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Taxes



All Reason.com articles with the "Taxes" tag.



Published: Fri, 09 Dec 2016 00:00:00 -0500

Last Build Date: Fri, 09 Dec 2016 12:38:56 -0500

 



Court Allows IRS to Order Bitcoin Exchange Coinbase to Give Up Their Customers' Identities

Fri, 02 Dec 2016 21:11:00 -0500

Bad news for patriotic Americans who want to keep their bitcoin business to themselves this week from the Department of Justice: A federal court in the Northern District of California entered an order today authorizing the Internal Revenue Service (IRS) to serve a John Doe summons on Coinbase Inc., seeking information about U.S. taxpayers who conducted transactions in a convertible virtual currency during the years 2013 to 2015. The IRS is seeking the records of Americans who engaged in business with or through Coinbase, a virtual currency exchanger headquartered in San Francisco, California. "As the use of virtual currencies has grown exponentially, some have raised questions about tax compliance," said Principal Deputy Assistant Attorney General Caroline D. Ciraolo, head of the Justice Department's Tax Division. "Tools like the John Doe summons authorized today send the clear message to U.S. taxpayers that whatever form of currency they use – bitcoin or traditional dollars and cents – we will work to ensure that they are fully reporting their income and paying their fair share of taxes.".... The court's order grants the IRS permission to serve what is known as a "John Doe" summons on Coinbase. There is no allegation in this suit that Coinbase has engaged in any wrongdoing in connection with its virtual currency exchange business. Rather, the IRS uses John Doe summonses to obtain information about possible violations of internal revenue laws by individuals whose identities are unknown. This John Doe summons directs Coinbase to produce records identifying U.S. taxpayers who have used its services, along with other documents relating to their virtual currency transactions. The actual order from U.S. District Court for the Northern District of California. The actual summons. As Ars Technica quoted from that summons, the government wants: Account/wallet/vault registration records for each account/wallet/vault owned or controlled by the user during the period stated above including, but not limited to, complete user profile, history of changes to user profile from account inception, complete user preferences, complete user security settings and history (including confirmed devices and account activity), complete user payment methods, and any other information related to the funding sources for the account/wallet/vault, regardless of date. A Coinbase spokesman via email said earlier this week when the DOJ announcement was issued: Although Coinbase's general practice is to cooperate with properly targeted law enforcement inquiries, we are extremely concerned with the indiscriminate breadth of the government's request. Our customers' privacy rights are important to us and our legal team is in the process of examining the government's petition. In its current form, we will oppose the government's petition in court..... We are aware of, and expected, the Court's ex parte order today. We look forward to opposing the DOJ's request in court after Coinbase is served with a subpoena. As we previously stated, we remain concerned with our U.S. customers' legitimate privacy rights in the face of the government's sweeping request. Jim Harper at Cato noted when the news of the summons broke: Equally shocking is the weak foundation for making this demand. In a declaration submitted to the court, an IRS agent recounts having learned of tax evasion on the part of one Bitcoin user and two companies. On this basis, he and the IRS claim "a reasonable basis for believing" that all U.S. Coinbase users "may fail or may have failed to comply" with the internal revenue laws. If that evidence is enough to create a reasonable basis to believe that all Bitcoin users evade taxes, the IRS is entitled to access the records of everyone who uses paper money. Anecdotes and online bragodaccio about tax avoidance are not a reasonable basis to believe that all Coinbase users are tax cheats whose financial lives should be opened to IRS investigators and the hackers looking over their shoulders. There must be some specific information about particular [...]



Canadian Panel Reportedly Recommends Low Marijuana Taxes and Purchase Ages

Fri, 02 Dec 2016 06:30:00 -0500

The task force charged with advising the Canadian government about how to legalize marijuana delivered its report this week. Although the report won't be released to the public until December 21 or thereabouts, National Post columnist John Ivison has the scoop on its major recommendations. It sounds like the panelists learned from some of the mistakes made in Colorado and Washington—in particular, the policies that have helped preserve a black market. "The key recommendation of the panel charged with outlining the framework for Canada's legal marijuana regime is that the system should be geared toward getting rid of the $7-billion-a year black market," Ivison writes. "All the other recommendations flow from that guiding principle." The task force cautions against prioritizing revenue from marijuana taxes, which has been a major selling point for legalization measures in the U.S., because high tax rates make legal merchants less competitive with black-market dealers. "To eat into the black market," Ivison says, "the report is expected to recommend prices should be lower than the street price of $8-$10 a gram." That's $6 to $7.50 in U.S. dollars, which is substantially lower than the prices typically charged by state-licensed retailers in Colorado and Washington. Grams at Medicine Man in Denver, for example, currently range from $12 to $14 (including taxes). Uncle Ike's in Seattle offers a "cheap pot" special for $7 a gram, but prices otherwise range from $10 to $19. Concerns about a lingering black market also inform the task force's recommendations concerning a minimum purchase age. "Provinces will set the legal age for marijuana consumption," Ivison writes, "but the report is likely to recommend the limit be the age of majority—18 in six provinces; 19 in B.C., Newfoundland and Labrador, Nova Scotia, New Brunswick and the three territories—which would keep many young people from turning to criminal sources." In the U.S., by contrast, all eight states that have legalize marijuana for recreational use have set the minimum age for buying, possessing, and consuming cannabis at 21, the same as the purchase age for alcohol. That decision exposes adults younger than 21 to criminal penalties for harmless activities (such as passing a joint) that are legal for their slightly older friends and siblings. It also helps keep the black market alive as a source of pot for college-age cannabis consumers who are not allowed to patronize legal retailers. Another consumer-friendly policy reportedly recommended by the task force would allow home delivery of cannabis by mail, the way medical marijuana is currently distributed in Canada. Home delivery was not part of the first four state legalization initiatives approved in the U.S., but it was included in the measures that passed in California and Massachusetts last month. Each Canadian province will decide whether marijuana should also be available from storefronts. Ivison notes that Ontario might sell marijuana at its provincially owned liquor stores, although that idea is controversial among people who worry about encouraging consumers to mix bud with booze. Prime Minister Justin Trudeau's government won't necessarily follow the task force's recommendations. It is expected to introduce legislation next April, and legal recreational sales could start as soon as January 2018.[...]



