Posts Tagged ‘megan mcardle’
Tuesday, May 21st, 2013 by Joe Kristan
Iowa’s elected leadership has come up with a deal to bring down Iowa’s high commercial property taxes in exchange for an increase in Iowa’s earned income tax credit. The Democrats who control the Senate have long been pushing for an increase in the EITC, and this seemed like an obvious compromise from early in the session. There will be much rejoicing if the deal gets completed, as appears likely; property tax reform has been the Governor’s highest legislative priority.
It’s too bad that the cost of a sensible property tax is a big increase in a program that is a poverty trap for honest taxpayers and a pinata for thieves. The phase-outs of the EITC result in shockingly-high marginal tax rates on each additional dollar earned by relatively low-income taxpayers.
The EITC is refundable, which means it is really a welfare program run through tax returns. About 25% of the EITC is claimed “improperly,” which is a nice way to say it’s stolen. The annual cost of the Iowa EITC boost is estimated at $35 million, so the price of fixing a broken commercial property tax regime is an $8 million annual thief subsidy. So while the politicians celebrate their great compromise, Iowa’s petty thieves also have occasion to raise a glass, filled by you.
TaxProf, Supreme Court Unanimously Reverses Third Circuit, Says PPL Can Claim Foreign Tax Credit for U.K. Windfall Tax and Avi-Yonah and Christians on Yesterday’s PPL Decision.
Jeremy Scott, Rand Paul’s Claim of “Written Policy” Seems Like GOP Overreach.
It is unlikely that Republicans will find Paul’s smoking gun, but the IRS scandal is almost certainly the result of political bias on some level. It is hard to believe that a group of officials would innocently pick terms like “Tea Party,” “patriot,” and “9/12” to single out organizations for additional scrutiny. It would be incredible to find such disinterested tone-deafness even in the most politically insulated of civil servants (and the IRS is far from insulated).
I doubt the White House left fingerprints on IRS efforts to harass political opponents (though it didn’t lift a finger to stop it). That leads to an even more depressing possibility: that the IRS went out its way to beat up on the President’s opponents on its own. Nobody blew the whistle. That means IRS management is so corrupt and political that it would go after the administration’s political opponents with only a wink and a nudge. And anybody who doesn’t think this was politically-motivated is kidding themselves.
James Taranto puts it well:
And the IRS scandal was a subversion of democracy on a massive scale. The most fearsome and coercive arm of the administrative state embarked on a systematic effort to suppress citizen dissent against the party in power. Thomas Friedman is famous for musing that he wishes America could be China for a day. It turns out we’ve been China for a while.
No-longer-Acting IRS Commissioner Steven Miller
Megan McArdle, Yes, What Happened at the IRS is a Scandal
Russ Fox, The IRS Scandal Reaches the White House
TaxGrrrl, IRS Hearing Marks End Of Their Worst.Week.Ever But Congress Signals More Hearings Are On The Way
Kay Bell, House and Senate committee hearings on IRS screening of Tea Party tax-exempt applications set for May 21 & 22
ViralRead, Report: Head of IRS Employees Union Met With President Obama the Day Before Tea Party Targeting Began
The Other McCain, Portrait of a Thug: IRS Union Boss
Peter Reilly, Bank Cannot Issue 1099-C And Subsequently Try To Collect
Jason Dinesen, Same-Sex Marriage, Community Property, And Multi-State Income — Part 3
Fiduciary Income Tax Blog, Passive Income: Good or Bad?
Paul Neiffer, A Farmland REIT is Now Publicly Traded
Stephanie Fitch, 5 Questions Congress Should Ask Obama Commerce Nominee Penny Pritzker
William Perez, IRS Offices to be Closed on May 24
Linda Beale, How Apple avoids US taxes with shell games
Going Concern, Last Year Was a Very Unfortunate One to Be Wealthy and French, Even By French Standards. When marginal rates exceed 100%, you know a country is off the rails.
Robert D. Flach has a new Tuesday Buzz up!
The Critical Question: NFL Linebacker James Harrison Spends More On Massage Than You Did On Your House. But Can He Deduct It? (Tony Nitti)
Tags: Anthony Nitti, Branstad tax policy, EITC, Fiduciary Income Tax Blog, Going Concern, Linda Beale, Martin Sullivan, megan mcardle, Paul Neiffer, Peter Reilly, Robert D Flach, Russ Fox, Stephanie Fitch, TaxProf, The Other McCain, William Perez
Posted in Eye on the Legislature, Eye on the Legislature 2013, Tax Roundup | No Comments »
Monday, May 13th, 2013 by Joe Kristan
If the IRS hoped Friday’s “apology” for giving extra special attention to tax-exemption applications of right-side groups would settle things, they’re very disappointed this weekend. The Washington Post reports that the Treasury Inspector General for Tax Administration will soon issue a report saying Friday’s apologizer, IRS Director, Exempt Organizations, knew this was going on in 2011. Meanwhile, in 2012 IRS Commissioner Doug Shulman was still testifying that IRS was not picking on the Tea Party.
So not only was the Shulman era at IRS grasping, incompetent and casually cruel, it was dishonest.
The Tax Prof has a fresh roundup, The Deepening IRS Scandal.
Another Washington Post story has this:
At various points over the past two years, Internal Revenue Service officials singled out for scrutiny not only groups with “tea party” or “patriot” in their names but also nonprofit groups that criticized the government and sought to educate Americans about the U.S. Constitution, according to documents in an audit conducted by the agency’s inspector general.
The documents, obtained by The Washington Post from a congressional aide with knowledge of the findings, show that the IRS field office in charge of evaluating applications for tax-exempt status decided to focus on groups making statements that “criticize how the country is being run” and those that were involved in educating Americans “on the Constitution and Bill of Rights.”
Yes, we sure need to keep an eye on those wingnuts who want to educate people on the Constitution and Bill of Rights. Dangerous lunatics, they are!
There is so much blog coverage of this that I won’t even try to round it all up. A few links from our blogroll:
Megan McArdle, Why Did the IRS Target Conservative Groups?
Going Concern, Footnotes: Tea Party Patriots to IRS: Drop Dead
TaxProf, Schmalbeck on the IRS ‘Targeting’ of Conservative Groups, where an academic gives a ”nothing to see here” take, one that is already largely overtaken by events.
And some other coverage:
Connor Simpson, Why the IRS Abruptly Apologized to the Tea Party (via Instapundit):
The report doesn’t shay whether or not Shulman was informed about the Tea Party questioning, but it does show the IRS’s chief counsel was. It’s standard procedure for the counsel and commissioner to discuss this sort of thing before a Congressional hearing.
If so, The Worst Commissioner Ever can only plead incompetence instead of lying to Congress.
Reason.com has a bunch of posts at their Hit and Run blog, including Matthew Feeney, IRS Scrutiny Extended Beyond Tea Party Groups (Reason.com); Jesse Walker, A Brown Scare at the IRS?; Matt Welch, NY Times: IRS Targeting of Tea Party Only Proves Republicans Are Desperate “It’s the inability to see discrete news events for what they are, rather than what they might mean for the neverending scrum between Teams Red and Blue.”
Jonathan Adler, IRS Scrutinized Teaching the Constitution (Volokh Conspiracy)
Professor Bainbridge, Wider Problems Found at IRS – Twisting slowly in the wind
William Jacobson, IRS anti-Tea Party scandal gets real — senior IRS officials aware of targeting (Update – Chief Counsel knew and targets expanded to groups “educating on the Constitution and Bill of Rights”)
Katrina Trinko, Rubio: IRS Commissioner Should Resign Immediately (The Corner)
Ann Althouse has more.
And here’s my take from Friday, if you missed it: Look at a celebrity return? You’re fired! Harass a Tea Party outfit? Carry on.
In other news:
Nina Olson, IRS Taxpayer Advocate, has an article in Tax Analysts (via the TaxProf) affirming her support for taxpayer regulation. Ms. Olson has done much good work as Taxpayer Advocate, but her support for increased preparer regulation is economically uninformed and hopelessly wrongheaded.
Russ Fox, IRAs and Owning a Business Through an IRA and What Can Go Wrong? Nevada Democrats Want to Give Tax Breaks to Movie Industry
Peter Reilly, Brooklyn Grandmother Wins On Dependency Exemption. Just in time for Mothers Day!
TaxGrrrl, IRS Set To Close Next Week. Bad news: it’s only temporary.
Trish McIntire, Max and Dave Looking for Reform
Nick Kasprak, Do Tax Cuts Pay for Themselves?
Patrick Temple-West, Falling deficit alters budget debate, and more
Linda Beale, Orrin Hatch on tax reform at the ABA–a predictable right-wing rant
Andrew Mitchel, Barnes Group – Structured Repatriation Was a Dividend. In spite of the best efforts of national tax firms.
Phil Hodgen, Decline of American Civilization, Form 8938 Edition. “Let’s just bury the world in useless paperwork, shall we?” That does appear to be the plan.
Kay Bell, IRS reports gains in criminal tax, other financial investigations
Jack Townsend, Cheating is Cheating, Except When Offshore Accounts Are The Means, followed up with More on Conviction Rates in Tax Cases.
Janet Novack, Independent Contractor Enforcement: There’s More Than The IRS To Fear. Plenty of state rules and taxes also come into play.
Jim Maule, The Complexities of Tax: Is This Really Necessary? “A recent IRS private ruling, PLR 201318003, illustrates how the special low rates for capital gain adds layer upon layer of complexity to the tax law.”
