by | ARTICLES, BLOG, ECONOMY, POLITICS, POTUS, TAXES, TRUMP
I am very glad the new Tax Cuts and Job Act is now law. With ongoing work reforming and reducing regulations, the tax bill will spur economic growth, and get people to understand the importance of reducing marginal rates. On the corporate side, the huge rate reduction (from 35% to 21%), move to territorial taxation, and expensing of equipment, is a home run. However, on the individual side, Congress allowed politics to get in the way of real reform, and that is inexcusable.
Without any discussion, Congress eliminated the deduction for miscellaneous itemized deductions. This is truly the only legitimate deduction, and it is absolutely necessary to maintain the integrity of the tax code. It gives people the chance to write off expenses incurred to allow them to earn the income they are taxed on. For instance, under current tax law, a person who earns $100K in a venture but had to pay $30K for legal fees to get it, would be able to pay taxes on only the $70K net that was actually made. With the new change now removing the miscellaneous itemized deduction, the person will have to pay taxes on the full $100K!
Another deduction Congress removed summarily is the moving deduction. Similar to the miscellaneous itemized deduction, this is a real and actual expense that is incurred when moving to get a new job (in order to earn the income that will be taxed.) It was removed from the tax code without discussion, and should not have been.
The casualty loss deduction was also eliminated. This enabled you to deduct a loss that was due to a sudden, unexpected event, such as a fire, hurricane, or robbery. Now, if your house burns down, you can no longer write it off. The exception to this change is if your loss is in a federally-declared disaster area. So if your house burns down, you get no deduction. But if it burns down in a large wildfire that was declared a disaster, you can claim the deduction. This is egregious; the effect on the individual — the loss of a house — is absolutely the same. This deduction elimination is unacceptable.
Furthermore, the alimony deduction was thrown out. The alimony deduction is a mechanism that prevents an inequitable tax burden to be created when a married family unit is split into two. It is inequitable and mean-spirited to create a targeted tax burden on people who suffered a family breakup.
While eliminating these important and equitable donations, Congress left in place a number of purely political, social engineering deductions and credits. Congress left in a substantial part of the mortgage deduction, which is really nothing more than a government subsidy to the real estate industry. They left in energy credits, rehabilitation and low income housing credits, and the Alternative Minimum Tax (AMT). It’s disappointing to see Congress talk about simplicity, efficiency, and equitability, and then remove good provisions from the tax code while leaving in parts that are merely political.
by | ARTICLES, BLOG, ECONOMY, GOVERNMENT, POLITICS, POTUS, TAXES, TRUMP
Richard Rubin makes some major errors in his summation of burgeoning tax bill. He uses a scenario of five people and goes through how they would be affected by the current proposed legislation. However, he does not get his calculations correct. He’s comparing apples and oranges. He’s also not looking at the reasons for the tax law changes and if the changes make the tax law fairer. He’s only looking blindly at how the tax law changes affect the current tax burden of the people. Rubin should have run his article by a real tax accountant before he published his account.
From the article, under the GOP plan:
“The executive would pay $868,000 in taxes.
The manufacturer pays $704,400, but might be able to argue her way into a lower bill.
The passive business owner pays $576,000.
The dividend-earning investor pays $476,000.
The heir to the estate pays nothing.
The manufacturer, the estate and the passive owner all get big tax cuts from the GOP plan. The investor and the wage earner generally don’t.”
Now, in this scenario, Rubin doesn’t explain that the the first person — the executive — would remain unchanged; His tax rate is 43.4%, which is a 39.6% rate + 3.8% medicare tax.
The manufacturer’s lower tax bill has to do with how flow-through businesses do things, because they are not a corporation.
The passive business owner is changed because he pays a new 25% tax rate + the 3.8% medicare tax.
The dividend investor pay the $476,000 because he pays 23.8%. It’s a dividend tax. However, what Rubin does not explain is that the dividend investor already paid another tax, a corporate tax, before the dividend was issued. That part of the tax law remains unchanged, and the investor remains unchanged.
The heir to the estate doesn’t pay any taxes because it is not income. Never has an heir paid an estate tax, because it has already been paid.
