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More on Inversions and the Effective Tax Rates of Foreign-Owned Firms

Tax Foundation - Mon, 2014-07-28 06:30

In his recent speech calling for legislation to stop corporate inversions, President Obama added fuel to the misperception that when a company moves its headquarters to another country it avoids paying U.S. taxes. He said, "If you are doing business here, if you are basically an American company but you are simply changing your mailing address in order to avoid paying taxes then you are really not doing right by the country and the American people."

But Obama is not alone.  In a July 24 article on corporate inversions, The Wall Street Journal’s John D. McKinnon and Siobhan Hughes wrote “When a company inverts, it can reduce or avoid U.S. corporate taxes.” This is a clear overstatement and likely misleading to the casual reader.

As I wrote here recently, moving its headquarters to another country does not relieve a company of paying U.S. income taxes unless it ceases to have income in this country. The domestic operations of inverted companies—like the U.S. subsidiaries of all foreign based companies—will continue to pay U.S. income taxes on the profits they earn in this country. What the move abroad does accomplish is relieve the firm from paying U.S. income taxes on its foreign earnings, which it currently has to do under our obsolete worldwide tax system.

One of the big concerns about inversions is that this trend will erode the U.S. tax base. But, as I wrote in a previous blog, this is a mistaken concern because the U.S. subsidiaries of foreign companies actually pay a higher average effective tax rate than do all corporations as a whole.

According to IRS data, in 2011, foreign-owned companies paid an effective tax rate of 27 percent compared to 22 percent for all corporations.

Below is a chart comparing the effective tax rates for foreign-owned firms with the effective tax rates for all corporations from 1994 to 2011. As you can see, foreign-owned firms have consistently paid a higher effective tax rate than the average for all corporations. Over the 18 year period, the effective tax rate for foreign-owned firms has averaged 29 percent, compared to an average of 26 percent for all corporations.

This data would indicate that fears of inversions leading to “earnings stripping” are overblown. Indeed, the administration has hinted that it could unilaterally change some IRS rules to limit the ability of foreign firms to load up debt on their US subsidiary and pay interest back to the parent.

During the last round of inversions in 2004, there was similar talk of tightening what are known as 163(j) thin-cap rules to prevent earnings stripping. Cooler heads prevailed when people realized that if we tightened our thin cap rules, other countries would retaliate against our companies in a similar fashion. The administration may want to think twice about taking unilateral action without considering the consequences.

Categories: Tax news

IRS Says a Summer Adjustment Can Prevent a Tax-time Surprise - Kansas City infoZine

Google IRS Federal Income Tax - Mon, 2014-07-28 06:00

Kansas City infoZine

IRS Says a Summer Adjustment Can Prevent a Tax-time Surprise
Kansas City infoZine
When you start a new job, you must fill out a Form W-4, Employee's Withholding Allowance Certificate. Your employer will use the form to figure the amount of federal income tax to withhold from your pay. Use the IRS Withholding Calculator on IRS.gov to ...

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Categories: Tax news

Tax and Wire Fraud: Three Years Prison - Virginia Connection Newspapers

Google IRS Federal Income Tax - Thu, 2014-07-24 18:26

Tax and Wire Fraud: Three Years Prison
Virginia Connection Newspapers
Le told federal authorities she'd prepared and filed the false income tax returns without her clients' knowledge or consent and that she had their refunds deposited electronically into her own bank accounts. She further admitted that the IRS sustained ...

Categories: Tax news

Irish, Dutch, UK law firms in tax inversion beauty contest in U.S

Yahoo Tax - Thu, 2014-07-24 13:46

By Soyoung Kim and Olivia Oran NEW YORK (Reuters) - A series of European law firms are aggressively pitching low corporate taxes in their countries to prospective U.S. clients, seeking to tap into the tax inversion frenzy that has seized Corporate America in recent months. At least eight European law firms are pitching their services to major U.S. law firms and Wall Street banks, hoping that U.S. companies considering an inversion choose Ireland, Britain or the Netherlands for their new tax domicile, according to people with knowledge of the matter.


