Posts Tagged ‘Kevin Williamson’

Tax Roundup, 11/5/15: Congress, the H.R. consulting specialists! And: Zombiecare?

Thursday, November 5th, 2015 by Joe Kristan

20130113-3Maybe Congress makes a poor compensation committee. Some years ago, Congress decided that it knew how executives should be compensated better than corporation boards of directors. The Omnibus Budget Reconciliation Act of 1993 limited public company deductions for executive compensation to $1 million per year, per executive, except for “performance based” compensation.

Victor Fleischer says it’s past time to get Congress off the compensation committee in The Executive Paycheck Myth (via the TaxProf):

In my view, the obsession with pay-for-performance is overkill. A risk-averse executive seeking the quiet life — if indeed such a person ever existed — would not climb the corporate ladder today. The labor market for executives already rewards those who act over those who stand on the sidelines. A risk-averse executive will soon find himself out of a job and unable to find a new one.

Yet the tax code operates as if we need a special incentive to encourage risk-taking. Section 162(m) was enacted in 1993. Instead of reining in executive pay, the tax code sprinkles holy water on high-risk, high-reward compensation plans. To qualify for the deduction, companies must use instruments like stock options and performance share plans with asymmetric payout structures — lots of upside, no downside — that encourage excessive risk-taking.

I don’t really think 162(m) was passed to encourage risk taking. If you take the Senate committee report at its word, it was passed to cut executive pay:

Recently, the amount of compensation received by corporate executives has been the subject of scrutiny and criticism. The committee believes that excessive compensation will be reduced if the deduction for compensation (other than performance-based compensation) paid to the top executives of publicly held corporations is limited to $1 million per year.”

Congress arbitrarily decided $1 million was the maximum appropriate pay for running a business with market capitalization in the billions. But it left an out for “performance-based compensation.” Stock options are part of the “performance-based compensation,” so naturally option packages became a big part of executive packages.

Prof. Fleischer makes the case for repeal:

There’s a strong case for simply repealing Section 162(m). We don’t need the tax code to encourage chief executives to give up the quiet life.

Congress might even consider flipping Section 162(m) upside down for investment banks and other large financial institutions where excessive risk-taking creates large social costs.

Would Wall Street executives suddenly become timid and risk-averse, regressing to the fabled quiet life? I doubt it. The forces of the labor market will continue to produce executives who take risks, and boards will probably continue to structure pay that rewards them generously.

Repealing 162(m) would be a good start. A good next step would be to repeal Sec. 409A, a moral-panic set of restrictions enacted as a result of the Enron scandal that now functions mostly as a malpractice trap for attorneys and a potential disaster for employees whose employers inadvertently fail its baroque requirements.

Related: 409A: the worst single tax provision of the Bush era; Congress, meet unintended consequences




Kevin Williamson, Obamacare Is Dead. But it still walks the earth.  Zombies are a bad thing to have around.

Bob Vineyard, The Problem With Obamacare (Insureblog). “OK, in case you missed it, the healthy people are not buying coverage, but the sick ones are.”



Jason Dinesen, Taxation of Railroad Retirement Benefits

Paul Neiffer, Social Security Potpourri. ” If you live less than age 80, then starting at age 62 will pay the most.  If you live past age 80, then waiting to age 70 is usually the best.”

Russ Fox, Time Running Out on the Miccosukee Tribe’s Battle with the IRS. “Indeed, I’m all for fighting the IRS when they’re (imho) wrong. However, fighting quixotic battles when you are wrong isn’t a good idea.”

TaxGrrrl, Members Of Congress Speak Out Against Private Tax Debt Collections.

Robert Wood, If Clinton Foundation Fails To Amend Its Taxes, ‘What Difference Does It Make?’ “In general, and subject to timing constraints, one can correct tax mistakes by filing amended returns. However, sometimes the IRS views amended tax returns as too little too late.”

Del Wright, Section 6676 – the Problem Penalty (Procedurally Taxing). “Section 6676 provides generally that an erroneous claim for refund on an income tax return is subject to a 20% penalty, based on the ‘excessive amount’ of the penalty, i.e., the amount by which a taxpayer’s claim for refund exceeds the allowable claim.”

Peter Reilly, Taxing The Virtual World.  “The actions of third parties creating a secondary market in all those things in contravention of the terms of service turned World of Warcraft into a hybrid economy.”


Jack Townsend, Not Your Ordinary U.S. Taxpayer With Foreign Accounts. “The press release narrative is a bit cryptic, but states the key points — he cheated and lied to his estranged spouse and then to others including a court and federal agents.” When your drive with a carful of cash from Alaska to Panama and back results in a Department of Justice press release, that’s a good sign that it went awry.




