Tag Archives: Taxes

GOP Reaches Compromise on Tax Bill

So far, so good.

House and Senate Republican leaders have reached an agreement in principle that would lower the corporate tax rate to 21 percent beginning in 2018, several people briefed on the plan said, a central component of the $1.5 trillion tax plan they hope to vote into law by next week.

The agreement would also lower the top tax rate for families and individuals from 39.6 percent to at least 37 percent, a change that would deliver a major tax cut for upper-income households.

I thought that the Moore defeat would raise the fear of Senate Republican defections would push the House to just pass the Senate version. I’m pleasantly surprised that not only does it look like the caucus is hanging together, but that what we know of the compromise looks better than expected.

“It makes me infuriated.”

I feel the same way every time the government increases my taxes too.

“I took a risk” to enter graduate school, Tischauser said. “Now they want to take more money out of the measly salary I take home. It makes me infuriated.”

But liberals call me selfish when I want to keep more of the money I earn instead of surrendering it in taxes.

Grad Students Whine About Real World Taxes

Yep.

Li, like other UW-Madison grad students, makes $18,000 per year. But under the bill, different versions of which passed the House and the Senate, she’d be taxed as if she makes roughly $50,000.

This is because her tuition, which is fully funded, would be taxed as if it was additional income under the bill. It’s a policy change that would dramatically affect “what type of person can go to grad school,” according to Don Moynihan, the director of the La Follette School of Public Affairs.

“When you’re a graduate student, you get paid a small amount of money … but you get the benefit that your tuition is paid,” Moynihan said, speaking as part of a panel alongside Li. “[If the provision becomes law], only the fairly wealthy will be able to afford to take this on.”

Li’s story echoes those of many graduate students around the country who have come out in opposition to the controversial tax. Li acknowledged that although her ability to pay for graduate school would be jeopardized under the bill, her classmates who have spouses and families would be even more affected.

Um, no… she won’t be “taxed as if she makes roughly $50,000.” She does make roughly $50,000 and will be taxed accordingly. The fact that over half of her income is paid in the form of tuition relief is immaterial. She is receiving something of value in exchange for her work. That is compensation. Here’s a handy definition:

(a) The term compensation means any form of payment made to an individual for services rendered as an employee for anemployerservices performed as an employee representative; and any separation or subsistence allowance paid under any benefit schedule provided in conformance with title VII of the Regional Rail Reorganization Act of 1973 and any termination allowance paid under section 702 of that ActCompensation may be paid as money, a commodity, a service or a privilege.

So what these graduate students are complaining about is the fact that they have been receiving tax-free compensation for years and now it might be taxed like everyone else’s compensation. Boo hoo.

Senate Passes Tax Reform Bill

Good. On to reconciliation.

Presiding over the Senate, Vice President Mike Pence announced the 51-49 vote to applause from Republicans. Sen. Bob Corker, R-Tenn., was the only lawmaker to cross party lines, joining the Democrats in opposition. The measure focuses its tax reductions on businesses and higher-earning individuals, gives more modest breaks to others and offers the boldest rewrite of the nation’s tax system since 1986.

McCain Will Support Tax Plan

Great!

(CNN)Sen. John McCain said Thursday he will support Senate Republicans’ tax plan, a major sign of progress for GOP leaders as the party barrels toward a vote on their overhaul of the US tax system by the end of the week.

McCain, who had remained a wild card and had kept his position on the tax bill unclear even from leadership, said that he came to support the legislation because he believed it had gone through committee and would improve the economic outcome of Americans.

AT&T CEO Promises Investment if Tax Reform Passes

This is one company. There are billions of dollars of pent up projects that businesses would do if they had more capital.

If tax reform passes, AT&T (T) CEO Randall Stephenson said the company will spend “at least” $1 billion in capital expenditure and be able to create an estimated 7,000 jobs.

