Tag Archives | Congressional clowns

Will Congress — new or old — do anything about expiring tax breaks?

The election is over, the people in their infinite wisdom have spoken…but here we are in mid-November and we still don’t know for sure what the tax laws are going to be for this year.

The problem is that a bunch of tax breaks and benefits have not been extended to 2014. These include:
–The $4,000 deduction for higher education tuition & fees.
–Deductions for state and local sales taxes.
–The ability to donate up to $100,000 from your IRA to a charity instead of taking a taxable required minimum distribution.
–The $250 deduction for classroom expenses for teachers in grades K-12.
–Credits of up to $500 for energy-efficient home improvements.
–The ability of businesses to write off more than $25,000 in new asset purchases.

The Wall Street Journal summarized
tax breaks it thought Congress should address. A lame-duck session might do something about all of this. Or it might do nothing. But either way, until we know for sure what the tax laws are for 2014, the IRS can’t finish programming its computers, which means that this is likely to be another tax season in which taxpayers will be unable to file their returns in early or even late January.

Watch this space for an update.

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.

Food stamp cut passes House; why should “the takers” eat?

The House of Representatives in September passed, on an almost party-line vote, a bill slashing $40 billion from the Supplemental Nutritional Assistance Program, more commonly known as food stamps, Read about it in the New York Times. The vote may have marked a new high, or low, in mean-spirited political gamesmanship.

If this bill survives the Senate, it would eliminate between 4 million and 6 million people from the food stamp program. As Paul Krugman points out in his blog, the SNAP program has gotten bigger in recent years , and that is exactly what you would expect when the economy is weak and unemployment and underemployment are at high levels.

But would cutting the program have much of a budget impact or reduce American’s taxes taxes? Not likely. The program historically amounts to about one-quarter of one percent of our gross domestic product. Slashing benefits won’t have much effect at all on the overall federal budget.

But the reductions would surely directly affect real people, including millions of the working poor, confirms the New York Times. Former Republican Presidential nominee Bob Dole and former senator Tom Daschle summarized their view of prospects going forward, writing in The Los Angeles Times, “The latest proposal from the House is an about-face on our progress fighting hunger. If Congress lets this bill fall victim to the misguided and detrimental partisan politics we face today, the results for families and children challenged with hunger will be severe.”

And it’s not as if the money spent on food just vaporizes into the atmosphere. Payments go to farmers, grocery stores, cashiers, truck drivers and other workers who produce food and bring it to market.

About 48 million Americans rely on food stamps, and almost three-quarters of the participants are families with children. The idea that it makes sense to try and balance the federal budget on their backs is nothing short of appalling.


World’s teeniest tax bracket

With the new tax bill passed by Congress in January 2013, there are now seven marginal tax brackets–10%, 15%, 25%, 28%, 33%, 35%, and 39.6%. OK, no big problem there.

Here’s the stupid thing: The only single filers who fall into the 35% marginal bracket will be those with taxable income of $398,350 to $400,000.

That’s right–there is now a tax bracket with a range of $1,650. One Thousand, Six Hundred Fifty Dollars.

You can see the new 2013 tax brackets for yourself here, courtesy of The Tax Policy Center, which estimates that fewer than 500 singles nationwide will fall into this bracket in 2013. You can also find Forbes contributor Howard Gleckman, in primo head-shaking mode, weighing in here.

I can’t make this stuff up.

Late refunds this year, courtesy of Congress

Are you used to filing your returns in January so you can get your tax refund early?

For 2013, think again.

Because Congress didn’t give us the final tax code for 2012 until January of this year, many taxpayers will be unable to get their returns processed by the IRS until late February or early March.

Who can’t file early? Anyone whose return includes depreciation (Form 4562), a residential energy credit (Form 5694) adoption expenses (Form 8839) and about two dozen other forms.

You can find out if you have one of the forms on the late list by checking here.