TAX POLITIX
The Politics of Taxes
Economy Looking Stronger With Jobs Report
The Wall Street Journal has done a nice roundup of the October Jobs Report released a few days ago. U.S. employers hired at strong rate in October, reflecting a sharp bounce back from September, when payroll growth slowed in the wake of hurricanes striking the southern U.S. Meanwhile, the unemployment rate fell to a new low for this expansion. Here are some of the key figures from Friday’s Labor Department report. UNEMPLOYMENT RATE 4.1% The jobless rate last month edged down to 4.1%, the...
WSJ: Get Rid of the Wealth Surcharge!
The Wall Street Journal weighs in on the surprise surcharge that the Republicans presented in their tax plan -- and subsequently defended when it was discovered. I have reposted it below in its entirety, because it is excellent: You know Republicans are intellectually confused when they send out press releases defending a top marginal income-tax rate of nearly 50%. Yet that’s what they were up to this weekend as they tried to justify their bubble bracket tax rate of 45.6% after our criticism...
Did the GOP Create a 46% Tax Rate?
Politico is reporting that there is a surcharge in the new Republican tax plan for high income earners. As described, "Thanks to a quirky proposed surcharge, Americans who earn more than $1 million in taxable income would trigger an extra 6 percent tax on the next $200,000 they earn—a complicated change that effectively creates a new, unannounced tax bracket of 45.6 percent." But in the new plan, House Republicans want to claw back some of that benefit for individuals who earn more than $1...
House Releases Tax Reform Bill Draft
The House Republican tax reform plan has been released. Here are the highlights: The top individual rate for high-income earners will stay at 39.6% The corporate rate will be cut to 20% Tax brackets will go from seven to four: the rates will be: 12, 25, 35 and 39.6% The standard deduction will increase for single filers to $12,000 and joint filers to $24,000 , so that those filers below those thresholds will pay no income tax. The child tax credit will increase from $1,000 to $1,600 per...
Republican Tax Writers Should Know Better
The stated intent of the new proposed Tax Reform Package is to grow the economy while providing tax cuts and simplification for the middle class. Forget the fact that as the most progressive tax system in the World, our lower and middle classes already carry a substantially smaller tax burden than in any other country. Just note that the principal middle class tax cuts being proposed is simple political theater and do little or nothing to simplify the tax law, grow the economy, or help the...
The Obnoxious Problem of Miscellaneous Itemized Deductions
There is a very real problem within the Internal Revenue Code (IRC) that deserves attention. The IRS generally requires that hedge fund investors pay taxes on huge amounts of “income” that does not exist. This is derived from rules that require investors to pay tax on investment income while denying them an offset for the expenses that were incurred to generate that income. That is the very definition of inequality. It is simply not uncommon for hedge fund investors to pay tax rates of 70-100%...
Dealing with the Ten Year Budget Reconciliation Issue
A major problem in constructing tax legislation is the “No deficit after 10 years” problem. It takes a 60 vote majority in the Senate to pass permanent legislation. A key exception is what is known as “budget reconciliation”, whereby financial budget items, including tax changes, can pass with a simple majority vote. But this requires that any proposed legislation cannot produce a deficit after 10 years. To satisfy this requirement, legislation often contains a provision that it will terminate...
Schumer’s Hypocrisy on State and Local Taxes
It is virtually impossible to defend the part of the Internal Revenue Code that provides for a deduction for individuals who pay State and Local income taxes ("SALT"). The deduction is simply a subsidy for those states who levy high income taxes on their constituents. It actually incentivizes those states to levy high taxes, knowing that their constituents will have their federal taxes reduced as their state taxes go up. But this is patently unfair to constituents who live in low tax states,...
Eliminate the State and Local Deductions
With President Trump proposing to eliminate the Federal tax deductions for state and local taxes, there has been an outcry from states that allow this deduction currently. The biggest criticism is that it creates “double taxation” because it forces individuals to pay two separate taxes – federal and State – on the same income- without giving any relief against the federal tax in recognition of the tax paid to the State. Without the deduction, Lawmakers warn that tax bills will rise...
Lowering Capital Gains is Necessary
Capital gains are unusual in that the taxpayer has the ultimate decision as to whether and when to sell his asset (stock, his business, a work of art, etc.) The higher the tax rate, the less likely he is to sell, seeing as he will only be able to enjoy or reinvest what is left of the proceeds after tax. History has borne this out – capital gains tax collections go down in the periods after increases, and go up in the years after decreases. The actual impact of raising the capital gains rate by...
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Obamacare Forms: 1095A, 8962, and Deadlines
This year, taxes will get extra tricky, because filers will be required to account for their health insurance on their forms. There are four ways to do so: 1) For taxpayers who do not have Obamacare, the process is simple: check a box indicating...
IRS Budget Cuts: The Good, the Bad, and the Ugly
Budget cuts to the IRS will be impacting citizens more drastically this year. The Taxpayer Advocate, Nina Olsen, painted a bleak picture for filing season and beyond in her annual report to Congress. The Good: -- The number of audits will decline....
Obamacare and Tax Returns: 21 Helpful Pages of IRS Filing Instructions
The IRS is getting ready for Obamacare to be accounted for by every citizen. For completing this section of your tax form, the IRS has published 21 pages of instructions, as well as long forms and tip sheets. For Americans who do not have...
Thinking Ahead For the Twilight Years
They say March comes in like a lion and goes out like a lamb. That expression is also applicable to persons in their 80s -- they go in like a lion and out like a lamb. As they start going along in those years, their ability to discern and filter...