Posts Tagged ‘Warren Buffett’

Tax Roundup, 3/20/14: An optional mandate? And: baseball-tax convergence!

Thursday, March 20th, 2014 by Joe Kristan


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Is the Obamacare individual mandate penalty now optional?  
 A couple of weeks ago the Wall Street Journal editorial page published ObamaCare’s Secret Mandate Exemption; HHS quietly repeals the individual purchase rule for two more years.  That’s a pretty bold statement, especially because the Administration has adamantly rejected calls for a delay in the individual mandate, after having delayed the business mandate twice.  If there is no mandate, Obamacare will likely lead to huge losses for insurers (to be subsidized by taxpayers), who need the forced patronage of the healthy to cover the sick that they can no longer exclude or charge risk-adjusted premiums.  Did they really do that and not tell anyone?

Here’s what WSJ says happened:

But amid the post-rollout political backlash, last week the agency created a new category: Now all you need to do is fill out a form attesting that your plan was cancelled and that you “believe that the plan options available in the [ObamaCare] Marketplace in your area are more expensive than your cancelled health insurance policy” or “you consider other available policies unaffordable.”

This lax standard—no formula or hard test beyond a person’s belief—at least ostensibly requires proof such as an insurer termination notice. But people can also qualify for hardships for the unspecified nonreason that “you experienced another hardship in obtaining health insurance,” which only requires “documentation if possible.” And yet another waiver is available to those who say they are merely unable to afford coverage, regardless of their prior insurance. In a word, these shifting legal benchmarks offer an exemption to everyone who conceivably wants one.

Did this really happen? The IRS has just issued Tax Tip 2014-04, The Individual Shared Responsibility Payment – An Overview.  It says:

You may be exempt from the requirement to maintain qualified coverage if you:

  • Have no affordable coverage options because the minimum amount you must pay for the annual premiums is more than eight percent of your household income,

  • Have a gap in coverage for less than three consecutive months, or

  • Qualify for an exemption for one of several other reasons, including having a hardship that prevents you from obtaining coverage, or belonging to a group explicitly exempt from the requirement.

So what kind of “hardship” would that involve?  The list of eligible hardships at Healthcare.gov provides a long list of qualifying hardships, including “You recently experienced the death of a close family member.”  I’m sure you can come up with one, but if that doesn’t work, try “You experienced another hardship in obtaining health insurance.”  Like, “Healthcare.gov” crashed, for example?  It’s your word against — whose?

So how do you claim “hardship?”  The first way is “You can claim these exemptions when you fill out your 2014 federal tax return, which is due in April 2015.”   

So somebody fills out the form and finds out the government wants hundreds of dollars in penalties for not buying insurance.  I bet they’ll come up with either a loss in the family or a hardship in a hurry.  There will be tens of thousands of these.  The IRS can’t possibly police this.

It appears the Wall Street Journal is on to something.  Considering the high cost of policies on the exchanges, a struggling young single really would incur hardship buying mandated coverage.  And if you feel it’s a hardship, they are practically inviting you to opt out.  It’s hard to see this ending well.

This also poses ethical issues for practitioners, which I’ll address another time.

 

IRS Bars Appraisers from Valuing Facade Easements for Federal Tax Purposes for Five Years (IRS Press Release):

The appraisers prepared reports valuing facade easements donated over several tax years. On behalf of each donating taxpayer, an appraiser completed Part III, Declaration of Appraiser, of Form 8283, Noncash Charitable Contributions, certifying that the appraiser did not fraudulently or falsely overstate the value of such facade easement. In valuing the facade easements, the appraisers applied a flat percentage diminution, generally 15 percent, to the fair market values of the underlying properties prior to the easement’s donation.

There’s a lot of interesting things here.  For example, they never mention the name of the appraiser group.  It would seem like that would be useful information to taxpayers.  Sometimes people who seem to be barred from a line of work apparently neglect to mention that to prospective clients.

