No Runny Eggs

The repository of one hard-boiled egg from the south suburbs of Milwaukee, Wisconsin (and the occassional guest-blogger). The ramblings within may or may not offend, shock and awe you, but they are what I (or my guest-bloggers) think.

Day by Day cartoon

Archive for the 'Taxes' Category

October 24, 2013

PlaceboCare Über Alles, IRS Edition?

by @ 9:05. Filed under PlaceboCare, Politics - National, Taxes.

The IRS choosing to implement its portions of PlaceboCare fully as its top priority during the 17% Shutdown instead of ensuring it could start receiving individual income tax returns on-time next year is the charge House Ways and Means Chair Dave Camp (R-MI) leveled after the IRS announced that it will not be starting the Tax Year 2013 filing season on-time. Camp noted that the prior tax season, the IRS managed to start accepting tax returns on-time even though there were wholesale changes approved by Congress in December 2012, though my memory says it was delayed by a couple days.

The IRS counter-claimed that they were in the middle of building a new system for the Tax Year 2013 filing season when they were forced to prioritize. One can only hope that they didn’t choose the 404Care Exchange designers for that.

The significance of the delay is those big spenders who budgeted for a big income tax refund check to arrive February 2014 (an aside – that is perhaps the stupidest financial decision one can make) won’t get one.

October 10, 2013

How many people would have avoided PlaceboCare’s tax had the exchanges worked 100% from Day One?

by @ 8:11. Filed under PlaceboCare, Politics - National, Taxes.

(H/T – Hot Air commenter MobileVideoEngineer)

3,800,000 according to DNC Chair (and Congresswoman) Debbie Wasserman-Schultz (D-FL). That’s right – the PlaceboCare exchange website was designed to handle a grand total of 50,000 people per day. There are 76 days, including weekends and holidays, between October 1 and December 15, the last day to sign up for PlaceboCare to be covered starting in January and thus not taxe…er…fined for not having PlaceboCare coverage.

No wonder why the IRS is saying the PlaceboCare exchanges are going “as planned”. They stand to get a rather-substantial ill-gotten windfall.

Revisions/extensions (8:15 10/10/2013) - I forgot to mention that, just like every other Rat-introduced health-related spending disaster, the PlaceboCare exchanges busted the budget by orders of magnitude. It was supposed to cost $94 million; instead, the cost is $634 million and counting.

R&E part 2 (18:20 10/10/2013) - It’s supposedly 50,000 at a time, not per day. Of course, that’s less than half the capacity of the GOP’s Medicare drug benefit expansion, which if memory serves was also available through snail mail.

September 5, 2012

Wisconsin GPR tax revenue estimates increase (again)

by @ 20:25. Filed under Politics - Wisconsin, Taxes.

The Department of Revenue stated today that General Purpose Revenue tax collections for FY2012 increased to $13.515 billion in their next-to-last report on said revenues. The MacIver News Service noted this was $127 million higher than the DOR’s May 2012 estimate and $320 million higher than the Legislative Fiscal Bureau’s February 2012 estimate.

Allow me to bring back from the memory hole a couple of other, earlier estimates. First is the LFB’s estimate immediately after the FY2012/FY2013 budget was adopted, as part of a longer memo showing that budget would produce a structural surplus in the succeeding biennium. In that memo, once the effects of the budget and the (prior-period) budget repair bill are added (subtracted, really) together, FY2012 GPR tax collections were expected to be $13.297 billion.

I’m sure my friends on the Left will say that, if we had just continued former governor Jim Doyle’s policies, things would be a lot better. That administration didn’t exactly see it that way. A LRB memo from late-January 2011 references the December 2010 DOR estimates, and despite economic assumptions that, on a national level, were a bit rosier than reality, the Doyle-era DOR foresaw only $13.304 billion in GPR tax collections for FY2012.

The Laffer Curve lives.

April 6, 2012

Wisconsin Tax Day Rally – April 14

by @ 11:18. Filed under Politics - Wisconsin, Taxes.

The Wisconsin chapter of Americans for Prosperity is hosting the 2012 Tax Day Rally at the King Street entrance of the Capitol on April 14th at 11:30 am. To help amplify the voices for smaller government, lower taxes and increased economic freedom, they’re bringing in James T. Harris, who moved out to Arizona to live the daily talk show dream, PJTV’s Stephen Kruiser, Dana Loesch and Jim Hoft to join Vicki McKenna and us.

AFP will be providing bus transportation from all over the state, but I recommend signing up very quickly as the bus from Waukesha has already been filled.

November 26, 2011

GOP members of the Super Committee – We were willing to give the Dems 89% of the tax revenues, and 91% of the tax hikes, they wanted

by @ 22:48. Filed under Budget Chop, Politics - National, Taxes.

In an editorial in the Washington Post, the Republican members of the failed Super Committee ripped the Democrats for insisting on no less than $1,000,000,000,000 in additional taxes between FY2012 and FY2021 versus the Congressional Budget Office extended-baseline between 2012 and 2021. They also admitted that the $250,000,000,000 in additional taxes versus the CBO extended-baseline proposed by Sen. Pat Toomey (Real Disappointment-Pennsylvania) was but half of the additional tax increase they were willing to give the Democrats.

Before I get to the details of that, however, I do have to deal with the disingenuous part of the op-ed:

Why do Republicans believe our proposal is preferable to the automatic 2013 rate increases? Apart from the fact that our economy could not withstand the almost $4 trillion tax increase, it would directly and adversely affect small-business investment decisions. Business decisions are highly sensitive to the rates of the capital gains, dividends and death tax, as well as marginal tax rates. That’s why Republicans would leave them alone and raise revenue instead by limiting personal itemized deductions and credits that have much less impact on investment decisions by small-business owners.