“From my standpoint, the driver of this is the business tax reform… if we get investment going, we get productivity going, we get wage gain going, we invest another billion dollars. Every billion dollars AT&T invests is 7,000 hard hat jobs. These are not entry-level jobs. These are 7,000 jobs of people putting fiber in ground, hard hat jobs that make $70,000 to $80,000 per year,” Stephenson said at an event hosted by The Economic Club of New York on Wednesday.

He described passing tax reform as a “major” and “significant” item for the U.S. economy.

“I cannot overstate how important I think a tax bill that makes the US corporate taxes a competitive regime around the world — that’s big. That’s significant,” he said.

He explained that it would be a “capital-freeing” event for corporate America.

“You are freed up to invest more capital. We have so many initiatives and projects that we would like to invest more in.”

Tax Bill Moves Forward in Senate

Good news. Remember that whatever they pass will still be subject to rewrite during reconciliation.

WASHINGTON — Two Republican critics of the Senate’s tax reform legislation voted to advance the bill out of committee and send it to the Senate floor Tuesday afternoon without adding their desired changes to it.

Sen. Ron Johnson, R-Wis., and Sen. Bob Corker, R-Tenn., both voted to advance the measure out of the Budget Committee in a party line vote after Senate Republicans met with President Trump for an hour over lunch. Johnson had threatened to block the bill if it was not amended to include a lower pass-through tax rate for small-business owners.

Johnson and Trump went back and forth over the issue at the lunch, and Johnson told reporters he was convinced enough progress was being made for him to vote the bill out of committee — a key first step that could deliver the president his first legislative victory.

CBO Spins for Democrats

Wow.

Poor Americans would lose billions of dollars worth of federal benefits under the Senate GOP tax bill, according to a new Congressional Budget Office report.

This is largely because the legislation would eliminate the individual mandate, which requires nearly all Americans to get health insurance or pay a penalty. This would result in 13 million fewer people having coverage in 2027, the CBO found.

Many of the folks who would forgo coverage would have lower or moderate incomes and would have qualified for Medicaid or federal help paying their premiums or out-of-pocket health expenses, CBO found.

So follow their “logic”… if we repeal the unconstitutional individual mandate that forces people to purchase health insurance, millions of people would choose to exercise their Gog-given free will to forgo buying said insurance. But by doing so, those same people won’t be taking advantage of subsidies that are funded by other people. So… somehow that’s a bad thing?

Graduate Students Fret Over Real World Taxation

Heh.

Talk among graduate students at the University of Wisconsin-Madison has been buzzing with speculation about a proposed federal tax bill that could hike their income taxes so high some wonder whether they could complete their degrees.

“A lot of folks are debating whether they would be able to stay in school,” said Adria Brooks, co-present of the Teaching Assistants Association, a labor union representing graduate student workers at UW-Madison. “People are panicked, they’re unsure of what to do,” Brooks said.

The U.S. House approved a tax reform bill Nov. 16 that would eliminate a section of the IRS code that exempts tuition remission for graduate students from taxes, making it taxable income.

Graduate students at public universities who work as teaching or research assistants often receive tuition reductions in addition to stipends for their work.

Well, it IS income, isn’t it? If a private employer gives an employee tuition assistance, it counts as income if it’s over a certain amount. Why wouldn’t the same apply if the employer is the university?

Murkowski Won’t Oppose Tax Bill For Ending Obamacare Diktat

She still won’t commit to voting for the bill, but at least she appears to be leaning that way. The Senate just jumped a huge hurdle

With Republicans preparing to vote on tax cut legislation next week, Murkowski announced on Tuesday that she would not oppose the bill simply because it includes a provision repealing the Affordable Care Act’s individual mandate.

Murkowski made the announcement in an op-ed for the Fairbanks Daily News-Miner. And she was careful not to promise she’d vote for the final tax legislation.

Senator Johnson Opposes Tax Plan

I’ve had about enough with Senator Johnson.

