If your creepy uncle, known for bad behavior with underaged girlfriends, bought an ice cream truck, you’d not trust him to limit himself to selling ice cream.
Last year the Taxpayer Advocate’s Office tried to force the IRS to stop luring people who have foot-faulted their foreign account reporting obligations with the promises of leniency, and then reneging and stomping them with big fines. Now IRS Commissioner Shulman has reopened his ice cream stand:
The Internal Revenue Service [has] reopened the offshore voluntary disclosure program to help people hiding offshore accounts get current with their taxes and announced the collection of more than $4.4 billion so far from the two previous international programs.
The IRS reopened the Offshore Voluntary Disclosure Program (OVDP) following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. The third offshore program comes as the IRS continues working on a wide range of international tax issues and follows ongoing efforts with the Justice Department to pursue criminal prosecution of international tax evasion. This program will be open for an indefinite period until otherwise announced.
Should taxpayers who want to come clean on reporting their foreign financial accounts come clean? That’s between them and their advisors, but they will surely consider this from the Taxpayer Advocate’s Office when it tried to force the IRS to abide by the original terms of its 2009 Offshore Voluntary Disclosure Program, saying the IRS bait-and-switch…
…burdened taxpayers, wasted resources, violated longstanding IRS policy, opened the IRS to potential legal challenges, and was not properly disclosed as required by FOIA. It also damaged the IRS's credibility with taxpayers as well as the practitioner community. As a result, the IRS is likely to have more difficulty gaining participation in any future settlement initiatives. This erosion in trust for the IRS among taxpayers and practitioners is also likely to have a negative impact on IRS's mission and voluntary tax compliance more generally.
You may have seen some tax-hating, freedom-loving types waving flags, flying planes with banners and screaming from the rooftops that if the Bush tax cuts expire that it will be “the largest tax hike in history.”
The argument has been made and questioned ad nauseum but yesterday Ryan Ellis of Americans for Tax Reform (founded by Grover Norquist, so you get the context) felt the urge to prove the point once again that this will be the largest freedom-hijacking ever:
CBO projects that nominal GDP over the next decade will be $187.7 trillion over this decade. In order for the Obama tax hikes to be bigger than THE TO WIN WORLD WAR II, it would need to be at least 5.04 percent of this, or $9.46 trillion.
Gerald Prante over at the Tax Foundation’s Tax Policy Blog isn’t amused with this latest attempt:
Ellis is thereby admitting that it’s simply not the largest tax hike in American history. When you say “history,” that includes the 1940s. If you want to exclude WWII, say peacetime. Furthermore, the Treasury study that Ellis bases these claims off only goes back to the 1940s, which means that we don’t even know the relative size of tax hikes pre-1940, such as when the individual income tax was initiated and ramped up. So in summary, we can say that you have to knock off about 170 years of American history in order to make Ellis’s claim only possibly defensible.
Hmmm. We have to give that point to Prante there. You can’t just say “the biggest tax hike in history” and then say “except for that one time.”
And while we’re splitting hairs, we (i.e. the US of A) can’t really take credit for killing Hitler, can we? The Führer killed himself under duress from the Soviets. So there’s that.
Anyhoo, back to the subject – Ellis than tallies up all the tax “hikes”:
The 2011 income tax hikes. These are the rate hikes, the capital gains and dividend hikes, the return of the marriage penalty and the death tax, etc. CBO score: $2.567 trillion
Failing to index the alternative minimum tax (AMT) to inflation. CBO score: $558 billion
Failing to stop dozens of business tax hikes (“extenders”). CBO score: $1.969 trillion
Interactive effects of all these. CBO score: $606 billion
Obamacare tax hikes. CBO score: $525 billion
Add all of these up, and you get to $6.225 trillion over the next decade.
Prante fires back, noting that Ellis is making an auditor to tax accountant comparison:
Ellis classifies a compilation of “tax hikes” that are set to go into effect as one giant tax hike, including AMT expiration, the extenders bill, Making Work Pay, and even health care reform. There are two problems with this. First off, Ellis and ATR have a countdown clock on the ATR website (which is off by one hour by the way due to Daylight Savings Time) saying “countdown to the biggest tax increase in American history.” Well, virtually all of the health care tax hikes, which he counts in his tax hike amount, don’t kick in until 2013 (731 days from January 1, 2011). Therefore, this is inconsistent. Furthermore, summing up all the tax hikes and counting them as one big tax hike is inconsistent with the Treasury study cited earlier. If you want to count all the “tax hikes” occurring under Obama as one big tax hike, then shouldn’t you do the same for previous administrations?
Right! If you’re going to have a countdown clock, shouldn’t it be accurate?
Wrapping up, Ellis says:
Expressed as a percentage of the economy, this is 3.31 percent of GDP. That’s the largest tax hike in history, except for the one that was used to fight simultaneous wars in Europe, North Africa, and the Asian Pacific Rim.
You got us, guys. It’s a mere 3.31 percent of GDP.
Final retort from Prante:
The Treasury study referenced wouldn’t even consider letting the tax cuts to expire to be a tax hike because there was no act of Congress. Has Ellis done a review of history to make sure that no tax cut has expired elsewhere in history that was not counted in this Treasury study (given that Ellis considers an expiring tax cut to be a tax hike)?
This is a good question. Have you done your research into historically impotent and unwilling legislative bodies? Because if you haven’t, then you’d find that the group we’ve got up there now seems to have pretty awesome ability to do exactly nothing (read: estate tax).
Whether past flaccidity demonstrated by Congress has resulted in larger “tax hikes” remains unknown but something tells us that since none of this is getting resolved any time soon, we’ll get an answer.
“Antitax voters clearly won a victory on Tuesday. But it would be a stretch to say that they don’t want higher taxes on the wealthy. More likely, they just didn’t want higher taxes on the nonwealthy.”
~ Robert Frank, on Washington’s rejection of Initiative 1098.
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:
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?
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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