Tell me when they get serious about the budget. The federal budget deficit is running about $1 trillion annually. So how does the President propose to address it? Primarily by increasing taxes by $1.6 trillion — over 10 years. And, of course, no real spending cuts. The TaxProf links this:
Wall Street Journal: Obama Sets Steep Tax Target: President to Seek $1.6 Trillion More in Revenue, Double Level From 2011 Talks:
President Barack Obama will begin budget negotiations with congressional leaders Friday by calling for $1.6 trillion in additional tax revenue over the next decade, far more than Republicans are likely to accept and double the $800 billion discussed in talks with GOP leaders during the summer of 2011. …
Kevin Smith, a spokesman for House Speaker John Boehner (R., Ohio), dismissed the president’s opening position for the negotiations. He said Mr. Boehner’s proposal to revamp the tax code and entitlement programs is “consistent with the president’s call for a ‘balanced’ approach.” …
In negotiations between Messrs. Boehner and Obama in mid-2011, the two sides neared agreement on a plan to cut the deficit by $4 trillion over 10 years, including $800 billion in new revenue. The deal fell apart after Mr. Obama asked to raise the revenue component to $1.2 trillion, and to this day each side blames the other for the collapse. Based on that history, some senior GOP aides said they believed a likely compromise would call for about $1 trillion in new tax revenue, possibly from capping deductions for wealthier taxpayers.
As noted here, a straight dollar cap on itemized deductions would still be a tax increase on pass-through businesses. Taxpayers who report business income on their personal returns have to deduct the state income taxes as itemized deductions, rather than as “above-the-line” business expenses. A straight deduction cap would eliminate the deduction for state income taxes on business income.
How would you be able to tell if they are serious? When they admit that to have government benefits for everybody, you have to increase taxes for everybody, and that cutting spending by cutting “fraud, abuse and waste” never happens. The rich guy isn’t buying.
Chart 29. The federal deficit has grown so large that tax increases only on America’s millionaires will not be our silver bullet. Even if the government took all of the income earned by those who have an after-tax income of $1 million or more, the amount of revenue generated would fall far short of eliminating the deficit. The expected federal deficit for 2012 is about $1.2 trillion. The latest IRS data indicates that the total after-tax income for all millionaires is roughly $709 billion. If every penny of that after-tax income were taken by the government through a 100% tax rate, and we assume that no spending cuts are made to accompany the tax increase, this would account for only about 60% of the amount needed to erase the deficit. With numbers like this, one thing is clear: soaking the wealthy with increasingly higher tax rates simply cannot be the only answer to our nation’s fiscal problems.
TaxProf, Democrats Embrace Romney’s Tax Plan to Limit Deductions
Patrick Temple-West, Essential reading: Democrats like a Romney idea on income tax, and more (Tax Break)
Tell me when they get serious about the budget II: Branstad, Grassley push for extension of wind tax credit (Radio Iowa, via The Beanwalker)
So much for that deficit solution. ‘Fat Tax’ in Denmark Is Repealed After Criticism (New York Times)
Howard Gleckman, Congress Can’t Avoid Tax Rate Hikes By Closing “Loopholes” (TaxVox)
Meanwhile, this upcoming tax season is likely to be horrible. Acting IRS Commissioner Steven T. Miller tells the IRS that many taxpayers may have to wait until late March next year to file, depending on whether and when an “AMT Patch” is enacted (my emphasis):
Without an AMT patch, about 28 million taxpayers would be faced with a very large, unexpected tax liability for the current tax year (2012). In addition, in order to allow time for the IRS to make the programming changes necessary to conform our processing systems to reflect expiration of the AMT patch and the credit ordering rules, the IRS would, at minimum, need to instruct more than 60 million taxpayers that they may not file their tax returns or receive a refund until the IRS completes the necessary systems changes. Because of the magnitude and complexity of the changes, it is entirely possible that these taxpayers would not be able to file until late March 2013, if not even later. Tens of millions of these taxpayers would unexpectedly have to pay additional income tax for 2012, leaving them with a balance due return or a much smaller refund than expected.
Tax season has become more compressed into the last few weeks before April 15 because 1099s and K-1s are issued later every year as a result of tax law complexity. It looks like it could get much worse.
You Gotti like it. John A. Gotti, son of the convicted organized crime figure, scores a legal victory, convincing the Tax Court not to grant summary judgment for the IRS in a tax case involving a corporation he controls with his wife. It involves a dispute over whether IRS correspondence mailed to a jail address was a proper notification at the taxpayer’s “last known address.”
Another sign of the apocolypse. There is now on online exchange for trading transferable film tax credits. Tax Analysts reports ($link)
The newly launched Online Incentives Exchange LLC (OIX) purports to be the first “truly national, transparent, liquid exchange for the trading of state tax credits,” competing against direct brokerages in the trading of transferable and/or refundable state tax credits.
Right now, only Louisiana tax credits are trading on the exchange. Organizers plan to enable trading of California and Georgia credits in December and to eventually list on the exchange transferable and refundable tax credits in the 45 states where those incentives are available.
I prefer Iowa’s new practice of imprisoning filmmakers, myself.
Richard Morrison, What Canada Can Teach Us about Corporate Taxes (Tax Policy Blog)
William Perez, TIGTA Reveals Cause of Refund Delays that Occurred in Early 2012
Kay Bell, Superstorm Sandy tax considerations; California cities’ soda tax falls flat
Paul Neiffer, IRS Announces It Does Not Like Fixed Dollar Gifts
Jason Dinesen, No to Additional Preparer Testing, Yes to CPE Requirements. I say no to the entire preparer regulation scheme.
Brian Strahle, What Are Your Year-End State and Local Tax Needs?
Robert D. Flach has an exasperated Buzz.
Worse than a computer virus? McAfee On The Run: Murder and Mayhem (But Few Taxes) In Belize (TaxGrrrl)
In these troubled times, it’s good to know there are still things we can believe in. Sixth Circuit Agrees That Cliff Claven Is Not A Thief (Peter Reilly)