Jeremy Scott, A Look Back at the Most Interesting Part of Bowles-Simpson (Tax Analysts Blog).

As a tax reform plan, Bowles-Simpson has been superseded by former House Ways and Means Chair Dave Camp’s H.R. 1, which also hasn’t garnered much support. But Camp didn’t really consider the most interesting part of the 2010 proposal: the elimination of the preference for capital gains.

Unless either ordinary gain rates come way down or corporation double taxation is eliminated, eliminating capital gain preferences strikes me as an awful idea.


Joseph Henchman, Voters in Five States Decide Tax-Related Ballot Initiatives (Tax Policy Blog). Coloradans voted to let the state keep an unexpected Marijuana tax windfall, but Ohio rejected an odd pot legalization scheme.

Howard Gleckman, Tax Reform Is Possible, But It Won’t be Easy (TaxVox). “As Breaux put it,’You’ve got to be able to sell it to members of Congress who don’t know the difference between a balance sheet and a tax return.'” Because that would get you a majority.

TaxProf, The IRS Scandal, Day 910.

Jenice Robinson, Tax Cut Crazy Talk (Tax Justice Blog). To the CTJ folks, that would be pretty much all tax cut talk.


The Critical Question. Are Sellers of Cheap Pizza Tax Scofflaws? (Jim Maule, Going Concern).

News from the Profession. Proposal Would Let Retired CPAs Take Their Three Letters Off Into the Sunset (Caleb Newquist, Going Concern).



Tax Roundup, 4/26/2013: The Earned Income Credit elephant in the room.

Friday, April 26th, 2013 by Joe Kristan
The Ultimate Swiss Army Knife. Flickr Image courtesy redjar under Creative Commons license.

The Ultimate Swiss Army Knife. Flickr Image courtesy redjar under Creative Commons license.

Christopher Bergin, Dilemma – The Earned Income Tax Credit (  An excellent summary of the problems with the tax law’s biggest welfare program:

Our politicians have tried to do too much through the tax law. And that has created a complicated mess of winners and losers that makes the task of trying to reform it, even to some level of sensible, a daunting one.The poster child for this mess is the Earned Income Tax Credit. Like it or not, the EITC is welfare administered through the tax system. Do we really want our tax system to do that?

The tax law works best if it is seen solely as a tool to finance the government.  Much of its hideous complexity comes from using it is the Swiss Army Knife of public policy.  As you add more gadgets it becomes less useful at being a knife.

Mr. Bergin isn’t afraid to mention the elephant in the room:

And there is another huge problem. The EITC program leaks like a sieve. More bluntly and honestly stated, well-intentioned as it may be, the EITC has been corrupted. Don’t take my word for it. Recently, the Treasury Inspector General for Tax Administration released a report stating that up to one-quarter of EITC payments made in fiscal 2012 were improper. How much does that represent? Try $13.6 billion. In one year. Using a ten-year budget window, that’s $136 billion, and that’s just the tainted stuff.

Supporters say the EITC is a program that “works.”  Can you say that something “works” when it sprays billions to thieves every year?

Read the whole thing.



 But the compliance costs imposed by the Marketplace Fairness Act would place smaller upstarts at a distinct disadvantage, which is, I suspect, one reason that market incumbents such as Amazon support the tax. The real cost of taxes is not the revenue out the door to the taxman; it’s the revenue out to the door to the taxman plus all of the costs involved in complying with the tax code.

Kevin Williamson, via Instapundit


Megan McArdle draws  Lessons from Curt Schilling’s Failed Business.  I would add one more: states shouldn’t finance private businesses.  Iowa hasn’t gotten the memo.

Peter Reilly,  How 38 Studios LLC Turned A CPA Into A Warrior


Paul Neiffer,  What About Those 1099s?!

Kay Bell,  Sony deal could help singer Lauryn Hill pay delinquent tax bill

Me: But how can we slap money launderers on the wrist if we don’t throw the book at widows?

Phil Hodgen,  How to Compute Net Tax Liability for Form 8854

Patrick Temple-West,  UK’s Cameron fights tax evasion, and more

TaxGrrrl,  H&R Block Offers Apology, Cash To Make Up For Filing Snafu

Howard Gleckman,  Will the Retirement of Max Baucus Open the Door to Tax Reform?


Jim Maule, When Taxes Are Cheaper:

And perhaps the short-sightedness and narrow-mindedness is compounded by  the “freedom” mentality that has taken such a hold in modern culture

Yes, let’s all get on board with the new hip “docile submission” mentality.  Because the government knows best!

David Cay Johnston,  Taxpayers Subsidize Rich Anti-Taxers (  Speaking up against the ALEC bogeyman.