It also shows that you can’t count on a too-good-to-be-true result just because a lot of other people have gotten it.  They just might not have been caught yet.  You can be sure the IRS is working its way down the appraisal group’s client list.

 

Principal Park, as seen from my office window.

Principal Park, as seen from my office window.

Baseball-Tax Convergence.  Over at Cubs Fan site Bleacher Nation, Proprietor Brett yesterday posted The Chicago Cubs Financial Story: the Payroll, the Debt, and the Syncing of Baseball and Business Plans.  A lawyer by training, Brett digs deep into the leverage partnership deal where the Ricketts family bought the Cubs in a way structured to defer taxes to the Tribune Company:

In a leveraged partnership, a “seller” partners with a “buyer” to form a new entity, which takes on the assets and distributes cash to the “seller.” In its formation, the partnership takes on a great deal of debt, which is guaranteed by the seller. Doing so allows the “seller” to receive the cash distribution, and defer the taxes associated with the sale of the asset. 

At least that’s the idea. Brett notes that the IRS doesn’t have to agree, and that they didn’t when the Trib tried a similar trick when it sold Newsday.  After tax season, and after I wander down to Principal Park for the noon I-Cubs game on April 16, I’ll try to explain this.

 

Tony Nitti, What Are The Penalties For Failing To File Your Tax Return On Time? .  A lot more than failing to pay.  It’s worth getting that extension in, even if you can’t pay right now.

Kay Bell, Missing your 2010 tax refund? Claim deadline is 4-15-2014

William Perez, Tax Reform Act of 2014, Part 1, Tax Rates

Russ Fox, IRS Releases New Forms W-8BEN and W-8ECI.  Important if you find you are doing business with an offshore payee.

Iowa Public Radio, State Tax Laws ‘A Mess’ For Same-Sex Couples And Employers.  That’s where specialists like Jason Dinesen can really help.

TaxProf, The IRS Scandal, Day 315

Bloomberg, Buffett Cuts Tax Bill, Tells Others Not to Complain.  He’s tired of hearing you complain about subsidizing him, peasant. (Via TaxProf)

Chris Sanchirico, As American as Apple Inc. (TaxVox).  A complaint that Apple doesn’t voluntarily increase its own taxes.

ThinkAdvisor offers 8 Tax Evaders Who Should’ve Known Better — public servants biting the hand that feeds them.

 

Scott Drenkard, Richard Borean, Cigarette Smuggling Across the States (Tax Policy Blog) “Smuggled cigarettes make up substantial portions of cigarette consumption in many states, and greater than 25 percent of consumption in twelve states.”

 

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Almost one in five Iowa smokes are smuggled.

 

Cara Griffith, City of Tacoma Considers Contingent-Fee Auditors (Tax Analysts Bl0g) It’s a bad idea, but it’s hard to see where it’s any different from red-light cameras, where the camera companies collect a bounty of their own.

TaxGrrrl, 10 Tips For Making The Most Of March Madness  My strategy is to ignore it.

 

The Critical Question. Can the IRS Tell a Good Story? (Susan Morse, Procedurally Taxing)

 

 

20130419-1You lied to the IRS all these years, but you’re telling me the truth?  Sometimes business owners get away with tax evasion for years.  Then they try to sell their business.

A Henderson, Nevada auto body shop owner decided it was time to cash out.  KTNV reports:

Robert E. D’Errico, 64, was sentenced Wednesday morning to six-months in federal prison for tax evasion.

According to the plea agreement, D’Errico owned Sunset Collision Center in Henderson. In 2009, he began listing the business for sale on small business listing sites and with small business brokers. D’Errico stated in his listings that, “Seller states that his discretionary take-home cash is $150,000 per year and has receipts to prove it.”

When contacted by a potential buyer, D’Errico re-iterated, “Seller’s discretionary cash take home beyond stated net income is approx. $150,000 avg. per year and is verifiable with receipts.”

During a meeting with a potential buyer, D’Errico stated he stopped accepting checks and was taking cash deductibles from customers, as well as selling excess inventory for cash. 