(CNN)Sen. Ron Johnson announced he is opposed to the tax bill Wednesday, making him the first member of the GOP to formally come out against the party’s plan, though the Wisconsin Republican said he was hopeful about being able to support a final version once changes are made.

Johnson issued a statement saying the current proposal in both chambers is imbalanced in favor of large corporations but he left open the door to supporting the bills if they are altered.
“Unfortunately, neither the House nor Senate bill provide fair treatment, so I do not support either in their current versions,” he said. “I do, however, look forward to working with my colleagues to address the disparity so I can support the final version.”
Here’s the thing… I supported Johnson for election – twice. He originally ran on repealing Obamacare. When it came to getting that done, he and his colleagues failed. Now when it is coming to tax reform, he’s about to be a part of it failing. He’s become a Senator that’s all hat and no cattle. It doesn’t do anyone any good for Johnson to tour Wisconsin and tell us how bad Obamacare is or how much our tax code needs reform if he is unable to bring himself to actually support DOING SOMETHING ABOUT IT.
As to his specific objection, it’s horse shit. The entire purpose of tax reform, I thought, was to spur economic growth and simplify the tax code. Both the House bill and the Senate bill (I like the House’s better) will accomplish those goals to some degree. Yes, in an ideal world, I would like the bill to cut taxes for more people and businesses and be much more simple, but it also has to be something that can get a majority of votes. Johnson is making the enemy of the good. But given the fact that Johnson is smart enough to know that getting something is better than getting nothing, I can only assume that he is just using this as an excuse because he doesn’t actually want to reform our tax system.
Less talk, Ron. More action.

GOP Releases Tax Reform Plan

Here’s a pretty good run down of what’s in the bill and some of the implications. Overall, this is a good bill. It goes a long way toward simplifying the tax code and putting more money back in the hands of taxpayers. It did leave a few things undone for, apparently, purely political reasons. That’s unfortunate, but probably politically necessary.

Now they need to pass this as soon as possible. The longer it lingers, the more likely the Democrats will pressure squishy Republicans to shy away from it.

Tax Reform Coming

Here we go. Let’s hope they can get a good tax reform package passed.

Speaker Paul Ryan (R-Wis.) detailed the House’s timeline on tax reform Tuesday, saying Republicans will pass the Senate budget on Thursday, unveil their long-awaited tax reform legislation next week and send the bill to the Senate before Thanksgiving.

The Speaker laid out that ambitious timeline during a closed-door meeting of House Republicans in the basement of the Capitol, according to sources in the room.

House GOP leaders have decided to take up the fiscal 2018 budget resolution that the Senate passed last week. Approving that budget will allow Republicans to fast-track their tax-reform plan without needing to secure any Democratic votes in the Senate.

Republicans tackle tax reform

My column for the Washington County Daily News is online. Here you go:

In an attempt to rise from the ashes of their failure to repeal Obamacare, the Republicans in Washington are forging ahead with an ambitious tax reform plan. While it remains to be seen if Congress can accomplish anything substantial under Republican management, this tax reform plan needs to get done.

There are substantial political obstacles for any real reform of the federal income tax system. The first political obstacle is that the United States’ federal income tax has become so progressive that any real reform of it will be lambasted by political opponents with the old tired rhetoric that it “benefits the rich more.” And that rhetoric will be largely true if the benefit is measures in real dollars.

As of the latest figures from the Tax Foundation, the so-called “rich” pay the vast majority of the taxes — and they pay a disproportionate amount of taxes compared to their share of income. The top 10 percent of income earners earn 47 percent of the aggregate adjusted gross income while they pay 71 percent of the overall income tax burden. The top 50 percent of income earners earn 89 percent of the aggregate adjusted gross income while they pay 97 percent of the overall income tax burden.

Looking at the numbers from the alternate perspective, the bottom 50 percent of income earners earn 11 percent of the aggregate adjusted gross income while they pay 2.75 percent of the overall income tax burden. Our federal income tax system is beyond progressive. It is redistributory. It is almost a mathematical impossibility to reform the federal income tax system without disproportionally benefitting the upper half of income earners.