Categories: Tax news

As Australia Repeals Carbon Tax, India Doubles Down on Coal

Tax Foundation - Thu, 2014-07-24 13:45

Just as Australia repealed its debated carbon tax, India is intensifying its own taxation of non-renewable energy by doubling its coal tax from $0.83 to $1.67 per metric ton.

India estimates that the tax increase will generate $1.2 billion of additional revenues for its National Clean Energy Fund, which pays for renewable energy projects and environmental cleanup. Notably most of the funds will be devoted to meeting India’s goal of achieving 20,000MW of solar energy by 2022.

India also plans to invest in wind energy, new transmission corridors to distribute the renewable energy, clean energy research and a Ganges River cleanup project.

How is a Coal Tax Different from a Carbon Tax?

Compared to Australia’s attempt, India’s tax on coal is an even further step backwards. Carbon taxes are by definition distortionary. By design they manipulate market incentives to reduce the demand for products that produce carbon emissions. However, some distortions are worse than others.

Theoretically, the best carbon tax decreases CO2 emissions to an acceptable level with the least cost to the economy.

Unlike a carbon tax, which targets the actual negative externality, a coal tax only targets a single factor in that externality’s production. So, instead of letting the market decide the most efficient way to reduce CO2 emissions, India has made that decision for the market by attempting to drive it away from coal.

Then, by transferring coal tax revenues to the National Clean Energy Fund, India bypasses the market again by selecting solar-power as the primary alternative energy solution.

A tax on coal will decrease use of coal, but it does not change the price of emitting greenhouse gasses when producers convert the coal (or any other fossil fuel) into energy.

Despite the political failings of Australia’s tax, they did reduce their carbon emissions by 0.8 percent overall. India’s coal tax seems to be nothing more than a cash grab for politically favored projects.

Is There a Good Carbon Tax?                                             

As carbon taxes shift people away from fossil fuels and carbon emission, the economic distortions involve more of the economy than meets the eye. Industries with low carbon footprints like much of the service industry would gain a preferential tax treatment. Meanwhile, industries with large carbon footprints would be heavily taxed, shifting the economy further away from manufacturing and transportation.

Carbon tax proposals often use the new revenue to pay for lower tax rates. The tax that Australia recently repealed used some of the new revenue to lower tax burdens on low income energy consumers. A similar carbon tax proposal in Massachusetts would have implemented a series of credits and deductions that would further complicate the tax code. But even if general rate cuts are accompanied by tax code simplification, carbon taxes face the same problem as all excise taxes.

If the tax is high enough to reduce carbon emissions it will simultaneously reduce the tax base on which it depends. As we have seen with cigarette taxes, revenues diminish over time. In an attempt to maintain stable revenue, excise taxes devolve in to a cycle of narrowing bases and increasing rates.

It is also important to remember that the unseen burden of raising the price of carbon or coal will be shouldered most directly by the world’s poorest citizens. Cheap energy is essential to raise people out of poverty and small changes in the price will leave those with little income with few options.

As countries around the world balance the risks of climate change and the benefits of economic growth, it is important to understand that some taxes are better than others. As governments begin to implement policies to reduce carbon emissions, the best policies will be those that damage the economy the least.

Categories: Tax news

When Did Your State Adopt Its Cigarette Tax?

Tax Foundation - Thu, 2014-07-24 08:30

This week’s map takes a look at when each state first adopted its cigarette tax. Although the federal government had been taxing tobacco since the 18th century and cigarettes specifically since 1862, states did not begin doing so until the early 20th century – when manufactured cigarettes surpassed plug tobacco as the highest-grossing tobacco product in the country. Iowa led the charge on raising revenue from this industry when, in 1921, it became the first state to levy a statewide excise tax on cigarettes at a rate of 2 cents per 20-pack.

(Click on the map to enlarge it. Reposting policy)

By the end of the 1920s, seven other states had adopted their own cigarette taxes. Facing declining collections from property and income taxes in the wake of the Great Depression, 19 states jumped on board in the 1930s, and by 1950 40 states and the District of Columbia were levying a tax on cigarette sales. The last state to institute a cigarette tax was North Carolina, which passed its cigarette tax in 1969.

