Taxable Talk

It’s hard for me to imagine such a high marginal tax rate, but those kinds of rates were the norm from the 1930s into the 1960s.  Higher marginal tax rates extended the Great Depression.  But that doesn’t seem to matter to the Senate or President Obama; a researcher believes that the Senate health care proposal by Senator Baucus would lead to 80% marginal tax rates.

Jim Capretta looks at the Baucus healthcare bill and concludes that, because the subsidies phase out as income rises, it imposes an effective marginal tax rate on income of about 30% for many families. Add that figure to the income tax, the payroll tax, and the phase-out of the EITC and “the effective, implicit tax rate for workers between 100 and 200 percent of the federal poverty line would quickly approach 70 percent — not even counting food stamps and housing vouchers.”

Indeed, Jim seems to understate matters, as he includes only the employee half of the payroll tax. Including both the employee and employer halves, as economic theory says is appropriate, appears to give a marginal tax rate closer to 80%. And, of course, many states impose income and sales taxes as well, and these would further raise the overall marginal tax rate. Jim was doing a rough back-of-the-envelope calculation.

Add in the rationing that’s inherent to socialized medicine and you can see why I believe the proposals from Congress are economic disasters. The one bright spot will be their impact on tax professionals: The higher that taxes rise, the more that individuals will concoct fancy methods of avoiding taxes. That means more business for people like me.

Hat Tip: Tax Prof Blog

There’s no such thing as a free lunch.  That said, Democrats in Washington are talking about extending the soon-to-expire first-time homebuyer’s credit. While this would certainly help the real estate market, this “free money” would have to be paid for…sooner or later.

It’s quite clear to me that Congress really wants me to have lifetime employment.

PJTV parodies the very successful Bud Light commercials “Real Men of Genius” with Real Members of Congress featuring Mr. Tax Law Writing Tax Evader. Unfortunately, the story is true….

Hat Tip: Patterico

>From PowerLine I learned that Sweden is lowering its tax rates to encourage job growth. Yes, a bastion of Scandinavian socialism understands economics enough to know that high tax rates discourage job growth. It’s a pity that our current Administration doesn’t understand this basic tenant of economics.

For embattled Congressman Charlie Rangel (D-NY), is time running out?

Byron York thinks it is. He notes that Congressman John Carter (R-TX) has introduced the “Rangel Rule”: “The brainchild of Rep. John Carter, a Texas Republican who spent two decades as a judge before coming to the House in 2002, H.R. 735 would require the IRS to give everyone the same kid-glove treatment it gave Rangel.” There’s no chance that will pass.

The New York Post notes in an editorial, “All of which makes Rangel’s continued role as chairman of the House Ways and Means Committee — Congress’ primary tax-writing body — a mockery.”

Glenn Thrush, writing in Politico, notes that Speaker of the House Nancy Pelosi (D-CA) is very unlikely to remove Rangel as Chair of the House Ways and Means Committee as it would cause even more problems for her.

That said, Democrats ran successfully against Republican corruption in 2006 and 2008. It now appears certain that Republicans will run successfully against Democratic corruption in 2010. Speaker Pelosi and other Democrats would be wise to ditch the corruptocrats…but perhaps that’s just not possible for a Congresscritter.

Congressman Charlie Rangel (D-NY) remains in trouble. But will anything come of it?

Mr. Rangel is Chairman of the House Ways and Means Committee, and is a powerful force among Democrats in Washington. However, his tax abuses are legion and, according to the New York Post, getting longer. Sure, there’s a House Ethics Committee investigation, but neither the Post nor I think anything will come of it (except a slap on the wrist).

Democrats campaigned quite successfully in 2006 and 2008 on charges of Republican corruption. It’s almost certain that the shoe will be on the other foot in 2010 (and probably 2012) unless something is done. In this case, having a tax cheat in charge of the committee that writes tax legislation will give the GOP plenty of self-written advertisements next year. Democrats would be wise to have Mr. Rangel step down as Chairman of the Ways and Means Committee. It doesn’t appear likely to happen.