Either the “potential buyer” ratted him out, or he was an IRS secret shopper.  The IRS got a search warrant, found the real ledgers, and things got ugly.  

Tax returns are sometimes the only financial statements a small business has.  Buyers naturally want to see them, and it can be awkward trying to convince a buyer that they aren’t the “real” financial statements.  But it can get a lot more awkward than that.

 

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Tax Roundup, 8/23/2013: Don’t die here edition. And the Butch and Sundance approach to tax controversies.

Friday, August 23rd, 2013 by Joe Kristan
Via Wall Street Journal

Via Wall Street Journal

Advice I intend to take this year.  The Wall Street Journal editorial page lists Iowa as a place to not die. But Minnesota is even worse:

The grand prize for self-abuse goes to Minnesota, which this year enacted a new 10% gift tax with a $1 million exemption. A gift tax is a levy on money given away while still alive. This tax is in addition to Minnesota’s 16% estate tax. The new law is all the more punitive because it applies the 16% estate tax (6% on top of the earlier 10% gift tax) to any gift within three years of death.

This is essentially a clawback tax, or more taxation without respiration. Democratic Governor Mark Dayton, who signed the law, is the heir to a department store fortune and knows a lot about inheriting wealth but not much about creating it.

I would expect that Mr. Dayton’s family has done a lot of estate planning, making sure that he won’t be hit hard by his new tax.  Many proponents of high taxes, like Warren Buffett, have no intention of paying any themselves.

 

Nick Gillespie,  The Immense and Growing Price of “Tax Expenditures”: (Reason.com)

Tax expenditures tend to be very popular with the people who benefit from them but they also represent a blatant attempt by the government to engineer behaviors ranging from having children to buying homes rather than renting. As the consensus that our current tax code is overly complicated and inefficient (both in terms of economic activity and revenue generation), all tax expenditures should be on the table for reconsideration and elimination.

Some folks consider every tax break a good thing, no matter how unfair it is to those who don’t benefit from it.  But tax breaks for special interests, (e.g., low-income housing developers) or economic sectors (manufacturing) are more or less direct government direction of the economy.  It’s nice to see a libertarian voice pointing that out.   The 20th century was an uncontrolled experiment demonstrating that such government direction is unwise.

 

Mistakes were made.  A Louisiana politician, Girod Jackson III, is in tax trouble, reports NOLA.com:

Several years ago, there were filing errors on my business tax returns and delayed initial filings arising from accounting errors and oversight. Today, I have accepted the consequences of those mistakes.”

As a part of accepting these consequences, regretfully, I have submitted my letter of resignation to the Secretary of State and The Speaker of the Louisiana House of Representatives. 

Makes you wonder just how those “accounting errors” got there.  It almost sounds like he booked an expense to miscellaneous expense instead of office supplies.

Christopher Bergin, It’s a Cover-Up! (Tax Analysts Blog):

The IRS is not a transparent organization; it is a secretive organization — as secretive as it can get away with. That is why, over the years, Tax Analysts has asked the courts to not let it get away with certain secretive things. But was it a “cover-up” that the IRS did not want to make private letter rulings public? Was it a “cover-up” when the IRS tried to hide field service advice or emails to staff that provided legal interpretation? I don’t think so and Tax Analysts sued over all those issues. I guess it depends on your interpretation of “cover-up.” 

But, sadly, this is what the IRS does, and Tax Analysts is quite familiar with its penchant for secrecy.

When your business is taking people’s money, laying low has its attractions.

 

Andrew Lundeen, Do I Have to Pay Taxes on My Interest from My Savings Account?  The short answer is yes.” (Tax Policy Blog).

 

TaxProf, The IRS Scandal, Day 106

TaxGrrrl,  Pennsylvania Mulls First Statewide Plastic Bag Tax In The U.S. As ‘Small Price To Pay’   Maybe they just want to kill Pennsylvanians.