The second political obstacle to tax reform is the throng of lobbyists and special interests in Washington who will fight against reform. While the average American and business owner yearns for a simple and fair tax system, the lobbyists and special interests thrive in the system’s complexity. For every tax exemption, loophole, credit, and shelter, there is a constituency that will fight tooth and nail to protect it. Any attempt at simplifying the tax code will run into a withering fire from K Street.

Despite the obvious political obstacles, the Republicans are seeking to simplify and flatten the tax code. There are many components to the plan, but the thrust is very straightforward and sensible. They want to lower the overall rates while removing almost all of the loopholes.

Under the plan, the individual income tax framework wouldbe reduced from the current seven tax brackets to just three brackets with rates of 12 percent, 25 percent and 35 percent. But while reducing the number of brackets and the rates, the plan would eliminate all tax exemptions except for those for home ownership, charitable giving, retirement savings and higher education. The plan would also increase the child tax credit and the standard deduction.

As a point of comparison, the current highest tax rate is 39.6 percent, but the effective average tax rate of the 1 percent is 27 percent after all of the deductions, credits, and loopholes. Under the plan, even though the highest rate would be lowered to 35 percent, the effective tax rate will most likely increase due to the elimination of most of those loopholes.

For business taxes, the Republicans’ plan would lower the corporate tax rate from a ridiculously high 35 percent to 20 percent — slightly below he world average. The plan would also eliminate almost all of the loopholes that corporations use to avoid paying income taxes.

Perhaps more importantly, the Republicans’ reform plan would decrease the top tax rate on small businesses from 39.6 percent to 25 percent. Since most businesses in America are small businesses whose profits are taxed at the individual tax rate of the owners, they are usually paying a much higher rate than corporations, although corporate profits are taxed twice.

Finally, the Republicans’ plan would switch to a territorial system for taxing overseas profits of American companies, which is more in line with the majority of industrial nations. This would encourage American companies to bring home and spend the estimated $2.6 trillion in cash that they are currently holding overseas to shield it from confiscatory taxation.

Year after year, Americans have clamored for a simpler, fairer, less burdensome tax system for our businesses and our own incomes. The Republicans’ tax reform plan would go a long way toward delivering that kind of system. It is also the Republicans’ last chance to deliver on one of their big promises before the next election. For the sake of the American people, let us hope that the Republicans can overcome the obstacles and pass their plan into law.

 

GOP Releases Tax Reform Plan

CNN has a good, easy to read, list of the major items in the tax plan. I encourage you to go read through the whole list.

Drastically lower rates for businesses. Fewer income tax rates for individuals. A much larger standard deduction and child tax credit. A repeal of the estate tax.
CNN obtained a copy Wednesday of a Republican framework for tax reform that has been in the works for months and will finally be presented Wednesday.

Given the performance of the Congress as of late, I don’t hold out high hopes that they can get this passed, but one can hope. Overall, it’s a good plan. It simplifies and streamlines the tax code. The cut in the corporate income tax, small business taxes, repeal of the AMT, repeal of the death tax, and reduction in the number of deductions are good. I’m not a fan of increasing the child tax credit. But overall, it’s a good, comprehensive plan that would greatly help America’s people and economy. I’ll get more excited about it once we see if the GOP in Congress can actually move this forward.

DHS Refuses to Waive Shipping Restrictions for Puerto Rico

Huh.

On Monday, U.S. Representative Nydia Velázquez and seven other representatives asked Elaine Duke, acting head of Homeland Security, to waive the nearly 100-year-old shipping law for a year to help Puerto Rico recover from Hurricane Maria.Gregory Moore, a spokesman for Customs and Border Protection, an office of Homeland Security, said in a statement that an assessment by the agency showed there was “sufficient capacity” of U.S.-flagged vessels to move commodities to Puerto Rico.

