Archive for the ‘Tax burden’ Category

Your tax dollars at work …

April 16, 2015

According to WashPost

Government records show that tens of thousands of federal workers are being kept on paid leave for at least a month — and often for longer stretches that can reach a year or more — while they wait to be punished for (or cleared of ) misbehavior or are disputing a demotion.

While disputing a demotion?

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Here are some details that’ll make you cringe …

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Nums: Who pays taxes? Who benefits?

April 15, 2015

Since it’s tax day, I thought I’d flashback to a drill down I did on the tax system —  who pays in, where does it go and who benefits …

In a prior post, we drilled down on taxes … or, as my Dem friends would say government “revenues”.

We posted that in 2012 Americans paid a tad over $5 trillion in taxes to the Feds, States and Local Governments.

Drilling down, the $5 trillion is split roughly 50%-30%-20% to the Feds, States and Locals, respectively. Note that the Federal portion is just under $2.5 trillion.

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If these are “revenues” there must be matching services provided, right?

I found a study by the non-partisan Tax Foundation that analyzes taxes paid and benefits received.

The study is old – using 2004 data – but, in my opinion is a good starting point to calibrate the answer.

(more…)

Your tax dollars at work …

October 22, 2014

According to WashPost

Government records show that tens of thousands of federal workers are being kept on paid leave for at least a month — and often for longer stretches that can reach a year or more — while they wait to be punished for (or cleared of ) misbehavior or are disputing a demotion.

While disputing a demotion?

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Here are some details that’ll make you cringe …

(more…)

Fed are raking in the dough … and still spending more than they get.

July 25, 2014

The WH-OMB estimates that, in FY 2014, the federal government will collect a record amount in inflation-adjusted tax revenues (i.e. taxes) while still running a deficit,


Source: CNS; See the Monthly Treasury Statement. for details

 

More specifically …

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Nums: Who pays taxes? Who benefits?

April 17, 2014

Since it’s tax week, I thought I’d flashback to a drill down I did on the tax system —  who pays in, where does it go and who benefits …

In a prior post, we drilled down on taxes … or, as my Dem friends would say government “revenues”.

We posted that in 2012 Americans paid a tad over $5 trillion in taxes to the Feds, States and Local Governments.

Drilling down, the $5 trillion is split roughly 50%-30%-20% to the Feds, States and Locals, respectively. Note that the Federal portion is just under $2.5 trillion.

image

* * * * *
If these are “revenues” there must be matching services provided, right?

I found a study by the non-partisan Tax Foundation that analyzes taxes paid and benefits received.

The study is old – using 2004 data – but, in my opinion is a good starting point to calibrate the answer.

(more…)

Tax havens … and tax hells.

July 18, 2013

According to a  Cato Institute recap

A couple of economists at a German think tank put together a “tax attractiveness” ranking based on 16 different variables.

They looked at the statutory tax rate  … and, they also considered policies such as “the taxation of dividends and capital gains, withholding taxes, the existence of a group taxation regime, loss offset provision, the double tax treaty network, thin capitalization rules, and controlled foreign company (CFC) rules.”

Drum roll …

Out of 100 nations, the German economists rated the U.S. #96 … in the pack with Indonesia, Philippines,  Zimbabwe, Japan and Egypt.

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Here are the rankings for all nations assessed …

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Taxes: How about an Alternative MAXIMUM tax ?

April 15, 2013

Interesting idea in today’s WSJ …  introduce an alternative maximum tax.

Here’s the gyst of the idea:

We need an alternative maximum tax as a simple, rough-and-ready way to limit the economic damage of increasing taxes. 

How much is the most anyone should have to pay? When do taxes indisputably start to harm the economy and produce less revenue — when government takes 50% of people’s income? 60%? 70%?

I like half, but the principle matters more than the number.

Once the country settles on a number, each of us gets to add up everything we pay to government at every level: federal income taxes, yes, but also payroll (Social Security, Medicare, etc.) taxes, state, city and county taxes, estate taxes, property taxes, sales taxes, payroll taxes and unemployment insurance for nannies, household workers, or other employees, excise taxes, real-estate transfer taxes, and so on and on, right down to your vehicle stickers and those annoying extra taxes on your airline tickets.

Once this total hits the alternative maximum tax, you’ve done your bit and federal income taxes can take no more.

You compute federal income taxes as usual, but then you get to reduce the “tax due” that the total is less than the alternative maximum.

For the dude’s supporting argument, see the the article America Needs an Alternative Maximum Tax

The plan has some holes, but it has potential …

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What’s so shocking about Cyprus’ tax on bank accounts?

March 26, 2013

OK, Cyprus is going to slap a tax on bank accounts over $100,000.

The world is aghast.  The end of financial systems as we know them is in the balance.

Say, what?

It’s not the first time that a government – think, U.S. government — has seized (oops, I meant “taxed”) private assets

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Here are a couple of examples from close to home …

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Outta Here: Tina Turner bolts for Switzerland.

January 26, 2013

Last week it was Phil Mickelson … the pro golfer said he was considering relocation options to mitigate high tax rates.

