“Instead of reprising their partisan, tiresome, and largely unproductive argument about what to do with the Bush tax cuts, President Obama and Congress ought to be asking a very different question: How do we build a tax system capable of generating the revenues we need to fund the government we want in the most efficient and fair way possible?”
Good question, you say? If you mosey around the web for a nanosecond, you’re likely to run into an article that is debating whether or not the 43rd President’s tax cuts from 2001 and 2003 should be continued. Since Nancy Pelosi is determined to get a vote on this pre-election day, the political rhetoric on this issue is flowing like a river of sewage you dare not dream of.
To help you make sense of it all, we perused some of the tax wonkiest corners of the web to bring you some perspective. And of course, some less bright observations.
• The Tax Foundation has a breakdown of how the expiration of the tax cuts would affect “Average Middle-Income Family, by State and Congressional District.” It’s simple to find your state/district to see the effect that the expiration of the cuts would have on you.
• Over at the Journal, Washington Wire presents the biggest winners and losers from the tax cuts being extended:
Among the states that would save the most from extending the tax cuts, according to a draft of the study: Alaska ($1,959 per family); Connecticut ($1,903); Maryland ($1,756); Massachusetts ($1,831); New Jersey ($1,860) and Utah ($1,779). The lowest savings for middle-income families would be in D.C. ($1,237); West Virginia ($1,316); and Mississippi ($1,355).
• Apparently Alan Greenspan still has a shred of credibility left because he weighed in a couple of weeks ago, telling Bloomberg, “I should say they should follow the law and let them lapse.”
• The Beard doesn’t agree with his predecessor, telling the House Financial Services Committee, “In the short term I would believe that we ought to maintain a reasonable degree of fiscal support, stimulus for the economy. There are many ways to do that. This is one way.”
• William G. Gale, a senior fellow at the Brookings Institution and co-director of the Urban-Brookings Tax Policy Center, wrote in the Washington Post about five myths around the tax cuts, including their affect on small businesses:
One of the most common objections to letting the cuts expire for those in the highest tax brackets is that it would hurt small businesses. As Sen. Orrin Hatch (R-Utah) recently put it, allowing the cuts to lapse would amount to “a job-killing tax hike on small business during tough economic times.”
This claim is misleading. If, as proposed, the Bush tax cuts are allowed to expire for the highest earners, the vast majority of small businesses will be unaffected. Less than 2 percent of tax returns reporting small-business income are filed by taxpayers in the top two income brackets — individuals earning more than about $170,000 a year and families earning more than about $210,000 a year.
• Derek Thompson is a little more pragmatic than most, arguing that President Obama should extend them for a year in order to buy some time to work on comprehensive tax reform:
The president should extend the Bush tax cuts — yes, the whole dang thing — for a year to temporarily silence his critics. Then he should use 2011 to knock it down and build a tax system that’s right for the next decade. Working off a bipartisan plan, real tax reform would simplify the income brackets and eliminate the multitude of deductions and exemptions that distort the economy with bad incentives and leave hundreds of billions of dollars on the ground.
• Fred Thompson (no relation that we know of) is using his camera moxie to voice his support for the extension of the cuts:
• Ezra Klein agrees that some cuts will be extended temporarily, although the debate among citizens isn’t as clear:
The cuts for the rich are likely to be extended for at least two years. The cuts for the middle class are sure to be extended for even longer than that. Total cost to the deficit over the next 10 years? More than $3 trillion, and maybe more than $4 trillion.
But according to a Pew poll, the American public isn’t as sure about this as the politicians are. A slight plurality — 31 percent — want all the tax cuts repealed. Thirty percent want the cuts for the rich extended. In other words, opinion is divided.
• And even though she needed crib notes, Sarah Palin managed to tell Fox News’ Chris Wallace that letting the cuts expire ‘idiotic’:
“[Obama’s] commitment to let previous tax cuts expire are going to lead to even fewer job opportunities for Americans,” Palin said. “It’s idiotic to think about increasing taxes at a time like this.”
“My palm isn’t large enough to have written all my notes down on what this tax increase, what it will result in,” Palin continued.
Host Chris Wallace noticed that Palin did indeed have something written on her palm. “Can I ask you, what do you have written on your hand?” he asked.
“$3.8 trillion in the next 10 years,” Palin responded, “so I didn’t say $3.7 trillion and then get dinged by the liberals saying I didn’t know what I was talking about.”
But who would ever get the idea that Sarah Palin didn’t know what she was talking about?
