Archive | Politics

IRS abandons voters on campaign finance mess

Don’t look to the IRS for potential relief from a tsunami of political advertising during the 2014 off-year elections.

The Service announced in late May that it is pulling back proposed regulations on tax-exempt groups. That means that everyone from the billionaire Koch brothers to tree-hugging lefties will be able to fund ad campaigns through organizations that often aren’t required to disclose where their contributions come from. It also means the IRS probably will not be doing anything to challenge the tax-favored status of nonprofit “educational” groups until after the end of this year.

This is the one place where many people would like to see the IRS doing more, but nooooooo….

Multinationals seek tax heavens, er, havens . . . oh, what’s the diff?

More and more U.S.-based corporations are growing wings and flying away from their U.S. tax obligations.

Bloomberg puts it as simply as possible: “U.S. companies looking for lower tax bills are heading for the exits, and Congress is doing nothing to stop them.”

The immediate impetus for the story was Pfizer’s proposed purchase of AstraZeneca, which would result in Pfizer reincorporating in Britain while tapping literally billions of dollars it has been holding outside the U.S., as The New York Times reported.

What’s the solution? Congress could grow a set and change the tax laws so that there is a crackdown on companies that use tax havens to keep profits outside of the U.S. system, as Steven Rattner suggests. Rattner also suggests in essence giving up on taxing corporations and instead increasing taxes on profits at the shareholder level, which would effectively increase the taxes paid by the wealthiest Americans.

I don’t know what the solution is, but when you consider that the effective federal tax rate paid by corporations has dropped from more than 40% in the 1950s to about 15% today, it seems clear that something has to change.

Washington Post’s maps paint a fascinating – and unexpected – picture of the USA

The Washington Post’s “GovBeat” feature is doing some great work, including this story and link to 25 maps and charts of the United States (your first 10 stories a month at Washingtonpost.com are free; then the paywall rises up.)

One, “Finding America’s Uninsured,” (#23) shows that the national problem of people not having health insurance may be strangely localized, with 116 counties (out of more than 3,000 total) accounting for more than half of all the uninsured in the U.S. Another, “Cartogram of Total Disenfranchisement rates by State,” (#16) features a stunningly distended Florida, where more than one out of every five black adults are not allowed to vote because they were at some point convicted of a felony.

On the other hand, it’s worth giving your brain a bit of a break and focusing on the maps of “Where The Breweries Are,”(#5) and “Where the Closest Pizza Joints Are” (#25).

For privileged corporations, paying state taxes is increasingly becoming a thing of the past

States regularly offer tax incentives (or, depending on your point of view, corporate welfare) to major corporations in exchange for promises of expansion, corporate relocation, retention of old jobs, creation of new jobs, and anything else with the word ‘jobs’ in the sentence. If you think about it, it’s an almost mindless rush to the bottom: the more tax incentives that get offered, the lower overall corporate taxes paid to all states and the more states will have to look to other sources (that’s you, Mr. & Ms. Non-Corporation) to make up the difference.

Now at least one state politician is trying to reverse this trend, or at least slow it down. The New York Times reports that Missouri governor Jay Nixon has called for a halt to the tax incentive border war between that state and Kansas.

“That is bad for taxpayers,” Mr. Nixon said of the moving of jobs. “It’s bad for our state budget, and it’s not good for our economy.”

Meanwhile, the Washington State legislature has just passed what Seattle Times columnist Danny Westneat reports is the largest state tax subsidy in history—more than $8 billion-with-a-B in corporate tax breaks — almost entirely for Boeing-with-a-B — over 15 years.

Super-rich have super-low tax rates, in super times or bad ones

Let’s stop a moment to reflect on the tax lives of the 400 highest-earning Americans, and how they suffered in the Great Recession of 2008-2009.

Oh, wait a minute—they didn’t suffer. As James B. Stewart points out in The New York Times, the fortunate 400 still averaged $202 million apiece in adjusted gross income in 2009. Perhaps even more extraordinary, they paid an average federal income tax rate of less than 20%–less than people in the top 1% (adjusted gross income of at least $344,000) and quite possibly less than you.

How did they do it? Well, more than half of their income came from capital gains and qualifying dividends, which were taxed at the preferential rate of 15%, compared to wages and other income that could be taxed as high as 35%.

Is there any sound reason for taxing earnings from capital at half the rate or less than earnings from one’s labor? Not really. No less a financial heavyweight than Pimco mutual fund co-founder Bill Gross wrote in his November investment outlook that, “The era of taxing “capital” at lower rates than “labor” should now end.”

If that ever happens, we’ll be back to one of the features of The Tax Reform Act of 1986, under which capital gains and wages were taxed equally. That bill was promoted and signed by that well-known enemy of the wealthy . . . Ronald Reagan.