Many states started taxing the purchase of cigarettes before they imposed a broad-based sales tax. Of the 45 states with sales taxes, only fourteen (mostly in the West and Midwest) waited to enact an additional excise tax on cigarettes after already having a general sales tax in place. Oklahoma and Washington, D.C. both adopted the two taxes simultaneously.

Today, tax rates on cigarettes have grown so large that consumers in some states have turned to black markets to procure tobacco. The latest estimate is that 57 percent of all cigarettes consumed in New York are smuggled into the state.

Additionally, just 18 percent of adults in the United States are smokers today, raising concerns about the stability of this narrowing base as a source of state revenue.

Current state cigarette tax rates are here in a chart, and here in a map.

Read more about cigarette and tobacco taxes here.

Categories: Tax news

Miner Cliffs reports loss on weaker commodity prices, volumes

Yahoo Tax - Wed, 2014-07-23 14:08
(Reuters) - Cliffs Natural Resources Inc, facing off against an activist fund that wants to replace its chief executive, reported a quarterly loss on Wednesday due to weaker commodity prices and a decline in sales volumes. The U.S.-based iron ore and metallurgical coal producer reported a net loss of $2 million, or 1 cent a share, in the three months ended in June, swinging from a profit of $133 million, or 82 cents a share, in the second quarter a year earlier. Analysts had expected a loss of 8 cents a share, on average, according to Thomson Reuters I/B/E/S. Cliffs said in a statement that second-quarter earnings included an income tax benefit of $69 million because of the operating loss in the quarter. Cliffs has been targeted by U.S. hedge fund Casablanca Capital ahead of its July 29 annual meeting, following several quarters of weak earnings and share performance.
Categories: Tax news

New Bill Doesn’t Address the Fundamental Issue with Higher Education Tax Credits

Tax Foundation - Wed, 2014-07-23 13:00

The House Committee on Ways and Means amended the Student and Family Tax Simplification Act last Thursday and has issued a comprehensive report on the bill. The bill, or H.R. 3393, was developed by Representatives Diane Black (R-TN) and Danny Davis (D-IL) in an attempt to further mitigate post-secondary education costs and simplify the education tax benefit structure. While these intentions may be noble, policymakers should approach education subsidies in a more holistic manner.

The legislation consolidates the four existing tax benefits into one permanent, partially-refundable annual credit of up to $2,500 per student which is indexed to inflation and phases out with income. Additionally, the legislation increases the maximum refund, tightens educational institution compliance measures, and improves the tax treatment of Pell Grants.

On the surface, H.R. 3393 appears to promote good tax policy. Consolidating existing tax benefits into one credit simplifies individual returns, thereby reducing compliance cost, with the added benefit of improving the credit’s effectiveness in achieving its goal of helping low-income taxpayers. Establishing a permanent credit affords individuals the certainty that the benefit will be there in the future. Making educational institutions report tuition received, instead of charged, allows for the computation of a tax liability that is more representative of the taxpayer’s situation.

Touting these benefits alone, however, indicates too narrow of an approach to the issue of education tax credits. Stepping back, the first question anyone should ask is why should the income tax system be an education policy and social welfare tool rather than a means for raising revenue? Tax credits, for education or otherwise, impose an administrative burden on the IRS—an undue burden considering that the Department of Education is an existing agency dedicated to “establishing policies on federal financial aid for education, and distributing as well as monitoring those funds.”

But beyond this elementary question are economic and equity considerations of education tax credits. A primary goal of H.R. 3393 is to mitigate the growing costs of post-secondary education. However, there is substantial doubt that subsidies like tax credits actually lower costs. This is because suppliers of education are near-perfect price discriminators—that is, colleges have personal financial information on all of their customers who file a FAFSA and they use this information to tailor their financial aid programs so that they receive most, if not all, of the benefits of tax credits. As credits decrease the marginal cost of education experienced by the student by a dollar, colleges increase tuition by a dollar.

Tax credits also disproportionately benefit upper-middle income taxpayers and future high earners. In 2010, 38% of credits went to taxpayers earning above $75,000. While H.R. 3393 may reduce this regressivity, credits will still accrue only to the taxpayers who actually choose to pursue a degree. William J. Bennett, former U.S. Secretary of Education, points out that as tuition increases, “poor kids look at the tuition—$40,000, $50,000 a year—and say, ‘Forget it.’” The students interested in an education but unable to afford it, even with credits, are left earning half the salary of students who receive credits and graduate college.