Geithner defends Obama policy on tax cut extension [AP]
“Treasury Secretary Timothy Geithner said Tuesday it would be ‘deeply irresponsible’ for the Obama administration to support a wholesale extension of Bush era tax cuts, including breaks for the wealthy.
Geithner said in a nationally broadcast interview that President Barack Obama strongly believes those reductions should be retained for the ’95 percent’ of taxpayers with individual incomes under $200,000 a year and families below $250,000.”
Bank of America, KPMG Settlement With Countrywide Investors Wins Approval [Bloomberg]
“Bank of America Corp. and KPMG LLP’s $624 million settlement with investors in Countrywide Financial Corp. led by New York pension funds won initial court approval.
U.S. District Judge Mariana Pfaelzer in Los Angeles ruled today on the accord. A fairness hearing will be held on final approval for the settlement, first announced in May.”
Snooki Tanning-Bed Protest Splits Sin From Taxes [Bloomberg]
“[P]eople don’t like government moralizing. If there’s one thing people dislike even more than taxes, it’s being told what to do.”
So does that mean that Alabama is imploring reverse psychology?
Reznick Group Promotes Four New Principals [Business Wire]
Reznick Group promoted Dan Fox and Renee Matthews in Bethesda, MD, Eric Jones in Sacramento and Daniel Worrall in Atlanta are the big winners.
Accounting & Consulting Group acquires Roswell’s Miller & Associates [New Mexico Business Weekly]
“With 95 employees overall, Accounting & Consulting Group is now the third-largest accounting firm in the state. Headquartered in Albuquerque, it has offices in Alamogordo, Carlsbad, Clovis, Hobbs and Roswell, and has a member firm office in Lubbock, Texas. The firm specializes in audit and financial reporting, tax compliance, business consulting and trust and estate planning.”
Becoming the Boss Can Cost Plenty [WSJ]
“When starting a business on a tight budget, a single spending gaffe can spell disaster. For this reason, experts in entrepreneurship recommend taking precautions, such as doing research to identify potential hidden fees, focusing only on necessities and setting aside emergency funds.”
SAP Business ByDesign 2.5: time to invest? [AccMan]
Dennis Howlett gives the lowdown on the “general availability of SAP Business ByDesign 2.5,” which means that it is available for any to purchase. Dennis reports that starter packs for as few as ten users are available for CRM, ERP and PSP.
Unfortunately for DeMint, not too many people think the permanent abolishment of the estate tax is that hot of an idea.
Namely, a whole bunch of Democrats (minus Lincoln and Nelson of Neb) led by Majority Leader Harry Reid. The amendment failed 39-59 in a vote yesterday but no worries lovers of tax-free death! A few races in this fall’s election could kick around the this particular political pigskin, including Reid’s in Nevada where Tea Party darling Sharron Angle supports the permanent repeal.
It’s worth noting that J DeM considered the abolishment of the tax not to be a ‘tax cut’ but a “continuation of current policy since Congress let the tax lapse this year.” In that context, it sounds like Senator DeMint is embracing the fact that Congress screwed the pooch on the whole damn thing and figured that continuing the impotence of Congress was easier than having the same debate over and over.
Estate Tax Vote: An Issue in Fall Vote? [Washington Wire/WSJ]
Senate rejects permanent estate tax death [Don’t Mess With Taxes]
Also see: Senate Rejects Measure to Permanently Abolish Estate Tax [TaxProf]
Bush Tax Cuts Roil Democrats [WSJ]
“Sen. Kent Conrad (D., N.D.) said in an interview Wednesday that Congress shouldn’t allow taxes on the wealthy to rise until the economy is on a sounder footing.
Sen. Ben Nelson (D., Neb.) said through a spokesman that he also supported extending all the expiring tax cuts for now, adding that he wanted to offset the impact on federal deficits as much as possible.
They are the second and third Senate Democrats to come out publicly in recent days in favor of extending all the tax breaks for the time being. Sen. Evan Bayh (D., Ind.) made similar comments last week.”
Madoff’s Ghost Still Haunts SEC [Washington Wire/WSJ]
In testimony earlier in the week, SEC Chair Mary Schapiro told a congressional committee that many of the people that investigated Bernie Madoff – 15 of 20 enforcement attorneys and 19 of 36 examination staffers – have left the Commission. However, that isn’t good enough for Rep. Bill Posey (R – FL).
“Republican Rep. Bill Posey of Florida –- home to many Madoff victims -– said he wants to know if those SEC employees ended up at other regulatory agencies, working for companies they were supposed to regulate, or retired with government pensions.
‘There’s a necessity to know where they went,; said Posey. ‘It’s like letting a pedophile slink out the door or change neighborhoods. We’re dealing with the same type of problem here.’
