors.

WESTHOVEN: But also maybe some room for the new gifts that you get this year.

Another idea is, yes, you can take advantage -- there are all of these holiday promotions out there for charity. Maybe you see a two- for-one sale, but you think I don't want that. Well, just go ahead, get that Christmas sweater for your mother-in-law, you can donate the second to your local homeless shelter. ROMANS: Oh, that's actually a really good idea. What about things that people can do at work?

WESTHOVEN: Well, this is a great time. A lot of companies put a lot of focus on helping communities right around now, so maybe you're going to see than idea that you can piggyback on. But if you don't see one, you can suggest some.

Some companies may even give you and your team time of to donate to complete a volunteer project together. You could organize a Red Cross blood drive. You could organize Toys for Tots or collect food cans for a local food pantry. And some companies may even help you directly by donating some money to your cause.

ROMANS: All right, a little bit of giving in all this getting. Jen, you're a perfect person to wrap it up for us. Thank you so much. Appreciate it. Have a great weekend.

WESTHOVEN: Have a great holiday, too.

ROMANS: If you can't find the time to donate your services this holiday season, you prefer to donate a few dollars, there are plenty of charitable organizations that need your help. But before you donate a penny, you really need to research the charity thoroughly. You can head to the Better Business Bureau's Web site at bbb.org and search for the charity in question.

To make sure that your donation goes even further, check to see if your employer has a gift-matching program, then it's $2 going to your charity, right? And hang on to those receipts. Most charities will e-mail you a receipt for donations made online, you're going to want a record of anything that's tax deductible, whether it's your money that you're giving or as Jen suggested, all of that stuff you're taking of your closets.

So many people are telling me all I want for Christmas is a job. How to work a holiday party, network smarty and bring home a paycheck for 2011.

(COMMERCIAL BREAK)

ROMANS: All you want from Santa is a job. Traditionally, the end of the year is a time for letting go, not getting hired, but career coaches say you can't afford to take a break for the holidays.

(BEGIN VIDEOTAPE)

ELLEN GORDON REEVES, CAREER COACH: Little firmer. Better watch out -- no, no, get right in there.

ROMANS (voice-over): Career coach, Ellen Gordon Reeves wants you to get a job for Christmas.

REEVES: People might think that December is not a great time to look for a job. The reality is, if you're job hunting, all you need is one job. ROMANS: No question, with more than 15 million Americans out of work, competition is fierce.

(on camera): People aren't hiring at the end of it have year, January maybe a little more likely, February maybe will be when we see when they're confident enough to start hiring.

BILL ROGERS, ECONOMIST, RUTGERS UNIVERSITY: In terms of career openings, it's broad based all throughout the economy, all sectors have openings. The challenge becomes because the number of people looking for a job relative to those openings.

ROMANS (voice-over): That number is now 4.4 job seekers for every available opening. Sounds daunting, but it's the best it's been in two years.

REEVES: Please don't bring family members or friends with you to an interview.

ROMANS: Reeves wants you to beat out three people to be that one.

REEVES: If you can get yourself invited to someone's office party as a plus one, fabulous, especially if it's a company or organization you want to get inside. Have a party. Have a pot luck, it doesn't have to be expensive, but you've got to be out there connecting with people.

ROMANS: According to consumer reports, Americans will spend on average 15 hours at holiday gatherings this year. Etiquette expert, Peter Post, says it doesn't have to be gauche to network for a job at those parties.

PETER POST, EMILY POST INSTITUTE: Tact, honesty, you show a little bit of restraint, at the same time, you're honest about your situation and all of a sudden it's amazing how people will open up, listen in, and offer to help you.

ROMANS: Bottom line, there are plenty of opportunities to network for a job this season. Just do it tactfully or don't do it at all.

(END VIDEOTAPE)

Here are a few tips if you plan to network this holiday season, because as Ellen Gordon Reeves to take December off. Have a 30-second pitch at the ready in case you run into an old work colleague or you make a new connection who may be in a position to hire.

And engage in small talk, something as simple as mentioning where you grew up could help you get your foot in the door. But don't be too aggressive. It can be a big turnoff in a laid-back social setting, tact is really key, here. Those are my tips on how to work the holidays for a job.

And speaking of tips, you want to tip, you want to tip the mailman, newspaper carrier, garbage collector, kids' teacher. But how much is enough to properly express a sincere thank you? Tobie Stanger is senior editor of "Consumer Reports" on Yonkers, New York.

And I throw in your kid's teacher, too, because you have to get a little gift for all these people. Some people get gifts, some people get tips and it starts to become overwhelming at the end o the year, Tobie, "Consumer Reports," your national research center, surveyed 1,900 Americans and found out that $35 is the top median tip.

I want to go through who's getting tipped what, Tobie. A cleaning person, 53 percent give cash a check or a gift card of about $35.

Garbage collector, about 89 percent get nothing, nine percent get cash, a check or a gift card and that's usually about $20.

The newspaper carrier, 61 percent of you out there say you don't give the newspaper carrier anything, but 36 percent get cash, a check, a gift card, maybe $15. It sounds like cash is king and of course, Tobie, the amounts vary from region to region. But, if you're giving gift cards, you give with care, right?

TOBIE STANGER, SENIOR EDITOR, "CONSUMER REPORTS": You do have to give with care with gift cards. There are a lot of rules and restrictions were eliminated with the recent law so you don't have to worry about a gift card expiring so quickly, but you know, if you give a store card, there's the possibility that if the store gets in trouble the card may not be valid, so be careful with that.