Howard Gleckman, The Center for American Progress Rethinks Retirement Savings:

Today, workers in 401(k) plans bear full investment risk and often struggle with how to allocate their retirement savings and what to do with their assets when they change jobs or retire. With SAFE, those risks would be mitigated. Enrollment would be automatic, savings fully portable, and investment funds pooled and professionally managed. Accounts would be automatically annuitized as in traditional DB plans. 

One of those “Nudge” things.

 

Tax Justice Blog, Max and Dave Do Silicon Valley

James Pethokoukis, Mad Men economics? No, we can’t return to the sky-high tax rates of postwar America

Kay Bell,  It’s time to eliminate many tax-exempt status designations

Robert D. Flach has his Friday Buzz going.  He also has wise advice in this interview:

And learn how to say “no” to a client when they ask you to do something that is “shaky” or “shady.” It is better to lose the client than to gain the potential problems.

So true.

 

The Critical Question: Will Bradley Manning’s Gender Reassignment Be Tax Deductible?  (Tony Nitti).

 

You probably won’t win a paperwork battle with the IRS this wayFrom a Justice Department press release:

 The Justice Department announced today the unsealing of a superseding indictment returned by a federal grand jury in Sacramento, Calif., charging Teresa Marie Marty, Charles Tingler and Victoria Tingler, all of Placerville, Calif., with conspiracy to defraud the United States and filing multi-million dollar liens against government officials.

Marty is charged with filing liens against the property of three Internal Revenue Service (IRS) employees involved in the collection of taxes she owed the IRS.  She also filed liens of at least $84 million against the property of two Justice Department attorneys involved in a lawsuit filed against her in 2009 to enjoin her and her business, Advanced Financial Services (AFS), from preparing tax returns. 

In case you’re wondering, the IRS doesn’t care for people to slap their employees with false liens.  They also don’t like this:

The indictment alleges that as part of the conspiracy, Harris and Marty engaged a commercial collection agency to collect one of the three false liens that Mr. Tingler had filed, one of which was in the amount of $500,000.

These folks were already in trouble on charges of filing false refund claims.  It sounds like they responded by going on the offensive.  It’s the tax controversy equivalent of Butch and Sundance charging the Bolivian Army.

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Tax Roundup, 12/12/12: Iowa income tax reform on hold? And Warren calls for more taxes on non-Warrens.

Wednesday, December 12th, 2012 by Joe Kristan

What’s missing here?  Governor Branstad had an interview with the Associated Press about his plans for the coming legislative year.  Topics covered include

– Property tax reform

– Education reform

– “Accepting” higher spending.

Anything missing?  Not a word here about income tax reform.  The governor had been talking about income tax reform in the runup to the elections, but hasn’t said much about it since.  I’m getting the feeling that Iowa’s chilly business tax climate isn’t warming up anytime soon.

What the current model of the Iowa tax law would look like if it were a car.

They could have thought about that before they voted for it.  From Byron York:

Sixteen Democratic senators who voted for the Affordable Care Act are asking that one of its fundraising mechanisms, a 2.3 percent tax on medical devices scheduled to take effect January 1, be delayed.  Echoing arguments made by Republicans against Obamacare, the Democratic senators say the levy will cost jobs — in a statement Monday, Sen. Al Franken called it a “job-killing tax” — and also impair American competitiveness in the medical device field.

You mean taxes matter?  Who knew?  (via Instapundit)

 

Warren Buffett calls for another tax increase on people who aren’t Warren Buffett.  From CNBC:

Warren Buffett isn’t limiting his call for higher taxes to a minimum rate for very rich Americans who get a large chunk of their income from investments.

He’s also one of several dozen wealthy people who have signed a statement calling for a “strong tax on the largest estates.”  It’s been released by a group called “United For a Fair Economy.”

Like the income tax hikes he supports, this increase wouldn’t affect him, because he plans to leave his pile to the Bill and Melinda Gates Foundation, where it will escape estate tax.  I’ll take him seriously if he calls for reducing or eliminating the estate tax charitable deduction.  Going Concern has more.