Schapiro strongly disagreed. ‘These aren’t bad people. In some cases they were people who were very junior and not adequately trained or supervised.’ In other cases, she said, they were pulled from one project to another.”
Despite the proclivities of some SEC employees, we haven’t seen anything warrant that particular label.
FASB in “religious war” to bring in fair value [Accountancy Age]
Lawrence Smith believes in fair value, you might say, in a fanatical sense. The FASB Member was quoted in AA, “Some people have advised us that we shouldn’t say this, but I’ll say it – fair value, to some of us, is almost like a religious war out there and we are trying to deal with that as best we can.”
Plus, at the rate things are going, the debate will soon reach Israel/Palestinian ignorability (word?) levels later this year.
Facebook IPO “when makes sense”, Zuckerberg tells ABC [Reuters]
That is, never.
Trust, but verify [MJS]
John Kyl and Blanche Lincoln must have figured that they could not allow one more billionaire (without naming names) get away with dodging the estate tax. The two Senators have introduced a proposal that would set the exemption at $5 million with a tax rate of 35%:
The proposal would require the Senate Finance Committee to amend H.R. 5297, the Small Business Lending bill, to permanently set the estate tax rate at 35 percent, with a $5 million exemption amount phased in over 10 years and indexed for inflation. It would also provide a “stepped up basis” for inherited assets.
“It’s time to take decisive action on the estate tax, and provide the permanent solution that Arkansas’s hardworking farmers and small businesses are desperately seeking,” Lincoln said. “Uncertainty in the estate tax law has caused incredible difficulties for these individuals, which is why I have fought for a quick resolution to the issue that is both permanent and fair. One way to improve upon an already strong legislative initiative that includes tax incentives and a number of other benefits for small businesses is to ensure that we reach a permanent solution on the estate tax to provide small business owners and famers with the certainty they need.”
See how she slipped in the “farmers”? “Small Businesses”? You sure this doesn’t have anything to do with a certain savvy billionaire who figured, “Yeah, 80 is a nice round number. Let’s do this.”
But they’ve got a plan! “The Lincoln-Kyl proposal provides an election for deceased taxpayers to either retain this year’s estate tax rate, which is zero percent with “carry over basis,” or file under the provisions of the new bill.”
Congress has been twisting itself into knots to pass 70-odd special interest “expiring provisions” this spring, though without success. These provisions that have come within one or two votes of being extended one more time are almost all special-interest provisons, providing tax breaks or direct cash subsidies to folks like biodiesel producers and race-track operators.
Meanwhile, the grandaddy of all expiring provisions goes largely unmentioned. Without new legislation, 24 million additional taxpayers will pay alternative minimum tax this year. That will happen because the AMT exemption for joint returns will fall from $70,950 to $45,000, and from $46,700 to $33,750 for single filers.
The AMT is a shadow tax system with fewer deductions and credits and a different rate schedule; it only applies when it gives a higher tax than the “regular” income tax. The reduction of regular tax rates in 2001 brought the regular and AMT brackets much closer, threatening to bring millions of voters into the AMT system. Congress has been passing “patches” to raise the AMT exemption for a year or two at a time since 2001 to avoid that. The last “patch” expired at the end of 2009.
An unpatched AMT would hit hardest taxpayers in the $100,000-$500,000 income range. Congress doesn’t want to anger that many potential campaign contributors. But where will Congress find the $68 billion or so of income that the AMT is budgeted to raise next year without a patch? The six month unemployment extension failed yesterday in the Senate because it would have increased the deficit by $34 billion.
So what will happen? Presumably an AMT patch will pass to appease voters as the election approaches, deficits be damned. Still, that’s not certain, especially in the current political environment.
So what can taxpayers do? They should start by projecting their tax for 2010. If you have one, your tax preparer is likely to have software to enable you to run the projection. If you use home tax software, it may also include a tax projection feature. Otherwise, you will have to use a 2009 copy of Form 6251, but using the reduced 2010 exemption amounts. Then you should fiddle with some items that affect AMT:
• The timing of your state and local tax payments.
• The timing of your miscellaneous itemized deductions.
• The timing of your capital gains, including capital losses.
Don’t be surprised if you find you have alternative minimum tax no matter what you do, especially if you live in a high-tax state. Then call your Congresscritter and ask for your patch.
The latest act in the ongoing circus known as the estate tax debate has three “liberal” senators – Bernard Sanders (I-VT), Tom Harkin (D-IA), and Sheldon Whitehouse (D-RI) – calling for billionaires to help close the $13 trillion some-odd federal deficit that these über-rich people ate.