Brickbat: Sounds Like the Right Man for the Job

Fri, 18 Nov 2016 04:00:00 -0500

(image) Jimmie Thorns has resigned from the Louisiana Tax Commission after a local TV station found he has not paid property taxes on a business property in New Orleans for some 30 years. Thorns currently owes $140,000 on the property.




Lower Taxes Will Help Bring Legal Weed out of the Black Market

Mon, 31 Oct 2016 16:57:00 -0400

If California voters decide to legalize marijuana for recreational purposes on Nov. 8, there will still be important decisions left to local elected officials. One crucial element that cities and towns will have to decide—if voters approve legalization statewide, as polls suggest they will—is whether to apply local sales taxes on cannabis. Proposition 64 sets a statewide sales tax of 15 percent on marijuana, but gives local jurisdictions the right to layer additional taxes on top. As I explained in a column in the Orange County Register this weekend, cities should resist the urge to set high tax rates that could keep a portion the state's marijuana market—a market that could account for more than $5 billion in annual sales—in the shadows and make it harder for legal marijuana businesses to get started. Other states aiming to legalize weed should take the same cautious approach. From my piece, which you can read here: The tax plan contained in Prop. 64, pro-marijuana activists say, could help California avoid some of the pitfalls that Colorado, Oregon and Washington dealt with in the aftermath of legalization. Each of those states initially imposed tax rates in excess of 25 percent (Oregon had the highest initial rate, 37 percent), but all three already have taken steps to reduce their taxes on weed. Higher tax rates, those states found, kept the marijuana industry partially in the shadows. California's lower tax rate should help to bring the state's robust black market for weed into the light. That's good for consumers, good for businesses and good for the state's tax coffers. California isn't alone in learning this lesson. States considering legalization this year are all aiming at lower tax rates. Voters in Arizona and Nevada, like those in California, will decide on Nov. 8 if they want to legalize recreational marijuana and tax it at 15 percent. A marijuana legalization initiative in Maine would set taxes at 10 percent, and Massachusetts' proposed 3.75 tax rate would be the lowest in the nation for recreational weed, if voters approve it. Estimates vary, but California is likely to net more than $650 million in revenue from the state sales tax on marijuana. An analysis by the Los Angeles Times suggests that that figure could rise to $1 billion within a few years. The state plans to use the revenue to pay for a wide range of things somewhat related to legalization, including law enforcement, drug education and treatment programs, environmental projects and DUI enforcement. Still, the biggest benefit of legalization is the end of a destructive and expensive war against the black market for marijuana. That's why it's important that legalization doesn't come with tax burdens that could force marijuana to stay in the underground economy. "It's a balancing act," says Lynne Lyman, whom I interviewed on this week's episode of American Radio Journal. Lyman is the California state director for the Drug Policy Alliance, which is supporting the passage of Prop 64. "Overtaxing will not only not generate the revenue—because people will stay in the underground market," says Lyman. "It will also increase crime, increase arrests, all the things we're trying to reduce with legalization." You can listen to the whole interview here, and check out more about California's Proposition 64 below. src="https://www.youtube.com/embed/69ndkRkbMBk" allowfullscreen="allowfullscreen" width="560" height="340" frameborder="0">[...]