Peter Reilly, Warren Buffett And George Soros Want Higher Estate Tax Than Obama Proposes

 

In Iowa he’d have to collect sales tax too.  The Tax Court yesterday told a Houston patrolman learned that he was in independent contractor when performing security services off-duty.  From the decision (citations omitted):

An employment relationship is indicated when the service recipient has the right to control the details and means by which the worker performs the services.  In contrast, independent contractor status is indicated where the opposite is true.  This factor is generally critical in determining the nature of a working relationship.  Petitioners did not demonstrate that the third parties maintained the requisite right to control Mr. Specks in the performance of the security services.

Also, his employers clients didn’t withhold taxes from his payments.  If there’s no withholding, that’s a strong clue that you are not an employee.  Off-duty officers in Iowa are also expected to collect sales tax for their services.  (Specks, T.C. Memo 2012-343)

 

Jack Townsend links to a study of plea agreements in federal criminal cases.  While much of his post is of interest only to attorneys, this quote from the study should be read by anybody tempted to file a return (or not file) based on the idea that the income tax is unconstitutional (my emphasis):

These constitutional challenges do not work out well for defendants. Almost twenty years ago, the United States Supreme Court held that a considered, fundamental disagreement with the constitutionality of the tax laws does not represent a valid defense to a charge of tax evasion. Yet even with this guidance, many tax resisters remain unwilling to concede the point, and demand to take their cases to trial. One exasperated federal judge catalogued some of the “tired arguments” advanced by these defendants: 

That defendants continue to press these arguments in court despite their nonexistent odds of success underscores how many parties simply do not behave as extrapolation from likely trial outcomes might predict.

There’s no point trying to convince tax protesters that they are wrong in theory.  All you can point out is that their arguments never work when it matters.

 

Patrick Temple-West,  Boehner tries to keep GOP ranks behind him, and more (Tax Break)

TaxGrrrl,  Boehner, Obama Talks Heat Up But Still No Deal On Taxes, Spending

 

Jason Dinesen,  What Couples in Same-Gender Marriages Should Be Doing, Tax-Wise, Before Supreme Court Ruling.  I think it’s likely the court will require the IRS to recognize same-sex marriages, and Jason’s post is a must read for affected taxpayers. 

Paul Neiffer,  File Your Gift Tax Return.  It gets the statute of limitations started.

David Brunori,  Time To Get Rid of the Deduction for State And Local Taxes.  (Tax.com)  When the taxes arise from business income, like from S corporations and partnerships, I disagree.  It any case, it should only come with rate reductions.

Brian Strahle,  State Budgets and Taxes:  What Will Happen in 2013?

Jim Maule,  Ohio as Role Model for Tax Policy

Buzz time!  It’s Wednesday somewhere, so Robert D. Flach has a new roundup of good tax stuff.

The Critical Question:  Is your response to taxes genetic? (Kay Bell)

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Tax Roundup, 12/5/2012: Happy Repeal Day! Too bad it’s not the tax code.

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

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Tax Roundup, 11/27/2012: Rocking Sheldon! And billionaires and millionaires

Tuesday, November 27th, 2012 by Joe Kristan

The Tax Update is in Sheldon, in the Northwest Iowa, helping out at the Iowa State University Center for Agricultural Law and Taxation Farm and Urban Tax School today.

Some of the happy practitioners at today’s Farm and Urban Tax School in Sheldon, Iowa.

Two schools are left: Red Oak and Ames.  Register today!

 

How easy is it for rich folks to avoid higher rates?  Florida Senator and potential presidential candidate Marco Rubio said that tax rate increases would be largely futile.  From Huffington Post:

WASHINGTON — Sen. Marco Rubio (R-Fla.) said Thursday there isn’t much point in raising tax rates on the wealthy, because they also have the money to hire people who will help them get out of paying taxes.

“The billionaires and millionaires that are going to be impacted by higher rates, they can afford to hire the best lawyers, lobbyists and accountants in America to figure out how not to pay those higher rates,” Rubio told National Journal’s Major Garrett at The Atlantic Washington Ideas Forum. “The people that are going to get stuck by that bill are the small businesses, the partnerships, the S corporations, that cannot hire the lawyers to get them out of it.”

