Tag: Taxes

You Can Blame the Tax Code for Expensive Baseball Tickets

Since it’s opening day for baseball, there are probably a few of you (non-tax accountants) that are at the ballpark enjoying sun, overpriced beers and, if you’re lucky, some complimentary tickets on behalf of your firm.

If you happen to be shelling out your own hard-earned money however, you’re no doubt aware that price of your tickets continue to go up season after season. Throw in $9 beers and Brother Jimmy’s BBQ and you’ll spend a small grip just to enjoy a day of sport and no work.

What’s the cause of the skyrocketing cost of attending a baseball game, you ask? The tax code of course!


That’s according to an op-ed by two professors, Duke law professor Richard Schmalbeck and Rutgers business professor Jay Soled, in today’s Times.

There are many reasons for the price explosion, but a critical factor has been the ability of businesses to write off tickets as entertainment expenses — essentially a huge, and wholly unnecessary, government subsidy.

These deductions have led to higher ticket prices in two ways. On the demand side, they have fueled competition for scarce seats, with business taxpayers bidding in part with dollars they save through the deductions.

On the supply side, the large number of businesses bidding for expensive seats has driven the expansion of luxury skyboxes and a reduction in overall seats in new ballparks.

The authors note that baseball was, until the 1970s, a “populist sport” and fans of all economic classes could attend games for a reasonable cost. Those days are long gone and the professors blame the ability of corporations to deduct business-entertainment expenses as the culprit. They state that you not need look further than the opening of the new Yankee Stadium that has “3,000 fewer seats than its 1923 predecessor but almost three times as many skybox suites.”

The professors advocate a limit on deductions for on luxury tickets to a low fixed amount (e.g. $50). They cite the outright elimination as “unrealistic” but we can’t recall at time when “realistic” and “Congress” collided in a sentence.

We agree with our esteemed colleague at ATL that if you really want to stick it to the companies who take advantage of tax code’s generous provisions, just make skybox tickets non-deductible altogether.

As the authors note, Corporate America has a love affair with sports-related perks and we’d guess that eliminating the deduction would not stop them from buying luxury tickets. The client relation types in your firms know that there is an intangible value to wooing potential clients in some comfortable confines as opposed to cramped seating in the stands with the commoners.

Throw Out Skybox Tax Subsidies [NYT via ATL]

Accounting News Roundup: Tax Freedom Day Is Nigh; Does the U.S. Government Need a Going Concern Opinion?; Google CFO Does Okay for Himself | 03.31.10

• Tax Freedom Day 2010 Is April 9; Historically Massive Deficits Promise Later Tax Freedom in the Future [Tax Policy Blog]
This year April 9th marks, Tax Freedom Day. That’s 99 days of work for you to pay all your federal, state and local taxes for 2010. This is only one day later than last year but two weeks earlier than 2007, according to the Tax Policy Blog. However, TPB notes that the earlier tax freedom isn’t really much to get excited about.

Tax Freedom Day does not count the deficit even though deficits must eventually be financed. Since 1948, when Tax Freedom Day was first calculated, the difference between what governments are spending and what they’re collecting has never been as great as during 2009 and 2010. If Americans were required to pay for all government spending this year, including the $1.3 trillion federal budget deficit, they would be working until May 17 before they had earned enough to pay their taxes—an additional 38 days of work.

• Expressing a Going Concern Doubt on the United States Government, Not According to GAAP [JDA]
Speaking of deficits, what does the U.S. Government’s deficit look like on a GAAP basis? Somewhere in the nabe of $4 trillion. But before you get all huffy about spendy Democrats, this is true bipartisanship at work. The deficit that includes social security and medicare was $11 trillion in 2004 and was all over the map throughout the aughts. Anyone thought of giving the U.S. a GCO?? AG notes that it’s a bit of problem when the government can’t even make things look rosy, “[W]hen even the government accounting makes things look bad (see: pensions), you really know you’ve got a problem on your hands.”

• Google’s Schmidt Got $245,322; CFO Paid $24.7 Million [Bloomberg BusinessWeek]
The $24.7 million in total comp that Patrick Pichette received for ’09 was up from $7.63 million in ’08, the year he joined the company. Most of this year’s haul was from $10.9 mil in stock awards and $10.8 in stock options. His salary was only a measly $450k.

