Tax Law Archives - Page 37 of 41

Baucus Healthcare Bill May Cause 70% Marginal Tax Rate

Harvard University Professor of Economics Greg Mankiw believes that Senator Max Baucus’ healthcare bill will impose a staggering tax on Americans of all income tax levels.

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 percent 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.”

Proposed Soda Tax: Coke Didn’t Make America Fat

Muhtar Kent, CEO of Coca Cola Company has a column in the October 7, 2009, Wall St. Journal about taxing soft drinks. The subtitle of the column is “Americans need more exercise, not another tax.”

Obesity is a complex issue, and addressing it is important for all Americans. We at the Coca-Cola company are committed to working with government and health organizations to implement effective solutions to address this problem.

But a number of public-health advocates have already come up with what they think is the solution: heavy taxes on some routine foods and beverages that they have decided are high in calories. The taxes, the advocates acknowledge, are intended to limit consumption of targeted foods and help you to accept the diet that they have determined is best.

In cities and states across America—and even at the federal level—this idea is getting increased attention despite its regressive nature and inherent illogic.

IRS Failed to Answer 22.4 Million Calls During 2009 Tax Season

As the federal government continues to grow, it provides less service at a higher cost. During the 2009 income tax filing season 75.7 million people tried to call the IRS toll-free telephone lines. Although the IRS answered 35.8 million (47.3%) calls, 22.4 million calls were not answered because taxpayers hung up, were disconnected by the IRS or received a busy signal.

Note the alarming negative trends in the chart below that summarizes IRS phone service over the last four years – declining service and longer wait times.

IRS Phone Statistics

Alternative Minimum Tax Time Bomb Explodes in 2010

Congress created the Alternative Minimum Tax (AMT) in 1969 because of a story in the Wall St. Journal about 100 millionaires who paid no income tax. The primary reason they did not pay any income tax was because they had invested in tax free municipal bonds, a type of investment that produces earnings that are not taxed under the federal income tax law. Congress created tax free municipal bond investments to give people an incentive to invest money in investments that paid lower rates of return than many taxable investments. Bottom line: Congress decided in 1969 to punish tax wealthy people who took the bait and invested in the tax-favored bonds.

Fast forward to 2010 and the 1969 AMT bomb will fully detonate. “The Individual Alternative Minimum Tax: Historical Data and Projections, Updated October 2009” examines the history of the AMT and explains the damage that will soon occur.

The alternative minimum tax (AMT), which originally targeted high-income taxpayers, requires annual legislation to prevent it from affecting millions of middle-income individuals each year. There are two primary reasons for the AMT’s broadening impact; its parameters are not indexed for inflation and the 2001-2006 tax cuts reduced regular tax liability without changing AMT liability. In 2009, four million taxpayers will pay $33.5 billion in AMT, but without congressional action that number will rise to 27 million owing $102 billion in 2010.

Why is it that a law that was intended to raise revenue from a small number of super rich Americans will soon cause 27 million taxpayers to pay $33.5 billion?

Rapper Method Man Arrested for Tax Evasion

New York Daily News: “The Staten Island rapper, actor and producer known as Method Man was tagged with another label Monday: tax cheat. The 38-year-old Grammy-winning artist, a founding member of the hip-hop group Wu-Tang Clan, was arrested for stiffing the tax man out of $32,799.”