Is it really possible for “billionaires and millionaires” to get out of taxes through the best efforts of their lawyers?  To some extent.  Greg Mankiw explains how Warren Buffett does it:

1. His company Berkshire Hathaway never pays a dividend but instead retains all earnings.  So the return on this investment is entirely in the form of capital gains.  By not paying dividends, he saves his investors (including himself) from having to immediately pay income tax on this income.

2. Mr Buffett is a long-term investor, so he rarely sells and realizes a capital gain.  His unrealized capital gains are untaxed.

3. He is giving away much of his wealth to charity.  He gets a deduction at the full market value of the stock he donates, most of which is unrealized (and therefore untaxed) capital gains.

All of these are useful only to people who don’t need their cash right away.  If you want to use your cash, these aren’t very useful.  And many of these items are fraught with danger for taxpayers with less pull than Warren.  For example, a closely-held C corporation that pays no dividends runs the risk of being hit with the Accumulated Earnings Tax.  Many other tax-sheltering opportunities have been shut down through various crackdowns on tax shelters over the years, like the passive loss rules.

The real futility of taxing the rich is that it does so little to address the government’s insolvency.  Letting the tax cuts for “the rich” expire only covers about $80 billion of the $1,200 billion annual budget deficit.  The big attempt to tax “the rich” is just a distraction; the rich guy isn’t buying.

 

Tax Prof Poll: Taxes and the Fiscal Cliff (TaxProf)

Joseph Henchman,   Chambliss, Others Distance Themselves from ATR Tax Pledge (Tax Policy Blog)

Patrick Temple-West,  Consensus on increasing tax revenue, a wide gulf on how to do it, and more (Tax Break)

Daniel Shaviro, Broadening the base versus raising the rate

 

I vote yes:  Can We Kill the Death Master File? (Russ Fox). The publication of dead folk’s Social Security numbers is a boon for identity thieves.

TaxGrrrl,  Tax Breaks For Medical Expenses Under ObamaCare.  Hint: they are fewer and smaller.

Paul Neiffer,  2012 May Be Last Year for Section 179 Flexibility.  “What many farmers do not know about is the ability to go back and amend their tax return to change their Section 179 deduction.”

Trish McIntire,  Document Your Holiday Giving.  If you give over $250, no receipt=no deduction.

William Perez,  Tax Tips for Charitable Giving During the Holidays

Anthony Nitti,  Could Tax Savings Expedite Free Agent Baseball Signings?

Jack Townsend,  Swiss Bank Pictet & Cie On DOJ Tax Radar Screen

Robert D. Flach didn’t let Thanksgiving weekend stop his Buzz!

Howard Gleckman, How Can 98 Percent of Us be Middle-Class? (TaxVox)

Angus Young (Wikipedia image)

Kay Bell, More Cyber Monday shoppers this year are paying state sales taxes

News you can use:  Tax Dodger Alert: Your Friend in the Senate (Robert Goulder, Tax.com)

Jeremy Scott,  Why the Finance Committee Needs Angus King. (Tax.com)  I prefer Angus Young.

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Buying you things with your own money

Monday, May 14th, 2012 by Joe Kristan

Supporters of the “Buffett Rule” aren’t being honest about U.S. Budget problems.  No matter how much you tax the rich, the rich just don’t have the money to pay for all the spending the politicians are doing.  Here is what an honest Buffett Rule fan would say:

Every nation in the world with the kind of welfare state we want for America pays for it by taxing a large majority of its citizens far more heavily than we do. To pretend we can do otherwise is to invite our countrymen to indulge a fantasy rather than call on them to make a serious commitment. Building the welfare state we need means most Americans are going to have to pay significantly higher taxes. No one likes such taxes, of course, but the reality is that they’ll fund an array of government programs that leave all of us better off than we will be with the rudimentary welfare state we’re forced to live with if we insist on a much lower tax burden.