Pennsylvania’s New Tax on Vape Shops is Forcing Them Out of Business

Mon, 03 Oct 2016 14:05:00 -0400

It's Friday afternoon and Chris Hughes is sitting inside his now-empty store in Williamsport, Pennsylvania. For the past three years, Hughes owned and ran Fat Cat Vaping, one of hundreds of small shops across Pennsylvania catering to the nascent community of electronic cigarette users. Hughes is a "vaper" himself, having switched from traditional cigarettes to the healthier electronic version a few years ago. After state lawmakers and Gov. Tom Wolf signed off on a budget bill that included a massive new tax on electronic cigarettes, Hughes knew Fat Cat Vaping's days were numbered. "I knew immediately that I would have to close," he says. He's not the only one. The estimated 350 vape shops scatter across Pennsylvania are getting hit hard by the new 40 percent wholesale tax on all vaping equipment and supplies. The real kicker is that the same 40 percent tax applies not only to purchases made after October 1—the day the tax took effect—but also covers all inventory on store shelves on that date. That means a store with $100,000 worth of inventory—about what a small vape shop would carry—owes the state $40,000 as of Saturday. "It's ludicrous to think what was a viable business yesterday — by the stroke of a pen — is no longer a viable business today," Dave Norris, owner of the Blue Door vape shop in Harrisburg, told PennLive in September as he prepared to close down all three of his locations because of the tax. The tax was passed in July as part of the 2016-17 state budget (taxes on packs of traditional cigarettes increased by $1 as well). It had support from both sides of the Republican-controlled legislature and was signed by Democratic Gov. Tom Wolf. The tax will raise an estimated $13 million. Some aren't so sure about that. "I am 100 percent confident that 40 percent of nothing is nothing," says Jeff Wheeland, R-Lycoming. What he means is that the state shouldn't be banking on revenue from the vaping tax if the tax decimates the businesses expected to pay it. Wheeland and state Sen. Camera Bartolotta, R-Washington, are rallying support to repeal the months-old tax. They are proposing a volume-based tax of five cents per milliliter on vaping fluid to replace the 40 percent wholesale tax. Wheeland says the trade-off would be almost revenue neutral, but would be easier for vaping businesses to handle and would be more in line with how other states tax e-cigarettes. Consumer Advocates for Smoke Free Alternatives, a national e-cigarette consumer group, favors the 5 percent sales tax. The 40 percent wholesale tax is "completely unworkable," the organization says. The clock is now ticking. The wholesale tax took effect on October 1, but businesses have 90 days to remit tax revenue to the state treasury. That gives lawmakers until the first day of 2017 to repeal the tax—but with the election looming, the state legislature is scheduled to be in session for fewer than a dozen days between now and the end of the year. Opponents of the vaping tax say it will not only wreck Pennsylvania's growing vape shops, but will also make it harder for smokers who want to use e-cigarettes to quit the habit. "A pack of cigarettes is going to be more affordable," Dori Odosso said in an interview last week. "That's something that I don't ever want to hear someone say to me—that they are smoking cigarettes instead of vaping because they can't afford to switch." Odosso owns the Sweet Home Vaper Company in Kittanning, Pennsylvania. She started the business in 2014 after switching from smoking to vaping and finding out that other smokers in her small hometown wanted to do the same. Despite fears from the federal government and anti-smoking groups, medical research shows vaping to be a safer alternative to smoking traditional cigarettes. Vapers get the same hit of nicotine and get to continue their habitual activity without inhaling the nasty tar, smoke and chemicals that are part of the reason why cigarettes are so unhealthy[...]



Donald Trump's Billion-Dollar Tax Loss Is a Diversion From More-Serious Matters

Sun, 02 Oct 2016 12:15:00 -0400

If you care about substantive policy debate, it's not good for Donald Trump that The New York Times has published a few pages of 21-year-old state-tax returns showing he declared a $916-million loss in 1995. Cue another week wasted with trivial distractions from what we should be talking about in the final month-plus of a presidential campaign. Care about foreign policy, government spending, and more? Maybe we'll get around to hashing all that out after the election. But don't hold your breath. To be sure, a billion-dollar write-off is a lot of money and, as the Times suggests in the story's headline, it means "He Could Have Avoided Paying Taxes for Nearly Two Decades." This adds fuel to the fire that Hillary Clinton lit during last week's presidential debate when she said that there are only sketchy reasons for Trump not to release his federal tax returns to the public, as presidential candidates have almost all done since 1976. A billionaire who doesn't pay any taxes who dares speak for the common man! Ouch, even though there's no reason to think there's anything at all illegal or even fuzzy about Trump's taxes. This will harden Clinton supporters in their contempt for Trump and it will do the same for Trump supporters toward Crooked Hillary, especially if a Clinton operative is unmasked as the leaker. For the record, here's the Trump campaign's official response: Mr. Trump is a highly-skilled businessman who has a fiduciary responsibility to his business, his family and his employees to pay no more tax than legally required. That being said, Mr. Trump has paid hundreds of millions of dollars in property taxes, sales and excise taxes, real estate taxes, city taxes, state taxes, employee taxes and federal taxes, along with very substantial charitable contributions. Mr. Trump knows the tax code far better than anyone who has ever run for President and he is the only one that knows how to fix it. More here. As I type, Trump and Clinton surrogates are duking it out on the Sunday morning shows, explaining why this unmasks Trump as a uniquely awful plutocrat or reveals him to be the single person who can dismantle our terrible tax code and replace it with something that will allow economic growth. This story, like the Miss Universe controversy that immediately preceded it, clearly puts Trump on the defensive. Given his softening in the polls after a weak debate performance and the rapidly approaching end of the campaign season (there are just 37 days leftt), the tax revelation forces Trump to engage an issue that has nothing to do with the core issues that put him in a tight race to the next president. Whatever. Sucks to be Trump right now. But you know what? No laws apparently have been broken and this doesn't even amble into the territory of bad judgment that many of his (and Clinton's) actions do. As Seinfeld's Kramer would note, most of us don't even know what a write-off is, and Trump is the one who's writing it off. Far more important, this sort of story is a major distraction from actually serious issues tied to the current state of the world and the specific proposals that candidates have laid out in their bids to become the country's next leader. As Matt Welch demonstrated with respect to foreign policy and failed military interventions, we already know that the "Media Would Rather Talk About Gary Johnson's 'Aleppo Moment' Than a Damning New Report on Hillary Clinton's Actual War." And as Brian Doherty pointed out, it turns out that Gary Johnson's trade-and-diplomacy vision for "has impressed even the foreign policy mavens at Foreign Policy magazine." Even as Aleppo is now being besieged by Syrian government, Iranian, and Russian forces and the president has dispatched new troops to Iraq, neither Trump nor Hillary have engaged in meaningful foreign-policy discussion about the United States' role in the world. And consider this: According to the latest numbers from the Committee [...]