Forbes reports that the Messrs. Sanders, Harkin and Whitehouse sent a letter to their fellow Senators laying out their case, “According to Forbes Magazine, there are only 403 billionaires in the U.S. with a collective net worth of $1.3 trillion. Clearly, the heirs to these multibillion fortunes should be paying a higher estate tax rate than others.”
The champs of the bill also go to the trouble of singling out Dan L. Duncan whose family stands to inherit his $9 billion fortune tax free. It’s a good thing those staffers pointed out that article in the Times to their respective Senators!
• Exempts the first $3.5 million of an estate from federal taxation ($7 million for couples), the same exemption that existed in 2009. Doing this would mean that 99.75% of all estates would be exempted from the federal estate tax in 2011 alone.
• Includes a progressive rate structure so that the super wealthy pay more. Under our bill, the rate for the value of the estate above $3.5 million and below $10 million would be 45%, the same as the 2009 level. The rate on the value of estates above $10 million and below $50 million would be 50%, and the rate on the value of estates above $50 million would be 55%.
• Includes a billionaire’s surtax of 10%. Our bill also imposes a 10% surtax on the value of an estate above $500 million ($1 billion for couples). According to Forbes Magazine, there are only 403 billionaires in the United States with a collective net worth of $1.3 trillion. Clearly, the heirs to these multi-billion fortunes should be paying a higher estate tax rate than others.
• Closes all of the Estate and Gift Tax Loopholes requested in President Obama’s Fiscal Year 2011 budget. These loophole closers include requiring consistent valuation for transfer and income tax purposes; a modification of rules on valuation discounts; and a required 10-year minimum term for Grantor Retained Annuity Trusts (GRATS). OMB has estimated that closing these loopholes that benefit the super-wealthy, would raise at least $23.7 billion in revenue over 10 years.
• Protects family farmers by allowing them to lower the value of their farmland by up to $3 million for estate tax purposes. Under current law, the value of farmland can be reduced up to $1 million for estate tax purposes under § 2032(a) (Special Use Valuation). Our bill increases this level to $3 million and indexes it to inflation.
• Benefits farmers and other landowners by providing estate tax relief for conservation easements. Our bill provides tax relief to farmers and other landowners by amending estate tax rules for conservation easements through an increase in the maximum exclusion amount to $2 million and increasing the base percentage to 60%.
Nice work on those last two Senator Harkin; you couldn’t be more obvious.
In case you didn’t catch it in there, the estate tax on the billionaires will be 55% PLUS! an additional 10% surtax. Sounds crazy right? Congress royally fucks things up by letting the estate tax expire in the first place and then has the stones to throw the double whammy on the rich because of it. Had they simply extended the estate tax (which seems to be a popular solution, btw) this political pigskin wouldn’t even be an issue.
But guess what? There are people behind this thing lock, stock and barrel. For one, the United for a Fair Economy (“UFE”) more or less says that this legislation is the catalyst to fixing everything, “The Sanders-Harkin-Whitehouse Responsible Estate Tax Act is an important step on the road to an economic recovery that benefits all Americans.”
Well, not all Americans.
No legislation is perfect though, amiright? You’ve got to take the good with the bad. The latest of the bad comes courtesy of everyone’s favorite bureaucratic nagging mother-in-law, the Treasury Inspector General for Tax Administration. The TIGTA has come out with a new report that shows that the FTHBTC program hasn’t really gotten any better at weeding out the unscrupulous activity.
TIGTA estimates that 14,132 individuals received erroneous credits totaling at least $26.7 million. These erroneous credits included:
• 2,555 taxpayers receiving credits totaling $17.6 million for homes purchased prior to the dates allowed by law.
• 1,295 prisoners receiving credits totaling $9.1 million who were incarcerated at the time they reported that they purchased their home. These prisoners did not file joint returns, so their claims could not have been the result of purchases made with or by their spouses. Further, TIGTA found that 241 prisoners were serving life sentences at the time they claimed that they bought new primary residences.
•10,282 taxpayers receiving credits for homes that were also used by other taxpayers to claim the credit. (In one case, TIGTA found that 67 taxpayers were using the same home to claim the credit.) TIGTA auditors have not fully quantified the total of these erroneous credits, but all indications are that the total will be in the tens of millions of dollars.
But wait! There’s good news! Inspector General J. Russell George was happy to report that there has been improvements, “The good news is that the IRS has made significant strides resolving problems associated with this program. For example, no minors received the Credit, according to our report.”
Progress! They’ve managed to keep the under-eighteen crowd under control. But do we prefer this to prisoners doing life getting our tax dollars? Seems like a toss-up.
