Tax Policy

C’Mon Man! — Tax Edition

by Joshua on January 4, 2011

Fountain Soda Drink Tax! C’Mon Man!

See America’s strangest taxes, Huffington Post

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According to an article from the Washington Post today, taxpayers spend 7.6 billion hours and nearly $140 Billion in order to comply with the Internal Revenue Code. This is reported a few days after the release of the President’s Economic Recovery Board’s report regarding the complexity of tax code. Evidence of the increased complexity of the code cited in the report is the enlargement of the Form 1040 (form used by individual taxpayers to file taxes) Instructions from 14 to pages to 44 pages and 15,000 changes to the code since 1986.

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Here is a link to a calculator created by the Tax Foundation which will compute your 2011 income taxes under three different scenarios: (1) If Congress allows all Bust tax cuts to expire; (2) Congress Acts to extend Bush tax cuts through 2011; and (3) Congress enacts tax laws as suggested in President Obama’s budget.

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A recent Tax Foundation publication, States Vary in Distribution of Who Bears the Burden of Federal Income Taxes, analyzes the distribution of income and federal income taxes by income group of each state:

Connecticut by far has the most progressive distribution of federal income taxes. Taxpayers earning under $50,000 earned 13 percent of the AGI in the state, but paid 5 percent of the federal income taxes paid by all taxpayers in the state. By contrast, taxpayers earning over $200,000 earned 44 percent of the AGI, but paid 66 percent of the income taxes.

New York has the second most progressive distribution of federal income taxes. Taxpayers earning more than $200,000 earned 40 percent of the state’s AGI but paid 63 percent of the state’s federal income taxes. Indeed, they paid three times as much in federal income taxes as every taxpayer earning under $100,000 paid combined.

The other states in which taxpayers earning over $200,000 paid a greater share of the state’s federal tax burden than the national average include: New Jersey (58 percent); Texas (57 percent); Florida (56 percent); Massachusetts (56 percent); Wyoming (56 percent); California (55 percent); Illinois (54 percent); and Louisiana (53 percent).

The article includes tables for each state displaying the distribution of income and federal income taxes by income group for each state. The tables also show the effective tax rate-or share of income paid in taxes-for each income group.

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According to the Associated Press, the Supreme Court will hear an appeal from the Eighth Circuit Court of Appeals on the issue of whether student doctors are students or employees when it comes to collecting Social Security taxes. The case on appeal is Mayo Foundation for Medical Education and Research v. United States, 568 F.3d 675 (8th Cir. 2009).  Argument is set to take place in fall or winter and Supreme Court nominee Elena Kagan would not take part in the case if confirmed because she signed the government’s brief defending the IRS’ position.

In a previous post, Medical Resident- A Somebody, Not “Student” Body under FERPA and FICA, I discussed the issues and case law surrounding medical residents and their status’ as students and employees under FERPA (Family Education Rights and Privacy Act) and FICA. Perhaps the Supreme Court’s ruling will provide public university administrators with some guidance on how to characterize residents for purposes of FERPA.

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2011: The Year of Taxpayer Uncertainty

by Joshua on May 26, 2010

In his Tax Foundation article Mark Robyn, addresses the uncertainty of the tax landscape in 2011:

Polls show that many Americans are anxious about their taxes and believe their payments are rising. At first glance this seems like a public misperception because tax policy at the end of the Bush administration and the beginning of the Obama administration has been dominated by a blizzard of tax cuts, most narrowly targeted at a few taxpayers but some broadly benefiting low- and middle-income people. But paradoxically, the people are right to be worried about high taxes. With federal deficits growing and the U.S. debt mounting to alarming levels, Congress will soon need to cut spending or raise taxes to shore up the long-term fiscal outlook.

In the article, Robyn calculates what typical tax returns will look like in 2011 under the tax policies that prevailed before the President Bush was elected, all Bush-era tax changes extended to 2011 (with no changes from President Obama), and combine Bush and Obama policies as outlined in the President’s 2011 budget.

Here is an example of table in the article. The table reveals the taxes owed (+ or -) on typical tax returns:

Table 1

Summary: Taxes Owed (+ or -) on Typical Tax Returns

Pre-Bush Bush Obama
Single Parent, One child, $25,000 - $928 - $1,881 - $2,281
Married couple, two earners, three children, $45,000 $1,020 - $1,510 - $3,183
Married couple, one earner, two children, $50,000 $2,825 $688 $288
Married couple, two earners, two children, $85,000 $7,235 $5,383 $4,583
Single, no children, $60,000 $8,236 $7,484 $7,084
Single, no children, $150,000 $29,962 $26,996 $26,996
Married couple, two earners, two children, $150,000 $22,776 $19,268 $18,468
Married couple, two earners, two children, $300,000 $64,181 $61,292 $61,292
Married couple, two earners, no children, $500,000 $130,210 $123,900 $130,342
Married couple, two earners, no children, $1,000,000 $298,510 $254,167 $307,342

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According to Bloomberg Businessweek, the United States Supreme Court will review the constitutionality of an Arizona tax credit for donations to organizations that provide scholarships at private schools. The case is Garriot v. Winn, 09-991:

The justices will review a federal appeals court decision that let a group of taxpayers press ahead with their challenge to the Arizona program, which has been in effect since 1997.