ROMANS: Tobie, how do you handle your child's teacher? Your survey showed that 45 percent gave a gift of about $20. Mail carrier, $15. But you said you had to be careful about giving cash to a mail carrier, but how do you handle the teacher?

STANGER: Well, you have to be careful. Some school districts may have rules against giving cash to teachers. It might be best to talk to somebody in the PTA or one other parent to find out what the custom is. If you want to give a gift, one nice thing to do is get together as a group and give one group gift to a teacher and it could be a gift card, it could be even donating a service like babysitting for the teacher's child so that the teacher can go out for a nice night on the town.

ROMANS: And finally, if you can't give a cash gift you say you should focus on doing something for them. But, you know, what can you do instead? Instead of the gift? Instead, if you want to tell somebody you appreciate them?

STANGER: Well, of course, if you can bake something that's always nice but be careful, there might be food restrictions. So make sure you don't make anything with nuts, say, and a nice, sincere, hand-written note is always appreciated. If you really can't fit this into your budget that will be appreciated. It's better than nothing.

ROMANS: I think that's a really good sentiment to end on. Tobie Stanger, "Consumer Reports," thank you so much for joining us, really appreciate it.

STANGER: Thank you.

ROMANS: OK, he's the man that doles out designer advice to Oprah Winfrey and now he's going to tell you how to decorate your home on a budget, next.

(COMMERCIAL BREAK)

ROMANS: Important news if you're renovating your home or thinking about it. Homeowners only recoup 60 percent of remodeling costs when they sell. A high-end kitchen is about the worst investment you can make. It just doesn't pay sometimes to pick up the hammer, but there are ways to update your home, right now, for little to no cost at all.

Our Stephanie Elam talked money and style with Oprah's design guru, Nate Berkus, host of the "Nate Berkus Show."

(BEGIN VIDEOTAPE)

STEPHANIE ELAM, CNN BUSINESS CORRESPONDENT: So Nate, when people are going to fix up their home, a lot of people go crazy on the sales. And I've seen some people doing that, some people in my own family, what do you say to that?

NATE BERKUS, THE NATE BERKUS SHOW: Here's the think, OK, Stephanie, the truth is this, when you're standing in that store with the army of sales people and they tell you it's 80 percent off and they will deliver it that second and that pair of orange chairs that you didn't leave the house wanting, don't buy it. Because it's the impulse buy, it's the impulse buy, and it's always on sale, that you end up paying more for it in the long run because you just can't make it work.

ELAM: And you kind of use it and it didn't really work?

BERKUS: Exactly.

ELAM: All right, so let's say you move into a brand new place and you've got nothing but empty walls and you want to cover them up very quickly.

BERKUS: She's talking about my fantasy.

ELAM: Yes, I know. Things you like, right? But the problem is some people want to just rush and fill them to up too quickly, though, right?

BERKUS: It's the worst thing you can do. It doesn't matter how much money you spend on design, if the home doesn't rise up to greet you, it's not filled with personal things, if it's not layered and assembled over time it's going to look like that.

ELAM: OK, let's say you're moving this afternoon. My husband and I got married, moving all our stuff together and you're trying to figure out what to keep, what are things that should go, what to give away. But you're saying some of this stuff you may be able to put into a different place in the house.

BERKUS: Yes, one of the things that I love to do is called "Moving Day" and it's when I look around my apartment and I think to myself, wow, would those nightstands, if I split them up, one could be, would those work as a side table in the living room? Would the chest of drawers that I've had in the closet be a cool option for the entry or for a sideboard in the dining room?

So it costs people nothing. But I love reimaging things in people's spaces. So it's about how you combine and work with what you have. It's the best place to start.

ELAM: All right, so let's just say, though, for some people they may not want their old stuff anymore, but maybe they should look at somebody else's old stuff?

BERKUS: Well, that's true, too. The thing is, again, a lot of people, their first instinct is they more or when they redecorate that everything has to be new. And I use about 80 percent vintage finds in all of my interiors. It doesn't matter if it's expensive, I can be. It can be from an antique store or an auction. But it can also from a flea market, form yard sale. Something you paint a different color and change the hardware. It's about not having not everything new in a space, because then it just feels new, as opposed to feeling assembled and thoughtfully built.

ELAM: OK, so tell me about this. Because this lamp, right here, right? This is something that is antique, right?

BERKUS: Yes, well, it's vintage, it's from the '60s, it's Italian. And it was something that I found at a antique's market. I do that everywhere I go around the country. The first stop is always the multi-dealer antique market -- and you meet a lot of great people that way, too. But I needed a little desk in here, not a huge, you know, scale desk, but this is actually from West Elm and it was a console table so I just cut the feet down so that it would be 30" high.

ELAM: So tell me if there's one big tip that people can do, just over the weekend, one thing that they could do to just spruce up their living room, what would be that tip that you would give?

BERKUS: I would say, clean that place up. You know what you are. You know who you are.

ELAM: I like that tip. I can actually pass that on to a few people I know?

BERKUS: Absolutely.

ELAM: Thanks so much.

BERKUS: My pleasure.

(END VIDEOTAPE)

ROMANS: All right, that's going to wrap it up for us, this week. Time now to send it back down to CNN Center for more CNN SATURDAY and this morning's latest news with my friend, T.J. Holmes.