The Book of John says that Lazarus emerged from his tomb four days after his death. While impressive, Lazarus has nothing on the Section 41 Research Activities Tax Credit. While Lazarus is credited with only one extension, the Research Credit, first enacted in 1981 as a temporary measure, it has been extended at least 12 times — several times after it had expired.
If it’s such a wonderful tool for our economy, as its beneficiaries always say, and if it is y isn’t it just made permanent? There are two main reasons, one only slightly less cynical than the other.
First, the credit costs the government a lot of revenue. The one-year extension in H.R. 4213, the current “extender” bill, is scored as a $6.6 billion revenue-loser. By extending it only a year at a time, the Congresscritters disguise the real cost of the credit, which they have no intention of allowing to expire. Remember this phony accounting the next time some corporate shmoe trembles while Henry Waxman berates his accounting methods.
Even more cynical: it forces the lobbyists for the credit to pay tribute to their Congressional patrons every year to keep their pet corporate welfare provisions alive. A former Congressional staffer explains (my emphasis):
I never understood the “why” about expiring tax provisions until one very late night markup of the “extenders bill” several years ago while I was working for the Ways and Means Committee. Bleary-eyed, one of usually twinkly-eyed members plopped down in a chair next to me in back of the dais–just to take a little rest away from his member’s seat. I asked him “why do we have to do this every year?…why can’t we just pass these things permanently?”
His eyes suddenly twinkled again, as he looked at me with a combination of amusement and disbelief. He said: “Are you kidding me?… We couldn’t do that!… Why, I’d lose all my friends!…Who would come visit me and say kind things to me and do nice things for me then, if they didn’t have to come back every year to ask for these tax provisions?!!”
The research credit is just one of 70 or so “temporary” provisions included in this year’s omnibus “extender” bill. Other tax breaks critical to the continued robust functioning of the economy include the Indian employment tax credit, the special short depreciation life for qualified leasehold and restaurant improvements, subsidies for biodiesel, and the all-important “7-year recovery period for certain motorsports complexes.”
To “pay for” these “temporary” provisions, Congress each year reaches deeper into its bag of tricks for permanent tax increases. The chumps this year: private equity, hedge funds, and small professional corporations. When these things “expire” a year later, this year’s victims will continue to pay their higher tax without Congress having to pass another bill; they will be forgotten while Congress is busy looking for its next revenue fix. And like any junkie, it will give up the addiction only when it’s impossible to score.
Since the the stench of last-minute pandering to voters is in the air today, Howard Gleckman points out over at TaxVox that while many candidates are quick to launch in with “I will cut taxes!” or “I believe in smaller government!” to catch some of the hot Tea Party action, these candidates (and many of the Tea Party types themselves) don’t really qualify as fiscal conservatives (if you go by the Wikipedia definition) who support balanced budgets and deficit reduction:
They are plainly interested in tax cuts—a core belief that appears repeatedly on Websites, position papers, and speeches throughout the movement. And while tea partiers say they favor smaller government, many in fact propose to shrink it in only trivial ways—by cutting earmarks or waste and abuse. Candidates elected on platforms supporting very large tax cuts and small spending reductions are likely to oppose aggressive efforts to reduce deficits, not back them. While some analysts see the tea partiers as the 21st century progeny of Ross Perot’s fiscal conservatism, nothing could be further from the truth.
One of Gleckman’s examples is Sharon Angle who claims to be the “one true conservative” (presumably that means a fiscal conservative) and is running for the Republican nomination in Nevada to face off against Harry Reid. Here is one of her ads:
There’s the mantra: “Limited Government!” “Lower Taxes!” As Mr Gleckman notes, Ms Angle would “abolish the Internal Revenue Code but doesn’t quite say how she’d finance government.” That’s a bit of a problem, especially since she says in her “On the Issues” page under healthcare that “the government must continue to keep its contract with seniors, who entered into the system on good faith and now are depending on that contract.”
Since this essentially represents the Tea Party’s position on healthcare we’ll agree with Gleckman when he says, “This view makes deficit reduction a challenge at best, especially when paired with big tax cuts.”
The point here is this – if you’re beating the drum of tax cuts and limited government to pander to a hot political movement but if you’re going to largely continue to spend tax dollars with the same fervor as George W. Bush, that doesn’t make you the second coming of Ross Perot.
Legalization of gay marriage didn’t go over very well in the Golden State but come November, my fellow Californians and I will be deciding whether or not we’re up for taxing the hell out of the chronic to save our state’s sad fiscal sitch with an estimated $1.4 billion in revenue a year by making marijuana possession legal. According to the bill, an ounce would bring in $50 in revenue .
