If you are going to say the dog ate your tax records, make sure you have a dog. A New Jersey man was having a hard time coming up with records supporting his deductions in Tax Court. He blamed a fire. The success of the argument can be guessed from the Tax Court’s discussion of “Petitioner’s Alleged Fire”:
The circumstances surrounding petitioner’s purported fire are vague, and he has offered no evidence, apart from his testimony, that a fire occurred and that his 2006 tax records were destroyed in such a fire. Significantly, he failed to introduce insurance documentation or third-party testimony describing the alleged events or the extent of any fire.
The Tax Court said the man couldn’t support his deductions.
The Moral? Back up your work. And if you are going to have a fire, something needs to actually burn. (Cite: Mears, T.C. Memo 2013-54)
It looks like the dreaded automatic “sequestration” spending cuts are going to happen, so there is a flurry of proposals to stop this sliver of random spending discipline:
Martin Sullivan, A Proposal to Get Tax Reform Back on Track:
Before earmarking what we will do with the money from limits on chimerical loopholes, our leaders need to clear the path for the painful process of broadening the tax base. President Obama has now poisoned the well by turning Republicans’ tax reform instincts against them. If they were to put any revenue increases on the table, the President would claim the proposals have the Republican seal of approval and incorporate them into his tax hike plans.
At the same time Republicans tax reform strategy is wearing thin. Their extravagant claims about cutting the top individual rates below 30 percent are just hollow speechifying as long as they refuse to put specific revenue-raisers on the table.
Jeremy Scott, Simpson-Bowles Try Again (Tax.com):
Simpson-Bowles is just another deficit reduction plan — and a politically infeasible one at that. Its authors want to make it seem grander by attaching tax reform to it, just like Obama wanted his own proposals (which simply include ways to raise revenue that Democrats have proposed ad infinitum over the years) to sound better when he mentioned tax reform at least three times during the State of the Union. But what they are offering isn’t comprehensive enough to qualify as true tax reform. Deficit reduction has its place, but conflating it with tax reform will stall whatever momentum people like Camp are trying to create for a true tax system overhaul.
They just aren’t serious yet.
Howard Gleckman, Bowles-Simpson II: A New Plan to Avoid the Sequester (TaxVox)
Patrick Temple-West, Simpson, Bowles revive deficit plan, and more
High taxes are good for us, so infinite taxes will make us perfect. The high-tax advocacy group Citizens for Budget and Policy Priorities has generated a paper that says that state tax cuts do no good:
This paper argues that state personal income tax cuts won’t help small businesses create jobs, and in fact could harm the ability of the small-business sector to contribute to economic growth. For all the reasons stated in this paper, the converse is also true: personal income tax increases, including those on the highest earners, won’t harm small-business job creation.
Really? There is no level of taxation that would discourage economic activity? There is no level of tax increase that would cause economic activity to be located in a neighboring state with lower taxes?
The paper makes the same mistake as the guy who drowned trying to wade across the river that was only two feet deep, on average. You can see it on the headings of the paper: “The vast majority of those who would get a personal income tax cut are in no position to create small-business jobs.” “Most small businesses make too little money for tax cuts to produce enough income to pay new employees.” “Most small business owners are not significant ‘job creators’ and have no plans to be.”
This is the same logic we heard when we were told that individual tax increases wouldn’t hurt business because most small businesses wouldn’t be affected. When you define “small business” to include your office Avon Lady and a manufacturer with dozens or hundreds of employees, of course “most” businesses won’t hire more if taxes are lower. Just the ones that matter.
Sure, relatively few businesses achieve enough success to hire a lot of employees. Yet some do, and they do a lot of hiring. And, contrary to the CBPP paper, their ability to expand does shrink if they have to pay more taxes. As a tax accountant, it’s part of the world I live in. Prices matter in making decisions — including the price of living, doing business and paying taxes in a state. Any argument to the contrary has to overcome the basic rule of economics that incentives matter.
Trish McIntire, FASFA?
Going Concern, The IRS Is Wasting Millions on Unused Blackberrys and Aircards Because Of Course It Is. Meanwhile they prepare to lay off their useful employees when sequestration hits.
Tags: CBPP, Going Concern, Howard Gleckman, Jack Townsend, Jacob Sullum, Jeremy Scott, Judge Thornton, Kay Bell, Martin Sullivan, Patrick Temple-West, Paul Neiffer, Robert Goulder, tax court, Tax Trials