If We Can’t Win, Let’s Change the Rules

On the Federal level, the Democrats in the Senate want to filibuster President Bush’s judicial nominees. Whether the Democrats in the Senate like it (or not), there’s nothing in the Constitution saying that you can filibuster appointments. The Democrats are trying to change the rules.

Here in California, after property taxes went crazy in the 1970s, Proposition 13 was passed. That limited property tax increases and mandated a 2/3 vote for new taxes.

The education establishment, unhappy that many of their tax increases aren’t being approved by the voters, now wants to change the rule so that it takes a 55% vote for passage. The next time you’re approached by anyone from the education establishment, ask them:

– Does money spent correlate with improved learning for our children? [No, according to numerous studies.]
– Why do the school districts that spend the most money have some of the worst results?
– Why are you against standardized tests that mandate our children meet basic education levels before being advanced to the next grade?

Remember, it’s our money being spent–that’s what tax dollars are.

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Richard Hatch: CBS Should Have Withheld Taxes

When we last left Richard Hatch, the $1 million winner from Survivor who didn’t pay his income taxes, he withdrew his plea of guilty. He now claims, in an interview with AP, that CBS should have withheld his taxes because under California law he should have been classified as an employee.

Ignoring, for the moment, the merits of his claim, ignorance of withholding does not alleviate one’s responsiblity for paying income tax. Penalties, however, could be eliminated depending on the truth of Mr. Hatch’s claim.

What will add to the confusion during trial (if this goes to trial) is that Mr. Hatch is a resident of Rhode Island. CBS (now part of Viacom) is headquartered outside of California. Survivor was filmed in the South Pacific. Frankly, Mr. Hatch is probably going to be forking over the ~$300,000 the government says he owes, along with interest. After all, there were only 300 million witnesses to his winning the $1 million…

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The Disneyland Impact

According to the Daily News, Disneyland brings $3.6 billion annually to the local economy. This story details the positive impact of the theme park: $1.62 billion to Orange County (45% of the impact). That mouse brings in a lot of money.

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Hatch Backs Away From Plea

While I was on the East Coast, Richard Hatch backed off from pleading guilty to tax fraud. Hatch, who won $1 million on Survivor, allegedly did not declare his prize on his tax return. The government has dismissed the charges, and will present all possible charges to a grand jury.

We’ll keep you informed.

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Just a “Little” Evasion ($200 Million)

As you will undoubtedly read (or have read) in your local newspaper, Walter Anderson has been arrested for allegedly not paying $200 million in Federal and District of Columbia income taxes.

Roth & Company’s tax updates (now renamed www.taxupdateblog.com) has two good posts (see here and here) on Mr. Anderson’s “anarcho-capitalist” views. I can just imagine saying, “Honey, I misplaced that $126 million….”


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Cheat $3.7 Million, Pay $1.4 Million

Adult videos can be a lucrative business. Michael S. Morrison of Atlanta owned some adult video stores. In 2000 & 2001, he reported on his tax return lower “booth rentals” because of competition. The IRS felt otherwise. As the Atlanta Business Chronicle reports, the government investigation found that Mr. Morrison had “sticky fingers” and skimmed the money. He also underreported other income.

The result? 3 years, 10 months in prison; 3 years supervised release; community service; and pay the IRS $1.4 million.

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California Warned (Again) on Factory Jobs

California received yet another warning about its’ dreadful business climate. According to this story in the Sacramento Bee, 1.3 million of California’s 1.5 million factory jobs are in danger of being lost. According to the Bay Area Economic Forum, most of these jobs would move overseas. The report blames the usual suspects: high tort costs, high energy costs, and high taxes.

Is anyone in Sacramento (e.g. the legislature) listening?

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Traveling

This week I’m traveling to Philadelphia and nearby environs so blogging will be close to nonexistent. I’ll be back with updates next week.

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Vox Blogoli 2.2: Whither the GOP

Hugh Hewitt asks, “Does the Senate GOP go McClellan or Grant if Harry Reid goes “Gingrich?” This is a lot more important than just pure politics, which is why I’m responding in a tax blog.

First, for the non-Civil War buffs, General McClellan was the first Union Commander of the Army of the Potomac, and was (at best) wishy-washy. General Grant, on the other hand, successfully led the Union and defeated the Confederacy. He might have been an alcoholic, and had other personal problems, but he knew how to lead.

Now, why is this important for tax policy? Let’s assume that the judicial nominees make it out of the Judiciary Committee (a safe assumption), and come to a vote on the Senate Floor and the Democrats filibuster (another safe assumption). Now, Senate Majority Leader Bill Frist has said he will go nuclear: interpret the Senate rules so that judiciary votes cannot be filibustered. Senate Minority Leader Harry Reid has promised, if this occurs, to shut down the Senate. This, if it were to occur, would cause budgeting and tax issues to grind to a halt (which is why I’m interested).

I’m all for the nuclear option, if the Senate Democrats filibuster. In the long-term, this will work for the GOP. The Democrats will be seen (by most of the public) as the party that shut down government, caused benefits to vanish, etc. This will lead to the Democrats getting further marginalized. (Remember what happened when Newt Gingrich shut down the government back in the Clinton years?)

Unfortunately, that’s not what I think will happen. No, I don’t think the GOP will go McClellan; rather, I expect a compromise. The Democrats don’t want the long-term damage. So the Democrats will say to the GOP, “We’ll allow votes on half the nominees.” And the Republicans will acquiesce. There are enough GOP Senators who don’t want to disturb the “Gentleman’s Club” of the Senate.

I don’t think that’s like General McClellan (although it’s much more like McClellan than Grant). Unfortunately, I don’t know any Generals best known for compromising. Probably a French general….

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Online Poker: North Dakota’s New Revenue Source?

North Dakota HB1509 would license Internet poker within the state, with the hope of tapping a new revenue source. According to North Dakota House Representative Jim Kasper, the bill could bring $500 million to the state. The bill passed the North Dakota House by a vote of 49 to 43 and is now waiting action in the North Dakota Senate Judiciary Committee. In order for the bill to take effect, a concurrent measure (House Concurrent Resolution 3035) must be approved by North Dakota’s voters. So is this a promising new source of revenue or is all of this just wishful thinking?

The bill, if passed, would impose a $10 annual license fee for each player and a sliding scale of tax rates to the Internet poker sites ranging from 8% of revenues to 1/4%. Given that Internet poker is currently raking in at least $2 Billion per year, Representative Kasper’s projections seem reasonable.

If only it were legal.

A couple of years ago, legislators in Nevada got the same idea: why not license online gambling sites and then we can get some of the revenues that are now flowing to Costa Rica and the Caribbean. The Nevada legislature passed the bill and it became law. Only one problem: the US Department of Justice told Nevada that it was illegal. While the law is still on the books, Nevada has shelved the idea of hosting online gambling sites.

Back to North Dakota. Assuming that this measure becomes law (and given the close vote in the North Dakota House, this might not happen), Representative Kasper states that North Dakota will fight the US. Yeah, really. Legally, poker is a form of gambling—not a game of skill. According to Chuck Humphrey’s website on gambling law, courts have held that poker is not a game of skill. As such, the Wire Act would probably prohibit the licensing in North Dakota of an online gambling site. Mr. Humphrey has an article on his website detailing the proposed North Dakota statute and its’ likelihood of raising revenues for the state.

Frankly, this seems like a whole bunch of hot air to me. In fact, its more likely that the US Congress will pass a law banning online gambling (Senator Kyl will be introducing such a bill soon) than North Dakota ever having a licensed online Internet poker site.

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