“The limitation is going to be port capacity to offload and transit, not vessel availability,” Moore said.

Puerto Rico has long railed against the Jones Act, saying it makes the cost of imported basic commodities, such as food, clothing and fuel, more expensive.

First, there is the actual discussion of whether or not this would help. If there is plenty of shipping, but the ports don’t have enough capacity, then the waiver wouldn’t actually help anyone. It seems that there is some dispute about that.

But second, it does highlight how high American taxes actually impact everyday Americans. After this spat passes, perhaps the Congress can see about lowering the tax burden.

Tax Freedom Day Is Finally Here

This is a healthy reminder for those Republicans in the legislature who want to increase taxes. Wisconsin is still a tax hell, and you have a lot of work to do.

It’s Tax Freedom Day for the Badger State, the day when hard-working Wisconsinites have finally earned enough money to cover their total tax burden for 2017, according to the Tax Foundation’s annual Tax Freedom Day initiative. That’s right – we work the first 117 days of the year to cover our tax bill.

National Tax Freedom Day was April 23 – 113 days of work – but since Wisconsin taxpayers still bear a heavier-than-average tax burden compared with the country as a whole, we must toil away for four more days.

Tax Freedom Day in Wisconsin ranks #40 on the Tax Foundation’s Tax Freedom Day list, meaning Wisconsinites pay off their tax bill before residents of New York, California, Minnesota, and Illinois. However, taxpayers are better off in four Midwestern states: Iowa (#14), Indiana (#19), Ohio (#27), and Michigan (#32).

Wisconsin’s #40 ranking held steady from 2016 but is down from #37 in 2015. Also, in 2015 Tax Freedom Day was on April 25, two days earlier than this year. Despite efforts to reduce the tax burden in the Badger State, it seems that other states have leapfrogged Wisconsin by taking on even more dramatic tax reform.

Wisconsin is the lowest-ranked state with a Republican trifecta – where the GOP controls both houses of the legislature and the governor’s mansion.

The tax burden matters

My column for the West Bend Daily News is online. Here you go:

One of the assets of our grand republic that has allowed it to perpetuate and thrive is the fact that we are also a federation of states. Our nation was designed to have a relatively small national government with limited powers while states retain broader and deeper powers to regulate our lives. This allows each state to experiment with different policies and for other states to observe and learn from the results of those policies.

Sometimes, those experiments go very well and other states can copy them to benefit their own citizens. This was the case when concealed carry began to sweep the nation after Florida allowed it in the 1987 and saw nothing but positive results. Since then, every state in the nation has come to allow some form of concealed carry and states continue to get closer to a full recognition of the right to keep and bear arms in the form of what has come to be called Constitutional Carry.

Sometimes, however, states try policies that prove instructive to warn other states to not attempt those policies. Minnesota has just provided one of those examples that Wisconsin, in particular, should be watching closely.

Minnesota has long been a state susceptible to fits of political absurdity. It is, after all, a state that has elected such luminaries as Saturday Night Live alum Al Franken and former professional wrestler Jesse Ventura to high office. In 2010 Minnesotans elected the ultra-leftist Democratic-FarmerLabor (DFL) Party member Mark Dayton with a 43.6 percent of the vote. The Republican and Independent candidates split the remaining 56.4 percent of the vote.

Not to be deterred by his mere plurality of support, Gov. Dayton and his DFL majorities in the state legislature launched an ambitious agenda including a massive tax increase on the “1 percent” to fill a budget deficit created by overspending.

Specifically, they passed a $2.1 billion tax increase in 2013 by increasing the income tax rate for people earning over $150,000 ($250,000 for people filing jointly) from 7.85 percent to 9.85 percent. They also passed a slew of other tax increases on the middle and lower taxes, but the crown jewel of their plan was to “tax the rich” to fund their spending.