Battle Over Publicly-Financed Las Vegas Stadium Heats Up

Wed, 28 Sep 2016 11:30:00 -0400

A prominent Las Vegas labor union and a conservative tax watchdog group have both come out in vocal opposition to the proposed $750 million public subsidy for a new stadium intended to lure the National Football League (NFL)'s Raiders to Sin City. As I noted here at Reason earlier this month, to get the stadium built, "the Raiders, who currently call Oakland (Calif.) home, will contribute far less at $500 million, while Sheldon Adelson, the billionaire casino owner and financier of failed political campaigns, will contribute $650 million through his Las Vegas Sands corporation." If the deal goes through as presently constructed, Adelson's group will not be required to share any profits with the public. Via the Twitter feed of KTNV political analyst Jon Ralston, The Nevada Taxpayers Association sent out a letter featuring 16 reasons to oppose raising hotel taxes one percent to help finance the stadium, including: The bond will have to be paid out of the public tax coffers whether or not the tax increase raises sufficient revenue. A recently as this year, a NFL team abandoned a city which publicly financed its stadium—before the debt on the stadium was paid off. The public won't share in the stadium's profits. Nevada Gov. Brian Sandoval (R)—who supports the stadium proposal—has called for $300 million in budget cuts "because other taxes are under-performing." And finally, "There is no evidence to suggest that a publicly funded stadium brings any benefit to taxpayers and there is significant data indicating that subsidized stadiums can be a detriment to a community." Earlier this week Nevada's largest private sector labor union—the Culinary Workers Union—released a Dr. Seuss-esque video mocking the stadium proposal. Watch below: src="https://www.youtube.com/embed/zwsq-3vTpEw" allowfullscreen="allowfullscreen" width="560" height="340" frameborder="0"> Not to be outdone, the Adelson-funded group Support the Las Vegas Dome (which has been pushing the unintentionally hilarious hashtag #DOTHEDOMETHING) released an NFL Films style video obviously directed at the jock-sniffers, but which was also loaded with overblown promises made countless times elsewhere about the thousands of new jobs and hundreds of millions of dollars that will be added to the economy. Tiltled "Five Things to Know About Bringing the Raiders to Las Vegas," the video includes such sound and reasoned arguments as, "The stadium will be awesome. Not awesome-awesome, Vegas-awesome," and "The public will own the stadium. That's right, it's YOUR stadium," though the video doesn't recommend you show up to the stadium without paying for parking and admission: src="https://www.youtube.com/embed/akwvOWDZITU" allowfullscreen="allowfullscreen" width="560" height="340" frameborder="0"> Gov. Sandoval has called for a special session of the legislature to convene in early October to vote on the stadium proposal, which if passed by two-thirds of both the Senate and the Assembly will become a reality. Read more Reason coverage on the never-ending boondoggle of publicly-financed stadiums here.[...]



Taxing Human Waste Won't Get Chicago's Pension Fund Out of Deep Doo-Doo

Thu, 22 Sep 2016 15:45:00 -0400

Residents of Chicago already pay for water and sewer services—like anyone else does. Starting next year, though, they'll be paying an extra 30 percent for the privilege of having indoor plumbing. Draining those dollars out of resident's wallets isn't a response to a sudden increase in the price of water and won't pay for upgrades to the city's sewers. In fact, not a single dollar of revenue from the new tax will be spent on any aspect of Chicago's public infrastructure. What it will do—maybe—is shore up a municipal employee pension system that's woefully underfunded and in danger of going bankrupt within the next few years. Right now, the Municipal Employees' Annuity and Benefit Fund of Chicago has only enough assets to cover 32 cents of every dollar owed to retirees and current employees. Since the Illinois Supreme Court ruled in March that retirement benefits are sacrosanct and cannot be reduced, Chicago is left with only one option: find a way to pay for promises that probably never should have been made in the first place. Mayor Rahm Emanuel pushed the tax through the city council with the promise that it would, within 50 years, close the pension plan's deficit. It's going to cost the average Chicago household about $53 in 2017, but will increase over the next four years. "Chicago's pension funds are now off the road to bankruptcy and on the path to solvency," Emanuel declared last week after the city council approved the new tax. Before getting into how the money will be spent and whether it will do what Emanuel says, you have to understand how the city got into this mess in the first place. The short answer: lots of bad decisions made over many years. The longer answer requires a bit of math, but I've tried to simplify things as much as possible. Chicago finds itself here because the city has failed to adequately fund the cost of its municipal pension plan. Going back to at least 2006, Chicago has never come close to fully funding its annual pension obligation—in most years, it hasn't even put in half of what would be required to keep the fund stable. Here's what that looks like. The blue line on the chart below is called the ADT—that's the amount of money the actuaries say the city should be putting into the fund each year. It's based on a lot of different factors, including investment performance, benefits due to retirees and benefits promised to current employees who will one day retire and have to be paid. If anything, the blue line represents the bare minimum that a city should be paying into the pension fund each year to keep up with its long-term obligations. It's the mortgage bill. The yellow line represents how much money Chicago has actually put into the pension fund each year. As you can see, the gap is huge. The big grey wall in the background represents the level to which the pension system is funded. A system funded at 100 percent has all the money necessary to pay for the retirement benefits promised to all current employees and living beneficiaries. Chicago isn't even close to being able to do that. It's not hard to see the relationship between the contributions and the funding level. There are other factors that affect the funding level—like investment returns—so it's not exactly that straightforward, but there's no doubt that failing to meet your annual obligations results in larger future obligations and a retirement system that is less well funded than it ought to be. If you enjoy gallows humor, you might get a laugh out of the MEABF's 50-year projection. This is something the fund is required by law to produce each year, but last year it was actually more of a nine-year projection because the fund is on pace to be completely out of money by 2025. (If you want to see this spelled out in black and white, it's on page 48 of the fund's 2015 annual report.) As you can see, the system isn't going[...]



