At a minimum, the Cain plan is a distributional monstrosity. The poor would pay more while the rich would have their taxes cut, with no guarantee that economic growth will increase and good reason to believe that the budget deficit will increase. Even allowing for the poorly thought through promises routinely made on the campaign trail, Mr. Cain’s tax plan stands out as exceptionally ill conceived. [NYT via TaxProf]
Related Posts
The IRS Will Enforce Mandatory Healthcare Using the Honor System
How much tax would you pay on April 15 if the IRS couldn’t levy on your bank account, slap you with a lien, charge you penalties and interest, or send you to jail? Not much, eh? Then ponder the rules forcing individuals to buy “minimum essential coverage” under Obamacare.
The forced purchase of insurance is key to Obamacare. The “personal responsibility requirement” – a funny name for a requirement imposed by the state – is needed to make sure that low-risk individuals buy insurance to help keep it affordable for high-risk buyers (or, less politely, healthy young men are forced to subsidize everybody else). The penalty is considered vital to any semblance of fiscal soundness for the program. The rule is backed up by penalties and will be collected on tax returns.
The reaction of healthy young men in 2014 when this penalty kicks in will be “Dude. You’re not serious.”
And they will be right.
Caleb noted this yesterday from the Joint Committee of Taxation explanation of the penalties (my emphasis):
The penalty is assessed through the Code and accounted for as an additional amount of Federal tax owed. However, it is not subject to the enforcement provisions of subtitle F of the Code. The use of liens and seizures otherwise authorized for collection of taxes does not apply to the collection of this penalty. Non-compliance with the personal responsibility requirement to have health coverage is not subject to criminal or civil penalties under the Code and interest does not accrue for failure to pay such assessments in a timely manner.
If we take them at their word – and new Code Sec.5000A(g)(2) seems to say just this – why would any sensible taxpayer ever pay the penalty?
• They can’t threaten you with jail.
• They can’t hit you with a lien.
• They can’t levy your accounts.
• There’s no interest charge, so even if you do pay it late somehow, you’ve had the interest in the meantime.
We tax preparers probably won’t be allowed to recommend non-payments to our clients, or we will be silenced by our new IRS preparer enforcement overlords, but people will figure it out in a hurry. And if you think that people will pay taxes anyway without the threat of collection, penalties or interest, then why are we wasting any money funding the IRS?
This provision means one of two things: either this penalty is a joke, and they are just kidding about the cost estimates of the bill — they will be much, much higher — or the toothless penalties are just a PR stunt that they plan to correct as soon as they can get away with it.
Tax Prep But Make It Catchy
We’ve got 27 days left until April 15 and one tax prep outlet in Houston […]
Study: Rich People Getting the Pleasure of Assisting Governments Increase Revenues Worldwide
The following post is republished from AccountingWEB, a source of accounting news, information, tips, tools, resources and insight — everything you need to help you prosper and enjoy the accounting profession.
The worldwide decline in top personal income tax rates over the past seven years generally appears to have come to an end, as this year’s average rate increased 0.3 percent globally, according to KPMG International’s 2010 Individual Income Tax and Social Security Rate Report, released this we remained static in most locations, including the United States, the finding of an upward moving trend in the KPMG report suggests some governments are beginning to opt for a personal tax rate increase to help combat deficits and raise additional revenue.
“In the current economic environment, as many countries are faced with increasing budget deficits, they need funding for various economic stimulus packages,” said Ben Garfunkel, national partner in charge of KPMG LLP’s (U.S.) International Executive Services practice. “Our study indicates that many of these countries are levying tax increases on their highest earning taxpayers in order to increase revenue. We also see governments becoming increasingly sophisticated and rigorous in the framing and application of their tax rules.”
According to the KPMG report, the majority of rate movement in 2010 originated in Europe. The United Kingdom implemented a 10 percent increase raising its top rate from 40 percent in 2009-10 to 50 percent in 2010-11 — the highest rate increase seen globally this year.
Other Western European governments have followed suit in an attempt to increase tax revenues. Iceland, amid the collapse of the banking sector, replaced its flat tax regime with a progressive approach raising the top personal income tax rate by approximately nine percent.
Greece, in response to public deficit concerns, raised its top rate by five percent. Portugal, and, most recently, France raised top rates by three percent and one percent, respectively, to help address budget shortfalls. Ireland’s top rate also increased by one percent in 2010.
Striking the Right Balance
“Personal tax rates can be a crucial deciding factor when evaluating where to locate workforces or the costs associated with international assignment programs,” said Garfunkel. “Tax authorities are trying to strike the right balance as they face increasing pressure to identify and secure greater revenues, while also trying to attract businesses to set up operations in their country.
“High income earners typically have the talent and credentials to migrate to countries that have lower personal income tax rates and a need for skilled labor,” added Garfunkel. “Attracting such individuals — including their tax revenues and disposable income — using a competitive personal tax rate, while also trying to address budget deficits, is a challenge, especially in the current economic environment.”
Top Rates Decrease in Some Countries
Some countries are decreasing their top personal income tax rates. Denmark opted to introduce a stimulus package in hopes of increasing consumer spending and as a result, decreased its top rate by almost seven percent. Croatia, this past July, also dropped its top rate by five percent.
Other report findings include:
• The low flat tax initiatives of Eastern European governments have stagnated. Estonia has abolished its plan to reduce its flat tax rate to 18 percent by 2012, while Latvia increased its flat tax from 23 percent in 2009 to 26 percent in 2010.
•Average top rates in Asia-Pacific declined by 0.4 percent in 2010. New Zealand and Malaysia dropped their rates by five percent and one percent respectively.
•Although the average rates for Latin America jumped 0.8 percent in 2010, personal income taxes continue to remain relatively low in Latin America.