Tag: Taxation

Gene Marks, President of the Marks Group PC and writer for outlets like The Guardian and The Hill, joins Carol Roth to discuss the state of small business coming out of 2020 into 2021. Gene and Carol break down Trump’s business legacy and what might be in store in the new administration. Plus, some great tax tips and breaks of which you may not be aware. 

Plus, a “Now You Know” on how to hack getting on the train at Penn Station.

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The American Revolution was sparked in part by unjust taxation. After all, the colonists in Boston rebelled against Britain for imposing “taxation without representation,” and summarily tossed English tea into the harbor in protest in 1773. Nowadays Americans collectively spend more than 6 billion hours each year filling out tax forms, keeping records, and learning new tax rules according […]

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A Flat Tax Is a Fair Tax

 

One of the most contentious political battles of the 2020 election cycle involves the Illinois “Fair Tax” ballot amendment. Supported politically (and financially) by Illinois’s billionaire governor, J. B. Pritzker, the amendment seeks to remove a provision in the Illinois constitution that requires all income taxes to be flat—that is, held at a constant rate regardless of the amount of income earned by any taxpayer. Currently, all income earned in Illinois is taxed at a 4.95 percent rate. The amendment requires a simple majority vote to be passed.

The amendment does not offer any specific progressive rate scale, but allows for increasing tax rates to be applied to successive tiers of a taxpayer’s income. Notably, the initial legislative plan on which the amendment is largely based—and which was proposed by the Democrat-controlled legislature—is a hybrid between a flat and progressive scheme. Most earners would be subject to progressive rate scales starting at 4.75 percent for the first $10,000 of income earned. Then. as income increases, so would the tax rate, maxing out at 7.85 percent. The legislative plan maintains a flat tax for the financial elite: Individuals reporting income above $750,000 and couples with joint incomes above $1,000,000 would pay a 7.95 percent rate from their first dollar.

This change in tax structure is held out as the fairest because it puts onto the rich the burden of shoring up Illinois’s rickety finances. The argument goes that the poorest 20 percent of the public are disproportionately exposed to high state, county, and local sales taxes, which total 10.25 percent in Chicago. This leads to a regressive system overall, where the poor pay an effective tax rate of 14.4 percent, while the top 1 percent pay only 7.4 percent. The obvious rejoinder is that, in total dollars, the rich pay far larger amounts in all taxes, much of which is used for transfer payments from which they do not benefit.

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The most recent Goodfellows conversation ends with a little debate about illegal immigration. As usual, an important subtext is left unaddressed. Yes, even many Republicans welcome lawless immigration in lieu of any impetus to reform legal immigration standards. Businesses like cheap labor.  Preview Open

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QotD: Government Policy

 

A government which robs Peter to pay Paul can always depend on the support of Paul. – George Bernard Shaw

If any statement explains how blue states work, it is this one. The number of makers is always fewer than the number of takers. So design policies to bribe the takers to vote for you.

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Today marks the 246th anniversary of the Boston Tea Party when American patriots, frustrated and angry at Britain for imposing “taxation without representation,” dumped 342 chests of tea into the harbor in protest. You’re probably somewhat familiar with this seminal event but you may not be with the story of those behind it. The “Sons Of Liberty” […]

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Richard Epstein parses President Trump’s economic criticisms of Amazon — and examines a Supreme Court case that will determine how online retailers pay taxes.

Richard Epstein examines the principles that should guide efforts to reform America’s tax system.

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I have heard Glenn Reynolds discuss the idea that you get more of what you subsidize, and less of what you tax. Well, one thing we can almost agree on is that we have too much “social justice” I want to move beyond progressive taxation… to oppressive taxation. Is there a good way to tax […]

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The source of much of the angst of this election season is the perceived waning work prospects of the average American. This may have reached a critical mass now, but it is the culmination of trends long in the making. The purpose of this post is to review them, and how they have created a […]

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On Abolishing the IRS

 

taxfairy“Claire,” I hear you all say, “You spend all of your time raving about Donald Trump making nutball promises to a credulous electorate. Why don’t you ever point out that Ted Cruz’s nutball schemes make no sense, either?”

(Actually, no one has ever said that to me, not even once, but I realized it this morning while I was reviewing last night’s debate transcript, so I figured this was a good opportunity to prove I’m equal-opportunity indignant. I’m against-all-nuts. It just hadn’t occurred to me that one of Cruz’s promises is Trump-level nutty: I was so busy barreling down Trump Tunnelvision Turnpike that I forgot to turn on the Cruz Control.)

Now, like every live-blooded American, I love the words “Abolish the IRS.” I love them so much that I didn’t really think deeply about them. The words themselves had me hypnotized, like a python in a snake-charmer’s gaze, giving me a tingly-all-over yes! feeling. (How could Cruz be doing so poorly in the primaries given this absolutely beautiful campaign slogan? Those are the winningest words in the English language.)