The Legal Marijuana Business Will Be as Complicated and Confusing as Everything Else in California

Thu, 08 Sep 2016 13:15:00 -0400

(image) It seems likely that Californians in November will vote to legalize the recreational use of marijuana, along with a massive raft of state regulation and taxation schemes. We bribe our government to secure permission to do what we want with our own bodies. Go figure.

In any event, the regulations don't stop on the state level. Proposition 64—the initiative that will legalize recreational growth, manufacture, possession, and use—also permits municipalities to set up their own regulations, just like they do for most other businesses.

So in preparation for the likelihood that Prop. 64 passes, there are a whole bunch of municipalities that are putting up local regulations for vote as well. Brooke Edwards Staggs at the Orange County Register looked through the filings and determined that there were 62 marijuana-related local measures under consideration in California cities and counties. She notes the complex issues cities are facing:

Should cities welcome marijuana dispensaries but not farms, or vice versa? Should their fees be fixed or increase over time? Should they tax marijuana patients less than those who just want to get high? Would that encourage continued abuse of the medical system?

Some initiatives would place caps on the number of dispensaries permitted. Some propose additional local tax rates that vary wildly. One county (Sierra County) wants to ban commercial cultivation entirely.

Obviously, the possibility of cities making money off of marijuana sales is heavily influencing this rush of new regulation (maybe that explains the sudden lack of resistance to seriously curtailing police civil asset forfeiture in California). The state would add a 15 percent sales tax, plus a tax on cultivation, plus whatever municipalities convince voters to approve. San Jacinto council members say they want to make the tax very high in order to discourage the marijuana industry from settling in their city.

That's a misguided idea, because what actually happens when taxes get extremely high on a product people want to consume is that you get the same kind of black market you'd get if you banned it entirely. Not for nothing do states with very high cigarette taxes also struggle with black markets for cigarettes that require police intervention and enforcement (with sometimes terrible outcomes). Is a pot shop worse for the city than the shadowy way people in San Jacinto get marijuana now, or is the problem that the city's leadership can't just pretend it's not there?

Read more here.




Pennsylvanians Will Have To Pay For Gov. Chris Christie’s Bad Spending Habits

Wed, 07 Sep 2016 11:00:00 -0400

New Jersey Gov. Chris Christie delivered an unpleasant surprise to some Pennsylvanians over Labor Day weekend. Starting next year, New Jersey will be taking a larger share of the fruits of their labor. Christie announced on Friday that he will terminate a 39-year-long deal between the two states that allowed residents of Pennsylvania who work in New Jersey to pay The Keystone State's comparatively lower income tax rate. The change in policy affects about 125,000 Pennsylvanians—most of them in Philadelphia and the city's suburbs, according to the Associated Press. When the tax deal was struck in 1977, New Jersey had a 2.5 percent top income tax rate and Pennsylvania had a 2 percent top income tax rate. Today, things are quite different. Pennsylvania uses a flat income tax rate of 3.07 percent. New Jersey has a progressive tax, with rates ranging from 1.4 percent to 8.97 percent. Practically, that means a Pennsylvanian who works in New Jersey and earns the average per capita income of $50,000 will see their their effective tax rate nearly double next year. Christie, a Republican, did not even try to hide the fact that he's ending the longstanding tax deal in order to pad his state's bottom line. The Christie administration hopes to collect $180 million annually by dumping the tax agreement with Pennsylvania (it was one of several tax reciprocal agreements that exist between states, like the one that allows workers in Washington, D.C., to pay taxes in whichever state they live). "In the longer team, it's just one more example of New Jersey not having a welcoming tax environment," said Joseph D. Henchman, vice president of legal and state projects for the Tax Foundation, a nonpartisan think tank based in Washington, D.C. At least the change won't drop New Jersey any further down the Tax Foundation's annual rankings of state tax climates. For 2016, it was already ranked dead last among the 50 states. Pennsylvania ranked a mediocre 32nd in the nation. Pennsylvanians who are unhappy with their higher tax bills can perhaps find solace in the fact that they will be helping to pay for the retirements of New Jersey state workers and to close a budget gap created by years of questionable spending on corporate welfare. That's because—despite Christie's claims that he needs more revenue to balance the budget—New Jersey remains a classic example of a state with a spending problem, not a revenue problem. On a per capita basis, only five states collected more revenue in 2013 than New Jersey's state and local governments did (two of them are Alaska and North Dakota, where tiny populations and a reliance on oil and natural gas excise taxes skew per capita measurements like this). Meanwhile, spending has increased almost every year during Christie's administration: the state spent $29 billion in 2010 when he took over the governorship but the budget Christie signed in July spends $34.5 billion. Christie blames the spending increases on the state's escalating pension costs. New Jersey's unfunded pension obligations total more than $80 billion, and mandatory state bond disclosures say the two main retirement funds could be completely out of money by the mid-2020s. To be fair, New Jersey's pension crisis predates Christie's time in office—and it will still exist when he departs. Still, Christie shares in the blame for failing to bring those problems under control. In 2011, Christie reached a deal with Democratic lawmakers that would have curtailed state spending in favor of increasing contributions to the pension system (state employees would have to pay more into the system too). In theory, the deal could have closed the unfunded pension gap within a decade. In reality, Christie couldn't follow through. Facing political pressure and revenue shortfalls, the governor reduced pension contribution[...]