States Are Coming Up with Some Really Bad Ideas for Taxing Services

Yesterday we explained why sin taxes can work, despite the feelings of those that just want to tell the religious types to GTFO of the legislative process. While we agree that religious based legislation is a bad — nay — a horrendous idea, since more states refuse to legalize and tax certain things like marijuana, gambling, prostitution, among others, our elected officials have started coming up with even far worse ideas that the Texas pole tax.


The Times ran a story over the weekend that examined various states and what types of services they are taxing to close their budget gaps. While many states are considering taxes on professionals like lawyers and accountants, legislators in other states have gotten so desperate it appears they’re just pulling ideas straight out of their asses:

In Nebraska, a lawmaker has introduced a bill to tax armored car services, farm equipment repairs, shoe shines, taxidermy, reflexology and scooter repairs. In Kentucky, Jim Wayne, a state representative, and some fellow Democrats are proposing taxing high-end services: golf greens fees, limousine and hot-air-balloon rides, and private landscaping.

In June, voters in Maine will decide whether to accept a state overhaul of its tax system that would newly tax services like tailor alterations, blimp rides, and entertainment provided by clowns, comedians and jugglers.

We get it. States are desperate for revenues but these are the ideas? A juggler tax? Taxing your shoe shines? How’s this idea for taxing a service? Prostitutes! A service is being provided, yes? Make it a 50% tax, whatever the hell you want. Plus, more people getting laid might actually cut down on the crazies taking matters into their own hands.

We decided to get a service provider’s (not a prostie) thoughts on the matter, so we asked resident GC tax expert Joe Kristan for his thoughts:

Being a service provider myself, I can’t say I’m excited about the idea. Still, standard tax theory would say that services should be covered to make the tax as broad as possible, allowing (in theory) a lower rate. Iowa taxes a bunch of services, including foot reflexologists (you’d thank that would take care of the budget right there), but CPAs and lawyers are exempt. I’d say it’s because we’re special, but mostly it’s because we have special lobbyists.

All right, so maybe there’s a “theory” to it but something tells us it has nothing to do with taxing clowns.

States Seeking Cash Hope to Expand Taxes to Services [NYT via Web CPA D&C]

A Salute to Charlie Rangel

Apparently it’s Chuck Rangel day here at GC. Since we know there is a contingent of you that love Rangs and his exploits (and bow ties!) we feel compelled to follow up the ironic tax advice report with this.


We don’t know who’s running against Rangel (anyone?) this fall but we don’t see how this spot would be excluded from the arsenal.

[h/t TaxProf]

Here’s Why Most Sin Taxes Aren’t Stupid (Hint: It Makes More Things Legal)

Elie Mystal, the Editor of our sister site Above the Law, did a fair amount of kvetching over the Texas “pole tax” on Friday. He focuses primarily on his distaste for sin taxes, “I can’t avoid sin taxes — and thus I can’t stand them. First of all, they are regressive. Secondly, they’re anti-business. So we literally have a tax regime that freedom-loving progressi conservatives should hate, and yet sin taxes continue to be an acceptable way for the government to shove its morality down our throats.”

We’ll address that statement in a minute but first, we’ll examine the pole tax which supporters have stated, “is an appropriate exercise in state power — promoting public safety by discouraging the ‘combustible combination’ of drinking and live nudity.”


Elie’s thoughts:

Nude women + alcohol = rape? What kind of sex crazed sociologist came up with that equation? Just because boobs and beer make your sick ass go out and terrorize females doesn’t mean that other males are incapable of telling the difference between fantasy and cold, lonely reality.

And if this is a serious problem — what the f*** is $5 going to do about it? Texas legislators want us to believe that there is an epidemic of sexual assaults occurring because of the “combustible combination” of alcohol and live nude girls, but they also want us to believe that a $5 surcharge is going to make a difference.

We agree with Elie that Texas has come up with a bad — nay — horrendous idea. An extra $5 at the door isn’t going to accomplish a damn thing. Strip clubs are highly “combustible” environments regardless; taxing patrons to get them to think twice before entering doesn’t make a lot of sense.

