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….”
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.
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?
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.
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….
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.
Assemblywoman Wilma Chan (D-Alameda) introduced AB6. This would increase the state’s top income tax rates by 0.7%. Most Californians would pay 10% income tax rates under this bill, up from 9.3%. This bill does require a 2/3 vote, and passage and signing by the Governator is most unlikely. But that this bill was even introduced tells one what the Democrats think.
The New York Times has for years editorialized against corporations “abusing the Tax Code.” But does the Times practice what they preach? Of course not— that would be fiscally irresponsible.
As Allan Sloan reports in today’s Washington Post (hat tip: Captain’s Quarters), the New York Times is taking full advantage of Section 338 of the Code in its’ $410 million purchase of About.com. As Mr. Sloan reports, Lehman Brothers’ tax expert Robert Willens puts the savings at about $160 million over 15 years.
The Times has liberally noted the “abuse” of the system by corporate America. For example, on January 30th the Times editorialized against Johnson & Johnson using a section of the Code to bring foreign profits back into the US at a lower tax rate. Indeed, a search I ran of the Times’s editorials and op-ed pieces from 1986 to the present found 84,425 hits for “corporate tax abuse.” Admittedly, many of these will deal with scandals such as Enron; however, can anyone really dispute where the Times stands on this issue?
I have no problem with the Times taking advantage of any part of the tax code (I want my own clients to take every possible legal deduction and credit). However, the Times should change their hypocritical editorial stance on corporate tax abuse. Or their next editorial should be, “Times Abuses the Tax Code.”
Today’s Orange County Register editorializes on a brain drain [registration required]: the high cost of doing business in the Golden State has led corporate planners to locate elsewhere.
I wrote last week that liberals would like California to increase taxes to businesses. A good friend of mine chided me on my “anti-liberalism.” Actually, I believe that many of the programs that liberals love are good; rather, these programs should never be run by the government.
Government cannot and should not be the end-all for everyone. If liberals had their way, corporations would pay 20% state income taxes (or more) to fund their programs. California’s liberals need to learn basic economics. If you increase the price of a good through taxes, the demand goes down.
That’s what syndicated columnist Thomas Elias suggests in today’s Pasadena Star-News. That’s not how Mr. Elias puts it; rather, he states that increasing property taxes on businesses is the “obvious solution” to California’s budget problems.
It’s not.
The obvious solution is to cut the size of the state budget, to decrease government programs across-the-board, and change the mentality from the government as welfare state to government is the last resort. Our money does much better in our pockets (the taxpayers) than in the government’s.
According to the Tax Foundation’s business climate survey, California ranks 38th of the 50 states. Another survey ranks California 46 of the 50 states and the District of Columbia for small businesses.
What happens if property taxes increase? Rents increase. Business profits decrease. Other tax collections (income tax, payroll tax) decrease. Eventually, fewer businesses are in California, and the cycle continues.
So let’s increase property taxes and improve Nevada’s (and Arizona’s, Oregon’s, etc.) business climates.
