Tax Roundup, 9/25/12: Pretty pictures of ugly truths. Plus: the most unlikely undecided ever.

September 25th, 2012 by Joe Kristan

The Tax Foundation has put together a wonderful “chartbook” of statistics on federal taxes.  Just flipping through the slideshow would increase the average congresscritter’s tax IQ by 100 points, to about 110.  It’s all great stuff, but I have favorites.  The charts and captions are by the Tax Foundation.

Chart 28. It is often said that raising top tax rates will have little effect on business activity because only 2% of taxpayers with business income will be impacted. However, the more economically meaningful statistic is how much overall business income will be taxed at the highest rates. In 2010, the vast majority (72%) of pass-through business income was reported by taxpayers earning more than $200,000. Millionaire tax returns earned 36% of all private business income while taxpayers with incomes below $100,000 earned just 12%.

Lesson: increasing the tax on “the rich” means increasing business taxes, reducing the ability of businesses to hire and grow.

And my favorite:

Chart 29. The federal deficit has grown so large that tax increases only on America’s millionaires will not be our silver bullet. Even if the government took all of the income earned by those who have an after-tax income of $1 million or more, the amount of revenue generated would fall far short of eliminating the deficit. The expected federal deficit for 2012 is about $1.2 trillion. The latest IRS data indicates that the total after-tax income for all millionaires is roughly $709 billion. If every penny of that after-tax income were taken by the government through a 100% tax rate, and we assume that no spending cuts are made to accompany the tax increase, this would account for only about 60% of the amount needed to erase the deficit. With numbers like this, one thing is clear: soaking the wealthy with increasingly higher tax rates simply cannot be the only answer to our nation’s fiscal problems.

Lesson: the rich guy isn’t buying.  Unless spending is reduced, the inevitable tax increase will fall on everyone, because the rich simply can’t cover the bill.  Politicians who pretend that our fiscal woes will be solved by taxing “the rich” just hope you are easily fooled.

 

Lawmaker questions incentives for Iowa fertilizer plant (Quad City Times).  Joe Bolkom (D, Iowa City), chairman of the Iowa Senate Ways and Means Committee, is not pleased with the incentive package for the Orascom fertilizer plant:

“We’d like to suggest that there was no reason to waste $250 million to convince this giant international corporation to essentially do what it was going to do any way. This is probably the worst economic development deal in the state’s history,” Bolkcom said. “We should have used this money to cut commercial property taxes for every Iowa business instead of giving this multi-national corporation this $250 million that we did not need to.”

I would suggest buying the Mercedes and Land Rover for the film producer might have been worse, dollar for dollar, but it’s debatable.   Naturally the Governor, who got the deal done, disagrees:

Branstad spokesman Tim Albrecht rebutted Bolkcom’s claims, saying the state needed to provide up to $110 million in tax credits to sway the company to bring the 165 permanent jobs, along with hundreds of construction jobs and other financial benefits — such as lower-cost fertilizer — to Iowa rather than seeing the project end up in Illinois.

I’m pretty sure the fertilizer will cost the same in Illinois.

 

TaxProf Paul Caron reports that Accounting Today has issued its list of the 100 Most Influential People in Tax and Accounting.  Once again I missed the cut, while the TaxProf, Max Baucus, Chuck Grassley and Doug Shulman all made the list.  I’m sure I remain one of the 100 most influential tax bloggers in Polk County.

 

Russ Fox,  Las Vegas Attorney Accused of Tax Evasion and Structuring:

Mr. Goldberg is accused of keeping two bank accounts.  There’s nothing wrong with that. However, he’s being accused of only including the deposits from one of the two accounts on his tax returns.   Adding to his troubles is that he’s being accused of “structuring” bank deposits.  Structuring is adjusting your bank deposits of cash deliberately so as to avoid currency transaction reports (CTR).  If you make a deposit of $10,000 or more of cash, the bank will file a CTR.  Mr. Goldberg is being accused of structuring bank deposits 147 times.

Bank employees are trained to spot “structuring” and are required to report it.  If you do it 147 times, the chances of not getting spotted become vanishingly small.

 

Janet Novack,  Judge Shoots Down Another Forbes 400 Member’s Tax Shelter

William McBride,  Is it True that “Just About Everyone” Eventually Pays Income Tax? (Tax Policy Blog)

Peter Reilly,  Dependency Exemptions – Divorce Court Orders Not Binding On Tax Court

Jason Dinesen, Should a Small Tax Firm (Or Any Small Business) Pretend to Be Bigger than They Are?

Anthony Nitti,  IRS Rules That State Law Doesn’t Dictate Whether Two Properties Are Like Kind

Kay Bell,  Payroll tax cut on its last legs

William Perez,  Year-End Tax Planning for College Expenses

Shock!  Robert D. Flach is undecided!  MY DILEMMA

Critical questions for $200, Alex.  Great unintentional juxtaposition at Tax.com this morning:

That is indeed a critical question.  If “they” are Congress and the answer is “no,” be very afraid, because this is what they do sober.

 

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