Perhaps no scarier line has ever been uttered than the title of this post. And if ObamaCare passes, there will be yet more fun for those of us in the tax profession.

Declan McCullagh is reporting that the new ObamaCare legislation contains language that may make you just a bit uneasy:

Section 431(a) of the bill says that the IRS must divulge taxpayer identity information, including the filing status, the modified adjusted gross income, the number of dependents, and “other information as is prescribed by” regulation. That information will be provided to the new Health Choices Commissioner and state health programs and used to determine who qualifies for “affordability credits.”

Section 245(b)(2)(A) says the IRS must divulge tax return details — there’s no specified limit on what’s available or unavailable — to the Health Choices Commissioner. The purpose, again, is to verify “affordability credits.”

Section 1801(a) says that the Social Security Administration can obtain tax return data on anyone who may be eligible for a “low-income prescription drug subsidy” but has not applied for it.

This language, if adopted in the final bill, would mean that it would be incredibly easy for individuals who shouldn’t have access to our tax returns to have access to them. I guess the Democrats in Congress don’t like the idea of privacy.

This is yet another reason that I’m not in favor of ObamaCare.

California’s tax brackets are indexed for inflation. Normally, the marginal tax brackets go up each year. But 2009 is anything but a normal year.

The Franchise Tax Board announced the new brackets, and deflation is the name of the game. Tax brackets will fall, and that means if your income is the same in 2009 as 2008, the amount you will pay to California just went up. And that’s besides the tax increase that came in February by bad budget #1.

Don’t worry, Democrats in the state legislature haven’t given up trying to pass even more tax increases.

I’ll have a lengthy post about 2009 California tax brackets and related items in a couple of weeks.

That’s the gist of the famous line uttered by Leona Helmsley. She ended up spending time at ClubFed. It appears that philosophy is shared by the Chairman of the House Ways and Means Committee, Charles Rangel (D-NY).

Mr. Rangel amended his 2007 disclosure report to note an account at the Congressional Federal Credit Union of at least $250,000; stock at PepsiCo and Yum Brands; and real estate in New Jersey that he undervalued. You might say he “Missed it by that much,” as he initially reported that it was worth between $6,511 and $17,900; the amended report notes the true value as between $45,423 and $134,700.

Now news comes out that besides just slightly undervaluing his property he ‘forgot’ to pay his property taxes on that property. Yes, the back taxes are only about $160 but it’s the principle of the matter.

Oh, Congressman Rangel has quite a bit to do with taxes. All tax legislation in Congress must originate in the House Ways and Means Committee. So a gentleman who has plenty of problems reporting and paying his taxes is responsible for the writing of tax policy in the United States. Makes you feel comfortable, right?

Mr. Rangel should resign his position as Chair of the Committee but the chances of that happening are somewhere between slim and none.

Hat Tip: Don’t Mess With Taxes, Instapundit

I’m not a fan of earmarks, but it’s how Washington works (unfortunately). Taxpayers for Common Sense and opensecrets.org have provided a list of earmarks out of this Congress.

For those who lobby, some got lots for their bucks. The University of Alabama spent $360,000 but received $40.55 million. That money will be used for two projects: $30 million for an interdisciplinary science and engineering teaching and research corridor and $10.55 million for weather research in the Gulf of Mexico.

Mississippi State University, the University of Mississippi, and the University of Mississippi Medical Center cleaned up. Together, they spent $440,000 in lobbying but they got back nearly $36 million.

Loma Linda University Medical Center was the biggest California winner. They spent $255,000 but did get back $2.8 million to be used in their space radiation health research program.

There were some losers. Texas A&M University spent a whopping $770,000 but only got back $500,000 in earmarks; Texas Tech spent $565,000 but they too received only $500,000 in earmarks. The Nature Conservancy, though, was the biggest loser. The non-profit spent $1.31 million but only received $445,000 in earmarks.

One day, hopefully in the near future, we will see all earmarks vanish. I can always dream.