That $3,949,000,000,000 tax increase from not extending the parts of current tax policy the Republicans wanted extended, as well as another $761,000,000,000 tax increase from expiring/expired tax policy the GOP didn’t mind seeing expire, was already baked into the “debt deal” that created the Super Committee. While the method of getting the $39,221,000,000,000 in revenue the CBO August 2011 baseline anticipates between FY2012 and FY2021 was not specified in the “debt deal”, the fact that the CBO extended-baseline is the starting point means that the end result, and its attendant $4,710,000,000,000 tax increase, has been stipulated to by anybody talking about “additional” tax revenues.

As for the “much less impact”, that’s a bunch of Bravo Sierra. The “rich” and “near-rich” aren’t exactly dumb; they would have quickly realized that what the federal government put in their right pocket, they vacuumed out the left at a faster rate, and the non-profits who depend on donations from the “rich” and “near-rich” would have been hit hardest.

Now to the other third of the GOP betrayal on taxes:

The essence of the plan was to dramatically reduce the deductions and credits wealthier taxpayers can claim to reduce their tax liability. That would generate enough revenue to both permanently reduce marginal rates for all taxpayers and provide more than $250 billion for deficit reduction. Added to other receipts, taxes and fees, the Republican plan amounted to more than $500 billion in deficit reduction revenue and $900 billion in spending reductions.

In order for an amount to be counted as “deficit reduction revenue”, it would have to make the FY2012-FY2021 revenue number larger than $39,221,000,000,000. Fortunately, since the resulting reduction in debt service is also scored for the purposes of debt reduction, any tax hike is slightly less than the amount of deficit reduction. While I haven’t seen any actual scoring of the final GOP plan, assuming it would raise taxes equally each year on an inflation-adusted basis, it would need to result in roughly $478,000,000,000 in new taxes beyond what was already baked in.

That brought the total amount of taxes the Republicans were willing to offer to $39,699,000,000,000, a $5,188,000,000,000 increase from extending current policy, and (using static analysis) a tax take of 20.9% of GDP in FY2020 (where it would be in FY2021 with no tax-code changes and no economic collapse) and 21.1% of GDP in 2021, both new national records. That, however, was not enough for the Democrats. From the op-ed one last time:

At no time in the negotiations did the Democratic committee members drop their insistence that, one way or the other, any deal had to include a trillion dollars in new taxes.

Adding $1,000,000,000,000 to the CBO extended-baseline revenue would bring taxes to $40,221,000,000,000, a $5,710,000,000,000 increase from extending current policy. Assuming the economy doesn’t enter a recession like it has the 5 times since World War II that the federal tax take broached the 19% GDP barrier, the new national record of 20.9% GDP would have been reached in FY2017, and reset every year thereafter with it hitting 21.3% GDP in FY2021.

As for the percentages in the title, the GOP offered up just shy of 89.5% of the tax revenues and, compared to extending current tax policy, 90.9% of the tax increases, the Democrats demanded. Indeed, the GOP continued its decade-long assault on the near-rich by targeting them and only them for removal of tax deductions while holding the poor essentially harmless, and the ‘Rats couldn’t hear them over Queen’s “I Want It All”.

[youtube]http://www.youtube.com/watch?v=1pm4fQRl72k[/youtube]

Revisions/extensions (8:42 am 11/28/2011) - Emperor Misha links and has a kick-ass close:

So yeah, the collapse of the StuporCommittee was really the best thing that could have happened and, furthermore, it is pretty clear to us that there is a LOT more housecleaning that needs to be done in the GOP next year.

August 30, 2011

Tax the rich? They’re already becoming extinct.

by @ 22:47. Filed under Economy Held Hostage, Taxes.

(H/T – Dad29)

Buried in an early-August Reuters story on the preliminary 2009 Statistics of Income tables produced by the Internal Revenue Service is this little “gem”:

The number of Americans reporting incomes of $10 million or more also plunged even more than the steep drop in income for the population as a whole.

Just 8,274 taxpayers reported income of $10 million or more in 2009, down 55 percent from 18,394 in 2007. Compared with 2007, total real income of these top earners in 2009 fell 58.6 percent to $240.1 billion, but average income slipped just 8.1 percent to $29 million.

July 31, 2011

Why tax hikes need to be way off the table

by @ 16:23. Filed under Budget Chop, Politics - National, Taxes.

Presented from the Congressional Budget Office June 2011 Long-Term Outlook, the anticipated federal tax burden in terms of GDP between 2013 (the first year the “SuperCommission”‘s $1.5 trillion in deficit reduction will likely affect) and 2021:

Extended-baseline (Bush tax rates expire at the end of 2012, alternate minimum tax not “patched” to protect middle- and lower-income taxpayers, and also the base from which that $1.5 trillion will be scored):
2013 – 18.8% (already well above the 1951-2000 18.06% average)
2014 – 19.9%
2015 – 20.0%
2016 – 20.0%
2017 – 20.3%
2018 – 20.4%
2019 – 20.5%
2020 – 20.6%
2021 – 20.8% (a new non-WWII record, breaking the 20.6% GDP set in 2000)

Alternate Fiscal Scenario (assumes Bush tax rates continue, AMT “patched” annually):
2013 – 17.0%
2014 – 17.5%
2015 – 17.6%
2016 – 17.6%
2017 – 18.0%
2018 – 18.1% (again, above the 18.06% 50-year average)
2019 – 18.2%
2020 – 18.3%
2021 – 18.4%

Moreover, while the CBO assumes in the Alternate Fiscal Scenario further tax-rate cuts are made to keep revenues at 18.4% GDP, The Heritage Foundation does not. They estimate that keeping the Bush tax rates and implementing an AMT fix would put the tax burden above 18% GDP by 2013, and above 20.6% GDP between 2030 and 2035.