Warren will never say anything of the sort, but that doesn’t change the math: either we spend less or everybody gets taxed more.  The rich guy isn’t buying.

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The rich guy still isn’t buying the drinks

Wednesday, December 7th, 2011 by Joe Kristan

Many commentators — not to mention a certain billionaire, and the President — are obsessed with increasing taxes on “the rich.” They imply that the government’s fiscal disaster would be solved if the plutocracy would just pay in some of those $100 bills they use to light their cigars. The leave out one thing: taxing the rich doesn’t solve the problem.
TaxVox, a blog of the center-left Tax Policy Center, has an excellent mental exercise on how much taxes would have to be raised across the board to get the nation’s fiscal problems under control without tax cuts — or, alternatively, how much would have to be raised in a VAT on top of the current income tax.

The goal of the exercise was to reduce the ratio of debt to Gross Domestic Product (a standard way of measuring red ink) to 60 percent…
Assuming current tax policy does not change, they estimate it would take a VAT rate of 22.9 percent in 2015 to meet the debt target in 2020. Because the glide path would be longer, the 2015 rate would only have to be 16.7 percent if the goal is to hit 60 percent by 2035.
To hit the 2020 target though an across-the-board income tax rate increase, rates in 2015 would rise from today

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There goes Warren again

Thursday, October 13th, 2011 by Joe Kristan

The Oracle of Omaha is back in the news for revealing glimpses of his tax situation. Janet Novack reports:

According to a letter Buffett sent to Rep. Tim Huelskamp (R-Kansas) that the Congressman posted here, the billionaire had adjusted gross income in 2010 of $62,855,038, taxable income of $39,814,784, and a federal income tax bill of$6,923,494. That makes his effective tax rate, as a percentage of AGI, just 11.06%, compared to an average effective rate in 2008 (the most recent year available) of 18.1% of AGI for the 400 taxpayers with the largest incomes, according to figures reported by the Internal Revenue Service.

TOOO must have quite the pile of itemized deductions. He no doubt has a hefty state tax liability in Nebraska. He may have a good chunk of charitable giving. The only other deduction that could be big enough to get his rate down that low would be an investment interest expense deduction — one that arguably is a cost of doing business for an investor, and which would artificially lower the effective rate on his AGI.
For the record, TOOO’s effective rate is much higher when you consider the taxes already paid by the corporations he controls and the inherent erosion of inflation on investment income. It’s also worth noting how so much of the income of high-bracket taxpayers is business income from partnerships and S corporations, not capital gains, and increasing taxes on business income is a direct hit on the ability of businesses to expand and grow.
But Warren has his pile already, so it’s easy for him to be generous with other people’s money.

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Warren Buffett’s exclusive club

Tuesday, October 11th, 2011 by Joe Kristan

Only eight of the Forbes 400 were willing to say they want to pay higher taxes. (via Instapundit).
Remember, when they push higher taxes, they mean higher taxes for other people. After all, they are already free to increase their own tax by just giving the government a tip for fine service rendered.

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Just because you’re President doesn’t make you Warren Buffett

Thursday, September 29th, 2011 by Joe Kristan

Echoing Warren Buffett’s complaint that he isn’t paying enough tax, President Obama said that he pays lower tax rates than a $50,000-per-year teacher. Factcheck.org says that isn’t quite so:

President Obama

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More math

Wednesday, September 21st, 2011 by Joe Kristan

The President invokes math to tax “the rich.” The Tax Policy Blog responds with data:

For the entire universe of American taxpayers, the average tax rate is 11 percent of our AGI. The highest average tax rate paid by anyone earning under $100,000 is 8 percent. That shows how successful the myriad tax credits available to the “middle-class” have been in reducing their tax burdens.
By contrast, millionaires pay an average rate of 25 percent. Although taxpayers earning between $2 million and $5 million pay an average tax rate of 26 percent, while those earning more than $10 million pay an average of 22 percent. We can speculate that one of the reasons for this is that much of their overall income comes from capital gains, which is taxed at 15 percent (only 20 percent of the total AGI for these $10 million-plus taxpayers is from salaries). However, even with this “preferential” tax rate on capital gains, the data clearly shows that their overall average tax rate is at least twice that of the nation as a whole.