Where Elie is dead wrong is his notion that “Either [the behavior subject to tax] is a serious societal problem that the government needs to step up and make [it] illegal — or it isn’t. If it’s not that big a deal, then what is a sin tax other than the government trying to get a taste of a lucrative American business?“

We have a problem with the “step up and make it illegal” part. The decriminalization and taxation of certain “sins” is a perfectly good way for states to raise money since taxes on income and property are far more political and thus, not effective.

Alcohol and tobacco both cause a myriad of health problems in humans that can result in high medical treatment costs. Taxes on these items are appropriate in order to supplement the burden that they place on society as a whole. Drugs and prostitution are, for the most part, criminalized. Thousands of people are arrested and jailed yearly for engaging in these behaviors, imposing millions of dollars in costs to taxpayers. Here’s a newsflash: human beings are not — ARE NOT — going to stop engaging in these behaviors. So why not take the “criminal” element out of the equation?

If they were to be made legal, highly regulated and taxed, states could enjoy new revenue streams and citizens can engage in behavior that they choose. That’s something many “freedom loving progressives” can certainly get behind. Plus, if drugs and prostitution are legal, won’t this encourage entrepreneurship and a more competitive marketplace? That sounds like something “money-loving conservatives” would approve of.

So while we’re with Elie railing against Texas’ impotent legislation, sin taxes are useful when implemented intelligently. California is putting legalized marijuana to a vote and DC may not be far behind so maybe we’re beginning to see some common sense for a change.

No Sin Taxes in the Champagne Room [ATL]
Earlier:
Texas Stripper Tax Will Survive One More Valentine’s Day

What’s the Best Course of Action When Your Client Starts Sobbing Over Their Tax Bill?

Tax professionals require many traits: good with numbers; explaining complex issues; the ability to forego adequate sleep regularly; borderline insanity, among others. One talent that some tax gurus, certainly not all, possess is that of makeshift therapist. When you think about it, this makes perfect sense, since Americans hate taxes and the IRS.

This passionate resentment obviously leads to strong emotions and sometimes actions; emotions that have to be addressed by tax professionals. Many situations that CPA, EA, or tax attorney encounter necessitate the phrase “calm your ass down.”


From the San Francisco Chronicle, a few examples include, marital relations “My actual designation is enrolled agent, but it should be marriage and family counselor…Sometimes I know about a divorce before the spouse. Or I’ll get a call after a couple has just had a hellacious fight, and she or he wants to have the tax refund put in another account.”

Then of course, the overall warped fear of the IRS that no amount of Xanax will help subside:

“People have had it drilled into their heads that the IRS is as close as we can get to the secret police,” says Stephen Graves, a CPA in downtown San Francisco who has been preparing tax returns for more than 40 years.

“The IRS (audit) is the adult equivalent of being called into the office — it’s a very interesting, basic emotion,” he adds. “Twenty to 30 percent of my job is kind of like being a shrink, and guiding them through that fear.”

However, the biggest common denominator that tax pros report is the weeping. All clients have personal problems of some sort but when you break the news to them that they owe the Feds a grip of cash, that can be too much to bear.

Your inclination may be to roll your eyes and drum your fingers on your desk until they get it out or to point at them accusingly and shout, “Jesus! Pull yourself together man!” but this would not be the advised course of action. The most effective? Nod, listen and don’t get all judge-y:

[T]heir techniques are decidedly un-quantitative. “I listen…I try not to patronize them and say, ‘Everything will be OK.’ I try and be a good listener. A lot of times people just need to get it off their chest and get on with it.”

“I try to be empathetic…Nobody leaves my office without a hug.”

There’s the answer friends. Hugs. More hugs.

Tears and taxes: Meet my therapist, the accountant [SF Chronicle]

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.

The Top Ten Tax Procrastinating Cities

So capital market servants, filed your tax returns yet? No? Too busy, you say? Fine. We’ve all got our excuses. Personally, we’re holding out until Doug Shulman and/or Tim Geithner start returning our calls about their compliance efforts for 2009. Since we’ve been encouraged to not hold our breath on this, we’ve already filed our extension.

But where are most of the kings of putting off the 1040 until the last minute? The greatest concentration of “I’ll do it this weekend” types? The engineers of procrastination station?


Well if you guessed Houston not only are you correct but you’ve got more useless knowledge in your brain than Ken Jennings.