To paraphrase the campaign of the last Democrat President, “It’s the spending, stupid!”

Revisions/extensions (6:28 pm 7/31/2011) - Jimmie Bise reminded me that, in 1944, the federal government took in 20.9% of GDP.

April 15, 2011

Must-see TV – Iowahawk and Hammer edition

by @ 9:07. Filed under Budget Chop, Politics - National, Taxes.

I don’t think you’ll be able to take Iowahawk’s advice of “Sleep tight, everybody” after this…

Meanwhile, Mary Katharine Ham dreams of what an audit should be.

Happy </sarcasm> Traditional Tax Day, everybody.

March 29, 2011

Tax the rich? We’ve already tried that – part 2

by @ 19:22. Filed under Politics, Taxes.

(H/T – Lance Burri, just because I don’t think a million hits is enough for him, or is it the fact that he used the eggs-in-a-basket analogy)

If I had paid attention on Saturday, I probably would have done this as the Weekend Hot Read. Robert Frank of The Wall Street Journal used the collapse of the rich and the resulting collapse of various states’ tax revenues as the topic of the WSJ’s Saturday Essay. I’ll take a larger chunk than Lance did to get you to read the entire thing:

The story of (Brad) Williams, the former chief economist and forecaster for the California Legislative Analyst’s Office, shows just how vulnerable states have become to the income shocks among the rich, and why reform has proven difficult.

In the mid-1990s, shortly after taking the job, Mr. Williams discovered he had a problem. Part of his job was to help state politicians plan their budgets and tax projections….

Historically, California’s tax revenues tracked the broader state economy. Yet in the mid-1990s, Mr. Williams noticed that they had started to diverge. Employment was barely growing while income-tax revenue was soaring.

“It was like we suddenly had two different economies,” Mr. Williams said. “There was the California economy and then there were personal income taxes.”

In all his years of forecasting, he had rarely encountered such a puzzle. He did some economic sleuthing and discovered that most of the growth was coming from a small group of high earners. The average incomes of the top 20% of Californian earners (households making $95,000 in 1998) jumped by an inflation-adjusted 75% between 1980 and 1998, while incomes for the rest of the state grew by less than 3% over the same period. Capital-gains realizations—largely stock sales—quadrupled between 1994 and 1999, to nearly $80 billion.

Mr. Williams reported his findings in early 2000, in a report called “California’s Changing Income Distribution,” which was widely circulated in the state capital. He wrote that state tax collections would be “subject to more volatility than in the past.”

The essay goes on to note how the states that became most-addicted to the outsized increased revenue from the high-income earners, have become the worst economic basket cases as the POR Economy (™ Tom Blumer) decimated those same people.

March 22, 2011

Tax the rich? We’ve already tried that.

by @ 19:44. Filed under Politics - National, Taxes.

(H/T – Allahpundit)

Scott A. Hodge of the Tax Foundation pointed out that the tax burden in the United States during the mid-2000s (specifically, 2005) was the most-progressive in the industrialized world. Specifically, while the richest 10% of Americans had, according to the OECD, 33.5% of the market income (3rd in the industrialized world), they paid 45.1% of the taxes (highest in the industrialized world). For those of you wondering, the tax take includes both income and social insurance taxes (and judging by the numbers, also state/local taxes). To put it another way, those in the top 10% paid a ratio of taxes to income of 1.35, easily the highest among industrialized nations, and far higher than the average of 1.11.

Further, during his testimony to Congress last week, Hodge pointed out that, again according to the OECD, low-income Americans had the lowest tax burden of any industrialized nation.

Let’s relate that to the federal income tax. One of the things the IRS does is offer statistical releases of tax data. One series of tables breaks down the returns with a positive Adjusted Gross Income by AGI and taxes paid. In 2005, those in the top 10% of filers had 46.4% of AGI and paid 70.3% of income taxes. The ratio of taxes-to-income was 1.51. Meanwhile, the bottom 50% of filers with positive AGIs (which I note again because there are those who through various means had negatifve AGIs) had 12.8% of income and paid 3.1% of income taxes, for a taxes-to-income ratio of 0.24.

Fast forward to 2008, when once again the bottom 50% of earners had 12.8% of income. Their share of the income taxes dropped to 2.7%, reducing the taxes-to-income ratio to 0.21. Meanwhile, the top 10% saw their share of the income drop to 34.7%, but their share of the income taxes only dropped to 69.9%. That caused the taxes-to-income ratio to increase to 1.69.

February 24, 2011

We’re number four – 2009 state/local taxes edition

by @ 17:55. Filed under Politics - Wisconsin, Taxes.

(H/T – Kevin Fischer)

The Tax Foundation has just released its analysis of Fiscal Year 2009 state and local taxes, and because Wisconsinites pay 11.0% of their incomes in state- and local-level taxes, we had the fourth-worst tax burden in the nation as of last year. That represents an increase of 2.2% from the 10.7% of income Wisconsinites paid in 2008, when Wisconsinites’ tax burden was 6th-worst. By contrast, the average American paid 9.8% of his or her income in state- and local-level taxes in 2009, a drop of 1.2% from the 9.9% of income paid in 2008.