It’s Friday, you aren’t being productive anyway.  Let’s Play a Game of Accountant/Not an Accountant! (Going Concern)



Tax Roundup: 1/8/2013: Iowa to issue mortgage credit certificates. And: got change for a trillion?

Tuesday, January 8th, 2013 by Joe Kristan



Dave Jamison

Iowa issuing new certificates for federal mortgage interest tax credits.  The Iowa Finance Authority yesterday announced that it will issue mortgage credit certificates that enable Iowans to qualify for the federal mortgage interest credit.  O. Kay Henderson reports:

The Iowa Finance Authority is offering a new tax credit for new homeowners who fall under limits on annual income and the purchase price of their home. Iowa Finance Authority director Dave Jamison says it’s a credit linked to the mortgage interest new homeowners are paying.

“Yet another way that Iowans who meet our program guidelines can experience the many benefits of home ownership,” Jamison says.

Iowans with the certificates may be able to claim the federal credit on Form 8396.  The IRS describes the credit here.  They note that interest that qualifies for the credit does not qualify for the home mortgage deduction.  You only qualify for the credit if you have a mortgage credit certificate from a qualifying agency; in Iowa, that agency is the Iowa Finance Authority.

The credit isn’t for everyone; there are limits based on income and home price.  From the O. Kay Henderson story:

Eligibility guidelines are different for each Iowa county. In the state’s largest county, Polk County, a couple with an annual income of up to $75,000 could qualify for the credit on a home that was purchased for $250,000 or less.

More from


Nick Kasprak, Monday Map: Percentage of Taxpayers with AGI over $500,000 (Tax Policy Blog)



Fiscal Cliff Notes

TaxGrrrl,  IRS Issues Statement On Tax Legislation, Makes No Promises About Start Of Tax Season:

The delay means that now, there are a lot of new forms to be printed, a lot of software programs to finagle. I’d be surprised – and wildly impressed, mind you – to see tax season kick off on time this year for all taxpayers. But fingers crossed, right?

I think the federal tax season won’t be too bad.  With all of the retroactive conformity problems in the new law, though, a lot of states are likely to give taxpayers fits.

Kevin D. Williamson,  You Cannot Raise Taxes on the Rich:

Tax hikes on the so-called rich may decrease the private sector’s share of income, but they probably will not do much to decrease the real income of high-wage workers and may in reality increase government revenue at the expense of low-wage workers in the long term, though it is very difficult to disaggregate the complex relationships between taxes, wages, and prices. But those who say that they are most interested in economic inequality would do well to follow Kenworthy’s example and look at transfers rather than taxes.

James Pethokoukis,  New study undercuts Obama’s income inequality argument

Washington’s tax hike on wealthier Americans won’t accelerate economic growth, won’t create jobs, and won’t lower the debt by an more than a rounding error. So what was the point of all that debate about the fiscal cliff? Why did President Obama insist on those upper-income tax increases, especially when the economy continues to struggle?

Simple: It was a way — even if mostly symbolic — of addressing what President Obama views as America’s biggest problem: rising income inequality.

A falling tide lowers all boats.

Freakonomics,  How Much Financial Inequality Is Due to Financial Illiteracy?  Is that illiteracy of the people who are unequal, or those who think it’s a big deal.

Jeremy Scott, Both Parties Should Have Pushed Payroll Tax Cut (

 Hani Sarji,  More Estate Tax Changes Could Follow Fiscal Cliff Deal (via the TaxProf)

Patrick Temple-West, More tax revenue to IRS before cliff, and more

 All the talk about the fiscal cliff and the inadequacy of the last-minute deal to avert it obscures one fact: It probably provided the government with tens of billions of dollars in unexpected tax receipts.

Many taxpayers accelerated income and deferred deductions anticipating the rate increases.

Wall Street Journal, The Stealth Tax Hike: Why the New $450,000 Income Threshold Is a Political Fiction:

Paul Neiffer, Fiscal Cliff Tax Bill May Increase Divorce Rate!


Russ Fox,  The Problem with PEOs.  No, not these PEOs.

Trish McIntire, More ITIN Info

Missouri Tax Guy,  Married Filing ….

Jack Townsend, HSBC Depositor Pleads Guilty to Conspiracy

Kay Bell, Tax moves to make in January 2013

I like the first half. Let There Be Wine (And Taxes)  (Jason Dinesen)

The Critical Question: Can You Distinguish a Tax from a Ransom Payment? (Robert Goulder,

I wasn’t serious about her anyway.  Ex-KPMG Chief to Auditors: You Are All Flirting With Irrelevance  (Going Concern)

Hope and change.  A lot of change, if you use it to buy coffee.   Should the President Mint a $1 Trillion Platinum Coin? (Megan McArdle)