The Moral: Warren Buffett may be a fine investor, but don’t hire him to do your tax return.

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Yes, the rich do pay higher taxes

Monday, August 29th, 2011 by Joe Kristan

Whenever you point out that the rich do pay significantly higher federal taxes than the poor, somebody shoots right back: what about payroll taxes?
Whenever you say that the tax system already leans heavily on the wealthy, someone says “Warren Buffett wants higher taxes for rich people, so you should, too.”
The center-left Tax Policy Center has issued data that these folks should ponder. A sample:

Click chart to enlarge.
This data shows that even when you take the payroll taxes into account, the tax system is highly progressive. This data also usefully incorporates the effect of corporation income taxes into the equation, a factor Mr. Buffett famously ignores when pleading for higher taxes on other people — and it’s only on other people, as he already is free to give the government as much as he wishes.

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Not all the rich guys think the government should get more of your money

Monday, August 22nd, 2011 by Joe Kristan

Harvey Golub in the Wall Street Journal (Via The TaxProf):

Before you “ask” for more tax money from me and others, raise the $2.2 trillion you already collect each year more fairly and spend it more wisely. Then you’ll need less of my money.

Spend less, spend smarter, then we’ll talk taxes — sounds about right. But Daniel Shaviro has a different view: while taxing the risk is futile and useless in solving the budget crisis, we should do it anyway:

. With an aging population and retirement programs that serve important social purposes (and also are baked in to people’s behavior and expectations), raising taxes just at the top will not be sufficient. But raising them at the top as part of the short-term budgetary response (if anything happens from the Gang of Twelve deliberations) would certainly be a start.

A pointless start, but a start nonetheless!
Related: Look at me! I want the government to take your money! Aren’t I great?
More from Peter Pappas.

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Look at me! I want the government to take your money! Aren’t I great?

Friday, August 19th, 2011 by Joe Kristan

Warren Buffett and Henry Bloch get all moralistic when they call for higher taxes on “the rich.” But they’re just striking a pose. The Tax Policy Blog shows how little shaking down high-earners will do to solve our federal fiscal disaster:

Mr. Buffett specifically called to raise tax rates on Americans making more than $1 million and proposed an additional increase on taxpayers whose income exceeds $10 million. Suppose Mr. Buffett got his wish and loopholes and deductions were eliminated, making it possible to tax the “super-rich” (those earning $1M – $10M per year) at an effective rate of 50%. The following table shows the effect that such a historic hike on effective rates would have on the deficit and debt:


Click to enlarge

In addition, Mr. Buffett wanted those making more than $10 million per year to pay even more. The table below exhibits the effect of imposing a 100% effective rate on these individuals:


Click to enlarge

So taking half of the yearly income from every person making between one and ten million dollars would only decrease the nation’s debt by 1%. Even taking every last penny from every individual making more than $10 million per year would only reduce the nation’s deficit by 12 percent and the debt by 2 percent. There’s simply not enough wealth in the community of the rich to erase this country’s problems by waving some magic tax wand.

So The Sage of Omaha and the man who built an empire on tax complexity want credit for sacrificing others on the altar of fiscal responsibility. Yet the problem isn’t that we let people who make money keep some of it. The problem is that we are spending too much. Rather than suggesting a way to spend less or pay for what we are spending, they preen their generosity with other people’s money. And yet the U.S. already relies very heavily on “the rich” for its taxes. If spending doesn’t go down, the rich aren’t going to be able to foot the bill.
Politicians offer goodies and say someone else will pay for it. TSOO and Mr. Bloch are doing the same thing. If they are going to act like politicians, they deserve no more credit for what they say than other politicians.
Related: Warren Buffett, Tax Poseur

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