Since the Tax Foundation looks at the taxpayer side of the equation rather than the taxer side, they break down what Wisconsinites pay in-state versus what Wisconsinites pay out-of-state. In fact, in explaining this, they mention Wisconsin as one of their examples – “When Illinois and Massachusetts residents own second homes in nearby Wisconsin or Maine, local governments in Wisconsin and Maine will tally those property tax col­lections, but we will shift those payments back to the states of the taxpayers.”

With that in mind, let’s take a look at what Wisconsinites paid in in-state taxes. In 2008, we paid a per-capita $3,356 in in-state taxes (10th-highest overall), representing 8.1% of $41,454 in per-capita income (5th-highest overall). In 2009, that increased to $3,418 in per-capita in-state taxes (9th-highest overall), representing 8.5% of $41,4321 in per-capita income (4th-highest overall). That was a $62 increase in per-capita taxes paid (making Wisconsin one of only 17 states where this increased), while per-capita income dropped $1,133, which resulted in an increase of the tax burden in terms of income by 4.7%.

What did the average American see in own-state tax burden? In 2008, the average American paid $3,163 inside their own state, or 7.1% of their $44,294 income. In 2009, the dollar amount dropped to $3,097, but because the income dropped to $42,539, the burden increased to 7.2% of income, or a 0.6% increase.

As for Kevin’s notation that we’re worse than California, we indeed passed them in 2009 in terms of income (i.e. ability to pay). In 2008, California and its local units of government took 8.6% of Californians’ income, and in 2009, that dropped to 8.4%.

In fact, the three states that exacted more from their citizens in terms of income were Connecticut (8.5% of income), New Jersey (8.7% of income) and New York (9.6% of income).

As Kevin said, “Enough.”

Revisions/extensions (3:15 pm 2/26/2011) - I probably should have also mentioned Minnesota’s and Kentucky’s rankings. While Minnesota’s state and local per-capita take from its residents was a bit higher than Wisconsin’s at $3,520 (7th-highest nationally), the fact that each resident has an average income of $45,220 makes the percent-of-income take quite a bit better at 7.8% (6th-highest nationally).

Meanwhile, Kentucky’s state and local takes from each of its residents was a mere $2,227 (37th-highest nationally). Even its 3rd-lowest per-capita income of $32,959 didn’t raise its percent-of-income dramatically, as the 6.8% of income taken by Kentucky was 25th-highest.

I can’t speak for Shoebox, but I’m sure the lower taxes in Kentucky had something to do with his move to a warmer climate.

February 21, 2011

It’s Monday

Do you know where your State Senator is?

Mike, a reader of NRE, sent me the following aides to assist us in the location and safe return of the Madistan 14. Maybe this could become a collectors series? Get all 14!

December 12, 2010

Drip, Drip, Drip

by @ 14:52. Filed under Politics - National, Taxes.

It’s been a week since President Obama announced that he had a “deal” with Republicans to get the current tax rates extended.  At that time, the “deal” included an extension of all current tax rates for an extension of unemployment insurance and an increase (yes, an increase as the current rate is ZERO) in estate (death) taxes.  For a reason yet mystifying, the “Republican Leadership,” and I can only assume that means Boehner and McConnell, agreed to this “deal.”  They agreed even though, in their first official action, it meant that they would clearly put a “we don’t care what you say,” sign out for all grass roots activists to see.

Since last week, Obama has been looking for ways to get Democrats to sign on to the extension bill.  While Joe “This is a big F%$&ing deal,” Biden told the Democrat caucus that there would be no room for change, the Democrat caucus has been doing just that.

The first drip was the inclusion of an extension of ethanol credits for two years.  Besides the fact that even Al Gore recognizes that ethanol is bogus green science, has anyone noticed how numerous food items are either increasing in cost or being reduced in size resulting in increased costs per ounce?  Yeah, look at the items increasing.  The majority can be traced back to corn either as an ingredient, a sweetener or a food source for the product.  Continuing to extend the ethanol credits is not only bad science, it is having the unintended consequence of pushing inflation into our food supply.

The second drip was the extension of credits for “green” cars, “green” transit, “green” diesel and “green” appliances.  Suffice to say that the only thing “green” about any of these items is the money that is being shoveled into black holes that don’t return a dime in benefit!

Additional provisions have been rumored to be considered as a way to improve Democrat’s chances of supporting the bill.  You can bet that none of them would move the bill to a more fiscally responsible bill.

One drip, two drips, heck, even three drips aren’t usually enough to cause any real damage.  However, if you’re already water logged, even one drip can do you in.  The Federal budget is clearly water logged.  Any drips, even the ones already “agreed” to, are too much.  The Republican leadership can still pull back and demand a straight up or down vote on extending the tax rates.  If they don’t, we’ll all be left wondering which drip it will be that will cause the US economy to do this:

December 11, 2010

Politics of Envy and Greed

by @ 14:45. Filed under Politics - National, Taxes.

There really is no editorial required on these.  Simply listen to the statements of one admitted socialist and one member of the Democratic Socialists of America.  It’s not hard to understand that their real complaint about “tax cuts” is that no one’s money is their own.  Their belief is that all money, regardless of how it was gained, is the government’s to use as it sees fit.

See Bernie Sanders Here.

Keith Ellison

To both of them I say, “Bring it on!” I don’t like this deal either. Let’s let the tax rates increase and see what the American people have to say about it…..shall we?

December 9, 2010

Munching Popcorn 12-9-10

by @ 19:25. Filed under Politics - National, Taxes.