Rubin is essentially trying to be provocative here by using a $2 million base figure as a means to show a great difference in numbers, when really, this random list of five people makes no sense. The comparisons don’t really compare, such as including some things that are not income items. Rubin needs to be more careful with his writing.
by | ARTICLES, BLOG, ECONOMY, FREEDOM, LAW, POLITICS, TAXES
Capital gains are unusual in that the taxpayer has the ultimate decision as to whether and when to sell his asset (stock, his business, a work of art, etc.) The higher the tax rate, the less likely he is to sell, seeing as he will only be able to enjoy or reinvest what is left of the proceeds after tax. History has borne this out – capital gains tax collections go down in the periods after increases, and go up in the years after decreases.
The actual impact of raising the capital gains rate by the Obama administration was devastating to the economy. By discouraging the sale of assets, there was reduced capital available for new projects and opportunities, reducing job creation and wages, and resulting in lower revenue collection.
Furthermore, with higher capital gain rates, the expected after tax rate of return on new projects went down, assuring that fewer of them went forward.
Additionally, there were a number of localities, like the state of California and New York City, which have tax rates of 12% or more and also a large concentration of wealthy people and high performing businesses. The Obama federal capital gains increase brought total capital gains rates of more than 37%. A capital gains rate this high virtually brought elective capital to a standstill. This amounted to a rate of almost 60% higher than the rate during the Bush Administration (15%) – when growth and the economy were very strong.
The higher capital gains rate put a stranglehold on risk taking and available capital. Why sell an asset to fund further investment and opportunity when the government takes a large share of the gain with the loss remaining all yours? It makes virtually no economic sense to do so, and the result meant an already anemic economy continued to struggle. Lowering the capital gains rate as part of the Trump Tax Reform package is a positive game-changer for the economy.
by | BLOG, ECONOMY, FREEDOM, POLITICS, TAXES
The concept of an American President (Obama) going after people making a lot of money and paying a relatively low tax rate on it was particularly naïve; it displayed an absolute lack of familiarity with how people get wealthy. As a CPA, I can attest to the fact that the most common way people accumulate massive wealth is either by a huge amount of hard work (creating a successful business) or selling an asset (an invention, real estate, etc).
Many people who file tax returns with large amounts of income, such as selling a business for $10 million, will have a multi-million capital gains amount. It’s not that the higher income earners have some sort of capital gains loophole, but it’s really that the wealthy have done something well to attain the American Dream. And when they do strike it rich through their effort, part of their wealth is treated as a capital gain and it gives those earners a chance to keep a part of it. Knowing that there is a low capital gains rate is an extra incentive to work hard and be successful.
Many of my clients are wealthy, and I have experienced time and again that they will come to me and ask the question: if they are successful, can they keep the majority of their money?” This is because they know that government wants to take more from the highest income earners who have proven their success, while at the same time, the government is quite happy to let them lose on their own on their particular endeavor.
Most in the top echelon get there from a one-time income-producing significant event. To punish such success by having a high capital gains tax only served to drive a deeper wedge between the have- and have-nots in an attempt to level the economic playing field. Trump would do well to lower the capital gains rate and and restore a sense of trust with those who work hard, contribute to the economy, and attain the American Dream.
by | ARTICLES, BLOG, ELECTIONS, FREEDOM, GOVERNMENT, LAW, POLITICS, TAXES
Taxpayers have been long bamboozled into making generous commitments to the retirement systems of public service workers. All over the country, in all levels of federal and state governments, these defined benefit plan pension plans have proven to be vastly untenable. To sustain the plans in their current arrangements and cover the obligations that have already been promised, the rest of society will be compelled to contribute to the retirement of those public service workers via higher taxes. This is turn makes the rest of the populace poorer — because their hard-earned money is being levied to the promised public pensioner, and not available to be saved for themselves.
The grand scheme is becoming unhinged. One must realize that the more people continue to buy into the idea that they are supposed to “retire at 65”, the more they are suckered into continuing to make their retirement years poorer and subsequently make the retirement years of public service employees richer. People see a public service worker being able to retire at that age and they think, “I should be able to also do so”. This idea needs to change.
There are two reasons why most people think that such pension programs are still sustainable and normal: 1) the exorbitant pension costs are buried in the category of “education costs” which allow advocates to falsely argue that higher education costs mean better education, and 2)the costs are largely buried in the larger budget process of federal/state/local governments (and how many people pay attention?).