I’d like to report a hijacking. It looks like somebody at Tax Analysts forgot to renew their ownership of the tax.com domain name. Going there this morning gets this:
Tax.com is (has been?) home to the great group blog featuring, among others, David Brunori, Christopher Bergin, David Cay Johnston, Martin Sullivan, Cara Griffith and Clint Stretch. I hope this is only a temporary hijacking.
Tags: Althouse, Andrew Mitchel, Connor Simpson, Going Concern, Jack Townsend, Janet Novack, Jesse Walker, Jonathan Adler, Katrina Trinko, Kay Bell, Linda Beale, Matt Welch, Matthew Feeney, maule, megan mcardle, Nick Kasprak, Nina Olson, Patrick Temple-West, Peter Reilly, Phil Dodgen, Professor Bainbridge, Russ Fox, Shulman, tax administration, tax.com, TaxGrrrl, TaxProf, Trish McIntire, William Jacobson
Posted in Tax Roundup | No Comments »
Tuesday, May 7th, 2013 by Joe Kristan
Be careful what you wish for. The WashingtonPost reports: “Senate passes bill letting states tax Internet purchases, siding with traditional retailers“ Congratulations on helping your most fearsome competitor, Main Street.
Megan McArdle explains why Amazon is actually lobbying for the bill. Not only is Amazon big and easily able to afford the added compliance costs, but paying sales tax is a necessary cost of their plan to dominate retail with same-day delivery:
Why the shift?
Because, whatever the history, Amazon’s competitive advantage no longer derives from its tax-free status. Amazon is the cost leader on most products even before you add in sales tax. They’re a marketplace killer because their giant warehouses are vastly more efficient than even a big box store…
Next day and same day delivery will increasingly become the norm, especially in urban areas. But to pull more business from bricks-and-mortar, Amazon warehouses will become a little big more like big box stores: nearer and more numerous.
That’s the tax law in its glory and majesty — giving the same sales tax compliance responsiblities to a nimble, powerful publicly-traded giant and a guy selling stuff out of his basement.
Related coverage of Amazon’s plans here. Also: Internet sales taxes and Red Vines
Tags: Amazon taxes, megan mcardle
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Tuesday, May 7th, 2013 by Joe Kristan
Lauryn Hill’s parents are 150 years old! The singer received a three-month prison sentence yesterday for failing to file tax returns, but the New Jersey native still may struggle with math, according to the reliable source of tax news, TMZ.com:
“I was put into a system I didn’t know the nature of. … I’m a child of former slaves. I got into an economic paradigm and had that imposed on me,” Hill said.
She continued, “I sold 50 million units … now I’m up here paying a tax debt. If that’s not likened to slavery, I don’t know what is.”
As slavery was eliminated nearly 150 years ago with the passage of the
13th Amendment, Ms. Hill either has difficulty with arithmetic or remarkable parents. The slavery analogy is interesting. So if tax is slavery, is President Obama the chief slave driver? The IRS Commissioner? Can we be sold down the river? To who?
Ideas that would work perfectly well in song lyrics can sound so wrong in court. The artist describes feelings, impressionistically. It’s in no way an excuse or justification. But sometimes artists/politicos use court as a forum for expression without any expectation that it will advance their legal cause. One can intelligently and consciously eschew persuasion and victory.
Perhaps. Still, sometimes celebrities just say strange things.
It’s Tuesday, so it’s Buzz day at Robert D. Flach’s place!
Area cat lady ridicules cat tax proposal (Going Concern)
Tags: Anthony Nitti, Going Concern, Jacka Townsend, Jen Carrigan, Jeremy Scott, Kay Bell, Ken Lay, megan mcardle, Patrick Temple-West, Peter Reilly, Robert D Flach, Russ Fox
Posted in Tax Roundup | No Comments »
Wednesday, May 1st, 2013 by Joe Kristan
Flickr image of Norwegian Forest Cat courtesy don.banane under Creative Commons license.
Do tax authorities hate the arts? Megan McArdle, in The Taxman Cometh, explains that the tax man is just fine with artists — to a point.
She discuss a sad story in Minnpost.com about a artist couple who have been battling over “hobby loss” issues with the Minnesota Department of Revenue. The story quotes one of the artists:
The tone of all these proceedings have been completely anti-art. There has been an emphasis on creating a product, advertising it for sale, and then selling it. That’s not how it works on the creative end of literature. Writers need to spend a long time writing, getting feedback, moving up the levels of critique, and then they participate in the publishing industry by sending things out to publishers. One tries for the prominent ones first, gets rejected many, many times, and eventually finds a press and an audience.
Ms. McArdle thinks the problem isn’t an aversion to art: it’s that “the couple in question are not actually making any money:”
Business expenses are not supposed to be subsidies for doing something we think is important or valuable. (We do have some of those items in the tax code, too, but Schedule C is not where they normally go.) Business expenses are supposed to be the expenses necessary to generate the profit upon which you pay taxes to the government.
The tax department will disallow your expenses if the auditor deems that 1) the expenses are unnecessary to making a profit or 2) there is no profit.
Close. She’s completely right that business expendutures must be, as the law puts it “ordinary and necessary” for the business. That’s why, for example, an accounting firm might have difficulty deducting expenses for an executive dirigible.
Saying that there is no deduction if “there is no profit” overstates the case. It’s the taxpayer’s “intent” to make money that counts.
Plenty of businesses come and go without ever making a dime, but their expenses may still be deductible. Trouble starts if the losses go on and on, with no obvious prospect for a turnaround — but with continuing prospects for sheltering other taxable income of the business owners. A classic example is the West Des Moines case of a couple who raised Norwegian Forest cats. Over three years the taxpayer claimed less than $3,000 in revenues while deducting over $190,000 in cattery expenses. This offset taxable income from a separate profitable IT consulting business.
The Tax Court judge explained the tax law rules (my emphasis):
Thus, the issues in the final analysis turn upon the question of whether during the years in question the petitioner and the corporation had the requisite intent or motive of making a profit. Intention is a question of fact to be determined not only from the direct testimony as to intent, but a consideration of all the evidence, including the conduct of the parties. The statement of an interested party of his intention and purpose is not necessarily conclusive.
In other words, talk is cheap. It’s what you do that matters. If you continue to adjust your business to find a way to make profits, trim unprofitable lines, keep good records, and follow a reasonable business plan, the tax law cuts you some slack, even with multiple loss years. If at a reasonable point you realize you aren’t going to make money, close the doors, and cut your losses, you probably are fine. But if the losses go on forever with no changes in the business plan, while reducing taxes you would otherwise pay on other income, expect the tax authorities to get upset.
To me the most interesting thing about this article is that, like in Iowa, Minnesota tax officials are raising hobby loss issues on their own. States usually limit themselves to examining state-only issues, like residency. As states become more desparate for revenue, we can expect more of this.
As for supporting the Arts, we staked out our vision of what the tax law can do back in 2005.
Related: IRS.gov, Is Your Hobby a For-Profit Endeavor?
Tags: hobby losses, megan mcardle
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Friday, April 26th, 2013 by Joe Kristan
The Ultimate Swiss Army Knife. Flickr Image courtesy redjar under Creative Commons license.
Christopher Bergin, Dilemma – The Earned Income Tax Credit (Tax.com). 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.
Fairness:
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 (Tax.com). 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)
Tags: Christopher Bergin, Curt Schilling, David Cay Johnston, Going Concern, Howard Gleckman, Instapundit, Kay Bell, Kevin Williamson, maule, megan mcardle, Patrick Temple-West, Paul Neiffer, Peter Reilly, TaxGrrrl
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Friday, April 19th, 2013 by Joe Kristan
More evidence that preparers are out of control and need IRS employees to keep an eye on them: 24 IRS Employees Indicted for Theft of Government Benefits (TaxProf).
24 current and former employees of the Internal Revenue Service have been charged for crimes relating to fraudulently obtaining more than $250,000 in government benefits.
Thirteen of the current and former IRS employees have been charged federally with making false statements to obtain unemployment insurance payments, food stamps, welfare, and housing vouchers. All thirteen, individually charged in separate indictments, are alleged to have falsely stated that they were unemployed while applying for or recertifying those government benefits.
They may have been right about being unemployed, just wrong about the timing.
We have to show the government our returns, so it’s only fair: Iowa Gov. Branstad plans to show income tax returns to reporters (AP)
Howard Gleckman, What Ever Happened to State Tax Reform? (TaxVox)
Kay Bell, Obama’s 2012 effective tax rate was 18.4 percent; Now what do your members of Congress pay in taxes? Make them do their returns on a live archived webcast, with a rolling comment bar.
Peter Reilly, How Not To Care About IRS E-mail Snooping
William Perez, IRS Provides Penalty Relief Due to Boston Marathon Explosion and Storms in South and Midwest
Patrick Temple-West, Tax extension after Boston attack, and more (Tax Break)
Russ Fox, RS Gives Extra Three Months for Filing and Payments to Boston-Area Taxpayers; Massachussetts Deadline Should be the Same
TaxGrrrl, So You Missed Tax Day, What Next?
Andrew Mitchel, Code §911 Foreign Earned Income Exclusion – Adverse Conditions
Freakonomics Blog, The History of Taxes
Megan McArdle, Our Tax Code is Too Complicated. Here’s How to Simplify It. ”Get rid of the corporate income tax. It’s not worth it, and there are better ways to collect the money.”
Janet Novack, Tax Geeks: Make Tax Filing Easy, Kill The Mortgage Deduction, Tax CPAs
Jim Maule, Tax Compliance and Non-Compliance: Identifying the Factors
Trish McIntire, You Need the Numbers Before You Do the Return
Scott Drenkard, Perry Calls for Reforms of Texas’ Margin Tax (Tax Policy Blog). It could use it.
