by | ARTICLES, BLOG, BUSINESS, ECONOMY, TAXES
The IRS recently announced plans to “close a loophole,” suggesting that hedge-fund managers have been suddenly trying avoid paying higher taxes on carried-interest profits. This issue, however, is really a non-starter, and should not be getting the coverage that it is.
The IRS wrote a rule that exempts carried interest from a longer holding period when it’s paid to a corporation rather than an individual. But it didn’t specify that it applied solely to regular corporations, whose income is subject to double taxation. What some are ridiculously suggesting is that an S-Corp “loophole” exists to allow a hedge fund manager to treat a two- or three -year capital gain as long- term. That is a joke.
When the IRS wrote the rule, they said it applies for all flow-thru, but not corporations. The reason why is because corporations don’t have capital gains rate. So if you have a hedge-fund manager for a corporation, they pay taxes at regular rates. All of a sudden, some people are suggesting that hedge fund managers might make their entity an S-Corp, so they could get the one-year provision instead of the three-year provision.
It should be obvious to anyone that the law would be implemented as applying to non flow-thru entities only. It only affects the one year holding period which was raised to three. This is unimportant anyway, because most (and certainly most substantial) gains usually take more than three years to develop anyway.
Almost every article published on this subject also incorrectly states that carried interests converts ordinary income to capital gain. In fact, it simply allocates to the manager income of the same nature as earned – ordinary, dividend, short or long-term gain.
You could probably fix the law by adding a couple of words of clarification. Every tax law is subject to the Technical Corrections Act, which is page and pages of errors that get changed. Yet all of a sudden, people are writing articles about it the rule being a loophole. It’s not, and it’s nonsense. This issue should not be getting any serious attention.
by | ARTICLES, BLOG, ECONOMY, GOVERNMENT, TAXES
From CNSNews.com, the monthly deficit/surplus roundup:
The federal government this January ran a surplus while collecting record total tax revenues for that month of the year, according to the Monthly Treasury Statement released today.
January was the first month under the new tax law that President Donald Trump signed in December.
During January, the Treasury collected approximately $361,038,000,000 in total tax revenues and spent a total of approximately $311,802,000,000 to run a surplus of approximately $49,236,000,000.
Despite the monthly surplus of $49,236,000,000, the federal government is still running a deficit of approximately $175,718,000,000 for fiscal year 2018. That is because the government entered the month with a deficit of approximately $224,955,000,000.
The $361,038,000,000 in total taxes the Treasury collected this January was $11,747,870,000 more than the $349,290,130,000 that the Treasury collected in January of last year (in December 2017 dollars, adjusted using the Bureau of Labor Statistics inflation calculator).
The Treasury not only collected record taxes in the month of January itself, but has now collected record tax revenues for the first four months of a fiscal year (October through January).
So far in fiscal 2018, the federal government has collected a record $1,130,550,000,000 in total taxes.
However, despite the record tax collections so far this fiscal year, and despite the one-month surplus in January, the federal government is still running a cumulative deficit in this fiscal year of $175,718,000,000.
That is because while the Treasury was collecting its record $1,130,550,000,000 in taxes from October through January, it was spending $1,306,268,000,000.
The levels of federal taxes and federal spending fluctuate from month to month, and it is not unusual—but not always the case—for the federal government to run a surplus in January.
Over the last twenty fiscal years, going back to 1999, the federal government has run surpluses in the month of January 13 times and deficits 7 times. Six of the Januaries in which the federal government ran deficits overlapped President Barack Obama’s time in office—including January 2009, the month Obama was inaugurated, and the Januaries in 2010, 2011, 2012, 2014 and 2016.
The federal government also ran a deficit in January 2004, when President George W. Bush was in office.
According to an analysis published on Dec. 21 by the New York Times, a “majority of provisions” in the tax law President Trump signed in December would “go into effect” in January. However, according to the Times’ analysis, February “is the earliest that most will see changes in their paychecks.”
The Internal Revenue Service released its new withholding tables, based on the tax-cut law, on January 11.
“The Internal Revenue Service today released Notice 1036, which updates the income-tax withholding tables for 2018 reflecting changes made by the tax reform legislation enacted last month,” the IRS said that day in a press release. “This is the first in a series of steps that IRS will take to help improve the accuracy of withholding following major changes made by the new tax law.
“The updated withholding information, posted today on IRS.gov, shows the new rates for employers to use during 2018,” said the IRS release. “Employers should begin using the 2018 withholding tables as soon as possible, but not later than Feb. 15, 2018. They should continue to use the 2017 withholding tables until implementing the 2018 withholding tables.”
The record total federal taxes the Treasury has collected in the first four months of this fiscal year have included $606,726,000,000 in individual income taxes; $75,533,000,000 in corporation income taxes; $371,931,000,000 in Social Security and other payroll taxes; $27,738,000,000 in excise taxes; $7,550,000,000 in estate and gift taxes; $12,634,000,000 in customs duties; and $32,637,000,000 in miscellaneous other receipts.
by | ARTICLES, BUSINESS, ECONOMY, FREEDOM, GOVERNMENT, TAXES
Americans for Tax Reform is keeping a running list of companies who have chosen to make “tax reform bonuses, raises, or 401(k) hikes” as a result of the tax law passed in December by Congress.
The list is sorted both by state and alphabetically; you can read a description of the positive financial choices each company has made as a result of the tax savings incurred by the tax overhaul. It’s worthwhile to see how companies across America are giving back.
You can read the entire list here.
by | ARTICLES, BUSINESS, ECONOMY, FREEDOM, POLITICS, TAXES
The latest example of sin tax stupidity comes from Seattle, Washington. The new tax on sugary drinks began on January 1, 2018, as a means to “discourage consumers from buying sugary drinks while raising revenue for nutrition and education programs.” It’s a tax of 1.75 cents per ounce.
For example, it will now cost $2.14 for a 20-ounce soda, up from $1.79. The tax on a 12-pack of Coke cans will be $2.52. And a 2-liter bottle of Coke which used to sell at $2.79 is now $4. Diet and zero-calorie drinks are exempt.
“In addition to regular sodas like Coke, the tax applies to sport drinks such as Gatorade and energy drinks like Red Bull. The tax will apply to any nonalcoholic beverage or beverage concentrate that lists as an ingredient any caloric-based sweetener. For that reason, many juice-based drinks will be taxed.”
These taxes are absolutely ridiculous. It hurts both consumers and store owners alike. For example, “in Philadelphia, where a sweetened-beverage tax took effect this year, non-chain retailers have passed on 100 percent of the cost, according to preliminary research.” And for store owners who just happen to live on the edge of the city, shoppers are not changing their behavior — just their geography; they’ll shop across the border of Seattle, leaving those store owners now with products more expensive than their nearby counterparts across the city, which hurts their business.
These sin taxes are merely tax grabs for the government but do little towards changing the actual behavior they intend by the existence of the tax. The real effect is that people will shift their purchase to outside the city, which will eventually cause a tax decline for Seattle — as seen in currently in Philadelphia. Government does not seem to understand that people will actually go out of their way (literally!) to avoid paying illogical, egregious taxes.