These economic concerns alone should be enough to convince policymakers to stop and think about the $17 billion, and growing, system of education tax credits and entertain other solutions. The Pell Grant is a much more effective instrument in targeting students from lower-income households, and its expansion would probably help this demographic more so than an expansion of tax credits. A universal tax-deferred savings account would mitigate costs for all income levels and allow households instead of colleges to retain the benefits. Although the passage of H.R. 3393 might make the education tax credit system simpler and better targeted, the very continuance of the system is economically and equitably unsound compared to other policy solutions.

Categories: Tax news

Senators Blast Dem Mega-Donor Over IRS Investigation into Tax Avoidance ... - Washington Free Beacon

Google IRS Federal Income Tax - Wed, 2014-07-23 11:56

Senators Blast Dem Mega-Donor Over IRS Investigation into Tax Avoidance ...
Washington Free Beacon
Senators from both parties blasted efforts by Renaissance Technologies, a hedge fund owned by Democratic mega-donor Jim Simons, to shield itself from federal income taxes during a Tuesday hearing. “Two banks and a handful of hedge funds developed a ...

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Categories: Tax news

Obamacare in chaos as federal court strikes down tax credits for low-income ... - Daily Mail

Google IRS Federal Income Tax - Wed, 2014-07-23 08:21

Breitbart News

Obamacare in chaos as federal court strikes down tax credits for low-income ...
Daily Mail
'It is pretty obvious what the congressional intent was here,' White House Press Secretary Josh Earnest said, which was for every qualified American to receive a subsidy 'regardless of whether it was state officials or federal officials running the ...
A Big F'ing Deal: DC Circuit Strikes Down Federal Obamacare SubsidiesBreitbart News
A busy day in the federal courts – potential circuit split on the Affordable ...al.com
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Use Of Condo By Son Blows 1031 Exchange For State Tax Purposes - Forbes

Google IRS Federal Income Tax - Wed, 2014-07-23 07:00

Use Of Condo By Son Blows 1031 Exchange For State Tax Purposes
Forbes
The Johnsons further suggest that because the IRS has not challenged their treatment of the transaction, the Commissioner is barred from doing so. We disagree. We do not equate the IRS' failure (thus far) to audit the Johnsons' 2007 federal income tax ...

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Categories: Tax news

In the Wake of Spain’s Recovery, Bank Tax Discourages Investment

Tax Foundation - Wed, 2014-07-23 07:00

Recently Spain announced that it is increasing the country’s taxation rate on total bank account deposits to 0.03 percent. New revenues from the tax will be distributed to each of Spain’s 17 regional governments to help them pay for budget shortfalls, which the federal government prohibits from being greater than 1 percent of GDP of regions in 2014.

Originally Spain’s tax on total bank account deposits was not intended to raise a dollar of direct revenue. Instead, the tax was created in 2013 as a legal mechanism to restrict the expansion of local deposit taxes. For example, at a required 0 percent rate, the tax negated regional bank account deposit taxes, like the 0.5 percent tax in Catalan.

Instead of directly raising revenues, the tax set a uniform standard for Spain’s 17 regional governments and helped to stabilize Spanish markets and stimulate growth.

Levying a new tax on bank accounts will only discourage investment and hamper Spain’s recent economic growth. The best way to continue regional government is to stick with the policies that have guided Spain through its recovery thus far.

Since emerging from the recession in the third quarter of 2013, Spain’s GDP continues to grow at rate of 0.4 percent. This growth has improved Spain’s deficit to GDP ratio. Since 2010 Spain’s deficit as a percentage of GDP has risen from -11.1 percent to -7.1 percent last year. Furthermore, the government’s deficit target for 2015 is now 5.5 percent, up from its original 5.8 percent goal.

Contributing to this recent success, Spain’s domestic banks deposits have also increased. In February of 2014 household and non-financial corporate deposits grew at a rate of 2.5 percent year-over-year, which is a marked improvement since the recession (see chart below). This growth has allowed Spanish banks to rely less on loans from the Eurosystem, lowering the cost of funding for these Spanish banks.

