Don’t forgive them, because they have no idea what they’re doing. Last night I taught a session on the Fiscal Cliff tax law and the Obamacare Net Investment Income tax to Iowa chapters of the Institute of Management Accountants over the Iowa Cable Network. Using the controls to talk to remote classrooms in Marshalltown, Dubuque, Marion and Cedar Falls was a challenge, but a piece of cake compared to working with the tax law.
When they passed the Net Investment Income Tax as part of Obamacare, there were only two concerns for the guilty congresscritters:
– Did it apply only to “the rich,” as defined that day? and
– Did it raise enough revenue for them to help them pretend that they weren’t raising the deficit?
Nobody who voted for the bill took the time to ask: “should we really set up an all-new tax, unlike anything we have ever done before, requiring all new regulations and recordkeeping requirements, just to collect 3.8% of something?” And that’s exactly what they did.
If you have any illusions that they have any clue what they are doing, a look at the new bracket schedule for 2013 for single filers should cure you of that:
If taxable income is: The tax would be: -------------------- ---------- Not over $8,925 10% of taxable income Over $8,925 but not $892.50 plus 15% of the over $36,250 excess over $8,925 Over $36,250 but not $4,991.25 plus 25% of the over $87,850 excess over $36,250 Over $87,850 but not $17,891.25 plus 28% of the over $183,250 excess over $87,850 Over $183,250 but not $44,603.25 plus 33% of the over $398,350 excess over $183,250 Over $398,350 but not $115,586.25 plus 35% of the over $400,000 excess over $398,350 Over $400,000 $116,163.75 plus 39.6% of the excess over $400,000
Notice something funky about that 35% bracket? It covers only $1,650. While you have to earn $215,100 to get through the 33% bracket, you skip through 35% to 39.6% with only $1,650 of additional income. Why? Because the administration wanted to only tax “the rich,” and they decided for that day that “rich” starts at $400,000 income, if you are single.
The only sure cure is to make congresscritters, the President, and the Cabinet prepare their own returns in a live webcast, with a comment bar for viewers to mock them. It would serve them right if they had to do it a la Robert Flach, with no computer.
What could you do with six billion hours?
Think hard. That’s the equivalent of 8,758 lifetimes. Yes, lifetimes.
It’s also how much time taxpayers spend every year trying to comply with tax filing requirements. That, according to the 2012 annual report as prepared by the National Taxpayer Advocate Nina E. Olson.
It’s not getting easier, either.
Martin Sullivan, Tax Reform Muddle (Tax.com):
Having agreed to tax increases, Republicans are now more insistent than ever that tax reform must be revenue neutral.
The big change is from Democrats– who have become so adamant on the need for tax increases in addition to the $600 billion raised by the fiscal cliff deal, and who realize additional rate hikes are absolutely impossible–are hell-bent on preserving the most politically feasible loophole closers for raising revenue.
It’s a hopeless game. The deficit is too big to deal with by “loophole closers.” Behind the push to raise taxes by closing loopholes is a delusion that you can pay for our incontinent government spending just by hitting “the rich” harder. But the rich guy can’t cover the check. Either spending comes down or everyone pays a lot more tax.
Nick Kasprak, Chart: Effects of Marriage on Income and Payroll Tax Liability (Tax Policy Blog)
Paul Neiffer, Section 179 Can Create a Farm Loss (In Certain Cases)
Christopher Bergin, Permanent Insanity: “Only in Washington would you find folks who would brag that they did a good thing by making permanent an unfair and indecipherable tax system that wastes billions of dollars to administer.” (Tax.com)
Norton Francis, What the Fiscal Cliff Deal Means for the States (TaxVox):
The good news for states is that American Tax Relief Act of 2012 will end much of the uncertainty that has plagued the income tax code in recent years. No longer will states have to guess what will happen to many provisions of the federal revenue code that were set to expire. The bad news is some states will lose revenue they were counting on from
scheduled changes in the federal estate tax that won’t happen.
Trish McIntire, Refund Loans
Patrick Temple-West, Public goals, private interests in ‘Fix the Debt’ campaign, and more
Jack Townsend, Bank Leumi Signals Cooperation with U.S. on Offshore Accounts. Israili bank ready to spill the beans on U.S. taxpayers with accounts there.
A Friday Buzz from Robert D. Flach.
The Critical Question: Shipping Wars’ Token Hot Chick Is a Former Accountant? (Going Concern)