Pot Legalization Ain’t (Tax) Consequence Free

 

Like death and taxes, you can count on the state to fumble the libertarian holy grail of recreational marijuana legalization. Take Colorado, for example.

There’s a ballot proposition (Prop BB) for next week’s election that allows the state to keep revenues from excise and sales taxes on pot, rather than having to return the excess to growers and taxpayers under Colorado’s TABOR.

What We Know So Far about the GOP Presidential Tax Plans

 

Bobby JindalThe Tax Foundation analysis of Bobby Jindal’s tax plan:

  • Governor Jindal’s tax plan would substantially lower individual income taxes, eliminate the corporate income tax, and repeal a number of complex features in the current tax code.
  • Governor Jindal’s plan would cut taxes by $11.3 trillion over the next decade on a static basis. However, the plan would end up reducing tax revenues by $9 trillion over the next decade when accounting for economic growth from increases in the supply of labor and capital.

So let’s summarize the four plans examined by the Tax Foundation model:

  • The Jeb Bush plan would lose $1.6 trillion over a decade (with economic feedback), lead to a 10% higher GDP over the long-term, and boost income in the bottom fifth by 10%, the middle fifth by 13%,the top fifth by 10%, and the top one percent by 16%.
  • The Marco Rubio plan tax plan would lose $1.7 trillion over a decade (with economic feedback), lead to a 15% higher GDP over the long run, and boost income in the the bottom fifth by 40%, the middle fifth by 16%,the top fifth by 18%, and the top one percent by 28%.
  • The Donald Trump plan would lose $10 trillion over a decade (with economic feedback), lead to an 11% higher GDP over the long term, and boost income in the the bottom fifth by 11%, the middle fifth by 19%,the top fifth by 21%, and the top one percent by 27%.
  • The Rand Paul plan would lose $1 trillion over a decade (with economic feedback, lead to a 9% higher GDP over the long term, and boost average incomes by 16%.
  • The Jindal plan would lose $10 trillion over a decade with economic feedback, lead to a 14% higher GDP over the long run, would boost income in the the bottom fifth by 8%, the middle fifth by 15%,the top fifth by 22%, and the top one percent by 26%.

One important caveat (other than the vagaries of dynamic scoring) is that the TF model does not factor the “fiscal costs of higher interest payments, as well as the macroeconomic effects of the spending reductions needed to bring the budget into balance.” Let me also add that one other thing the TF model shows is that personal income tax cuts tend to have the biggest revenue loss and the least GDP bang for the trillion bucks.

Unintended Consequences of Cutting Corporate Tax Rates

 

Jeb!’s tax plan provides a good opportunity to explain why cutting corporate tax rates below individual tax rates will only worsen problems with the existing tax structure.

We tend to think of large multinationals, or at least publicly-traded corporations, as the paradigm corporate taxpayers. But according to the 2012 IRS Corporate Income Tax Report, 86 percent of Form 1120 filers (commonly known as C Corps) had assets of less than $1 million. (I used the data in Figure F, to separate out the S Corp returns.)

The Conceptual Flaw in the Hillary Clinton Tax Plan

 

Hillary Clinton’s proposal to increase capital gains taxes on short-term investments in order to incentivize key corporate officers to invest in the long haul has been the subject of widespread debate in recent weeks. As I note in my new column for Defining Ideas from the Hoover Institution, however, the shortcomings of the former Secretary of State’s proposal run deeper than debate over the cap gains rate suggests:

Start with this question: Is the proper object of taxation income or consumption? Right now, we tax income, but as a matter of principle that decision is highly suspect, because of the extra taxation it places on personal savings, savings that become the capital investments Clinton wants. Any capital gains tax, either long-term or short-term, exerts a lock-in effect on investors that makes them reluctant to sell their current investments to buy new ones.

SCOTUS Notes # 3: Comptroller of the Treasury of Maryland v. Wynne

 

shutterstock_103670531The third case in my series is a Constitutional decision under the “dormant Commerce Clause,” involving state income taxation called Comptroller of the Treasury of Maryland v. Wynne. It is interesting because: (1) it limits the right of states to tax individual income, and (2) it generated an unusual 5-4 split, dividing both the conservative and liberal justices 2-2, with Justice Kennedy casting the deciding vote.

I. Issue

Whether the Commerce Clause of the federal Constitution prohibits a state from imposing an income tax system that results in a higher tax burden on out-of-state income.

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While recounting a guided tour of the Jack Daniel’s distillery on my way back from the airport, I was surprised when my dad referenced the ATF in relation to “sin” taxes. Half the price of a bottle of whiskey is taxes. Half the price of a carton of cigarettes is taxes. Handguns, bullets, and even […]

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