Christopher Bergin, It Just Isn’t Fair (Tax.com):
The headline producing data in the report was that revenue loss – about $181 billion – from corporate tax expenditures in 2011 was “approximately the same size as the amount of corporate income tax revenue the federal government collected that year.” That makes a headline grabber; here would be my version: “Corporations Got More in Tax Breaks Than They Paid in Taxes, Government Says.”
It’s almost like the tax exists only so the politicians can carve loopholes for their friends.
Indeed. It’s Rarely a Good Sign When a Tax Prep Business Closes Its Doors Three Days Prior to April 15th (Going Concern)
Just plead “miseducation” and leave it at that. Lauryn Hill asks judge for leniency in upcoming tax evasion sentencing claiming she failed to file taxes due to threats and withdrawal from society (dailymail.com.uk)
Tony Nitti, Girl, You Know You Better Watch Out: Singer Lauryn Hill To Be Sentenced On Tax Evasion Charges
Jack Townsend, Bank Frey Executive and Swiss Lawyer Indicted
How I spent April 15. (Marketwatch, via Going Concern). I approve of the comment at the bottom of the GC post.
Me too. Tax Season 2013: Mostly Unpleasant, And I’m Glad It’s Over (Jason Dinesen)
Robert D. Flach returns! THAT WAS THE TAX SEASON THAT WAS 2013
Me: Back to work.
News you can use. Hone your corporate tax evasion skills (Boston.com)
Tags: Andrew Mitchel, Anthony Nitti, Christopher Bergin, Freakonomics, Going Concern, Howard Gleckman, Jack Townsend, Janet Novack, Jason Dinesen, Jeremy Scott, Kay Bell, Lauryn Hill, maule, megan mcardle, Patrick Temple-West, Peter Reilly, Robert D Flach, Russ Fox, Scott Drenkard, tax crime, TaxGrrrl, Trish McIntire, William Perez
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Thursday, April 11th, 2013 by Joe Kristan
Iowa Senate Republicans advance income tax plan. TheGazette.com reports:
Sen. Randy Feenstra, R-Hull, said all 24 minority Senate Republicans have signed onto a proposal to significantly lower state personal income tax rates and simplify the Iowa tax code by offering a two-pronged approach that would eliminate federal deductibility and benefit most Iowans.
…
The Hull Republican said the proposed new tax structure would flatten the current nine income tax brackets into three, elimination of federal deductibility as a competitive impediment, enhance the current standard deduction for all taxpayers and provide an extra boost for blind, elderly and dependent Iowans, eliminate itemized deduction, increase personal exemption credits, and raise filing thresholds.
So far I have been unable to find the bill (though it being April 11, I’m not going to spend a lot of time looking for it today). As Senate Republicans have no chance of advancing a bill in the face of majority Democratic opposition, it’s really a gesture. Still, it’s nice to see that income tax reform remains alive, in spite of the Governor’s indifference this year. It’s also nice to see that the insistence on keeping the deduction for federal taxes is eroding. Much better to build it into a lower rate.
If they keep talking taxes, they may finally see that The Quick and Dirty Iowa Tax Reform Plan is the way to go!
Radio Iowa has more.
Megan McArdle, “Tax Breaks for Corporate Jets”: The Non-Issue at the Heart of the Presidential Agenda:
This is a bit weird given that President Obama rides on what is essentially the nicest corporate jet in the world. To be fair, the President is quite right that companies do not need a tax break to buy corporate jets. But since they don’t really get a tax break for buying corporate jets, we probably don’t need to spend this much valuable presidential time worrying about this non-problem.
Anything to make life difficult for a high-tech U.S. manufacturer. As long as the President continues to beat dead horses like this and the “Buffett Rule,” we know he is not at all serious.
Tony Nitti, Tax Aspects Of The President’s FY 2014 Budget
Howard Gleckman, The Real 2014 Budget Battle May Be Over Spending, Not Taxes
William McBride, President Obama’s 2014 Budget Takes another Whack at Savers (Tax Policy Blog)
Paul Neiffer, Here We Go Again!
Cara Griffith, Crafting a Better Mainstreet Fairness Act? (Tax.com)
By enacting it? How Democrats Will Destroy Progressive Government (Joseph Thorndike, Tax.com):
Sure, Democrats pay lip-service to infrastructure, education, and the like. But for the most part, they are profoundly unwilling to make a wholistic case for activist, progressive government.
Actually, they probably wouldn’t get very far making the case honestly.
TaxProf, Is the IRS Stalking You on Facebook, Twitter? Is that how they caught “The Queen of IRS Tax Fraud?”
Jason Dinesen, Same-Sex Marriage, Divorce and Taxes
Me: How much K-1 loss can I deduct? Start with your basis. Part of my 2013 filing season tips series. My exciting installment on partnership debt basis goes up later this morning.
Oh, but it’s for our own good. IRS Claims It Can Read People’s E-Mails Without Needing a Warrant (Joseph Henchman, Tax Policy Blog).
Jack Townsend, KPMG Publication on FBAR Filing Requirements for Corporations and Executives
Russ Fox, Bozo Tax Tip #2: Nevada Corporations
Kay Bell, Top 10 things you don’t want to hear from your accountant. How about “I’m calling from Brazil, thanks for the cash!”
He’d have had trouble during tax season. FYI: The Guy Who Stabbed 14 People At a Texas College Wanted To Be an Accountant When He Grew Up (Going Concern)
Christopher Bergin, Why Transparency Is Like Porn (Tax.com) No, it’s not about Lululemon.
News you can use. Make Your Own Bubble in 10 Easy Steps (Bryan Caplan)
Tags: Anthony Nitti, Branstad tax policy, Bryan Caplan, Cara Griffith, Christopher Bergin, Going Concern, Howard Gleckman, iowa tax policy, Jack Townsend, Jason Dinesen, Joseph Henchman, Joseph Thorndike, Kay Bell, megan mcardle, Obama Tax Policy, Paul Neiffer, Quick and Dirty Iowa Tax Reform Plan, Russ Fox, tax crime, TaxProf, William McBride
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Wednesday, April 10th, 2013 by Joe Kristan
Flickr image by Samat Jain under Creative Commons license
Should we just get a bill from the IRS, instead of filing returns? That’s something Janet Novack seems to be thinking about. She has two guest posts on the issue:
Joseph Bankman, The Case For Easy, Free Tax Filing
Arlene Holen, Five Fallacies About Return-Free Tax Filing
Some people fear return-free filing will separate citizens further from the costs of government. I think that is caused by an income tax that now is effectively only on high-income earners. When 51% can send the bill to the other 49%, bad policy seems inevitable.
Mistakes, mistakes. The IRS has issued a list of “Common Errors to Avoid,” ably covered by Jana Luttenegger (Common Errors to Avoid in Tax Returns) and TaxGrrrl (Eight Common Tax Filing Errors And How To Prevent Them).
It makes me wonder: if there are “Errors to avoid,” are there errors we should seek out, or at least not sweat? I can’t think of errors I’d want to make on a tax return, but I can think of some that I wouldn’t lose sleep over:
1. Forgetting to check the “presidential election campaign fund” box. After all, your entire tax bill is basically the federal election campaign fund.
2. Misspelling the name of a stock on Schedule D.
3. Writing a “smiley face” next to the tax refund line.
4. Forgetting to update your “occupation” on the signature line when you change jobs.
Any other ideas?
Kay Bell, Tax returns, refunds running behind last year’s levels
Peter Reilly, GLAD Alerts Same Sex Couples To Act Quickly To Preserve Refund Rights
Clint Stretch, Are Roth IRAs Your Best Choice? (Tax.com) I think that they are if you can’t get a deduction, but not otherwise.
Russ Fox, Bozo Tax Tip #3: Use a Bozo Accountant!
Day traders have their own April 15 deadline. Yesterday’s 2013 filing season tip. Today’s tip goes up later this morning.
Jack Townsend, Lies, Dams Lies and Statistics – DOJ’s Promo Stats.
Jim Maule, How To Protest a Tax: Part Two. It involves dance. If it makes Prof. Maule bust a move, it’s worth it!
Tony Nitti, The Masters: A Tax Break Unlike Any Other. The tax-free Masters windfall for Augusta homeowners.
David Brunori, Prohibition Through Taxation (Tax.com). If you jack up taxes beyond reason, people cheat.
Howard Gleckman, An Opportunity to Really Fix Social Security (TaxVox)
No jest. Shirley man pleads guilty in multimillion-dollar tax fraud scam (Newsday)
No, it’s not me. West Des Moines Man Banned from Bar Until He Can Pay Tab (West Des Moines Patch)
Megan McArdle, There’s No Such Thing As A Free Lunch in Taxland.
The core problem is that the IRS cannot look into the hearts of companies and see which of them really needs to provide free lunch to their employees in order to have a healthy, vibrant company, and which of them is doing this in order to provide a tax-free boon to their workers.
In case anyone asks, donuts are critical to a healthy, vibrant tax practice.
Tags: Anthony Nitti, Arlene Holen, Clint Stretch, David Brunori, Howard Gleckman, Jack Townsend, Jana Luttenegger, Janet Novack, Joseph Bankman, Kay Bell, maule, megan mcardle, Peter Reilly, Russ Fox, tax crime, TaxGrrrl
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Friday, April 5th, 2013 by Joe Kristan
So a Blonde and a lawyer walk into Tax Court. She loses.