In the private sector, costs are held in check by the fact that out-of-control costs make the overall cost of the product too high in the marketplace, and will bring the company down. The employees negotiate with company officials who are responsible to a board of directors and shareholders who need to provide a competitive product. But in the public sector, with no competition, costs become whatever the public sector unions can squeeze out of the elected officials who they have helped elect, and who are more accountable to them than to the taxpayers who pay the bill.
The costs to keep public employee pension plans afloat are borne by all the rest of society — the taxpayers. This arrangement enables a small group of people to be paid a sizeable and continuous pension until death. It is not out of the ordinary anymore for a person to receive $65K- $100K for the rest of his or her life. But the actuarial cost to provide that promised benefit is astronomical, and unfair to hard-working private sector employees.
by | ARTICLES, BLOG, GOVERNMENT, IRS, LAW, POLITICS, TAXES
The Democrats have continuously claimed that they are looking out for America’s middle class by keeping the tax rates the same for them while seeking to raise rates on the wealthiest Americans who need to “pay their fair share”. This assertions serves to deflect attention away from the one policy that is already the mechanism for ensuring that the wealthiest pay more. What is it? The AMT.
The Alternative Minimum Tax (AMT) currently serves virtually no useful purpose, other than the raising of an ever-increasing amount of tax revenue. The AMT was instituted in its present form when the prior “add on” Minimum Tax was transformed into the AMT in the early 1980’s. Its stated purpose was to require that all taxpayers paid at least a “fair share of tax”. Yet it has become very clear in recent years that this AMT tax revenue is not coming from just the taxpayers who were the intended targets of this tax.
The AMT was developed to identify “loophole” type deductions, also known as “preferences”. There would then be an alternative calculation using lower tax rates applied against this taxable income as increased by the preferences. Whichever of the taxes is higher is the one the taxpayer must pay.
However the AMT was seriously flawed from the outset. Instead of focusing on these loophole type preferences (which would have limited the tax to a very small number of tax law abusers), the law that was passed included items that were not loopholes at all. A convoluted formula is used to calculate and compare the differences between income and deductions in order to determine who falls under the guidelines. Interestingly, a very substantial majority of all current AMT paid by taxpayers results from the following factors: 1) treating state and local taxes as a preference; 2) treating miscellaneous deductions as a preference; 3) allowing lower exemptions than the regular tax.
These factors have flaws. For instance, state and local taxes are hardly a loophole because taxes exacted by state and local governments are hardly “voluntarily” paid by taxpayers in an attempt to avoid paying federal taxes. Likewise, “Miscellaneous Deductions” is the category of deductions that consists primarily of expenses incurred to earn income. It often includes unreimbursed employee expenses, investment expenses, etc. This is the most basic and important deduction necessary to have a truly fair income tax system and should not be considered a loophole. Furthermore, the exemption available under the AMT is a fixed dollar amount which, unlike exemptions and standard deductions under the regular tax system, is not indexed for inflation; it is also phased out entirely over certain income levels.
During AMT discussions over the years, Congress used to posture and point to the AMT patch as some major revenue loss (had the AMT been applied to those families) as an excuse to raise to raise taxes in order to offset this “potential missing tax revenue”. Once the “patch” became permanent and the higher exemption level kept many taxpayers from being hit with the AMT, Congress stopped talking about the AMT altogether. But the fact still remains that there is a parallel tax system already that goes after the highest income-earners; they already pay “their fair share” — and then some
by | ARTICLES, BLOG, FREEDOM, GOVERNMENT, LAW, OBAMA, OBAMACARE, POLITICS, TAXES
I’m sick and tired of reading over and over again in places both liberal and conservative that Trump’s (as well as the Republican’s) proposed tax reforms are going to give the lion’s share of the cuts to the top 1%. The entire concept is totally distorted.
In fact, nobody has been talking about the series of tax changes that occurred when Obama and his Democrat cronies passed the Obamacare increases. These raised the Bush tax rates on only the wealthiest from 36% – 39.6 % and then again raised the tax rates on the wealthiest by adding a net investment income tax (NIIT), otherwise known as the “Obamacare tax,” which covered all investment income. The increase also raised capital gains tax on the wealthiest from 15% – 20%. When the 3.8% tax is added, capital gains rates effectively went from 15%- 23.8% — an increase of almost 60%. That’s ridiculous!