TurboTax’s rankings are based on the largest number of people that file between April 14 – 17. Here are your biggest putter-offers for 2009 (with previous year ranking in parents):

1. Houston – (#2)

2. Chicago – (#4)

3. New York – (#3)

4. Austin, Texas – (#11)

5. San Francisco – (#1)

6. Seattle – (#7)

7. San Diego – (#5)

8. Los Angeles – (#8)

9. Dallas – (#9)

10. Las Vegas – (#10)

This marks the fourth time that H-town has topped this list but we’ll be damned if we can figure out why. Does the humidity and obesity cause a hibernated state that we’re not aware of or is just good old fashioned, “we’re Texans and we hate taxes”? California too. What the hell is their problem?

In order to get to the bottom of this, we asked a friend (and strangely enough, a tax guru) who is a current Los Angeles resident and former resident of Houston to explain and she put in this way:

“Well.. Californians are selfish and think they can do whatever they want to get theirs…and pretty much Texans are the same, but they do it with a smile and an accent.”

Makes total sense now.


Free Tax Filing, Efile Taxes, Income Tax Returns – TurboTax.com

Houston, We Have a Problem [Tax Break]

Ludacris Should Be Giving Ving Rhames Tax Advice

In today’s celebrity tax scofflaw du jour, we learn that Ving “Why do people always have to bring up that scene in Pulp Fiction” Rhames owes the IRS over $800k from two liens, both filed by the IRS in Los Angeles.

Rhames has had trubs in the past, having liens filed against him last May as well.

It seems to that California, being in the fiscal trouble that’s it in, really needs to call on its other celebrity residents to hold some sort of Haiti-esque fundraiser for some of their fellow celebs.


Sure, it might not fix all the state’s budget problems but at least we could admire our celebrities for being financially responsible pillars of the community rather than pillars of the community when there’s an international crisis. Plus, maybe California wouldn’t have to fire more teachers.

In semi-related news, you will never, ever, EVER hear about Ludacris owing the IRS a damn thing. Not now, not ever.

“I pay more in taxes than most people would ever imagine. I guarantee you, I’m looking dead in the camera, you will never hear about Ludacris owing the damn IRS no damn money.”

Okay, financial celebrities f-ups, get on the horn and find out what the great financial mind-cum-rapper/actor of Ludacris has in store for you. Things haven’t worked out so far, so it can’t hurt to see what the man has to say.

Ving Rhames far from OK with Uncle Sam [Tax Watchdog]

Accounting News Roundup: Sarbanes-Oxley’s Credibility Takes a Major Hit; You Shouldn’t Hate the IRS; You Especially Shouldn’t Tell Inappropriate Jokes About the IRS | 03.15.10

• The Valukas Report on Lehman Brothers: Sarbanes/Oxley’s Credibility Takes a Dive [Re:Balance]
Has the Vakulus report exposed Sarbanes-Oxley as a, dare we say it, a waste of time? Perhaps that’s a stretch but the question of its effectiveness in the case of Lehman Brothers is certainly worth noting, “if Sarbox didn’t have an impact on Dick Fuld and Lehman, what possible good has it wrought?” asks Jim Peterson.

CNBC tried having this discussion on Friday although it didn’t seem to get anywhere. And some may say that SOx has resulted in a many positive developments, although this latest disaster may indicate that overwhelming support of legislation should be a sign that something doesn’t smell right, “the hindsight revelation of the Valukas report is that the inability of Sarbox to reach global-scale problems shows the futility of legislation so politically anodyne that it passed the US Senate by a vote of 96-0.”


In other words, SOx was sold as the cure-all to the problems revealed by Enron et al. and it made for some nice pandering during an election year. Once the election was over, Congress figured their work was done and nearly eight years later people are asking questions. The question now is, who will pick up the Lehman/E&Y torch in this cycle? There’s less than eight months until election day!

• Why I Don’t Hate the IRS — and Neither Should You [Politics Daily]
Okay, so maybe the IRS isn’t perfect but using planes, guns or more subtle forms of dissatisfaction doesn’t really help matters.

“While it may be superficially gratifying, it is absurd to use the IRS as a whipping boy. Is there anyone who really believes that we could live in a world where citizens expect the government to provide benefits without raising the taxes needed to pay for them?”