Now, we’re not promoting huge grow rooms in grandma’s Pomona basement but the law would allow an ounce for personal use (some of you might question that amount as a tad large) and for anyone over the age of 21 to have 25 square feet of plants growing in their residence.
As is, California is pretty loose with the definition of “medical use” and if you’ve ever been to Venice Beach, you already know that pot has been a big business round these parts since Proposition 215 made medicinal use legal. Everyone from depressed shlubs to Mr Magoo-sighted grandmas can head to the cannabis club for their medicine and some smart cities like Oakland already tax these sales.
Some of you may not realize this but pot is essentially legal in San Francisco anyway. I’ve never heard of cops asking for a prescription if you get busted toking on a blunt in the FiDi (hey, work is stressful) and the rumor is that the SFPD has actually made it an unofficial policy not to hassle pot smokers as long as that’s all they’re doing.
So if you’re smoking a joint on the street, you’re fine. If you’re smoking a joint AND killing someone or smoking a joint AND not wearing pants, you might have some trouble but for the most part, you can trot around town puffing away without having to worry about getting hassled. Of course, driving under the influence is still illegal so I would not recommend puffing away from behind the wheel, no matter how lax the locals are towards the green stuff.
The state seems divided equally on the issue, with the LA Times reporting that a recent poll left the state split 49/41, with 49% in favor of the legislation. Listen, if it’s between legal weed and paying $989 to register my car, I’ll take the weed tyvm.
So? Smoke ‘em if you got ‘em and if you don’t got ‘em, feel free to tax ‘em. Get used to the sin taxes, it might be the only way to bring my fine state (and others in equally dismal fiscal situations) back from the brink of financial Armageddon. And if that doesn’t work, at least we’ll be too high to notice.
AICPA Protests Disclosures of Uncertain Tax Positions [Web CPA]
The AICPA has come out against the IRS’ uncertain tax positions proposal, saying “it should withdraw its proposed rule that would require companies with more than $10 million in total assets to disclose uncertain tax positions on a new schedule.”
The AICPA is not so hot on the idea of the IRS wading into the financial reporting waters, “We understand that the UTP proposal does not change the underlying rules for financial reporting, but believe overlaying a tax disclosure construct on the financial reporting system introduces a dynamic which could work at cross purposes with the original and fundamental purpose of the financial reporting rules.”
Haitian recovery needs accountants [Accountancy Age]
Nearly five months after the Earthquake in Haiti things are recovering slowly. Financial records for the government and private business have had two considerably different experiences:
[T]he finance ministry’s financial controls and systems are now being restored after its headquarters were destroyed. The World Bank has helped this critical process, placing accounting experts with the ministry.
As for the private sector, Laforest said many companies’ financial systems had survived thanks to accounting software packages, whose data had been uploaded to cloud computing remote data sumps on the internet. But bills, receipts and other paper records vital for making tax returns had been lost where offices collapsed.
And creating proper controls around the donations process has been crucial for organizing those funds. According to one volunteer, “[W]ithout proper controls, the money that you and your friends and your government have given might as well be left in a big bucket in the middle of the market with a sign saying ‘biggest at the front, smallest at the back.’”
Pot could bring in $400K for D.C. [Post Now/WaPo]
The District’s Council is expected to vote on June 15th on a provision that would levy a 6% sales tax on ganj sold there. At an approximate price of $350 an ounce, each bag would yield $21 for DC and would be expected to raise $400k in the next 5 years.
Tweedie replacement must juggle dual roles [Accountancy Age]
The candidates for the IASB chair are dwindling but most people seem to agree that having the role split into “Chair” and “CEO” roles might benefit the Board. “Richard Sexton, head of audit at PwC, suggested the role should be split.” And BDO’s sometime blogger and International CEO Jeremy Newman chimes in, “It’s unrealistic to expect one person to cover both.”
Also, whoever fills the big chair can’t be a über double-entry geek or just a crafty political type to heavy one way or the other. Most think that it needs to be a balance of both, although the preference of which is more important is debatable, including one Deloitte partner’s point of view, “If you don’t understand the accounting, you won’t be able to do the diplomacy around the debate,” versus Grant Thornton, “At this stage in the IASB’s life, we would place political awareness ahead of technical [knowledge] for the chair, but of course the chair must be technically astute.”
Proposed Overhaul of Accounting Standards Contains Mark-to-Market Rule [NYT]
The FASB has rolled out MTM 2.0 and while the usual suspects have already started belly-aching, Bob Herz insisted that “The financial crisis reinforced the need for better accounting in this area.”