The results were predictable. Minnesota saw an immediate increase in tax revenue. This makes sense. When a tax increase like this is passed, most people have little choice but to pay it. The prospect of uprooting their families, changing schools, getting a new job and moving out of state to avoid the tax is not an option immediately doable.

But over time, all fixed costs become variable costs. When those high earners begin seeking out their next career move, one of the factors they will consider is the amount of their paycheck they have to send to the government that they would be able to keep by simply moving to a different state. That is exactly what is happening in Minnesota.

The results of the tax increase are becoming known. The IRS keeps track of when people move to different states by the flagging when people list a new resident on their tax returns. This data gives us a vivid picture of taxpayer movement because it is actual data and not just a statistical projection.

As detailed in a report by the Center of the American Experiment, the most recent IRS data available is for the year immediately after Minnesota’s tax increase and it shows a grim picture. Between 2013 and 2014, Minnesota reported its largest net loss of income in its history with $944 million of adjusted gross income leaving the state. Lest one think this is the natural flow of retirees moving to warmer climes, 63 percent of the state’s net loss of tax filers were younger than 65.

Most of the former Minnesotans are predictable fleeing to states with better tax climates like Colorado, Florida, South Dakota, Texas, Arizona and Washington. In fact, five of the 10 states to which Minnesotans flee do not have an income tax at all. It is notable that one of the places that is not receiving an outflow of high-earning Minnesotans is Wisconsin. That is because despite a few years of progress, Wisconsin remains a state with one of the highest tax burdens in the nation. Even after Minnesota’s tax increases, Wisconsin still ranks four notches worse than Minnesota on Forbes’ ranking of overall tax burdens.

The data shows what we all know. The tax burden matters. In the short run, most people do not have a choice but to pay what the government tells them to pay. But over time, choices expand and people will factor the tax burden into their decisions about their lives. Minnesota’s experiment with higher taxes is showing a way that Wisconsin should not follow. In fact, they are showing that Wisconsin should do the exact opposite and push harder to have a tax burden that actually attracts high-earners to our state.

Wisconsin Improves in Tax Rankings

Wisconsin is moving ever so slightly in the right direction. There’s still so much work to do.

After reaching 11.8 percent of income in 2011, Wisconsin’s state and local tax burden has declined for three consecutive years, the WTA reported, due largely to a drop in local taxes as a share of personal income.

“During 2011-14, Wisconsin’s local tax burden fell from 4.8 percent to 4.1 percent of income,” the analysis stated. “By comparison, state taxes as a share of personal income dropped less – 0.3 percentage points, from 7 percent to 6.7 percent. A tightening of property tax limits imposed by the state on local governments explains the drop in local tax burden.”

Return of the Living Death Tax

Despite what the media has decided are the important stories for this election, there are some real issues out there that have a real impact on real families.

Likewise, interpretations of regulations by the IRS can change, leading to additional tax liability for family farms. Most recently, the IRS has proposed changes to the estate tax regulations regarding the valuation of business assets. The American Farm Bureau Federation has cautioned that this change may result in family farms seeing an increase in estate tax liability, and has urged members to contact their congressional leaders to support proposed legislation prohibiting the change.

Despite favorable provisions, the death of the family’s patriarch or matriarch may still result in a family farm being divided up and sold off to pay the taxes. Farmers are usually considered cash poor, because their money is tied up in assets, especially land. When the value of a deceased’s estate goes over the exempted amount, the hefty tax has to be paid whether the estate actually has the cash to do so. Many times, that means farmland, equipment, or buildings have to be sold to pay Uncle Sam. For children that wanted to keep farming, this scenario could dash their dreams.

[…]

In an election that has been filled with the scandalous and salacious, there is hardly room for estate tax discussion on the campaign trail. For family farmers though, the very real possibility that it could result in their farm being divided up and sold upon their death makes this issue extremely important and relevant. There are many issues that voters should take into consideration when making their choice on Election Day, but the future of the estate tax should definitely be one of them.