Last we checked, the answer to that question is yes, starting with the fans of Joe Stack’s Facebook page.

• TIGTA Is Investigating 70 Jokes/Inappropriate Statements About the Attack on the Austin IRS Office [TaxProf Blog]
Aaaannnd another thing. If you think you can tell semi-serious jokes about the IRS plane crash, you will be dealt with in a swift and serious manner. Expect to receive yearly financial rectal exams for the rest of your time on Earth. Someone in Utah should be paying especially close attention.

Quote of the Day: We Will Tax Those Love Handles Right Off | 03.10.10

“While such policies will not solve the obesity epidemic in its entirety and may face considerable opposition from food manufacturers and sellers, they could prove an important strategy to address overconsumption, help reduce energy intake and potentially aid in weight loss and reduced rates of diabetes among U.S. adults.”

~ Researchers from the University of North Carolina, who concluded that an 18% tax on pizza and soda could help adults lose an average of 5 pounds a year.

Accounting News Roundup: SEC Official Explains His Porn Habits; Private Companies May Embrace IFRS Quicker; New Bill Would Ax Tax Tardy Fed Employees | 03.04.10

• Porn Nightmare Never Ends for SEC Official [FINS]
Whatever your porn preferences, you’re probably not sharing them with complete strangers. If you are, the cloud of awkward around you has got to be so thick that you may as well have leprosy. However, if you have the unfortunate luck of getting caught viewing this art form at work, then you might be forced to discuss your preferences, how often you’re engaging in the activity, among other things:

[T]he really juicy stuff begins when he’s asked about accessing Web sites like tgirlhotspot.com and ladyboyx.com (warning, very NSFW): “Our records show that on Wednesday, August 13, 2008, beginning at 1:57 p.m., you made approximately 85 attempts…to access a Web site called tgirlhotspot.com. Do you have any recollection of attempting to access this site?”

The employee answers: “I do not personally have recollection of it, but it would not surprise me.” To which the inspector — and the reader — responds: “Okay. That’s fair.”

Seriously, who can remember every instance that they’ve visited ladyboyx.com? Does the guy have a photographic memory? Maybe on certain images but date, time, and spreadsheet you had open that you could quickly jump to in case someone came to close? That’s asking a little much.

• Should the U.S. Forget about Private-Company GAAP? [CFO Blog]
Now that the Blue Ribbon Panel for private company GAAP has been announced, it makes some people wonder if the non-SEC types will just ignore this whole song and dance the Commission is doing get with the IFRS program ASAP. Ahh, the advantages of being a private company…

Even though both the BRP and the SEC will release their musings on their respective topics in 2011, private companies already have options, “[T]he U.S. private sector has already set some IFRS wheels in motion. In 2008, AICPA recognized the IASB as an official standard-setter, which means U.S. auditors are allowed to issue opinions on private-company financial results filed using IFRS.”

It’s doubtful that IFRS reporting will spread like H1N1 among private companies but while the SEC twiddles the private sector seems to recognize where all this is ultimately going.

• Jason Chaffetz: Ax Hill staff tax cheats [Politico]
Since all the members of the House are up for reelection this year, everyone needs something solid to campaign on and apparently Jason Chaffetz (R-UT) has found his stump.

Chaffetz is introducing legislation that would extend an IRS policy — termination employees that haven’t paid their federal taxes — to all federal departments and agencies.

In 2008 alone, 447 House employees and 231 Senate workers didn’t pay their taxes, according to figures from the IRS, Office of Personnel Management and Department of Defense.

“We have over 600 staffers on Capitol Hill not paying their taxes. That’s just not acceptable,” Chaffetz said in an interview with POLITICO. “It’s disingenuous to take federal taxpayer dollars and not pay your full share of taxes. It’s wrong.”

Between to the two bodies in Congress, over $8 million are owed in taxes. We don’t have to remind anyone how little money this is grand scope of the federal government. But hey! Rep. Chaffetz has an election to win and by God, this could be the ticket. Some other notable delinquent federal employees include the Postal Service at $257 million; Dept. of Veteran Affairs at $131 million; Army and Navy owe $81 million and $61 million respectively.

But pointing out those people wouldn’t make for very good press.