The new rule will require loans and loan-related instruments to be valued at their market value immediately, thus accelerating any losses that might occur. Losses will either be booked as a hit to earnings or as a reduction in the value of the asset. The Times quotes Jack T. Ciesielski of Accounting Analyst Observer, who reassures, “It will messier to read, but if you know what you are doing you can figure it out.”
The comment period (which should yield some interesting thoughts) will run through the end of September, after which the FASB will hold roundtables discussing the rule and then make any final changes. Institutions with greater than $1 billion in assets will be required to adopt the rule in 2013 while those with less than $1 billion will have until 2017.
The Property Tax: Unsung Hero [TaxVox]
States have their property tax revenues to thank for their budgets not being in an even bigger mess than they already are, according to TaxVox. “[P]roperty tax revenues have yet to fall both because the levy tends to be backward-looking (it takes a while for assessed values to catch up with reality on both the upside and the downside) and because local governments can raise rates. The strength of the property tax was the main driver of the small positive growth in overall state and local taxes for the fourth quarter of 2009.”
If states are lucky, by the time property tax rates adjust to the reduced home values, sales and income tax revenue may be on their way to recovery. However, it’s unlikely that tax revenues will return to their previous levels which means governments may have to continue (or maybe start?) to – God forbid – cut spending.
“I Didn’t Know What ‘$’ Means” Fails as Tax Defense [TaxProf Blog]
Who let this guy out of the lab? “I am unaware of the meaning of this symbol.”
Yahoo CFO Sees Annual Revenue Growth Of 7%-10% From 2011-2013 [WSJ]
Contrary to what some might believe, Yahoo is still in business and doing quite well, thankyouverymuch. CFO Tim Morse expects things to brighten up with revenue increasing 7-10% from 2011-2013, due mostly to increased advertising business. Yahoo’s partnership with Microsoft and Zynga (they make Farmville) are seen as key to the search engine competing with Google.
Survey finds tax departments more concerned with getting it right than aggressive tax planning [GT Press Release]
Grant Thornton’s latest CFO survey finds that they are more concerned with getting their taxes right than with paying less. Obviously the latter is a goal but considering the regulatory environment (i.e. Democrats are running things), it’s not the priority, despite what those people running for re-election might tell you.
The IRS just came out with its annual “Dirty Dozen” list of tax scams. It is a useful rundown of current ways for taxpayers to create enormous trouble for themselves. While useful, it’s incomplete. It only looks at scams used by taxpayers. Hence, the Dirty Dozen Tax Policy Scams — in reverse order Letterman-style.
12. State non-conformity to federal rules – The federal tax law is complicated enough. When you have to start over in order to compute your state taxes, that’s a recipe for stupid. When you have to file in multiple states, it’s just crazy. California, the nation’s leader in bad ideas, has led the way ttp://www.rothcpa.com/archives/005787.php”>the bandwagon is getting crowded.
11. Asinine feel-good tax breaks – These are stupid tax rules passed to show us just how caring our legislators are. The bill allowing 2009 deductions for 2010 Haiti relief donations is a classic of the genre – it will cause countless people to double up on the charitable deductions, cause state tax return errors, and might well screw up return processing, all without actually helping Haiti.
10. Heads they win, tails you lose provisions – Sometimes the tax laws are designed to screw you. Gamblers are popular screw-ees. The federal tax law taxes gambling winnings above the line, but allows deductions only “below the line,” as itemized deductions, and then only to the extent of winning. If you don’t itemize, you lose. If you don’t have meticulous records, you lose on audit. And in some states, you just plain lose – you are taxed on winning bets, and losses are ignored.
9. Bait and switch tax treats – The alternative minimum tax has made this popular. They enact a politically popular tax break – say, home equity loan deductions – and they disallow it for AMT. So it’s there, but it’s useless.
8. Using the tax law to micromanage your life – Soda taxes. Insulation tax credits. Tax breaks for riding bikes to work. Will anybody ride a bike to work in Des Moines in February because of a $25 tax break? The tax law is full of… this sort of thing.
6. Economic Development Credits – Where the state economic development geniuses take your money to lure and subsidize your competitors. It’s like taking your wife’s purse to the bar to finance your pick-up efforts – the girls aren’t impressed.
5. Film tax credits – If there is a stupider approach to economic development than throwing money at Hollywood, at least this side of North Korea, it must be bipartisan.
4. Sitting on your tax refunds – The states have spent so much of your money that they don’t want to pay what they owe you. When they pay their public employees before they pay what they owe you, it shows where you rank.