A New Look at the Kennedy-Reagan Growth Recipe

Mon, 05 Sep 2016 16:00:00 -0400

America can return to prosperity and robust economic growth by looking to the Kennedy-Reagan model of income tax cuts and a strong, stable dollar, a new book argues. JFK and the Reagan Revolution: A Secret History of American Prosperity, by Lawrence Kudlow and Brian Domitrovic, will be published this week by Penguin Random House's Portfolio imprint. It tells the story of how the tax and monetary policies of Presidents Kennedy and Reagan triggered impressive economic growth. As Kudlow and Domitrovic describe it in their introduction, "the combination of a strong and stable dollar with big, permanent, across-the-board tax rate cuts" can lead to a near-utopia. "Budget deficits, the retirement crisis, student loans, unaffordable health care, poor schools, [problems of] inner cities—all these things will fade away as lasting economic growth takes hold." Kudlow couldn't have been more gracious three years ago when my own book JFK, Conservative was published, and part of what I want to do here is repay the kindness. My own suggestions that the Kennedy tax cuts might be a useful model today have been met consistently and predictably by liberal objections that today's top income tax rates are considerably lower than the 91 percent top federal rate that obtained before Kennedy won a reduction to 70 percent. There's less room to cut now, the argument goes, and the effects on incentives and growth would be concomitantly less powerful. What's more, neither the Democratic presidential candidate, Hillary Clinton, nor the Republican one, Donald Trump, has been campaigning on a Kennedy-Reagan-Kudlow-Domitrovic platform. Clinton, while talking some about both economic growth and tax simplification, has also been calling for increased taxes on top earners and on some capital gains. Trump, while proposing some substantial income tax rate reductions, has also threatened to increase tariffs on imports. If that is more than just a negotiating threat, it would create a sharp contrast with Kennedy, who, Kudlow and Domitrovic write, "spurred the biggest round of tariff reductions of modern times." So are the Kennedy and Reagan examples irrelevant? Not quite. JFK and the Reagan Revolution doesn't really get into it, but it's worth mentioning that both presidents also spent heavily on arms buildups, pursuing a peace-through-strength approach to national security. They were fighting a Cold War against the Soviet Union, but some might argue that a similar strategy is in order now against the Islamic State or other manifestations of militant Islam. As for the argument that marginal rates today are lower than the ones that either Reagan or Kennedy began paring, I'd argue that there's still plenty of room to cut. State and local income taxes piled atop the federal ones mean marginal top rates for Californians or New York City residents are more than 50 percent. That means various governments take more than half of every additional dollar earned. At lower levels, phase-outs of benefits and subsidies create even steeper effective marginal rates. At 39.6 percent, the top federal rate is considerably higher than the 28 percent rate that Reagan left it at. Remember, too, the Sixteenth Amendment that gave the government the power to levy a federal income tax was only ratified in 1913, well more than a century after the country was founded. One useful contribution of JFK and the Reagan Revolution is to remind readers that Kennedy and Reagan didn't necessarily start off as tax-cutters, either. Reagan raised taxes as governor of California. When he ran for president in 1976, he insisted that tax cuts needed to be offset by spending cuts. As a congressman, Kennedy voted against tax cuts championed by Senator Robert Taft of Ohio. Kudlow and Domitrovic remind us, too, that even the Wall Street [...]



Will a Zombie Congress Devour Our Gains?