Yesterday, Joe Biden tried to explain to the Democrat caucus why The Won caved on his tax promise.  He calmed their concerns by telling them there was no abiilty to change the deal.  There is no doubt that somewhere in his explanation Biden told the caucus that “This is a big f%$*ing deal!”

Today the Whitehouse released a video of Austan Goolsby doing a version of “Obama is smarter than you for dummies.”  Austan doesn’t have to worry about a call to join SNL anytime soon:

Following this fun, the Dems had a House Caucus meeting during which at least one member could be heard saying, “F&*^ the President.” Following that, reporters could hear “just say no” being chanted within the meeting room. At the end of the meeting, the caucus cast a voice vote to reject the tax compromise that President Obama caved on negotiated.

At the end of this, the bad news is we don’t know what is happening with tax rates yet.

The good news is that I’m getting much more “heart healthy” as I chow down on bucket after bucket of high fiber popcorn….non butter of course.

December 7, 2010

Tuesday Hot Read – Daniel J. Mitchell’s “The Good, the Bad, and the Ugly”

by @ 11:49. Filed under Politics - National, Taxes.

The Cato Institute’s Daniel J. Mitchell pretty much summed up my initial take on Le Grande Compromise between Obama and the Republicans on tax rates and unemployment benefits:

Compared to ideal policy, the deal announced last night between congressional Republicans and President Obama is terrible.

Compared to what I expected to happen, the deal announced last night is pretty good.

Point of order – there currently is no guarantee that Nancy Pelosi and Harry Reid, who weren’t exactly involved in the negotiations, are going to let this pass. I believe the applicable term when (I don’t believe it’s a matter of “if) this falls apart and all of the Clinton tax rates return full-force will be “poison pill”. Teh Won will bite his lower lip and whimper out, “I never tried so hard for anything as a middle-class tax cut” (if that sounds familiar, it should – that was what the last Democrat President said).

Even if this is a genuine and doable compromise, it’s essentially a punt into 2012 for everything except the reinstated death tax (at 35% with the first $3.5 million exempt for 2 years, compared to the previously-imminent (and now merely delayed until after 2012) 41%/$1 million exempt to 55%-beyond-$3 million), another 13 months of extended unemployment benefits (it’s still at the 99-week limit instead of 26 weeks), and the 1-year 16% reduction in the FICA tax (a reduction of the employee portion from 6.2% to 4.2%, in exchange for allowing the Make Work Pay tax credit). For the sake of argument, let’s look at the three:

  • The Death Tax returns - The number one killer of family businesses is back. Let me put it this way – that money was already taxed once (or in the case of unrealized capital gains, will be taxed when said gain is realized) – the government has no right to a second taxation that is at a higher marginal rate than the first taxation just because one died.
  • Extending unemployment benefits - Did the POR (Pelosi-Obama-Reid) Economy put you out of work? No problem – your 2011 can be as work-free as 2010 was. We’ll just borrow from the Red Chinese so you don’t have to worry about getting a job until 2012.
  • The 1-year FICA tax reduction - This is actually better than the old Subsidize Low-Paying Jobs welfare plan. If you work, you’ll get 2% more on your paycheck. So what if SocSecurity runs a cash deficit again? It was going to be in the red anyway (seriously, this has a less-than-6-month effect on the SocSecurity fund-exhaustion dates).

July 29, 2010

Another Tax Man stinker – 2008 edition

by @ 20:31. Filed under Economy, Politics - National, Taxes.

(H/T – Charlie Sykes)

In his discussion of the requirement of every small business to report to the IRS every payment of at least $600 in the aggregate (discussed here earlier this year), David Frum found a real gem of a form – Form 1099-K (draft version). While that is not the form he is thinking of, one of his readers remembered what that form is for. It seems a credit/third-party network transactions reporting requirement was slipped into the “Housing Assistance Tax Act of 2008″ by Harry Reid and his fellow Senate Democrats, and it is a doozy, and the IRS made it an even bigger doozy in its proposed implementing regulations.

To cut to the quick; all payment-card payments (on cards issued by an entity unrelated to the entity accepting final payment) and all third-party network transactions that exceed $20,000 and 200 transactions to a particular payee in a year from said network (not from an individual account holder, but from every account holder) must be reported on an aggregated monthly basis, and a separate 1099-K must be filed for each determinable cardholder/account owner.

Are you going to use that Chase MasterCard to buy a $800 computer from Best Buy in March 2011? Are you going to use your debit card to buy a $8 meal from Culver’s in April 2011? Are you going to use PayPal to buy a $500 airline ticket from AirTran in June 2011? Will you be passing through a tollbooth using EZ-Pass in January 2011? Will you be using a WMATA SmarTrip card on a DASH bus in February 2011? Will you be making a phone call using a prepaid phone card in September 2011? If so, the IRS will find out about it.

But wait; it gets “better”. If you accept a payment-card or third-party network transaction, you better tell that card or payment company your correct Taxpayer ID Number if you don’t want them to withhold federal taxes on the payments due you.

I suppose there is one little bit of good news. If those proposed IRS regulations I linked to go through without changes, those of you with businesses just might have a little less paperwork to deal with. If all of your payments to a particular vendor are made with a business credit card, you won’t have to report those payments because your credit card company will take care of that for you.

July 26, 2010

Well, you’re wrong – Neumann property tax edition

by @ 12:10. Filed under Politics - Wisconsin, Taxes.

On Spike TV’s “MXC”, a humorous dub of Tokyo Broadcast System’s “Takeshi’s Castle”, the Captain Tenneal character had a catch phrase he used right after he asked the contestants an opening question. That phrase, “Well, you’re wrong,” applies to both the Mark Neumann campaign’s sales pitch of his property tax shift and some of the critics of that plan.