Phil – a white, conservative, male – got blasted by the liberal press for his apparent unwillingness to be patriotic and pay his fair share.

Yesterday, the story got more interesting.

Rock icon Tina Turner announced that she’s renouncing her U.S. citizenship to become a Swiss-miss.

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As you may know – or can see above – Tina is not a white, conservative, male.

So the press coverage has been, shall we say, “gentle”.

To that point …

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Shocker: Taxpayers head for friendlier confines.

December 28, 2012

According to new Census data reported in the WSJ

New York, Illinois, New Jersey, Connecticut and Rhode Island led the country last year in “out-migration” (measured as a share of their population).

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The Tax Foundation ranks New York, New Jersey and Rhode Island among the five worst business tax climates.

Connecticut, which raised income, sales and corporate taxes last year to the tune of $1.5 billion, is not far behind.

Illinois also increased income taxes last year by 67% and the corporate rate by 46% and will likely seek to hike taxes again to backfill the state pension fund, which is $83 billion in arrears.

Where are they going?

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Reality: The end of “cake & eat it”

December 9, 2012

Why the DC gridlock re: taxes & spending?

First, while Obama won a relatively slim majority of the countrywide macro vote … the GOP won a majority of the district-by-district micro vote.

In other words, the whole doesn’t equal the sum of the parts.

Further, as argued by Jay Cost in an Insightful Weekly Standard piece, people don’t really grasp the perilous financial situation the US is in … in part, because past economic growth rates have insulated folks from the hard choice of higher taxes or lower spending.

They’ve been able to have their cake … and eat it, too.

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Here’s the essence of Cost’s argument:

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Nums: Who pays taxes? Who benefits?

December 8, 2012

As loyal readers know, I’ve been trying to get my arms around this question.

In a prior post, we drilled down on taxes … or, as my Dem friends would say government “revenues”.

We posted that in 2012 Americans will pay a tad over $5 trillion in taxes to the Feds, States and Local Governments.

Drilling down, the $5 trillion is split roughly 50%-30%-20% to the Feds, States and Locals, respectively. Note that the Federal portion is just under $2.5 trillion.

image

* * * * *
If these are “revenues” there must be matching services provided, right?

I found a study by the non-partisan Tax Foundation that analyzes taxes paid and benefits received.

The study is old – using 2004 data – but, in my opinion is a good starting point to calibrate the answer.

(more…)

Why not separate business income on 1040s?

December 3, 2012

Given Obama’s obsession with increasing tax rates on the “millionaires & billionaires” making more that $250,000 … and, given the GOP’s rhetoric that they want to protect small businesses … I can’t figure out why they don’t just treat business income reported on 1040s differently than ordinary income.

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Specifically, in a prior post  we said:

  • Separate business income reported on 1040s from all other income … then cap the business income portion at 25% … allow losses to offset ordinary income.
  • Then, since Obama is obsessed with raising rates on “millionaires & billionaires” who make more than $250k, I  add some brackets with high rates for folks making more than $500,00, #1 million, etc

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A loyal Homa Files reader – who is a part-owner of a relatively small business — that will have his company hammered by Obama’s proposed tax rate change.

Here’s a paraphrase of his real life perspective:

“Personal income” should be just that, the take-home pay and revenue received by the individual worker and should exclude income listed on the K-1 in the personal tax return.

  • Note: Income from S-Corps, LPs, etc., is conveyed via K-1s.  The “corporate income tax” is, in effect, paid by the equity-holders and partners as personal income.

Example: Say an individual “earns” $250,000 and owns 5% of an S-Corp that earns $5MM

The individual gets allocated $250,000 (5% times $5 million) of the S-Corp’s earnings via a K-! … that $250,000 is rolled into the individual’s 1040 return.

  • Important: the individual didn’t get any cash from the S-Corp, just an allocation of earnings.

Having broken the magical $250,000 threshold, Obama’s tax scheme  would certify the individual as a “millionaire or billionaire” and jack up his tax rates to 39.6% … plus 3.8% in ObamaCare taxes since the income is “unearned”.

Think about that.

The highest corporate tax rate is 35% … the average corporate tax rate is much lower.  Think, GE’s zero-percent rate.

But, under Obama’s plan this small business owner gets slapped with a tax rate of over 44%.

Does that sound right to you?

To make matters worse, the individual didn’t get any cash … just an allocation of earnings.

To pay the tax bill, he has to reach into personal funds … which are probably limited since he’s thrown his dough into the company … or, the S-Corp will have to distribute dividends to partially cover the individual’s tax liability.

If the S-Corp pays out dividends to partially fund the owners’ tax liability, the company has less money to invest in the business.

Does that make any sense?

Thanks to ST for feeding the lead

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Follow on Twitter @KenHoma                    >> Latest Posts

What states have the lowest (and highest) total tax burdens?

November 24, 2012

Last week we posted Which states have the lowest (and highest) incomes taxes?

A couple of readers asked “Yeah, but what about when you consider sales taxes and property taxes?”

Good question.

Here’s a recap for 2010 – latest analysis I could find.