Finally as a capstone to Spains’ recovery, in January of 2014 Spain exited the European Commission’s Financial Assistance Programme after experiencing a trend of economic improvement.

However, Spain’s Post Programme report moderated the extent of Spains’ success stating that “important challenges to sustained economic and employment growth, public finances, and the banking sector still remain.” Furthermore, the report warned that though the banking sector returned to profitability in 2013, “profitability remains under pressure.”

If Spain wants to improve the debt to GDP ratio of its regional governments it should push for more spending cuts or find revenue streams other than taxes on investment. In the end, instead of helping regional governments, an increase in the deposit tax discourages investment. The bank tax harms a sensitive banking sector that is only in the first stages of recovery. 

Categories: Tax news

Eric Garner Arrest Linked to Excessive Cigarette Taxes

Tax Foundation - Tue, 2014-07-22 12:00

The recent death of Eric Garner after an incident with New York police has recently made headlines and sparked controversy about excessive force and police practices. Sources report that police and prosecutors are investigating the use of a chokehold by an officer in the process of detaining Garner.

Garner was in the process of being arrested on charges of illegally selling cigarettes, a crime that is only profitable because cigarettes are taxed at such exorbitant rates in New York City ($5.85 per pack in state and local taxes). Reason’s Hit and Run Blog covered this well:

We should be concerned that the reason why the police swarmed Garner in the first place is getting lost. He allegedly possessed "untaxed cigarettes." That is it. There is this press focus on how the police took Garner down, and the problem with that focus is the question, "Well, what do you do when a 400-pound man refuses to cooperate when you try to arrest him?" Or to put it another way: Would there be an objection to police using a chokehold to take down and subdue man who was engaged in violent activity harming others? Because you know that's going to be part of the defense of this behavior.

There needs to be more attention on the absurd reason that a pack of police officers was on top of Garner in the first place: black market cigarettes. It's a crime that only takes place because of the city's own oppressive taxation system. It's a crime that happens when the city makes it too hard for people (especially poor people, of course) to get what they want legally.

For now, we can put this tragic incident in with the many other unfortunate episodes of violence associated with cigarette smuggling.

Follow Scott on Twitter.

Categories: Tax news

Eric Garner’s Arrest and Death is Another Example of Cigarette Taxes Causing Violence

Tax Foundation - Tue, 2014-07-22 12:00

The recent death of Eric Garner after an incident with New York police has recently made headlines and sparked controversy about excessive force and police practices. Sources report that police and prosecutors are investigating the use of a chokehold by an officer in the process of detaining Garner.

All of this is relevant to our blog because Garner was in the process of being arrested on charges of illegally selling cigarettes, a crime that is only profitable because cigarettes are taxed at such exorbitant rates in New York City ($5.85 per pack in state and local taxes). Reason’s Hit and Run Blog covered this well:

We should be concerned that the reason why the police swarmed Garner in the first place is getting lost. He allegedly possessed "untaxed cigarettes." That is it. There is this press focus on how the police took Garner down, and the problem with that focus is the question, "Well, what do you do when a 400-pound man refuses to cooperate when you try to arrest him?" Or to put it another way: Would there be an objection to police using a chokehold to take down and subdue man who was engaged in violent activity harming others? Because you know that's going to be part of the defense of this behavior.

There needs to be more attention on the absurd reason that a pack of police officers was on top of Garner in the first place: black market cigarettes. It's a crime that only takes place because of the city's own oppressive taxation system. It's a crime that happens when the city makes it too hard for people (especially poor people, of course) to get what they want legally.

For now, we can put this tragic incident in with the many other unfortunate episodes of violence associated with cigarette smuggling.

Follow Scott on Twitter.

Categories: Tax news

Law Article Discusses Post-DOMA Tax Changes

Tax Foundation - Tue, 2014-07-22 11:15

A law professor wrote an article discussing our work ensuring state tax guidance to same-sex couples after DOMA was struck down. About half the states both (1) require state tax return filing status to match the federal tax return filing status and (2) ban gay marriage. As these together create a paradox for taxpayers, we worked with states to provide affirmative guidance and options, rather than just throwing same-sex couple taxpayers to the wolves. I'm pleased to say that every state did so.