First things first, it is not a tax cut (with a possible exception which I’ll address as a concern in a bit). Rather, it is a shift of when the property taxes are paid. Instead of the 2011 property tax (the first bill that would be affected by Neumann’s proposal) being paid either at the end of 2011 or over the first 5 months of 2012, it would be paid over the course of the entirety of 2012.

On a related note, the “no other enterprise waits an entire year to bill for services” bit is a bunch of smoke and mirrors. Who here has paid their entire 2010 income tax? Who filed their 2010 income tax return back in April? Indeed, because the property tax bill comes in December of the named year with the ability to settle the entire tax bill before the end of the year, the dating of a particular property tax bill makes more sense than the dating of the income tax bill, which cannot be settled in full until sometime in the following year.

Indeed, Neumann’s plan, unless he simply decides to call the 2011 property tax the 2012 property tax, makes it worse. Instead of waiting a maximum of 17 months (to the end of the following May) for the final payment, one would wait a full 2 years for the final payment.

As for the criticism that the tax deductibility would be lost, that also is false. For those that itemize on their federal income tax return, the amount paid in property tax is deductible on the same year’s tax return that the property tax is paid, regardless of the date on the property tax bill. The reason why a lot of people pay their property taxes in full in December is that they don’t want to wait two return cycles to deduct the property tax payment. In fact, I am sure there are some people who wait to pay one year’s property tax until January (or even May) and then turn around and pay the next year’s property tax in December to get effectively a “double” reduction on the second year’s income tax.

As for the plan itself, there are two concerns I have. The first is that, once an owner decides to get in, there’s no way out, not even for a new owner.

The second relates to the liability of the previous owner in a sale. Currently, tax liability for the previous owner extends to the month of the sale. Neumann was unclear on whether that means the previous owner gets to walk away from a year’s worth of taxes or whether that owner has to pay property taxes on his or her old property for 12 months after the sale.

Beyond that, I could just as easily flip a coin weighted slightly against the proposal. Offering a smaller per-payment tax bill that is paid more often will allow property-taxing authorities to grease the skids for a bigger property tax hike.

June 17, 2010

The IRS being placed in charge of PlaceboCare was no accident

Philip Klein explains over at The American Spectator the strategy the Obama adminstration is using to try to short-circuit challenges to PlaceboCare (emphasis added):

Late last night, the Obama Department of Justice filed a motion to dismiss the Florida-based lawsuit against the health care law, arguing that the court lacks jurisdiction and that the State of Florida and fellow plaintiffs haven’t presented a claim for which the court can grant relief. To bolster its case, the DOJ cited the Anti-Injunction Act, which restricts courts from interfering with the government’s ability to collect taxes.

The Act, according to a DOJ memo supporting the motion to dismiss, says that “no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed.” The memo goes on to say that it makes no difference whether the disputed payment it is called a “tax” or “penalty,” because either way, it’s “assessed and collected in the same manner” by the Internal Revenue Service.

Klein goes on to explain how that is a violation of both his claims that it isn’t a tax and his his campaign pledge to not raise taxes by “one dime” on those making less than $250,000 (later lowered to $200,000 if one is single, with the $250,000 supposedly still applying to those who are married).

April 29, 2010

The death of small business – courtesy PlaceboCare

by @ 13:18. Filed under Business, Politics - National, Taxes.

(H/T – Ed Morrissey)

Chris Edwards over at the Cato Institute found a significant penalty for anybody doing business in the recently-passed PlaceboCare bill – essentially every business transaction aggregating to $600 in a given year must be reported to the IRS and the payee starting in 2012.

First, let’s review the current state of the applicable law (Section 6041 of the Internal Revenue Code) – An entity that, in the course of engaging in a trade or business, pays more than $600 (or less, as noted) in a taxable year of the following categories of payments to an individual (generally-speaking; there are some limited instances where that entity must report payments to a corporation) must report the aggregate amount to the IRS and the payee:

  • Wages
  • Salaries
  • Rent
  • Premiums
  • Annuities
  • Compensations
  • Renumerations
  • Enoulments
  • Dividends (including patronage dividends – threshhold of $10)
  • Interest (threshhold of $10)
  • Royalties (threshhold of $10)
  • Stock ownership plan distributions (threshhold of $0.01)
  • Other fixed or determinable gains
  • Other fixed or determinable profits
  • Other fixed or determinable income

There were a trio of changes buried on page 737 of the 936-page engrossed version of PlaceboCare, specifically in Section 9006, titled “Expansion of Information Reporting Requirements”. In order:

  • A new section (h) is created to require reporting payments made to corporations that do not qualify as tax-exempt organizations. That’s right – rent paid by a business entity to a corporation would have to be reported to the IRS.
  • “(A)mounts in consideration for property” would also have to be recorded and reported. I’m not a tax lawyer, but my read of applicable definitions does not limit this to real estate. Rather, it includes any good purchased for the business, from computers to raw materials to fuel burned in business vehicles. That’s right – if you are a contractor who uses your vehicle for business, and you spend $600.01 at a chain of gas stations owned by a single entity, you must add up the amount and report it to both the IRS and the gas station owner.
  • “(Other) gross proceeds” would also have to be recorded and reported. That captures every business transaction.

When this was part of the original version of PlaceboCare that came out of the House, the Air Conditioning Contractors of America noted the following (emphasis added):

Consider all the payments you make in the course of your business for property, such as computers, software, office supplies, and fuel to services, including janitorial services, coffee services, and package delivery services. If you paid more than $600 over the course of the tax year, you’ll need to file a Form 1099.