Those ludicrous tax increases were principally responsible — along with the hemorrhage of regulations coming out of the Obama administration — for the horrific economic performance since Obama took office. The first step of any meaningful tax reform should be to reverse those Obamacare tax increases, which went 100% to the higher income individuals, and 0% to the middle class and lower income. The reversal of those insane tax increases should in no way be considered a tax cut. It is just restoring what was in fact an egregious toxin on our entire economy.
by | ARTICLES, BLOG, FREEDOM, GOVERNMENT, POLITICS
The appointment of Former F.B.I Director Robert Mueller as Special Counsel for the Trump-Russia investigation seemed like a decent choice for the task. I had only heard good things about Mueller and looked forward to getting to the bottom of whether or not there were actual, illegal ties between Trump’s campaign and Russian officials. Unfortunately, by one single action, Robert Mueller has now revealed himself as a person unfit to be special counsel. This action was his selection of Andrew Weissmann as a key advisor in the investigation. Mueller has simply discarded his integrity. Andrew Weissmann is an outrageous, criminal human being.
Robert Mueller knows full well that Andrew Weissmann should be jailed for misconduct, or at the very least, disbarred. The one job that Weissmann should never again have is that of prosecutor. There are two very well-known, high-profile court cases I will briefly overview which will show Weissmann’s lack of any moral compass and highly unethical legal practices.
The first example is the famous Arthur Andersen case. The list of egregious behaviors by Weissmann runs long:
In an effort to make a name for himself, Andrew Weissmann brought an indictment against the Arthur Andersen firm as an entity, instead of only against the partner that allegedly committed a crime. No indictment against a company for the action of one person had never been done before — or ever since. This is especially important because Weissmann knew, that in the context of a “Big 4 CPA firm,” bringing an indictment — even if no conviction were ever accomplished — would automatically and completely destroy the firm and all of its employees, which is exactly what happened.
Once he issued forth the indictment, he used malicious and unorthodox methods to pursue his case, including threatening indictment of numerous individuals if they testified for the defense, intentionally distorting the “crimes” that Arthur Andersen allegedly committed, and refusing to allow Arthur Andersen tell their side of the story to the Grand Jury.
If that wasn’t enough, Weissmann lambasted Arthur Andersen in court for legally shredding documents, which they – in accordance with their firm’s existing policy and existing law — had no obligation whatsoever to retain. Most outrageously, Weissmann made changes to the definition of the “crime” and its level of criminal culpability (intent) in the jury instructions. With all these procedures, Weissmann strongly urged — and convinced the jury — to find Arthur Andersen guilty – even if the firm had no knowledge that its members had done anything wrong.
What’s worse is that in the end, no crime was actually ever committed, as determined later by a unanimous 9-0 Supreme Court decision. At oral argument, the Court viciously ridiculed the theory that Weissmann used in order to charge the crime in the first place. Unfortunately, that exoneration came too late: Weissmann had destroyed an 89 year-old accounting institution and eliminated 85,000 jobs by distorting the law, denying the defendants a fair trial, and taking intent out of the jury instructions, all for no purpose whatsoever, except possible personal gain and fame.
The second case high-profile case, involving Jim Brown of Merrill Lynch (also related to Weissmann’s position on the Enron task force), is equally appalling:
Andrew Weissmann persecuted and prosecuted Jim Brown, a Merrill-Lynch executive, for a deal with Enron which Weissmann argued in court was a bogus deal. The problem is that Jim Brown never extracted a deal at all; he opposed it and was not a privy to it. The deal in question involved a solicitation from Merrill-Lynch to provide $7 million cash for minority holdings in a company that electrical power barges near Nigeria; Enron held the majority interest. The crime in question was the allegation that Enron had agreed to buy the barges back later, thereby making its accounting as a gain from its sale to Merrill-Lynch wrong. Weissmann alleged that since Jim Brown was one of four Merrill-Lynch executives, he was a culpable party.
Much of the case hinged on a phone call where the deal was discussed — a phone call that Jim Brown wasn’t actually on. Weissmann met with Brown voluntarily to hear his opinion of the telephone call, and despite hearing the exculpatory explanation, Weissmann nevertheless had Brown indicted for perjury and obstruction of justice. Weissmann later produced an email that mentioned the phone call, written by Brown in a different context and a year after the phone call in question, then urged the judge to prevent any evidence that would explain the email’s actual meaning.