No, the Tax Court has not started to report petitioner hair color in its decisions, along with the names of the attorneys and the resident state (“petitioner resided in Iowa and was brunette during the tax years at issue but gray at trial”). This taxpayer’s first name is actually Blonde. And she was an attorney, at least until 2006, when she pleaded guilty to failure to file tax returns. From the Tax Court:
Since the only issue currently before the Court is whether Blonde Grayson Hall signed the Form 4549 under duress we will refer to Blonde Grayson Hall as petitioner.
Petitioner attended the University of Michigan Law School and was admitted to practice law in 1982. Petitioner was the chief executive officer of Hall & Associates, LLC, a law firm in Philadelphia, Pennsylvania, from 1995 to 2006.
As part of her plea deal, the taxpayer filed Form 4549 agreeing to assessment of additional tax liabilities for several tax years. She apparently had second thoughts:
Thus, the issue before us is whether Blonde Grayson Hall should be relieved of her agreement in the Form 4549 because it was signed under duress.
Of course, duress is what a plea deal is all about. You accept a bitter pill because you think it could get a lot worse if you go to trial. While this is a fearsome and sometimes abused weapon in the hands of prosecutors, the Tax Court said it wasn’t the kind of duress that makes the Form 4549 go away (my emphasis):
The requirement that petitioner sign the Form 4549 stems from the Government’s efforts to prosecute her for admittedly criminal conduct and to collect taxes and penalties. No doubt, given the circumstances, these efforts were zealous and disadvantageous to petitioner. However, every criminal defendant who is offered a plea agreement faces an equally unpalatable decision — accept a legally authorized plea agreement that will include terms disadvantageous to the criminal defendant or go to trial which may result in significantly worse consequences for the criminal defendant. This unpalatable decision does not constitute duress or involuntariness.
The taxpayer is stuck with the Form 4549 that she signed.
The moral: If you plead guilty to criminal tax charges, it is very hard to fight the assessment for the years covered by the plea. Even if you are a lawyer, and even if you are Blonde.
Cite: Hall, T.C. Memo 2013-93.
Iowa’s loss, Government accounting’s gain. Iowa’s longtime State Auditor David Vaudt is leaving office to head the Government Accounting Standards Board. He’s fought the good fight for honest reporting of state finance. It will be hard to find a replacement as good.
His term in office has covered governors of both parties, all of whom found him more or less annoying with his objections to budgetary games. His office did excellent work in the film credit scandal, issuing a comprehensive report showing that 80% of the credits were improperly granted. Best of luck to him in his new job.
William McBride, Standard Economics Says Capital Income Taxes Should Be Zero (Tax Policy Blog). He quotes Garett Jones:
Under standard, pretty flexible assumptions, it’s impossible to tax capitalists, give the money to workers, and raise the total long-run income of workers.
Not, hard, not inefficient, not socially wasteful, not immoral: Impossible.
Yet the effort to do so never ends. Nor the harm it causes.
Christopher Bergin, ‘Commissioner-Less’ (Tax.com):
The Internal Revenue Service is currently without a Commissioner. Douglas Shulman, the 47th IRS Commissioner stepped down last November.And from what I’m starting to hear, the IRS may not have a new Commissioner for as long as close to two years. That is not a good thing.
Still an improvement over the last one.
Eric Todor, Moving to a Territorial Tax May Not Be the Windfall Multinationals Expect (TaxVox)
David Cay Johnston, Unkind to Charity (Tax.com) “The tax rules on charities, both the many good and the few bad, are about to get much more anti-giving.”
Jack Townsend, District Court Denies Bankruptcy Discharge for BLIPS Shelter Investor
Kay Bell, William Shakespeare, tax cheat
William Perez, GoodApril Online Tax Planning Application
Perverse incentives. Whoa, Cowboy: Tax Laws May Make Romo Highest Paid NFL Player (TaxGrrrl)
News you can use: You Are a Terrible Investor and You Should Stop That (Megan McArdle). Actually, it’s excellent advice that I try to follow.
Russ Fox, Bozo Tax Tip #6: Just Don’t File. It sure didn’t work for the Blonde.
Jim Maule, How to Protest a Tax:
According to this report, dozens of people supporting a bill to repeal a state sales tax on amounts charged by dance establishments decided to dance in protest. According to the report, the protestors demonstrated the salsa, the flamenco, the tango, and even a conga line. Considering the speed with which legislatures get things done, perhaps they engaged in some slow dancing, though the report does not mention it.
First they came after the big bands, but because I was a conga dancer, I did nothing.
Tags: Christopher Bergin, David Cay Johnston, David Vaudt, Eric Todor, Garrett Jones, Jack Townsend, Judge Ruwe, Kay Bell, maule, megan mcardle, Russ Fox, tax crime, TaxGrrrl, William McBride, William Perez
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Friday, March 15th, 2013 by Joe Kristan
Calendar-year corporation returns are due today! They are easy to extend on Form 7004 if you can’t finish them today. If you don’t extend an S corporation return and you file late, the penalty starts at $195 for each late K-1, and $195 each for every additional month the return is late.
If Iowa’s tax law were a car, it would look like this.
Joseph Henchman, Iowa House Passes Alternative Maximum Tax: Income Tax Option Clear of Carveouts (Tax Policy Blog). Joseph has some good things to say about the Iowa alternative tax that passed the house this week (HF 478):
I’ve never filled out an Iowa income tax form but it looks like one of the harder state tax returns. Iowa allows you to deduct what you pay in federal income tax, which is nice but is that much more calculation work (and probably drives up tax rates). There are lines for the lump-sum tax, the minimum tax, the K-12 textbook credit, the school district surtax, the motor fuel tax credit, and the earned income tax credit. I’m sure each one of these has their explanations of necessity but together it sounds like a lot of paperwork, record-keeping, and Tax Filing Day frustration.
…
Hence, I’m impressed by a bill passed yesterday (House File 478) by the Iowa House which would offer an alternative to all Iowa taxpayers: a 4.5 percent tax on all income above about $15,000, which no further deductions or exemptions. It’s not perfect: our friend Joe Kristan pointed out that a credit for taxes paid to another state and a deduction for federal interest are probably constitutionally required, and offsetting deductions to certain kinds of income (allowing gambling losses if you tax gambling winnings) is good policy. But as Joe said, the bill “is a welcome step towards improving Iowa’s income tax.”
I’m hoping it’s a step towards the Tax Update Quick and Dirty Iowa Tax Reform Plan.
It’s a myth, so they’re cracking down on it!
Huffington Post, The Millionaire Migration Myth: Don’t Fall for This Anti-Tax Scare Tactic.
Bloomberg News, States Crack Down on Top Earners Who Flee as Levies Rise: Taxes
If they feel have to “crack down” on something, maybe there’s something to that myth.
The Ultimate Swiss Army Knife. Flickr Image courtesy redjar under Creative Commons license.
Janet Novack, Blame Congress, As Well As H&R Block And IRS, For College Tax Credit Mess. Oh, I do! From the article:
Far be it from me to let either the Internal Revenue Service or tax prep giant H&R Block off the hook for the current mess which has delayed refunds for more than 600,000 taxpayers claiming college tax credits by up to eight weeks. In addition to their operational missteps, both did a poor job (at least initially) of communicating with taxpayers who desperately need those refunds to pay tuition or other bills.
But let’s put some of the blame where it rightly belongs: on the Washington politicians. For more than two decades, Congress has been expanding “tax expenditures” with little regard for how complicated such provisions might be for taxpayers to use and for the IRS to administer, let alone for whether they do enough good to justify their cost and the economic distortions they create. A new 1065-page Congressional Research Service compendium lists 250 different tax expenditures. Happy reading.
Every little break like this diverts IRS resources from actually collecting income taxes and makes the income tax a little less effective and useful. Yet Congress still sees the tax law as the Swiss Army Knife of public policy.
Jim Maule, Tax Depreciation: Do the Math:
No matter how well a student in the basic tax course masters the depreciation deduction to the extent it is studied, that student knows that the total depreciation with respect to a property cannot exceed its cost. All of the students would find themselves bewildered by the proposition that depreciation deductions on a property that cost $34,799 would total $56,000.
So was the Tax Court.
Tony Nitti, Golfer Sergio Garcia Comes Up Short In Tax Court, But Is The Decision A Victory For Other Athletes? He won on his endorsement royalty income, so while he may not have had an undisputed win, he did OK, like a PGA golfer who gets second-place prize money.
William Perez, Delays in Issuing Tax Refunds Related to Education Tax Credits
Going Concern, IRS Won’t Be Sorry If You Never Get Around to Claiming Your Refund. Over $900 million in 2009 refunds will be out of reach of their rightful recipients after April 15, when the 3-year window for claiming them expires.
Trish McIntire, Don’t Lose Your 2009 Refund
Paul Neiffer, Will Large Farmers Be Able to Use Cash Method in the Future?! Farmers should get the same tax rules and breaks everyone else does, no less and no more.
Kay Bell, Will a relationship neutral tax code save traditional marriage?. Not every problem is a tax problem.
Howard Gleckman, The Ideological Chasm Between the House and Senate Budgets
William McBride, Dave Camp Floats a Rewrite of Small Business Tax Rules (Tax Policy Blog)
Jack Townsend, U.S. Taxpayer Pleads to FBAR and Tax Perjury Violation
Brian Mahany, IRS Agent May Be Headed To Prison For Info Leak – Whistleblower Protection
Brian Strahle, State Tax Revenues: Corporate Income Tax Not That Important?
Oh, Goody. Applying for Obamacare Subsidies Will Be as Complicated as Doing Your Taxes (Megan McArdle)
Argo pay your taxes. It turns out Iowa isn’t the only government whose film tax credits attract scammers. From London comes this via Boston.com:
In some ways ‘‘A Landscape of Lies’’ was a typical indie film, with a tiny budget, a B-list cast and an award from an American film festival.