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Dirty Dozen – Highest Combined State & Local Tax Rates

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12 Lowest Combined State & Local Tax Rates

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All States – Alphabetical

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Data Sources & Recaps

Best data source I  found for state-by-state tax rates – income, sales, property, estate – is at BankRate.com

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Some other useful links:

Bloomberg recap of all S&L taxes by state

USA Today recap of S&L taxes by state

Tax Fed sales tax rates by state & locality

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Follow on Twitter @KenHoma

Tax moves … higher Fed taxes motivating folks to bolt.

November 20, 2012

Except for eccentric billionaires, I haven’t heard about people renouncing their US citizenship and relocating to foreign tax havens.

But, in the past week, I’ve heard 4 stories of sober-minded friends starting to implement plans to move to states with no or low income taxes and no estate taxes.

That’s not a new thing, but the breadth of interest and urgency is something I haven’t seen before.

Some is induced by aging … 3 of the 4 are nearing retirement age.

The flashpoint, though, is ignited by Obama’s re-election and his rants and threats to jack up taxes.

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Savvy folks understand that (a) more than folks making $250K will be impacted, and (b) many of the tax increases are already baked in courtesy of ObamaCare.

So, the thinking goes: “I can’t control the Fed taxes I pay but I can control the local taxes I pay … so, I’m moving to a low tax locale to offset the hit Obama’s putting on me.”

The interesting irony: the destination states are red ones … or purple ones (think Florida).

The bulk of the migration will be wealthier folks bolting from high tax & spend blue states (think CA, MD, NY, NJ) … giving the blue states  a declining tax base and forcing them to jack up state taxes on everybody else to feed their tax and spend monsters.

An unintended consequence of the caviler Fed tax policy Obama is pushing … watch it develop.
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Follow on Twitter @KenHoma

Some bar stool economics

November 5, 2012

A variant of an old tale that’s making the email rounds…

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Suppose that every day, ten men go out for a beer and the bill for all ten comes to $100.

If they paid their bill the way we pay our taxes, it would go  something like this:

  • The first four men (the poorest) would pay nothing.
  • The fifth would pay $1.00.
  • The sixth would pay $3.00.
  • The seventh would pay $7.00.
  • The eighth would pay $12.00.
  • The ninth would pay $18.00.
  • The tenth man (the richest) would pay $59.00.

So that’s what they decided to do.

The men drank in the bar every day and seemed quite happy with arrangement, until one day, the owner threw them a curve.

“Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily beer by $20.00.”

Drinks for the ten men now cost just $80.00!

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected.  They would still drink for free.

But what about the other six men – the paying customers?

How could they divide the $20 windfall so that everyone would pay their “fair share”?

They calculated that $20.00 divided by six is $3.33.

But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being PAID to drink beer.

That didn’t seem right.

The bar owner suggested that it would be fair to reduce each man’s bill by roughly the same percentage.

Under the bar owners plan:

  • The fifth man, like the first four, now paid nothing (100% savings).
  • The sixth now paid $2 instead of $3 (33% savings).
  • The seventh now paid $5 instead of $7 (28% savings).
  • The eighth now paid $9 instead of $12 (25% savings).
  • The ninth now paid $14 instead of $18 (22% savings).
  • The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before!

And the first four continued to drink for free.

But once outside the restaurant, the men began to compare their savings.

“I only got a dollar back out of the $20 savings,” declared the sixth man.

He pointed to the tenth man, “but he got $10!”

“Yeah, that’s right,” shouted the seventh man.  “Why should he get $10 back when I got only $2?  The wealthy get all the breaks!”

“Wait a minute,” yelled the first four men in unison.  “We didn’t get anything at all.  This system exploits the poor!”

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn’t show up for drinks, so the nine sat down and had beers without him.

But when it came time to pay the bill, they discovered something important.

They didn’t have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and college professors, is how our tax system works.

The people who pay the highest taxes get the most benefit from a tax reduction.

Tax them too much, attack them for being wealthy, and they just may not show up anymore.

In fact, they might start drinking overseas,  somewhere the atmosphere is somewhat friendlier.

For those who understand, no explanation is needed.

For those who do not understand, no explanation is possible.

David R. Kamerschen, PH. D.
Professor of Economics, University of Georgia

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BTW: Atlas Shrugged Part 2 opens in theaters October 12th
www.atlasshruggedmovie.com

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Back to the Clinton years? … Dems: Be careful what you wish for.

September 27, 2012

Lots of articles have been written about how the the bottom 50% pays no Federal income taxes and the very top tiers pay vast shares.

The usual cry from the Dems: what about payroll taxes?

Then, they holler: go back to the rates in effect during the glorious Clinton years.

Well, the Independent Review pulled together Federal tax burdens back to 1980 … including payroll taxes

The key findings:

Since 1980, the bottom 40%’s share of total Federal taxes has almost halved … from about 9% to to 5%.

The top 10%’s share has grown about 15% … from 40% to almost 55%.

Most of the top 10%’s share  increase has landed where?

You guessed it … among the evil 1-percenters.

Geez.

If we could only get the wealthy to pay their fair share, we’d be out of this fiscal mess, right?

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