Based upon the above facts, there is no way anyone could think Jim Brown could be accused of a crime. So, in order to win that case, Weissmann (1) concocted evidence; (2) terrorized anyone that would come forth to support Jim Brown’s position; and (3) threatened prosecuting individuals who would testify for Jim Brown. More outrageously, Weissmann also hid Brady material (evidence known by Weissmann that would be important to the defense and which by law Weissmann was required to turn over); he then repeatedly lied to the court about having such material. In a truly incredible incident, a document was discovered in which Weissmann highlighted in yellow magic marker evidence that would have gone a long way to proving Jim Brown’s innocence — at the same time he was telling the court that he had no such evidence!
The atrocities don’t end there. In another example, Katherine Zrike, a key individual in the Brown transaction, virtually exonerated Brown in her testimony under oath to the Grand Jury. Weissmann hid this information from the defense (a clear Brady violation) and subsequently lied to the Court about having relevant information. Jim Brown was ultimately found guilty of fraud, conspiracy, perjury, and obstruction and sent to prison. The fraud and conspiracy charges were later overturned.
On October 26, 2011, six years after the Arthur Andersen case was decided and less than two years after the Jim Brown debacle concluded, Robert Mueller announced the appointment of Andrew Weissmann as FBI General Counsel and Deputy Director under Mueller’s watch. What’s more, in 2015, the same Weissmann moved to the criminal fraud section at Department of Justice. And now, Weissmann is a part of Mueller’s special counsel team investigating allegations of collusion between Trump’s campaign and Russia. This truly is the story of the fox -with blood on his lips – guarding the henhouse!
The current Trump-Russia investigation requires evenhanded, impartiality, and integrity. It’s as important as any special counsel in history. That fact that Mueller would even consider someone with such a heinous, tainted history as Andrew Weissmann to work on his team shows incredibly poor judgment. It is absolutely imperative that Robert Mueller resign now.
by | ARTICLES, BLOG, BUSINESS, ECONOMY, FED, POLITICS, POTUS, TAXES, TRUMP
The Trump Administration has continued the same path of deficit spending as its predecessors.
(CNSNews.com) – The federal government collected record total tax revenues through the first eleven months of fiscal 2017 (Oct. 1, 2016 through the end of August), according to the Monthly Treasury Statement.
Through August, the federal government collected approximately $2,966,172,000,000 in total tax revenues.
That was $8,450,680,000 more (in constant 2017 dollars) than the previous record of $2,957,721,320,000 in total tax revenues (in 2017 dollars) that the federal government collected in the first eleven months of fiscal 2016.
At the same time that the federal government was collecting a record $2,966,172,000,000 in tax revenues, it was spending $3,639,882,000,000—and, thus, running a deficit of $673,711,000,000.
Individual income taxes have provided the largest share (47.9 percent) of federal revenues so far this fiscal year. From Oct. 1 through the end of August, the Treasury collected $1,421,997,000,000 in individual income taxes.
Payroll taxes provided the second largest share (35.9 percent), with the Treasury collecting $1,065,751,000,000 in these taxes.
The $233,631 in corporate income taxes collected in the first eleven months of fiscal 2017 equaled only 8.6 percent of total tax collections.
The $21,172,000,000 collected in estate and gift taxes equaled only 0.71 percent of total taxes collected this fiscal year.
(Tax revenues were adjusted to constant 2017 using the Bureau of Labor Statistics inflation calculator.)
by | ARTICLES, BLOG, FREEDOM, POLITICS, TAXES, TRUMP
This past April, some Republicans approached Attorney General Jeff Sessions to look once again into the case of Lois Lerner and the IRS targeting scandal. Today, the Department of Justice released a statement that “reopening the criminal investigation would not be appropriate based on the available evidence.” Though the response was expected, it was still disappointing; Lois Lerner deserved to be prosecuted to the fullest extent of the law for her conduct.
Lois Lerner headed the IRS division that processes applications for tax-exempt groups. An inspector general’s report in 2013 found that the IRS had singled out conservative and tea party groups for extra scrutiny when they applied for tax-exempt status. Many had their applications delayed for months and years. Some were asked improper questions about their donors and even their religious practices. Yet, Obama’s Department of Justice concluded in 2015 that they had “found no evidence that any IRS official acted based on political, discriminatory, corrupt or other inappropriate motives that would support a criminal prosecution.” By then, Lerner and others embroiled in the scandal had resigned or retired.
It is a national tragedy that the woman who harassed taxpayer groups, interfered with evidence, and colluded with government entities to suppress thought remains absolved from her transgressions.