What made it special is that it was created solely to cover up a huge tax fraud.
…
In fact, officials say, the project was a sham, set up to claim almost 1.5 million pounds in goods and services tax for work that had not been done, as well as 1.3 million pounds under a government program that allows filmmakers to claim back up to 25 percent of their expenditure as tax relief.
No word on whether Leo Bloom prepared the fraudulent returns.
News you can use: Polish Up Your Guccis. (Christopher Bergin, Tax.com).
Will there be tax reform? I think there has to be. But I don’t think it will look like theTax Reform Act of 1986 because, in short, it’s not 1986, and we don’t have the same problems or even the same tax system. That doesn’t mean there aren’t a lot of lessons to be learned from the ’86 experience. But I don’t think tax reform will happen soon. And a few of the reasons I think that come right out of “Gucci Gulch.”
I have a copy of Showdown at Gucci Gulch, the book about how the 1986 tax reforms were enacted. I haven’t brought myself to open it; it seems too much like reading about my job.
TaxGrrrl, Arrest of Dancing Mascot Puts Liberty Tax Wavers In The Spotlight
He should have hidden the cash across the pond. Opening statements underway in Beavers tax evasion trial (WGNtv.com)
Tags: Anthony Nitti, Beavers, Brian Mahany, Brian Strahle, Christopher Bergin, film tax credits, Going Concern, Howard Gleckman, iowa tax policy, Jack Townsend, Janet Novack, Joseph Henchman, Kay Bell, maule, megan mcardle, Paul Neiffer, Quick and Dirty Iowa Tax Reform Plan, TaxGrrrl, Trish McIntire, William McBride, William Perez
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Wednesday, March 13th, 2013 by Joe Kristan
I will fight for the right to tax you to subsidize other people. Governor Branstad is touchy about criticism of the massive tax breaks for the Southeast Iowa Orascom fertilizer plant. Radio Iowa reports:
“I’m here to make it clear that the chief executive of this state is on your side and we will fight for these jobs and I want to make it clear that when we make a promise to Lee County — or to any county in Iowa for that matter — it’s a promise we’re going to keep, no matter what they might say in Des Moines in any committee meeting,”
Never mind the high possibility that the plant would have been built without our tax money. Never mind the moral problem of taxing existing businesses and taxpayers to lure and subsidize outsiders. Never mind that political allocations of investment capital are always and everywhere unwise. Forget the lost opportunities for taxpayers to spend the money on their own projects. Jobs!
The Governor also hinted at darker forces opposing the tax credits, reports KCCI.com:
And he said he believed the Koch brothers were behind some opposition to the plant because it would hurt their fertilizer business.
So Iowa Democrats opposing the subsidies are tools of the libertarian Koch brothers. Who knew?
The EITC is a refundable credit, which means the tax man writes checks to folks with no taxes. Naturally EITC fraud is rampant.
TaxGrrrl, Hundreds Of Thousands Of Taxpayers Thought To Be Impacted By Education Credit Snafu
IRS agent pleads guilty to charges resulting form selling out a whistleblower. Jack Townsend has the scoop.
Kay Bell, 2013 tax filing season gets crazier for some H&R Block, TurboTax customers
Jason Dinesen, Small Business Health Insurance Credit, Part 2
Elizabeth Malm, Texas Considering Drastic Modifications to Margin Tax (Tax Policy Blog). Good.
Patrick Temple-West, Yankees embrace frugality to dodge tax, and more. Who says taxes don’t influence behavior?
Jeremy Scott, Carl Levin Changed the Face of Tax Enforcement (Tax.com)
Howard Gleckman, Taxes and Paul Ryan’s Budget (TaxVox)
William Gale, A Carbon Tax is a Win-Win for the Economy and the Environment (TaxVox)
David Brunori, Things to Read, Sites to Visit. (Tax.com). He shares some online resources, but tragically fails to mention the Tax Update.
Peter Reilly, No Fans Of Sister Wives At The IRS ? As far as I’m concerned, the possibility of consolidated individual returns should be all the argument needed against polygamy.
The Critical Question: Why Is My Refund Short? (Trish McIntire)
News you can use. Note to Drivers: All Wheel Drive Does Not Give You Superpowers, Just a Dangerous Overconfidence (Megan McArdle).
So you think you’re having a bad busy season? It could be worse: Upstanding San Leandro Accountant Finds Himself on Oakland’s Most Wanted List. Going Concern has the news of law enforcement gone awry.
Tags: Branstad tax policy, corporate welfare, David Brunori, Earned Income Tax Credit, economic development, Elizabeth Malm, Going Concern, Howard Gleckman, Jack Townsend, Jason Dinesen, Jeremy Scott, Joe Bolkcom, Kay Bell, megan mcardle, Patrick Temple-West, Peter Reilly, TaxGrrrl, The Critical Question, Trish McIntire, William Gale
Posted in Eye on the Legislature, Eye on the Legislature 2013, Uncategorized | 1 Comment »
Wednesday, January 30th, 2013 by Joe Kristan
Why so grumpy? Because it’s the first “official” day of tax season as the IRS begins processing returns. But only some of them. The last-minute Fiscal Cliff tax law is delaying the processing of many forms, delaying most business filings until “late February or into March.” They also have delayed processing of returns with education credits until sometime next month.
Oh, and the streets are a mess.
Kay Bell, Tax filing on hold for taxpayers who need 31 federal forms
TaxGrrrl, IRS Opens For Business Today, Many Taxpayers Qualify To File For Free
Taking your money to give to the well connected. From Taxing the Rich to Pay for Big Business Tax Credits by Veronique de Rugy:
Taking from the small businesses, giving to the big business with pull.
Brian Gongol on the decision of Senator Harkin to not seek an umpteenth U.S. Senate term:
Wouldn’t it be wonderful if we could start with a blank slate and ask ourselves (as Iowans): Who is the smartest, most dependable, most thoughtful person we could send to an august body of decision-makers who are challenged with bringing wisdom and sobriety to the decision-making process of government?
Like somebody like that would stand a chance.
Why bother with a state corporate income tax? While state income taxes are a reliable source of work for people like me, they do surprisingly little for the states, according to a new report released by the Tax Foundation yesterday. Nationwide state corporate income taxes accounted for only 3% of 2010 state revenues. In Iowa, it’s even lower. Here are the revenue sources from Iowa and some nearby states:
Source: Tax Foundation
The corporation income tax raises little revenue, is expensive to administer, is exploited by the well-connected and well lobbied, and is almost certainly a job-killer. Why not go for a low-rate, low-loophole system like The Tax Update’s Quick and Dirty Iowa Tax Reform Plan?
TaxProf, A Distributional Analysis of the Tax Systems in All 50 States, passing on a report from the Center on Budget and Policy Priorities says state tax systems are regressive. Keep this in mind:
Source: Heritage Foundation/
If you only look at the distribution of taxes paid and ignore the value of services and cash payments received, you miss a lot.
Janet Novack, IRS Tips Won’t Protect You From Identity Theft Tax Fraud.
Jack Townsend, Article on Importance of Jury Instructions in White Collar, including Tax, Crime Cases
Jason Dinesen, An Obligatory 1099-K Post for 2013
Trish McIntire, Before You Sign. A timely reminder that you are responsible for what’s on your return, even when you use a paid preparer.
Patrick Temple-West, Mickelson and the sports star migration, and more (Tax Break)
William McBride, CRS: Tax Rates Do Matter for Profit Shifting (Tax Policy Blog)
Joseph Thorndike, The Income Tax Is Inquisitorial — Get Over It. (Tax.com) May he have a good National Research Project exam in his future.
Robert Goulder, French Budget Minister Caught In Tax Probe (Tax.com)
That wouldn’t take much. Payroll Tax Cuts May Boost the Economy More than You Think (Howard Gleckman, TaxVox)
Bad news, good news: The Twinkie is Dead! Long Live the Twinkie! (Megan McArdle).
News you can use. Tax Law Warning: Don’t Cut Mom a Rent Break (Jim Maule)
Tags: CBPP, Gongol, Howard Gleckman, iowa tax policy, Jack Townsend, Janet Novack, Jason Dinesen, Joseph Thorndike, Kay Bell, maule, megan mcardle, Patrick Temple-West, Quick and Dirty Iowa Tax Reform Plan, Robert Goulder, state tax policy, tax administration, Tax Foundation, TaxGrrrl, Trish McIntire, Veronique De Rugy, William McBride
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Wednesday, January 9th, 2013 by Joe Kristan
The IRS announced yesterday (IR-2013-2) that it will begin processing 1040s January 30. From where I stand that’s right on time, as very few of our clients have their 1099s, W-2s and K-1s before then anyway.
The IRS will be unable to process some returns that soon. From the IRS press release:
There are several forms affected by the late legislation that require more extensive programming and testing of IRS systems. The IRS hopes to begin accepting tax returns including these tax forms between late February and into March; a specific date will be announced in the near future.
The key forms that require more extensive programming changes include Form 5695 (Residential Energy Credits), Form 4562 (Depreciation and Amortization) and Form 3800 (General Business Credit). A full listing of the forms that won’t be accepted until later is available on IRS.gov.
Form 8582, used to report passive losses, is one of the forms that will cause delays.
State taxes, that will be another matter. As the legislature has to decide whether to accept the retroactive changes to the tax law, many Iowans will have to wait awhile to know what the 2012 Iowa rules are.