The article discussing this (and other interesting post-DOMA invalidation wrinkles, such as Medicare, Social Security, and military benefits) is Sarah R. Sullivan & Martha Prado, Preemption of Public Benefits in the Shadow of DOMA: When State and Federal Law Collide, 15 Fla. Coastal L. Rev. 225 (Winter 2014).

Categories: Tax news

Are Carbon Taxes Worth It? Australia Says No

Tax Foundation - Tue, 2014-07-22 11:15

Australia is the first developed country to both institute and repeal a tax on carbon. On Thursday, July 17, the Australian Senate repealed its carbon tax with a 39 to 32 vote.

After the repeal, Prime Minister Tony Abbot characterized the tax as destructive to jobs, families and the economy, without actually helping the environment. “The Carbon Tax was a $9 billion a year hit on the Australian economy,” he said, and stated that the repeal would “save the average Australian household $550 a year.”

Under the repealed law, liable Australian entities had just began paying the top rate of 25.4 Australian dollars per ton of carbon pollution emitted. Liable entities were mostly large emitters (25,000 tons of carbon dioxide per year), who cumulatively produced about 60 percent of the country’s emissions.

Australia implemented its carbon tax in July of 2012 with a tax of A$23 per ton of carbon. The tax was set to rise 2.5 percent each year until 2015 when a cap and trade system would be implemented.

Australia’s attempt to tax carbon indicates that raising the price of energy consumption is difficult to implement properly and can be politically unpopular. 

Why is Taxing Pollution so Difficult?

Setting aside the politics for a second, a carbon tax can make theoretic sense as a way to charge people for the social costs of their pollution. Economist call these uncompensated damages negative externalities. To offset these externalities, some economists recommend a tax on carbon emissions that is equal to the social cost of the pollution. These are known as Pigovian taxes, after the late British economist Arthur Pigou.

The problem is, such tax schemes must overcome two hurdles to be sound tax policy. First, the collected tax must go to remitting the damage caused by the externality. And second, policymakers must be able to know the uncompensated cost of carbon emission.

Additionally, regulators often lack sufficient knowledge or correct incentives to estimate and implement efficient carbon taxes. It is not an easy task to set a tax equal to the cost of the externality and distribute the revenue to compensate the appropriate individuals.

Why is Australia’s Experience Important to the United States? 

Australia has been called an important laboratory for U.S. energy policy because of the similarities between the two countries. The continental U.S. is roughly the same size as Australia, both countries are heavily reliant on carbon producing fossil fuels, and the distribution of emissions by industry are similar. Both Australia and the U.S. are among the top per capita carbon dioxide producers in the world.

The Australian laboratory for U.S. carbon tax policy seems to have demonstrated that politically, the costs of taxing carbon are prohibitively unpopular. The high social and economic costs of transforming an economy away from carbon emission are mostly borne by ordinary citizens. The first lesson in tax economics is: when people cannot quickly change their demand (as is the case with energy usage), most of the tax cost will be passed along to the consumer through higher prices.

A tax on carbon is, by extension, a tax on energy. Taxing energy raises the price of transportation, heating, cooling, manufacturing, and everything else that uses electricity, gas, oil, or plastic.

A tax on energy is a tax on growth and innovation. Historically, economic growth has been fueled by low energy prices and hampered by high energy prices. The Australian carbon tax has enforced this narrative by exacerbating the 2008 recession and handicapping its economic recovery.

Most of the revenue generated from Australia’s carbon tax went to tax breaks for low income taxpayers and subsidies to power plants and aluminum manufactures. In theory a carbon tax is intended to place upward price pressure on carbon emitting activities, forcing emissions to decrease. However, the revenue from the Australian tax was redistributed in the form of subsidies to low income energy consumers and to some of the largest polluters.

These two policies are fundamentally at odds. With one hand the government raised the price of energy, and with the other hand subsidized the use of carbon emitting energy to the tune of one billion Australian dollars.

The carbon tax did provide some funding for alternative and green energy projects, but again this use is not supported by sound tax theory. The increased price of energy under the tax regime would theoretically incentivize private actors to develop new technologies – allowing the market to decide what the most efficient alternative technologies are.