3. AGI-based deduction and credit phaseouts – Almost every moronic new piddly tax break goes away as adjusted gross income goes up, whimsically embedding marginal rate spikes all over the tax code.
2. Shooting Jaywalkers – Sometimes the tax law has horrible penalties for trivial, but politically convenient, violations. The 50% of your bank balance FBAR penalty, the $10,000 automatic penalty for late international form reporting, and the insane Section 409A penalties for deferred compensation foot-faults are the kind of penalties that are almost perfectly designed to hammer honesty and reward sneakiness.
1. Expiring provisions – This cynical game enacts popular provisions (see AMT patch and research credit) one year at a time, so that the budgeters don’t have to count the real 5-year cost. The congresscritters, of course, have no intention of letting these things expire, and they often enact foolish permanent tax changes to fund another temporary extension.
Sadly, there’s one key difference between tax policy scams and the Dirty Dozen Tax Scams. You can go to jail if you use a Dirty Dozen Tax Scam, but if you use a dirty dozen tax policy scam, you just stay in Congress forever and ever, amen.
More news out of the land of Quakers, as Pennsylvania has announced a tax amnesty program for delinquent taxpayers. The program allows tax deadbeats to pay their back taxes but all the penalties and half of the interest will be waived. Pennsylvania’s will begin on April 26th and be open for 54 days.
The AP reports that the state could generate an additional $190 million in revenues for the state which, like pretty every state, is in a dire need of revenues.
For those that participate in the amnesty program, they’ll have to be on good behavior going forward, “participants who fall into delinquency again within two years may be required to pay the full penalties and interest that had been waived. Also, once the amnesty period ends, a special, ‘nonparticipation penalty’ of 5 percent will be levied against delinquent taxes, penalties, and interest not paid in full.”
Participants will also not be eligible for future amnesty programs. Sounds like a novel idea right?
Well, maybe not.
Our resident tax guru, Joe Kristan, is not a fan of tax amnesty programs saying, “they become an expectation and they make chumps of compliant taxpayers.”
Joe’s home state of Iowa passed a tax amnesty program back in 2007 and his sentiments haven’t changed since then, “[Iowa is] adding more
loopholes targeted tax incentives to its tax law while doing nothing to lower rates or broaden the tax base.”
But Joe, being the silver lining-type, also notes, “those of us who charge for tax work by the hour, it truly helps our economic development during an otherwise slow time of year.” So tax pros will take those new clients despite the bad policy that encouraged them.
Regardless of the bump in off-season revenues, the Tax Policy Blog (who Joe cites) noted that these programs are of little value if reform doesn’t accompany it, “if lawmakers decide to implement tax amnesty programs, they should be accompanied by fundamental tax reform that makes the tax code simpler and easier to comply with.”
So it appears that tax amnesty is nothing more than a duct tape solution from a policy stand point but it certainly makes good pandering fodder in an election year.
Pa. will offer tax amnesty [AP via Philadelphia Inquirer]
~ Update includes quote from Britt Aboutaleb of Fashionista
We meant to get to this on Friday but there was a social engagement occurring that couldn’t be avoided; you know how it is. Anyhoo, the Ernst & Young CEO sat down with Bloomberg last Friday to talk tax policy and we found a few things rather interesting. Watch and we’ll chat about some things after the jump:
First things first: How about the two hotties that Bloomberg threw at JT?
Second: why does the MSM always refer to the “Big 4” as the “so-called Big 4”? Does Big 4 carry some negative connotation in some corners of society or is it meant to be a not-so-subtle dig, like when you call the token short guy on your team “big guy”?
Third and of utmost importance: what’s with JT’s footwear? Are those Timberlands? Does he just put on whatever the wife lays out for him or did she happen to take all of his wingtips to the cobbler this week? OR did he just get back from hiking the Appalachian Trail à la Mark Sanford?
Whatever the situation is, they look like they’ve gotten some good use. We’re not sure what Jimbo likes to do for recreation but it must involve some rugged backdrops that may involve him wearing a flannel shirt and chopping wood.
Britt Aboutaleb, one of the editors of our sister site, Fashionsita, had these thoughts, “I can’t even see the shoes — they look like they’ve emerged from a swamp! Maybe he forgot the shoes he was supposed to change into after trekking through the snow? Or maybe he didn’t realize his feet would be caught on camera…”
God, we hope JT could have arranged for some car service rather than schlepping through the snow. On the other hand, maybe walking to interviews is part of a green initiative? Either way, he could have brought the shoes along and changed into them. Just a thought.
On the other, to say that this is a fashion faux-pas would be an understatement akin to saying “E&Y had a few layoffs last year.”