Did the roundtrip ticket for your air travel to the ACCA Annual Conference cost more than $600? If you answered yes, then you would have to issue a 1099 to American Airlines. This enormous impact will hit all businesses, but especially small businesses that don’t have a large administrative staff.

Don’t forget that in order to file all these 1099s, you’ll need to collect the necessary information from all your service providers. In order to comply with the law, you would have to get a Taxpayer Information Number or TIN from the business. If the vendor does not supply you with a TIN, you are obligated to withhold on your payments.

April 13, 2010

A taxing proposition

If it’s tax time, it’s time to talk taxes. There are four interesting items that popped up the last few days, a Rasmussen poll, a CBS News poll (H/T – Allahpundit), a Milwaukee Journal Sentinel story series, and a video from the Center of Freedom and Prosperity (H/T – Ed Morrissey). Before I get to the meat of the post, I’ll present the video which explains how even those who don’t think the tax code doesn’t impose a significant drag on the economy are ensared by the massive amount of work that is required to comply with a code that requires a handcart to make just the federal portion portable.

[youtube]http://www.youtube.com/watch?v=XX8EswfGKQw[/youtube]

In the CBS poll, very few people across all income levels think they’re undertaxed. Overall, 50% said they pay their fair share, 43% said they pay more than their fair share, and 1% said they pay less than their fair share, the worst fair-share/more-than-fair-share split in that poll since 1997. Interestingly, of those making less than $50,000 per year, despite many having no net federal income tax liability (47% at last count), only 2% said they didn’t pay their fair share. Of course, the 7.65% FICA tax, whatever portion of the federal excise taxes (mostly gasoline, alcohol and tobacco, a total of 0.46% of income in 2007), and whatever state/local taxes they pay put a drag on that.

That ties with the Rasmussen poll, where 66% believe that America is overtaxed, with 25% not believing so. In that poll, a plurality (34%) believe America pays around 30% between federal, state and local taxes, while 26% believe it’s around 20% and 15% believe it’s around 40%. Further, an overwhelming majority (75%) believes the total government take should be under 30%, and a near-majority (43%) believe it should be under 20%. In reality, as of 2007, it was over 37%, not including water bills or state-level unemployment/worker’s compensation.

That leads me to the big enchilada – the Journal Sentinel story, which uses Census data to compare Wisconsin state and local taxes to those in other states, and includes a sidebar story comparing Wisconsin and Minnesota. Dave Umhoefer noted that, once crosses the $30,000 threshhold in Wisconsin, or buys property, the hammer really comes down, and doesn’t stop coming down at a harder and harder rate. My biggest gripe is that he and the rest of the staff didn’t put the taxation in terms of income, so I’ll do that.

According to the Bureau of Economic Analysis, in 2007, the per-capita income in Wisconsin was $36,271, which ranked 26th-highest among the 50 states and the District of Columbia, and was a bit lower than the national per-capita income of $38,615. According to the Census Bureau, the state and local taxes were $23.340 billion, not counting water bills or unemployment/worker’s compensation taxes (which the Census Bureau counts separately). That took 11.49% of income in Wisconsin, which ranks 11th-highest and compares poorly to the average of 10.96% nationwide (note – I sent an e-mail to Dave last night asking whether he added water bills into that, which would make Wisconsin 15th because water bills in Wisconsin are far lower than the national average; I haven’t received a response yet). Specifically, property taxes took 4.14% of income (10th nationally, far higher than the 3.29% national average), sales taxes took 2.19% of income (34th nationally, lower than the 2.57% national average), the gas tax took 0.49% of income (9th nationally, higher than the 0.33% national average), individual income taxes took 3.12% of income (13th nationally, again far higher than the 2.49% national average), the corporate income tax took 0.45% of income (25th nationally, marginally below the 0.52% national average), and vehicle license fees took 0.18% of income (24th nationally, essentially the same as the 0.18% national average).

Fees in Wisconsin, ranging from tuition to school lunch, from hospitals to sewers, but not including utilities or mass-transit, took in $6.079 billion, or 2.99% of income. That was 31st nationwide, and just under the 3.02% national average. Overall, taxes and fees took $29.419 billion in 2007, or 14.49% of income. That ranks 19th, and is significantly higher than the 13.98% average.

Spending by the state of Wisconsin and local governments, which includes $7.166 billion in federal money transfered to the state and local units of government, was $46.612 billion in 2007. While the 22.95% of income ranks 28th, it is still higher than the 22.93% national average. Moreover, because that federal money is not quite what other states received, the $39.446 billion ex-federal-funding spending, which represents 19.42% of income, both ranks 16th-highest nationally and is significantly higher than the national average of 18.91%

Let’s compare that to Minnesota. The per-capita income was $41,108, which ranked 13th and was significantly higher than both the national per-capita and Wisconsin per-capita income. The tax take was $23.665 billion (11.11% of income, 20th nationwide, compared to 10.96% nationwide and 11.49% in Wisconsin), with property taxes taking 2.87% of income (31st, compared to 3.29%/4.14%), sales taxes taking 2.13% of income (36th, compared to 2.57%/2.19%), gas taxes taking 0.30% of income (39th, compared to 0.33%/0.49%), individual income taxes taking 3.39% (9th, compared to 2.49%/3.12%), corporate income taxes taking 0.56% (15th, compared to 0.52%/0.45%), and vehicle license fees taking 0.24% (15th, compared to 0.18%/0.18%).