Instead, Australia invested much of the tax revenue into government research initiatives and subsidies for politically favored alternatives, displacing private investment. Well-structured tax policy would have used the tax revenue to mitigate climate related damage, not dictate future energy production.

While carbon taxes can be alluring on the pages of a text book, in practice they fail to become good tax policy. The laboratory results are in and Australia says they are done with the experiment.

Categories: Tax news

DC Circuit Orders Vacatur of IRS Obamacare Regulations Extending Tax ... - Federal Regulations Advisor

Google IRS Federal Income Tax - Tue, 2014-07-22 10:43

Forbes

DC Circuit Orders Vacatur of IRS Obamacare Regulations Extending Tax ...
Federal Regulations Advisor
We conclude that appellants have the better of the argument: a federal Exchange is not an “Exchange established by the State,” and section 36B does not authorize the IRS to provide tax credits for insurance purchased on federal Exchanges. We reach this ...
DC Circuit to IRS: Only Congress Can Change the LawForbes
Courts Issue Conflicting Rulings on Health Care LawNew York Times
Obamacare in chaos as federal court strikes down tax credits for low-income ...Daily Mail
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Categories: Tax news

A Big F'ing Deal: DC Circuit Strikes Down Federal Obamacare Subsidies - Breitbart News

Google IRS Federal Income Tax - Tue, 2014-07-22 09:03

Breitbart News

A Big F'ing Deal: DC Circuit Strikes Down Federal Obamacare Subsidies
Breitbart News
"We conclude that appellants have the better of the argument: a federal Exchange is not an 'Exchange established by the State,' and section 36B does not authorize the IRS to provide tax credits for insurance purchased on federal Exchanges," the ...
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Categories: Tax news

Russia may ask rich to help foot bill for Crimea with 'solidarity tax'

Yahoo Tax - Tue, 2014-07-22 08:58

By Lidia Kelly MOSCOW (Reuters) - Russia could ask its richest citizens to help foot the bill for the annexation of Crimea by paying a "solidarity tax" proposed by a group of lawmakers. Deputies from the State Duma lower house of parliament, which is dominated by backers of President Vladimir Putin, have drawn up a draft law that would increase income tax for people earning more than more than 1 million roubles ($28,700) a month. "The main goal is to support regional budgets and that means also the budget of Russia's new territories," Andrei Krutov, the deputy leading the planned legislation, told Reuters. His reference to the "new territories" made clear that a key intention was to help the government pay for Crimea's absorption into Russia.


Categories: Tax news

Massachusetts Ballot Referendum Challenges Gas Tax Indexing

Tax Foundation - Tue, 2014-07-22 08:45

This November Massachusetts will vote to repeal House Bill 3847. The law, signed in 2013, raised the state’s gas tax from 21 to 24 cents per gallon and automatically tied the tax rate to inflation for future years. Despite opposition by the group Tank the Gas Tax, which successfully gathered enough signatures to trigger a referendum to repeal the tax increase, the 2013 measure is a sensible solution that stabilizes state gas tax revenues for future years. 

Since 1991, the last time Massachusetts passed a gas tax increase, Massachusetts gas tax revenues have fallen 18 percent after inflation adjustment while the total level of state and local gas tax collections  across the nation have Increased by 15 percent. Over this same period, Massachusetts gas tax revenues have fallen from 0.5 percent of the state’s GDP to only 0.15 percent, showing that gas-tax revenues have diminished even as the rest of Massachusetts’ economy has grown.

Yes, consumers may be driving less and cars have become more fuel efficient, but the gas tax’s declining share of revenue and GSP from 1991 to 2013 show that this is not the entire story. The gas tax prior to the 2013 changes failed to generate revenue at a rate to match the growth of the rest of the economy. As the Consumer Price Index increased by 71 percent from 1991 to 2013, the value of a 21 cent tax on gasoline diminished.  Essentially, Massachusetts has been experiencing a de facto tax cut for that last 20 years.

Raising the rate from 21 to 24 cents and indexing the tax for inflation fixes this issue.  Contrary to what groups like Tank the Gas Tax claim, tying the gas tax to the rate of inflation is not an arbitrary tax hike but a way to stabilize gas tax revenues.

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