Tue, 30 Aug 2016 12:50:00 -0400

Congress will be returning to session next week after Labor Day with a busy agenda that nobody actually wants to deal with because this year's elections seem so crazy. At the top of mind of small-government conservatives (and obviously libertarians) is the intense pressure to pass a spending bill to keep the government in operation. The omnibus spending bill approved last December funds the government to the end of September. So they've got to pass something. Several activist groups that support reducing the size of government and lowering taxes are putting forward an organized effort to try to discourage Congress from kicking the can down the road to December's lame duck session and then pushing through a last-minute, post-election, must-pass spending bill influenced by members of Congress who are on their way out the door and don't have to worry about accountability. (We're looking at you, Sen. Harry Reid.) Some of the groups involved—like Americans for Prosperity, FreedomWorks, and Americans for Task Reform—are heavy-hitters in small-government and Tea Party activism. They, and several dozen other organizations, are calling on Congress to avoid a last-minute push to fund government all the way through 2017 and quietly include all sorts of cronyist regulations that benefit certain influential parties that lobby the government. In a teleconference with the media this morning, participants noted efforts to re-establish the loan authority of the cronyist Export-Import Bank as a concern. In a letter, the groups note how last year's last-minute, must-pass omnibus spending bill turned out: Congress already considered the matter of expiring tax provisions a little under a year ago. The $680 billion package signed into law last December made some of these items permanent and allowed more than two dozen others to expire at the end of 2015, laying the groundwork for comprehensive tax reform. Included in the nearly $20 billion in tax provisions that are set to expire are provisions pertaining to small-scale wind power, geothermal heat pumps, race horses, film production—provisions that distort our tax laws and narrowly benefit favored industries over the rest of the tax base. These provisions were made temporary for a reason. It makes no sense to come back just one year later and selectively extend certain provisions in a lame duck. Reason noted some of the secret stuff buried in that Omnibus legislation earlier in our April issue (not all of it was bad—but it was certainly not transparent). In a press call this morning, representatives from three of the groups involved in this push said they're specifically focused on making sure spending legislation is not approved at the last minute, and only spending and tax-related legislation. They're going to stay focused on that goal and not other types of bills that could get pushed through in December. That may matter in the event that heavily negotiated criminal justice and sentencing reforms finally make it through Congress before the end of the year. But clearly something does need to be passed in order to prevent a government shutdown. What some Republicans are pushing for is a continuing resolution to fund the government through March of next year. That would put the new president and a new Congress into place. Read more about the push behind that six-month plan here.[...]



Bay Area Politicians Strangling the Region's Key Industry

Fri, 26 Aug 2016 01:15:00 -0400

In most of the country, a region's "big" industry—think automotive companies in Michigan's heyday, the oil business in Houston and entertainment in Los Angeles—is treated with deference by locals. Sometimes that attitude morphs into support for subsidies or even indifference to pollution or other problems. But it's rare to see city leaders purposefully stifle companies that produce a large share of good-paying jobs and tax revenues. Enter San Francisco, where officials often don't play by the normal economic rules. No metropolitan area is more closely identified with the burgeoning high-tech economy than the Bay Area. Yet in June, three of the city's 11 supervisors proposed a 1.5-percent payroll tax that would be imposed specifically on technology companies that earn $1 million in gross receipts. This "tech tax" was designed to raise money to battle the city's homeless problem. But the economic rationale was epitomized in a statement by the bill's author, Supervisor Eric Mar: "The rapid tech boom in our city and region threatens our city's ability to thrive and prosper," he said, in a Guardian report. "Five years after the boom, it's time for San Francisco to ask the tech companies to pay their fair share." Earlier this month, the measure that would have placed the tax proposal on a citywide ballot was defeated in committee. Enough San Francisco legislators apparently understand an idea that goes back to Aesop's day: Strangling a golden goose is a quick route to poverty. But this won't be the last San Franciscans will hear about such a tax increase, nor is it the only example of increasing hostility by city officials and local activists to the tech industry. "Corporate buses that Google and other tech companies (use) to ferry their workers from the city to Silicon Valley, 30 or 40 miles to the south, are being targeted by an increasingly assertive guerrilla campaign of disruption," according to a 2014 Guardian article. Protesters have blocked buses. A window was busted on one of them. As the article put it, protesters complain that "the tech sector has pushed up housing prices in the city and made it all but unaffordable for anyone without a six-figure salary." The Google buses make it easier for tech workers to live in beautiful San Francisco, rather than in the more mundane San Jose area. Likewise, San Francisco supervisors recently passed a law that legalizes short-term rentals in the city, but imposes restrictions on them. Property owners can only rent out their entire house 90 days a year. It must be their primary residency. They must pay hotel taxes. They must follow the city's rent-control laws. The most controversial element: Hosting sites, such as Airbnb and HomeAway, would be responsible for making sure hosts—i.e., the people who post their homes for rent on company sites—are registered with the city. Airbnb filed a lawsuit arguing the law violates the First Amendment and Communications Decency Act. The latter is a 1996 federal law that protects websites from being held accountable for what individuals post on them. Advocates for the short-term rental law use a similar argument as those who defend the "tech tax" proposal. They blame these rentals for depleting the city's housing stock and driving up the cost of apartments. "It is ultimately about corporate responsibility," according to Supervisor David Campos, quoted in the San Francisco Chronicle. "About an industry that has made and continues to make tens of millions of dollars in this line of work taking responsibility for the negative impact that they are having on the housing stock." Once again, many San Francisco officials see thriving tech companies as a problem. They blame their success for driving up housings costs. Appare[...]