Tax Update on Iowa Cable Network tomorrow. I will be giving a rundown Thursday at 6:00 pm on the Fiscal Cliff tax bill and other recent tax developments in an ICN broadcast (is that the right word for a closed-circuit presentation?) for the Institute of Management Accountants. There will be a live audience at 6500 Corporate Drive, Johnston and viewing sessions at Grinnell High School, Marion High School, Keystone AEA (Dubuque) and St. Ambrose University. Contact Kathy Smith, ksmith4dlord@gmail.com, if you are interested.
The TaxProf gives a non-subscriber link to Ethan Yale’s Taxing Market Discount on Distressed Debt, which appeared in Tax Notes yesterday. The paper talks about the weird and ugly issues that arise when a third party buys bad loans and tries to collect. The market discount rules treat the debt as having a real high interest rate, with all payments principal first, based on the difference between the discounted purchase price and the face amount of the debt. The rules also can cause the income on collections to be ordinary, but the losses to be capital.
The paper talks about why these rules don’t make sense for deeply-discounted debt. If you buy a debt at 50% of face due in one year, it doesn’t make sense to assume that it will cash out at a 100% APR return, but that’s how the regulations would work. The paper also covers arguments taxpayers can make to try to ameliorate the harsh treatment that the market discount rules would apply, but there’s no assurance the IRS would buy them.
A 79 year-old widow pleads guilty to concealing overseas bank accounts. She agrees to pay over $20 million in penalties in the plea deal and faces up to six years in prison, according to a Department of Justice press release. Jack Townsend has more.
Fiscal Cliff Notes
Problem solved! Well, not really. You know how the tax increases in the Fiscal Cliff legislation won’t begin to solve the $1.2 trillion deficit? The Congressional Research Service reports that it’s even worse: it will increase the current fiscal year deficit by $330 billion and the cumulative 10-year deficit by $4 trillion. ($link through Tax Analysts)
Howard Gleckman, Grim Predictions about the Fiscal Cliff II and Deficit Reduction (TaxVox):
I spent lunchtime today moderating a thoroughly discouraging Urban Institute panel discussion on the fiscal cliff. The consensus of the speakers—all highly-regarded budget experts—was that the New Year’s cliff deal was pretty lame and the coming round of self-imposed budget crises will be even worse.
Oh, goody.
Roger McEowen on the Fiscal Cliff bill: A short summary of the most significant provisions.
Paul Neiffer, Reprieve For S Corporations With Built-in Gain
Patrick Temple-West, Insiders benefited from special dividends, and more (Tax Break)
William McBride, Taxes Up, Stocks Up, What Can Go Wrong? (Tax Policy Blog)
Jana Luttenegger, Filing for 2012 Taxes Delayed Until January 30 (Davis Brown Tax Law Blog)
TaxGrrrl, IRS Announces Delayed Tax Filing Season
Russ Fox, IRS Announces Tax Season to Start on January 30th
David Brunori, Good — and Not so Good — Corporate Tax Ideas from New Mexico (Tax.com):
New Mexico Governor Susana Martinez, a rising star among GOP politicians, is calling for a steep reduction in the corporate tax rate. She proposes cutting the rate from 7.6 to 4.9 percent. That is good news. The corporate income tax is — and will likely remain — one of the worst ways to raise revenue for state governments. The tax is inefficient, ineffective, and distorts economic decision making. It would be better if Governor Martinez called for the repeal of the tax, but whittling it down is okay as well.
Repeal of the corporate income tax would be a good idea in Iowa as well, but the influential corporations that get big checks from the state via the tax law aren’t going to jump on the repeal bandwagon.
Jason Dinesen, The IRS — Putting Paperwork Ahead of People. Doug Shulman’s legacy of identity theft nightmares lingers.
Kay Bell, Tax Carnival #110: Happy New Tax Year
It’s Wednesday, so it’s Buzz Day at Robert D. Flach’s place.
Socially-awkward, that’s something else. Great News: Accountants Are Less Likely To Be Psychopaths (Going Concern)
News you can use: The Problem With Libertarian Women is Not Libertarian Men (Megan McArdle)
Tags: 2012 filing season, David Brunori, Ethan Yale, Fiscal Cliff, Going Concern, Howard Gleckman, IMA, iowa tax policy, Jack Townsend, Jana Luttenegger, Jason Dinesen, Kay Bell, megan mcardle, New Mexico, Patrick Temple-West, Paul Neiffer, Robert D Flach, Roger McEowen, Russ Fox, Tax Analysts, tax crime, TaxGrrrl, TaxProf, William McBride
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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 WHOTV.com.
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 (Tax.com)
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, Tax.com)
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)
Tags: Dave Jamison, Freakonomics, Going Concern, Hani Sarji, Iowa Finance Authority, Jack Townsend, James Pethokoukis, Jason Dinesen, Jeremy Scott, Kay Bell, Kevin Williamson, megan mcardle, Missouri, Nick Kasprak, O Kay Henderson, Patrick Temple-West, Paul Neiffer, Robert Goulder, Russ Fox, The Critical Question, Trish McIntire
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Thursday, January 3rd, 2013 by Joe Kristan
The Hoover Office Building, the warm and cuddly home of the Iowa Department of Revenue.
The Fiscal Cliff Bill complicates Iowa tax returns for 2012. Iowa doesn’t automatically adopt federal tax law changes, so some retroactive tax law provisions in the Fiscal Cliff bill won’t apply to Iowa state income taxes absent action by the Iowa General Assembly. From an Iowa Department of Revenue e-mail to practitioners yesterday:
The federal legislation passed on January 1, 2013 to avert the “fiscal cliff” included provisions for what are commonly referred to as the federal “extenders.” The federal “extenders” are not currently reflected on Iowa tax forms for 2012 and will require approval by the Iowa legislature before being allowed for Iowa tax purposes. Should legislative approval be given, Iowa online forms will be updated accordingly. The federal extender provisions include:
- Educator Expenses (Line 24; IA 1040)
- Tuition and Fees (Line 24; IA 1040)
- Itemized Deduction for State Sales /Use Tax Paid (Line 4; IA Schedule A)
- Treatment of mortgage insurance premiums as qualified residence interest (line 11, schedule A)
- The federal section 179 expensing limit of $500,000 for 2012 and 2013
Iowa income tax returns must be filed based upon current Iowa law. Therefore, the extenders should not be included on Iowa returns at this time.
Let’s hope the legislature acts quickly to pass conformity legislation, or we will have another messy Iowa tax season.
Why 12%? Today’s Des Moines Register story on reactions by Iowa business people to the Fiscal Cliff bill quotes me as saying that Iowa businesses may face a 12% reduction in their after-tax income. Where did I get that number?
I started by computing the after-tax amount of a dollar earned by a top-bracket taxpayer under 2012 law, assuming full detectability of Iowa taxes on the federal return and vice-versa. That results in a combined rate of 38.92%, leaving 60.18 cents in the taxpayer’s pocket. Under the same assumptions using the 2013 39.6% top rate and the 3.8% surtax on “passive” income, the combined federal-state effective rate goes up to 46.39%, leaving 53.61 cents after-tax. That’s a 7.48 cent reduction in after-tax income — 12.24% of the 60.18 cent 2012 after-tax number.
The 12.24% number is actually too low because it doesn’t account for the phase-out of itemized deductions for high-income taxpayers in the new bill. For top-bracket taxpayers, itemized deductions will be reduced 3 cents for each additional dollar of income. The result is a hidden 1.188% additional tax. Plugging that into our tax computation gives a combined federal and Iowa rate of 47.46%, leaving 52.54 cents after-tax. That reduces after tax income from 2012 law by 8.54 cents, or 13.99%.
Should I assume the 3.8% passive income tax, like I do in the above examples? It won’t apply to K-1 income if all owners “materially participate” in a pass-through business. Those taxpayers face “only” an 8.41% reduction in their after-tax income. If you don’t think that’s significant, consider whet your reaction would be if your employer said that your after-tax pay was going down that much.
But the 3.8% tax will apply to family members that don’t participate in the business, like out-of-town siblings, retired founders, or children of owners. The business has to distribute at least enough to let owners pay their taxes, which means the taxpayer in the highest bracket has to be covered. For that reason many family-owned businesses will have to distribute enough to cover the 3.8% Obamacare net investment income tax, making the combined 47.46% rate their real rate.
Fiscal Cliff Notes
TaxProf, House Approves Fiscal Cliff Tax Deal
Megan McArdle, After the Fiscal Cliff: What do Democrats Want? “I submit that just as Republicans are more interested in entitlement cuts as talking points than as actual new laws, Democrats will prove much more interested in tax hikes in theory than in practice.”
Robert D. Flach, THE AMERICAN TAXPAYER RELIEF ACT OF 2012
William McBride, Fiscal Cliff Resolved, Still Likely to Get Downgraded
TaxGrrrl, The World Will Keep Turning, Even With The Expiration Of The Payroll Tax Cuts
Patrick Temple-West, Cliff bill means some pay more taxes, and more
Trish McIntire, American Taxpayer Relief Act of 2012
Paul Neiffer, Help! What Is My Capital Gains Tax Rate?!
