Tax Roundup, 9/18/2013: No, the rich guy still isn’t buying. And non-phony scandals.

September 18th, 2013 by Joe Kristan

taxanalystslogoJoseph Thorndike gets a lot wrong in Two Cheers for a Government Shutdown (Tax Analysts Blog), but he gets one important thing exactly right (my emphasis):

 Democrats have been much less willing to defend discretionary government spending — the kind of spending that will grind to a halt during a shutdown. The discretionary portion of the federal budget has been slashed to the bone in recent years, and it’s slated for more slashing in the years ahead.

Those cuts are bad for the country in any number of ways. But until Democrats make the case against them, they’ll keep coming.

And here’s the most important point: Defending the value of discretionary spending also means defending the taxes that pay for it. Yet Democrats have been unwilling to defend taxation for decades. Ronald Reagan really was a transformative president — he changed not only the way Republicans talked about taxes, but the way Democrats talked about them, too.

Democrats have always liked taxing the rich. But for decades, they understood that you couldn’t tax only the rich. Anyone who thinks seriously about solving our long-term budget problems comes to the inescapable conclusion that taxes are going up for everyone. At least they will be going up if we hope to continue with a federal government that looks anything like the one we have today.

20121226-1Democrats have to embrace that fact. They have to defend the value proposition of progressive government, not just the feel-good politics of progressive taxation. 

I don’t buy for a moment that discretionary spending has been “slashed to the bone.”  Just visit your friendly money-bleeding post office, airport TSA line, high-speed rail boondoggle, solar subsidy disaster…  But he is exactly right when he points out that the rich guy isn’t buying.

 

Chart by the Tax Foundation

 

When the “Rogue Agents in Cincinnati” defense of the IRS in the Tea Party scandal was discredited, those attempting to minimize the scandal fell back to new defensive positions:

There is no evidence of partisan bias, and

Progressive groups were targeted too.

These assertions appear in a USA Today Story (via Instapundit), IRS list reveals concerns over Tea Party ‘propaganda’.

 Newly uncovered IRS documents show the agency flagged political groups based on the content of their literature, raising concerns specifically about “anti-Obama rhetoric,” inflammatory language and “emotional” statements made by non-profits seeking tax-exempt status.

More than 80% of the organizations on the 2011 “political advocacy case” list were conservative, but the effort to police political activity also ensnared at least 11 liberal groups as of November 2011, including Progressives United, Progress Texas and Delawareans for Social and Economic Justice.

Progressive outfits are unlikely to be caught by a screener looking for “anti-Obama” rhetoric. Given that “over 80%” of the groups picked for extra screening are right-side, it’s hard to accept that there is no political bias in the screening process.  Prior revelations have shown that the few left-side groups that were picked for extra scrutiny got very gentle treatment compared to their right-side counterparts:

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Nothing phony about this scandal, no matter how much some people devoutly wish otherwise.

 

TaxProf, The IRS Scandal, Day 132

Russ Fox,  IRS Scandal: Lerner, Others Re-Enter Spotlight

 

 

Lynnley Browning, Complying With U.S. Tax Evasion Law Is Vexing Foreign Banks (via the TaxProf).   It’s one more reason why foreign banks are closing their doors to U.S. expats, and why Americans abroad are turning in their passports.

 

Paul Neiffer,  IRS Has Two Sets of De Minimis Rules.  He is discussing final regulations issued last week on what purchases need to be capitalized, rather than written off as expenses:

The first set applies to companies with applicable financial statements (i.e. an audit) and allows the company to expense any fixed asset purchase that does not exceed $5,000.  The second set allows any other taxpayer to expense any fixed asset purchase that does not exceed $500.  Personally, I would have hoped this number would be closer to $2,500, but $500 is better than none.

The Regulations also provide for guidance to IRS agents that they can reach an agreement with a taxpayer during audit to use a de minimis number higher than the ceiling in the Regulations.

I think the distinction between audited financial statements is nonsensical, but at least taxpayers know where they stand.

 

Jason Dinesen: Having a Side Business in Multi-Level Marketing Doesn’t Make Personal Expenses Deductible.  It’s amazing how many people believe that it does.

 

Kay Bell,  Tax deadlines extended to Dec. 2 for Colorado flood victims

Tony Nitti, IRS Provides Tax Relief To Victims Of Colorado Storms   

Trish McIntire,  Disasters and Chutes and Ladders

TaxGrrrl,  2014 Tax Brackets, Exemption Amounts Likely To Save Tax Dollars   

William Perez,  Top Tax Rate Paid by Sole Proprietors by State

Brian Mahany,  Do You Have The Right To Rely on IRS Forms? Court Says “Maybe”

David Brunori, The Conundrum of Taxing Lots of Kids (Tax Analysts Blog)

 

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Phil Hodgen, Simplicity:

Reaching for $1,000X of tax savings frequently costs you $2,000X in accounting and legal fees to make the IRS all warm and fuzzy on your tax returns. We saw this last week where a prior year tax election was made that saved $5,000 (!) of tax, but so far has cost $40,000 to fix. Not to mention the time distraction for the principal of the venture.

That’s why I don’t care for things like C corporations that try to manipulate their income to use the lower tax rates when income is under $100,000.  You can save maybe a few thousand in taxes if you do it just right, but at the cost of professional fees and management time best spent elsewhere.

 

The Critical Question: Is the Spies Element for Evasion (i) Tax Deficiency or (ii) the Criminal Tax Number? (Jack Townsend)

 

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