Chicago Culture Cops Tax Concert-Venues Because Rap, Rock, Country Aren't 'Art'

Wed, 24 Aug 2016 10:30:00 -0400

When is a live musical performance not a live musical performance? When it takes place in Chicago and the genre is rap, rock, country, or electronica. According to local officials, such concerts don't fall under the category of either "music," "fine art," or "culture"—and hence bars that host them must pay up. See, under the law in Cook County—which includes the city of Chicago—all event venues are subject to a three percent tax on ticket sales unless the event in question is a "live theatrical, live musical or other live cultural performance." County code later defines cultural performances as "any of the disciplines which are commonly regarded as part of the fine arts, such as live theater, music, opera, drama, comedy, ballet, modern or traditional dance, and book or poetry readings." Most area venues that host live musical performances of any kind took themselves to be exempt. But the county has recently been trying to squeeze more amusement-tax money out of local businesses by insisting that some live musical performances don't count for tax-exemption purposes because they're not artistic enough. The Chicago Reader reported last week on Cook County's attempt to ring more than $200,000 in back taxes out of Beauty Bar, along with money from around half a dozen other venues "that routinely book DJs or electronic music." Pat Doerr, president of Chicago's Hospitality Business Association, said the move likely stems from a 2014 appeals court ruling allowing the county to go after the Chicago Bears for $4 million in unpaid amusement taxes. "My suspicion makes me think they wanted to look at every possible way to collect amusement taxes," he told the Reader, "and that's where we're at today." At an administrative hearing on Monday, Cook County officials clarified their position: it's not just DJ or electronica music that is suspect but rap, rock, and country music also. "Rap music, country music, and rock 'n' roll" do not fall under the purview of "fine art,'" Anita Richardson, an administrative hearing officer for the county, explained. Under Richardson's interpretation of the code, it's not enough for a performance to merely contain theater, music, comedy, dance, or literature. No, only specific works which live up to county culture cops' standards get a pass. As Bruce Finkelman, managing partner of one of the company that owns Beauty Bar, complained, such a position essentially requires a performance venue to check in with the county for every show it books to see what state art critics think. Even Cook County Commissioner John Fritchey seems flabbergasted by the position. "No pun intended," he told the Reader, "but I think the county is being tone deaf to recognize opera as a form of cultural art but not Skrillex." The next administrative hearing for Beauty Bar and co. is scheduled for October. The administrative hearing officer told owners they should bring musicologists to "further testify the music you are talking about falls within any disciplines considered fine art."[...]



How Passing Prop 64 Would Affect Marijuana Taxes in California

Wed, 24 Aug 2016 08:05:00 -0400

If California voters back Proposition 64 to legalize marijuana in November, the state will have the lowest statewide excise taxes on weed in the country. Aside from the obvious response—cheaper legal weed!—this is an important development that shows California policymakers have learned from the mistakes made in some other states that went down the legalize-and-tax-it route in recent years. Lawmakers in Colorado, Washington and Oregon have already considered reductions to their states' marijuana taxes after finding that high tax rates—each of those states have rates of at least 30 percent for recreational marijuana—did not shut down black markets for weed. California has a robust black market for marijuana, of course. With that in mind, Proposition 64 contains a more modest 15 percent excise tax on recreational marijuana and would do away with the existing use taxes on medical marijuana. There would be no tax on marijuana grown for personal consumption but a per-ounce cultivation tax applies to buds and leaves sold by growers to distributors. Even with a lower rate—or perhaps because of it, depending on how the Laffer curve applies to marijuana—California could be looking at more than $1 billion in weed-related revenue within a few years after legalization, the Los Angeles Times reported this week. That's more than six times the amount that Colorado collected in 2015, a sign of just how large the marijuana market in California could be. Here's how the statewide taxes break down, courtesy of a new report from CalCann Holdings LLC, which helps marijuana-related businesses navigate California's legal and regulatory framework: But the state excise tax is only one part of the story, as the CalCann Holdings report details. Cities across California already have a myriad of taxes on medical marijuana and a similar patchwork of local taxes for recreational weed could be possible if Prop 64 passes. There are essentially three types of cities looking to tax marijuana, according to the analysts at CalCann. Progressive cities likely to welcome the marijuana industry will set low rates, like the 2.5 percent tax rate on medical marijuana currently found in Berkeley and Stockton. Other governments less welcoming to the end of marijuana prohibition might be inclined to pile on the taxes in the hope of keeping marijuana businesses out of the area—effectively outlawing legal marijuana and letting the black market continue to operate (it should be noted that Prop 64 also allows local governments to outlaw weed even if it is legalized statewide). The third group is probably the most interesting—and potentially the most worrisome. CalCann Holdings says deeply indebted cities could welcome marijuana-related businesses as sources of much-needed tax revenue. But high local taxes could offset the benefits of California's comparatively low statewide tax rate, something that is already worrying supporters of Prop 64. "If we're getting up to 30, 35 percent tax, yeah that's when people are going to stay in the illicit underground market," says Lynne Lyman, California state director for the Drug Policy Alliance, who discussed the taxation issue in a wide-ranging interview with Reason TV earlier this week. She says the message advocates are sending to local govenrments is "we know you need money for everything. Don't go crazy. Start low." Assuming, as all this does, that Proposition 64 is approved in November, that's good advice for cities in California to follow. On top of concerns about keeping some or all of the marijuana market in the shadows, high taxes will limit the potential economic growth from new investment in the cannibis industry--bringing growth a[...]