Taxable Talk

Via Watts Up With That comes news of Congressman Earl Blumenauer’s (D-OR) proposed Water Resources Protection Act. Buried in this legislation are four new taxes [link opens a Word document]

– 3% excise tax on items disposed of in wastewater, such as toothpaste, cosmetics, toilet paper and cooking oil: These products wind up in the water stream and require clean up by sewage treatment plants.

– 0.5% excise tax on pharmaceutical products.

– 0.15% tax corporate profits over $4 million.

– 4 cent per container excise tax on water-based beverages.

I’m beginning to wonder if there’s anything the Democrats don’t want to tax.

As a reminder to those like Congressman Blumenauer, all taxes are passed on to consumers. Perhaps his constituents are different than most Americans and they want to pay more for the items they need on a daily basis. Perhaps they want a lower standard of living. Or perhpas they have the mistaken belief that only the wealthy pay taxes.

The Thomas Register shows that this bill has only seven co-sponsors. Hopefully that number will head to zero for this misguided piece of legislation.

When President Obama was elected, I noted that everyone should watch their wallets and that tax increases would be on the horizon. Sure, President Obama said that there would be no middle class tax increase. Unfortunately, it appears that every Obama promise comes with an expiration date and this one is no exception.

Senior White House adviser David Axelrod today told George Stephanopoulos that President Obama would not rule out a middle class tax increase as part of a package to pay for health care reform.

I am beginning to wonder if the Democrats’ solution to all problems is to increase taxes.

The Obama Administration has announced plans to increase taxes on American businesses with foreign operations. Generally, taxes would increase on these firms’ foreign profits.

So assume you’re the CEO of such a firm. Well, if we move American employees overseas the profits of our foreign divisions would decrease. Voila, decreased taxation!

Unfortunately, this obvious reaction escaped the Obama Adminstration. It didn’t escape Steven Ballmer, CEO of Microsoft. Bloomberg quotes Mr. Ballmer, “It makes U.S. jobs more expensive…We’re better off taking lots of people and moving them out of the U.S. as opposed to keeping them inside the U.S.”

Perhaps Mr. Ballmer is now having buyer’s remorse. He was a $100,000 contributor to Mr. Obama. I try to keep politics out of a tax blog, but generally there’s a reason that Democrats are known for ‘tax and spend’ politics. And it’s happening again.

The Obama Administration has set a record on spending. Somehow they have had the belief that they wouldn’t have to increase taxes to pay for the spending. All along I’ve said that’s nonsense. It appears that everyone except the current Administration has come to that conclusion.

Even the left-leaning New Republic agrees. William Galston notes:

The conclusion is inescapable: to accomplish over the next decade what Treasury Secretary Geithner promised yesterday in Beijing, we will need a combination of spending restraints and revenue increases going well beyond what anyone has put on the table so far. The more imponderable question is how long it will take the political system to acknowledge this uncomfortable reality.

Yes, change you can believe in….

The Stimulus bill which will soon pass Congress is one of the largest spending bills ever. It’s pork, pure and simple, with a veneer of stimulus. But forget the veneer, it appears to me to just be spend, spend, spend.

That said, there are a few tax proposals buried in its 1400+ pages. Let’s look at them:

1. Joe Kristan noted that estimated payments for “small business owners” for 2009 only are reduced from 100%/110% of 2008 taxes (under the Safe Harbor method) to 90%/100%. To qualify under this provision an individuals Adjusted Gross Income (AGI) must be under $500,000. As Joe noted, it’s up to the IRS to define what a small business is. Perhaps the IRS will do this before it’s time to file 2009 tax returns.

2. The AMT patch is contained within the stimulus bill. This is a good thing as otherwise it would be debated sometime late this year. It would have been better to just eliminate the AMT but there’s always tomorrow’s stimulus bill.

3. There’s a Net Operating Loss carryback provision: NOLs can be carried back up to five years for 2008 if the business’ gross receipts are $15 million or less.

4. The first time homebuyer’s credit is increased to $8,000 for 2009 for eligible purchasers. And for 2009 purchasers (but not those who got this credit in 2008) the credit does not have to be paid back.

5. There’s a deduction for interest and sales tax on new car purchasers. There are weight restrictions (under 8500 pounds) and income restrictions (AGI under $125,000/$250,000 MFJ). The deduction applies to cars, light trucks, motorcycles, and recreational vehicles purchased in 2009.

6. The eligible income floor for the Child Credit has been lowered to $3000 from $8500 for both 2009 and 2010.

7. A new tax credit of up to $2500 for tuition and expenses paid during the tax year. The credit phases-out at an AGI of $80,000 ($160,000 MFJ) and 40% of the credit is refundable.

8. Bonus Depreciation is extended through 2009.

I’m sure there are more tax provisions…especially since no Congressman or Senator has read the bill they’re voting on.

Hat Tips: Roth Tax Updates, NAEA