Kay Bell, What’s your 2013 tax rate and other fiscal cliff tax bill questions
Margaret Van Houten, Estate and Gift Law Tax Aspects of Fiscal Cliff Legislation (Davis Brown Tax Law Blog)
Courtney A. Strutt Todd, A Permanent Fix to the AMT Problem (Davis Brown Tax Law Blog)
Jana Luttenegger, Individual Tax Rates, Deductions, and Credits (Davis Brown Tax Law Blog)
Greg Mankiw has a pithy post that I hope he doesn’t mind me reproducing in full:
Here are the effective federal tax rates (total taxes as a percentage of
income) for 2013 under the new tax law, as estimated by the Tax Policy Center, for various income groups:
Bottom fifth: 1.9
Second fifth: 9.5
Middle fifth: 15.6
Fourth fifth: 19.0
Top fifth: 28.1
80-90 percentile: 21.5
90-95 percentile: 23.4
95-99 percentile: 26.3
Top 1 percent: 36.9
Top 0.1 percent: 39.6
Russ Fox, Your Mileage Log: Start It Now! Great advice. If you travel on business and the IRS comes by, you’ll be glad you have that log.
David Brunori, Only Tax Professionals Benefit from the State Corporate Tax. (Tax Analysts Blog) Well, the loophole lobbyists do pretty well by it too.
Peter Reilly, Form 8332 – Don’t Let The Kids Live In Another Home Without One ?
TaxTV, IRS Penalty Relief-First Time Penalty Abate Program
Robert Goulder, The Unspoken Tax Expenditure (Tax Analysts Blog)
Jack Townsend, New Article on the Emerging Consensus for Taxing Offshore Accounts
William Perez, Social Security Tax For 2013
Career planning news you can use: Life After Public Accounting: Harassing Auditors For a Living Isn’t a Bad Gig If You Can Get It (Going Concern)
Tags: Courtney Strutt Todd, David Brunori, Fiscal Cliff, Going Concern, greg mankiw, Iowa tax administration, Jack Townsend, Jana Luttenegger, Kay Bell, Margaret Van Houten, megan mcardle, Patrick Temple-West, Paul Neiffer, Peter Reilly, Robert D Flach, Robert Goulder, Russ Fox, TaxGrrrl, TaxProf, TaxTV, Trish McIntire, William McBride, William Perez
Posted in Iowa Tax Law, Tax Roundup | No Comments »
Thursday, December 27th, 2012 by Joe Kristan
From a Tax Foundation chartbook, “Putting a Face on America’s Tax Returns”
What happens as you ratchet up the top rate. A timely explanation of the effect of raising already high tax rates from Megan McArdle:
Taking your tax rate from 5% to 10% decreases your after tax income by 5.26%. But by the time your tax rate is 50%, you’re only keeping half of your income. So increasing the tax rate by 5% decreases your after-tax income by 10%: you used to take home 50 cents out of every dollar, but now you only take home 45 cents.
If you were surprised that Gerard Depardieu decided to leave France rather than pay the new 70% top rate, think of it this way: the rate increase was only 30%, but it was going to cut his income in half. Yes, that would still leave him with more money than you and I live on. But people don’t think this way: if the government came and took half your after-tax income away, that would still leave you with more money than a middle-class family in Bangalore lives on, and you would still be hopping mad, not to mention panicking about how the mortgage was going to get paid. Even if they only took half of your marginal after-tax income away–an extra 50% of every dollar you made over $40,000 say–you would be pretty upset, because you’ve probably already earmarked uses for those dollars.
With the people in the highest-income states already pushing a 50% marginal rate under current law (and also, under what I take to be the negotiation outcome desired by most of the Democratic Party), every 10% tax hike is a 20% decrease in the after-tax value of extra work.
Applying that analysis to Iowa, the combination of the fiscal cliff and the Obamacare 3.8% “net investment income” tax can reduce the after-tax value of additional income of a top-rate Iowa taxpayer by 12.24% — about 1/8. For Iowa businesses that pay their taxes on owner returns — that is, partnerships, LLCs and S corporations — that’s a 1/8 reduction in their cash flow, their ability to finance expansion, their ability to service new debt. It’s also a 1/8 reduction in the returns to taking a chance on a new product, a new location, a new employee. That makes for fewer chances taken.
Worse, soaking the rich doesn’t even begin to solve the spending problem or close the deficit, no matter how hard you try. The rich guy isn’t buying.
Fiscal Cliff Notes
Veronique de Rugy, A Little Symbolism to Fight Fiscal Denial (The Corner)
TaxGrrrl, Treasury Advises That U.S. Will Hit Its Debt Limit In 5 Days
Cara Griffith, The Promise of Tax Stability (Tax.com). For one company, anyway; tough for the rest of Oregon.
Peter Reilly, Retired IRS Officer Launches Petition Against Clergy Tax Benefit
Robert D. Flach, WHAT’S NEW FOR NJ INCOME TAXES FOR 2012
Anthony Nitti, The Top Ten Tax Cases Of 2012, #1: Obamacare Is Constitutional Because The Individual Insurance Mandate Is Both A Penalty And A Tax. Wait…What?
Romney won? How You Can Lose Money on Paper And Still Win at Tax Time Like Romney (TaxGrrrl).
As bad as today’s news is, it could be worse. And it was, actually, as Don Boudreaux reminds us in Cataloging Our Progress: Men’s Business Wear (Cafe Hayek)
Yeah, that’ll work. Man jailed in federal tax fraud, bills paper for using his ‘copyrighted’ name. A convicted tax cheat sent a $6 million invoice to the local paper for using his name twice in a news story reporting his guilty plea on tax charges. Doesn’t he know that if he collects they’ll send him a 1099? (vindy.com)
Tags: Anthony Nitti, Cara Griffith, Don Boudreaux, Fiscal Cliff, megan mcardle, Peter Reilly, Robert D Flach, tax policy, TaxGrrrl, the rich guy's not buying, Veronique De Rugy
Posted in Tax Roundup | 1 Comment »
Monday, December 17th, 2012 by Joe Kristan
The expectant crowd gathers in Ames, Iowa for the final 2012 session of the ISU Center for Agricultural Law and Taxation Farm and Urban Tax School.
350 practitioners are signed up, and the coffee’s on!
Fiscal Cliff Notes
Because writing big checks in April is always popular. A few commenters have said that the Treasury Secretary can prevent Fiscal Cliff disaster by just setting the withholding tables to pretend that the tax law isn’t changing January 1. Marie Sapirie of Tax Notes says it’s not that simple ($link)
Commentators have suggested that Geithner may even be able to prospectively implement the administration’s policy of raising taxes on taxpayers making more than $250,000 per year by increasing withholding only on income above that level. That is almost certainly wishful thinking. Whatever the “most appropriate” amount of withholding to reflect the tax rates in section 1 may be, section 3402(a) does not give the Treasury secretary the power to create withholding tables that have no basis in current or recently expired law.
Of course Secretary Geither hasn’t always been big on following the tax law.
TaxProf, NY Times: Itemized Deduction Cap: Popular, But Unfair
KayBell, National Taxpayer Advocate Nina Olson discusses fiscal cliff tax complications
TaxGrrrl, Budget Resolution May Come Down To One Question
Steven Rosenthal, Paying Taxes on Capital Gains Early: How Investors are Avoiding Tax Hikes (TaxVox): “All of this planning suggests that sophisticated taxpayers are outracing Congress again.”
Nick Kasprak,Alternative Minimum Tax Increase Looming Over Fiscal Cliff Negotiations (Tax Policy Blog)
Robert D. Flach, WHAT FOOLS THESE POLITICIANS BE!
Remain calm, all is well. Deficit Hysteria and Debt Denialism (Joseph Thorndike, Tax.com)
TaxProf, Sullivan: Why the SALT Deduction Is Always Under Attack
Megan McArldle discusses an interesting pension funding approach:
Big news in pensions today: Silverdex, a major US-based conglomerate with fingers in just about every economic pie, from mining to solar cells, turns out to have been stuffing its main pension fund full of… it’s own corporate bonds
Just kidding.
I don’t really know how to say this, but sorry, I lied a little bit. I’m not talking about a private company at all, because of course, if a private company did this, it would be completely and totally illegal. Regulators would have shut this down decades ago and probably at least a few lower-level executives would have spent a little time in the pokey. Instead this is, of course, a description of how the United States Social Security “trust fund” works.
Like so many things: private sector does it, it’s scandal and ruin. Government does it, it’s Tuesday.
Courtney A. Strutt-Todd, Tax Law Blog: Attacks on the Exemption for Municipal-Bond Interest and Why it is Important to the Average Taxpayer (Davis Brown Tax Law Blog)
Paul Neiffer, Another Nice Feature of a Living Trust
Brian Strahle, D.C. Combined Reporting: How Much Will it Cost Your Company?
Missouri Tax Guy, Capital Gains, What you need to know
Trish McIntire links to the annoying new 2013 EIC Interview Sheet, so practitioners can double up as welfare caseworkers.
Russ Fox, What Happens When Cigarette Taxes go Through the Roof?
Martin Sullivan, Capital Gains Frustration for Tax Reformers (Tax.com). His “reformers” want to increase the problems inherent in capital gains taxes by increasing them. May their frustrations endure.
The Critical Question: Naming Spousal IRAs After Senator Hutchison – Is That A Priority ? (Peter Reilly) I still think Roth & Company should get royalties for the Roth IRA…
Linda Beale, Goggle’s Bermuda hideaway/HSBC’s too-big status: time to rein in the corporations! Too big, eh? Google’s entire market capitalization is about $234 billion this morning. That’s how much the federal government spends in 23 days. And it’s Google that’s too big?