Fees took in 3.01% of income in Minnesota, which puts the state 30th nationally, and slots between the nationwide average (3.02%) and Wisconsin (2.99%). Overall, the 14.12% of income taken by Minnesota and its locales puts it 24th, a few ticks above the national average (14.12%) and quite a bit better than Wisconsin (14.49%).

Spending in Minnesota follows a similar pattern because like Wisconsin, Minnesota is a “federal net donor” state. The $47.222 billion, including $7.333 billion from the federal government, represents 22.17% of income, good for 35th nationally and well lower than the national average of 22.93% and Wisconsin’s 22.95%. Backing out the federal money brings spending closer to the national average (18.73% versus 18.91%), ranking Minnesota 24th and placing it far better than Wisconsin’s 19.42%).

January 24, 2010

Video of the day – Taxman

by @ 17:17. Filed under Politics - National, Taxes.

This is self-explanatory…

[youtube]http://www.youtube.com/watch?v=_0M__0Z1pjg[/youtube]

January 14, 2010

There’s no way out of TARP, part 243,129

by @ 12:51. Tags:
Filed under Business, Politics - National, Taxes.

I’ve done so many of these that I’ve lost count. Fox Business has the dirty details on a brand-new attax…er, attack…er, tax on the cream of the American financial sector:

President Obama will announce today a new “financial crisis responsibility fee” on the top 50 financial firms that is designed to recoup at least $90 billion in projected losses in the government’s bank bailout program, a senior Administration official said….

The official said the fee would be set at 0.15% and, if approved by Congress, would be assessed starting in June for at least a decade on firms with assets of more than $50 billion, including U.S. subsidiaries of foreign banks and large insurance companies with bank or thrift subsidiaries.

If you thought that the biggest vacuums of TARP, specifically the now-government-owned companies which will never repay the money, were going to be part of this, or that those institutions that managed to not get strong-armed into TARP will escape this, think again:

The fee would be paid not just by some firms that received investment capital from the government’s $700 billion Trouble Asset Relief Program (TARP) and by many banks that have already repaid their TARP funds, but also by some firms that did not take TARP money. “All of them have benefitted both from the stabilization (measures), as well as the exceptional, extraordinary Federal Reserve actions,” the official said.

But the two auto companies that the government bailed out last year, General Motors and Chrysler, would not pay the fee, the official said, and neither would mortgage giants Fannie Mae and Freddie Mac, which the government also took over in 2008. He said the fee “does not and cannot work for a more industrial company like an auto company” and that charging Fannie and Freddie would amount to moving taxpayer money “from one pocket to another.”

That’s right; this is another wealth transfer from responsible companies to the most-irresponsible, government-subsidized companies. But wait, there’s more. Do note the “at least a decade”. If the TARP losses are less than the $90 billion that it’s “likely” going to be, where’s the rest of that money going?

November 18, 2009

Melt the phones – Milwaukee County edition

by @ 7:41. Filed under Politics - Milwaukee County, Taxes.

Milwaukee County Executive Scott Walker issued on Monday 35 line-item vetoes that, taken together, more-than-fully reverse the County Board’s decisions to raise the property tax levy 3.8% and make county government even less efficient. The Board will be meeting at 1:30 pm today at the County Courthouse (901 N. 9th St. Room 201) to consider overriding those vetoes.

Since it takes a 2/3rds vote to override a particular veto, and the budget as a whole was passed on a mere 10-9 vote, there is hope that we will get a zero-levy-increase budget. However, unless your Supervisor hears from you at 278-4222, they will likely regress to the mean. If you don’t know who your Supervisor is, head here for a map of the districts.

My Supervisor, Paul Cesarz, already knows I expect him to uphold all 35 vetoes. Does your Supervisor know? The sentence of the day is, “Be polite, but be equally firm in your request that the vetoes be upheld.”

October 22, 2009

Hot Read Thursday – William Ahern’s “Can Income Tax Hikes Close the Deficit?”

by @ 11:13. Filed under Politics - National, Taxes.

William Ahern of The Tax Foundation asks the question, and pretty much answers it in the negative. You’ll have to go over there for the lengthy explanation as well as the charts, but I’ll give you a feel for the analysis for the “ebb tide of deficits” year of 2012, as well as a note that the analysis assumes that the higher tax rates won’t influence the larger economy:

This analysis assumes that individuals would not change their income-earning or tax-planning behavior in response to higher tax rates. That is, they would earn the same amounts as they would with current tax rates, and they would fill out their tax returns in the same way they do now. But of course they would alter their behavior. With high-income people paying a federal tax rate over 90 percent, and most states adding on about 8 percent, plus local income taxes and payroll taxes, tax rates would be over 100 percent for many households. In other words, beyond some point government would be taxing away all earnings and there would be no incentive to work….

…(E)ven in 2012 and 2013, when projected deficits are the lowest, according to the Administration, tax rates would have to be levied at prohibitively high levels to erase the deficit. For example, in 2012, even after the top two tax rates have been raised from 33% to 36% and from 35% to 39.6%, all the rates would have to be multiplied by 1.87 to raise enough to erase the deficit (see Table 3).

Average tax payments would rise precipitously in 2012 if that were the year targeted for eradicating the deficit, though not as steeply as in 2010.

Table 4 shows the effect on average tax payments in 2012 if Congress decided to close the deficit that year. Low-income filers (AGI between $0 and $20,000) would pay $248 instead of $129; middle-income filers (AGI between $75,000 and $100,000) would pay about $13,700 instead of $7,000; and the highest-earning filers (AGIs over $1 million) would pay about $1,650,000 instead of $935,000.

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