The taxpayers say the program uses religious organizations to award scholarships and lets those groups require that recipients enroll in sectarian schools.

Additional Coverage:

The Associated Press

Education Week News Blog

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According to Justin Higginbottom’s Tax Foundation article, taxes on plastic bags have been disappointing in their debut:

Since January 2010, shoppers in Washington, D.C. have had to pay five cents on most paper or plastic bags at grocery and convenience stores. In early results, shoppers are often unwilling to pay, so carry-out bag use is greatly reduced, revenue from the tax is low, and the mayor has suggested transferring what little has been collected out of an environmental fund into a general fund. Whether the citizens consider the new tax a success depends on which of the many, often contradictory purposes they remember from the debate over passage.

In at least 15 states, bag tax proposals are pending (see table). Sometimes they are pitched as “fees” and sometimes as “taxes,” with important rhetorical, political and legal ramifications. In almost all cases, proposed bag taxes do not come close to meeting the definition of a fee. Even when pitched more honestly as taxes, they are likely to fall short of ambitious environmental clean-up goals. Also, bag taxes cause unintended effects, such as stimulating bulk purchases of plastic bags, perhaps of a type that would cause equal environmental damage. And bag taxes invariably get caught up in the political process in which special interests in business and government are served more than the public’s interest.

Whether assessed theoretically or practically, bag taxes are not a promising development in tax policy.

Below is a chart from Higginbottom’s article that lists proposed bag tax legislation:

Proposed Legislation to Tax Bags
State Legislation Description
Alaska AK S.B. 22 15 cents per plastic bag
California CA A.B. No. 68 At least 25 cents per paper plastic
Colorado CO S.B. 156 (rejected Feb. 2009) 6 cents per plastic bag
Connecticut CT H.B. 5215 5 cents per paper or plastic bag
Hawaii HI S.B. 2125 20 cents per plastic bag
Maine ME S.P. 131 10 cents per plastic bag
Maryland MD S.B. 462 5 cents per paper or plastic bag
Baltimore Bill #08-0208 25 cents per paper or plastic bag
Massachusetts MA H.B. 2686 5 cents per plastic bag
Nevada NV S.B. 397 10 cents per plastic bag
New Jersey NJ A.B. A.B. 2121 5 cents per paper or plastic bag
New York NY S.B. No. 4866 5 cents per plastic bag
Rhode Island RI S.B. 804 15 cents per plastic bag
Texas TX H.B. 1361 7 cents for plastic bag
Vermont VT H.B. 262 17 cents per plastic bag
Virginia VA H.B. 1115 5 cents per paper or plastic
Note: Bag tax legislation generally only applies to carryout bags and may have exclusions similar to that of Washington D.C.

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The following is a report from the Denver Daily News which describes a recent Rassmussen poll which found that 49 percent of Colorado state voters say marijuana should be legalized and taxed:

According to a recent Rassmussen poll, in the same week that Colorado lawmakers approved a bill increasing regulations on medical marijuana dispensaries, 49 percent of the state’s voters say the drug should be legalized and taxed. The latest Rasmussen Reports statewide telephone survey of likely voters shows that 39 percent do not think marijuana should be taxed and legalized in Colorado. Another 13 percent are undecided. Men in Colorado are much more supportive than women of legalizing the drug. Most Democrats and voters not affiliated with either major political party support legalizing and taxing marijuana. Most Republicans do not. Support for this legislation in Colorado is almost identical to results found in California. A year ago, 41 percent of voters on the national level supported legalizing and taxing marijuana to help solve the nation’s fiscal problems. Colorado has allowed the use of marijuana for medicinal purposes for several years, and polling on the national level shows 63 percent of Americans believe patients should be allowed to smoke marijuana if it is prescribed by a doctor. Fifty-one percent of adults nationwide say alcohol is more dangerous than marijuana, while 19 percent disagree and say the opposite is true.

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An Inconvenient Tax

by Joshua on April 17, 2010

Below is the trailer for “An Inconvenient Tax” which opened in select theaters [conveniently] on April 15.  Here is a summary of what the documentary is about from it’s website

“An Inconvenient Tax sheds light on one of America’s messiest problems — a fundamentally broken tax code that affects every part of people’s lives. With the U.S. Congress making over 16,000 changes to the tax code in the last two decades alone, many Americans want something better, but few know where to start. This feature-length documentary film reveals the many ways Congress uses the tax code to achieve political goals that have nothing to do with raising revenue. It also tackles the controversial issue of tax reform through a non-partisan presentation of U.S. tax history and current proposals to fix the code. In a time when America faces fiscal crisis, An Inconvenient Tax brings a crucial exploration of the tax code to the big screen.”

An Inconvenient Tax – Trailer from Life Is My Movie Entertainment on Vimeo.

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