Sorry, I think there’s already a mortgage on it. A New Way to Reduce Our National Debt – Sell Alaska. (Greg Mankiw)
Tags: Brian Strahle, Courtney Strutt Todd, Farm Tax School, Fiscal Cliff, greg mankiw, Joseph Thorndike, Kay Bell, Kick Kasprak, Linda Beale, Martin Sullivan, megan mcardle, Missouri Tax Guy, Paul Neiffer, Peter Reilly, Robert D Flach, Russ Fox, Steven Rosenthal, TaxGrrrl, TaxProf, The Critical Question, Trish McIntire
Posted in Tax Roundup | No Comments »
Friday, December 14th, 2012 by Joe Kristan
Flickr image courtesy seriousbri under Creative Commons license.
Cause and effect: the Iowa Chamber Alliance can’t quite put them together. The umbrella group for Iowa’s chambers of commerce has issued its 2013 legislative agenda. The Des Moines Register reports (my emphasis):
TAXES: Iowa’s tax system is among the highest for businesses, the alliance contends, and commercial and property tax relief are needed. In addition, the group supports addressing unfunded mandates, public employee pensions and other measures to help offset rollback effects on local governments. The alliance also supports efforts to simplify and reduce corporate income taxes, and to streamline the personal income tax code.
So far, so good. But then:
ECONOMIC DEVELOPMENT: The Iowa Economic Development Authority needs money for flexible incentives to compete for investments and jobs, the allliance said. It backs a variety of tax credits to retain, grow and attract investments in Iowa, including restoration of the $185 million cap on economic development tax credits.
Let’s spell this out: Iowa’s tax code needs simplification because it is larded with “economic development” provisions, including dozens of “economic development tax credits.” The rates are high because if they weren’t, the special breaks would keep it from raising any revenue. To say you want lower rates, a simpler tax code, and economic development credits is like saying you want to lose weight and you want some more cookies.
There is a better way: The Tax Update’s Quick and Dirty Iowa Tax Reform Plan.
Fiscal Cliff Notes
Tax Offer for Firms Pits Big vs. Small (Wall Street Journal):
If ideas proposed by the White House take hold—a long shot—rates for big companies likely would fall next year while those paid by many small-business owners through the individual tax system would rise.
That potential gap could encourage more companies to organize as corporations. For now, the prospect is strengthening alliances between Democrats and big-company CEOs on the one hand, and Republicans and small-business groups on the other.
It’s Warren Buffett and Goldman Sachs vs. the entrepreneur — influence and pull vs. the rest of us.
Patrick Temple-West, Tax offer pits big companies against small, and more (Tax Break)
Martin Feldstein, The Tax Hike Canard (via Mankiw)
Janet Novack, Will Your Retirement Be Thrown Off The Fiscal Cliff?
Howard Gleckman, Why the Senate’s Tax Bill is No Way Out of the Fiscal Impasse
IRS reminds taxpayers of “Savers Credit” (IR-2011-121) This non-refundable credit matches as much as 50% of taxpayer contributions to their IRA or 4o1(k) accounts. It works on joint returns with incomes up to $57,500 and single filers with incomes up to $28,750. Savings made when young can do great things when compounded over a career, and this credit makes it painful. Giving your recent grad starting out in the world some cash to fund an IRA can help build a nest egg and net a nice tax refund.
Andrew Mitchel, Doctrine of Constructive Receipt. You can’t avoid the income this year by waiting until next year to cash the check.
Kay Bell, Reindeer year-end tax tip games 2012: Dasher says use up your FSA funds
Paul Neiffer, Some Interesting Ag Cooperative Facts. Iowa leads the nation with total co-op sales of $22.4 billion.
Jason Dinesen, This Accountant’s Idea for Eliminating Kickoffs in the NFL. Without kicking, where does the “F” in NFL go?
The Critical Question: When a Tax Argument is Nonsense, Why Not Say So? (Jim Maule?
Why not? The 2012 Holiday Kitchen Gift Guide (Megan McArdle)
I can quit any time. I just need six more drinks. “Wind Energy Association Says Industry Can Survive Without Tax Credit” (Tax Analysts, $link):
The wind energy industry could be self-sustaining over the long term if its primary federal incentive is renewed in 2013 and then gradually phased out over six years, the industry’s trade association said December 12.
Because the last 20 years of the tax credit just weren’t enough for a good buzz.
Tags: Andrew Mitchel, corporate welfare, economic development, greg mankiw, Howard Gleckman, iowa tax policy, Janet Novack, Jason Dinesen, Kay Bell, Martin Feldstein, maule, megan mcardle, Patrick Temple-West, Paul Neiffer, Quick and Dirty Iowa Tax Reform Plan, Savers Credit, The Critical Question
Posted in Tax Roundup | No Comments »
Wednesday, December 5th, 2012 by Joe Kristan
Happy National Repeal Day!
Either we cut spending or everyone will pay more taxes. This post by Veronique de Rugy puts together in one handy package some points I have been trying to drive home about budget and tax policy. It’s all worth reading, but some key items include:
In my opinion, the problem with the fiscal-cliff debate has been that no one is acknowledging the fact that there is no way out of raising taxes on everyone eventually unless Congress gets serious about addressing our long-term fiscal problem, by restraining spending.
“The Rich” simply don’t have enough income to foot the bill. But borrowing temporarily hides the problem:
This, by the way, is why I thought the Bush years were so toxic. Cutting taxes while increasing spending dramatically — Bush increased real spending by 60 percent, as opposed to Clinton’s increase of 12.5 percent — is a recipe for large deficits leading more taxes later or certainly intense pressure to raise taxes.
What will taxes look like when the bill comes due?
This weekend, Mark Steyn gave us an idea of what that tax bill would look like. He writes:
A couple of years back, Andrew Biggs of the American Enterprise Institute calculated that, if Washington were to increase every single tax by 30 percent, it would be enough to balance the books — in 25 years. If you were to raise taxes by 50 percent, it would be enough to fund our entitlement liabilities — just our current ones, not our future liabilities, which would require further increases.
Finland shows how high taxes have to be to adequately fund a lavish welfare state, as I have noted:
Finland has an extensive welfare state and most years pays for it without budget deficits. It does so with income taxes that reach a 2012 top rate of 29.75% at €70,301, which is about $57,021 at current exchange rates. For a US taxpayer filing single, the 28% rate doesn’t start until taxable income reaches $85,651, and not up to $142,701 on joint returns. On top of that, Finns pay a 23% Value-added tax on most purchases — a tax that is not tied to income. But there’s more! There is a mandatory 4.7% payroll tax on employee gross wages, plus another 18.3% “paid” by the employer — but that necessarily reduces what they can pay the employee after-tax.
I’m not sure all that would go over well here, but that’s what we’re headed for. Anybody who says rich people can pay for all of the free government stuff is either clueless or lying. The rich guy isn’t buying.
Megan McArdle, Who Gets More Damaged If We Go Over the Fiscal Cliff? At least there’s a drink at the bottom.
At least the weather’s nice. Oh, maybe not… Top Federal Marginal Tax Rate Will Exceed 50% in California, New York, and Hawaii in 2013 (TaxProf)
Amy Feldman, Getting ready for the Medicare tax on investment income (Reuters)
Don’t think he actually plans to pay the higher taxes he supports. Warren Buffett Makes Money On Tax Breaks He Discredits (Steve Stanek, IBD)
Joseph Thorndike, Moral Abdication Dressed Up Like Hard-Nosed Realism (Tax.com)
But think of the intangible benefits of the Iowa film tax credit program! Film financier sues state over unpaid film credits (AP) The producer of one of the films involved in the suit pleaded guilty to felony chargesarising from tax credits for the film.
Joseph Henchman,New York Times Tells the Tale of Michigan’s Bankrupt State-Backed Film Studio (Tax Policy Blog) Oh, and Happy 75th Birthday to the Tax Foundation!
Kay Bell, Tax Carnival #109: Tax Stocking Stuffers
TaxGrrrl, 12 Days of Charitable Giving 2012: Be An Elf
Russ Fox,Nominations Due for 2012 Tax Offender of the Year. ‘Tis the Season!
Must be a Cubs fan. Hapless Mr. Williams Loses Again (Jack Townsend)
Nor do I. No, I Don’t Plan to Take the RTRP Exam (Jason Dinesen).
Jim Maule, The Hidden Government Spending Game. Spending doesn’t become something else just because you run it through a tax return.
Trish McIntire, Do You Have a Spare $2,350? You do? Good, you may need to send it to the IRS in April if Congress doesn’t “patch” the Alternative Minimum Tax for this year.
Peter Reilly, Hobby Losses – Need To Convince Tax Court You Love Money More Than The Game
Robert D. Flach has his Wednesday Buzz roundup of tax posts up!
Holistic auto healing? Cadillac chiropractor sent to prison for tax fraud (Mlive.com)
The Critical Question: Bartlett: The Fiscal Cliff and the Debt Limit — What Would Lincoln Do? (TaxProf)
Judge Holmes Quote of the day.
Allison T. O’Neil, the ex-wife of Michael J. O’Neil, does not want to pay a penny of their joint 2005 federal tax liability because, she says, it [*2] would be inequitable to make her do so.
2 Michael recalls providing Allison with $6,000 to $10,000 per month. Allison recalls getting only $6,000 per month.
Cite: O’Neil, T.C. Memo 2012-339
Tags: Amy Feldman, Bruce Bartlett, film credit fraud, film credits, Harel Goldstein, harold hill, Jack Townsend, Jason Dinesen, Jim Maule, Joseph Henchman, Joseph Thorndike, Judge Holmes, Kay Bell, megan mcardle, Peter Reilly, Robert D Flach, Russ Fox, Steve Stanek, TaxGrrrl, TaxProf, Templeton Rye, The Critical Question, the rich guy's not buying, Trish McIntire, Veronique De Rugy, Warren Buffett
Posted in Uncategorized | No Comments »
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