Published: Sat, 21 Jan 2017 00:00:00 -0500
Last Build Date: Sat, 21 Jan 2017 21:24:35 -0500
Fri, 06 Jan 2017 12:18:00 -0500
When states started enacting general sales taxes in the 1930s, it wasn't long before there were songs complaining about the new levies. In 1934, the Mississippi Sheiks recorded "Sales Tax," which starts with a spoken skit in which the band is alarmed to learn that they now need to pay three cents more for their cigarettes.
"They say that's the government's rule," one of the Sheiks explains.
"The government's rule?" another replies. "Well, there's lots of things sold that the government knows anything about." And then the bluesmen break into a song where even the bootleggers and prostitutes are now charging extra for their services:
src="https://www.youtube.com/embed/2hv7xxrmyh8" allowfullscreen="allowfullscreen" width="560" height="315" frameborder="0">
You might be curious why anyone would still be buying liquor from a bootlegger in 1934, a year after the Prohibition Amendment was repealed. Answer: These were the Mississippi Sheiks, and Prohibition in Mississippi lasted a lot longer than Prohibition nationwide. It was the last place to keep a statewide alcohol ban on the books, eliminating it not in 1933 but in 1966:
Thu, 05 Jan 2017 10:35:00 -0500A new tax on soda and other sugary drinks that took effect in New Year's Day in Philadelphia is already generating outrage from some residents and businesses in the city. Meanwhile, in New York and elsewhere, lobbyists and public officials are looking to duplicate the dubious policy. When it was passed last year, Philadelphia became the largest city in the nation to create a specific tax for soda and sugary beverages, a policy that had previously been contained to progressive enclaves like Berkeley, California. The tax is levied at a rate of 1.5 cents per ounce, which makes it 24 times more expensive than Pennsylvania's taxes on beer. Practically, that means that some drinks end up being nearly twice as expensive after the tax is applied, turning $2 sodas into $4 sodas. That's causing quite a stir in the city, as social media posts this week have revealed. In one photo that went viral after being posted to Facebook, a receipt shows more than $3 in tax added to the cost of a $5.99 12-pack of Propel, an energy drink. From a Facebook post, the Philadelphia sugary drink tax implemented today damn, between that & Pennsylvania gas tax no wonder folk revolted pic.twitter.com/ZUtmufCyQn — SalenaZito (@SalenaZito) January 2, 2017 The Tax Foundation posted photos from inside grocery stores in Philadelphia and confirmed the ridiculously high taxes on products like Propel and other sports drinks. With the tax added, the 12 pack of Propel ends up costing more than a 12-pack of cheap beer, the organization noted. City officials told KYW-3 that the tax was intended to hit distributors of sugary drinks. In a shocking twist, the TV station reported on Wednesday night that the tax "is being passed onto the customer." After the tax was passed, some economists suggested that it would hurt businesses in the city by giving customers a good incentive to buy beverages outside city limits. Small businesses interviewed by Reason in October expressed similar concerns, since the tax is applied not only to cans and bottles of soda, but to soda fountains (like the ones found in many pizza places and cheesesteak joints across Philadelphia) too. Already, those predictions seem to be coming true, at least anecdotally. @ctemp153 @MeosoFunny @GayPatriot @ChrisLoesch @liars_never_win @chadfelixg @ChrisStigall Weekend grocery shopping trips. pic.twitter.com/vVl1QLk5dz — Gay Penn Patriot (@GayPennPatriot) January 2, 2017 Congrats, @PhiladelphiaGov. You've made sure my grocery shopping will be done outside the city with this ridiculous #sodatax. — Dan Baker (@Nadrekab) January 3, 2017 Finks Hoagies in Northeast Phila is outraged with unfair soda tax and posted a nasty note. Hope more outrage 2 follow pic.twitter.com/T0xKWcOiOq — Howard Eskin (@howardeskin) January 5, 2017 Rather than nudging people to make heather decisions about what they drink—as the tax is supposed to, even though the health benefits of soda taxes are overrated—it might just nudge Philadelphians to shop outside the city whenever possible. Businesses in the city might suffer from the tax, but they also get to deal with more paperwork too. Marisa Waxman, Philadelphia's first deputy revenue commissioner, tells WHYY that city retailers need to keep their bills to show their compliance, since there won't be a tax stamp or sticker on the beverages. "Even if you are compliant," said Waxman, "make sure you are hanging on to all your invoices and records so if we show up at your establishment you can show us yep I am doing what I need to be doing." The city will be hiring additional tax collectors to make sure everything is paid up, WHYY reports. About the only people happy with the new tax are, predictably, the city officials who will have an estimated $90 million in new annual revenue to spend. Officials in Philadelphia sold the soda tax by promising to use the revenue to fund a new pre-K program for the city's youngest schoolchildren. As Baylen Linnekin noted in July, "spending tens of millions of dollars to expand pre-K in a city where even the most [...]
Thu, 15 Dec 2016 08:30:00 -0500The IRS is in the process of trying to force Bitcoin exchange Coinbase to give up the identities of its clients, in a quest, the IRS says, to find tax cheats. I reported on this IRS attack earlier this month, and explained the IRS's attitude toward taxing bitcoin profits back in 2014. (It considers the alt-coin legally property, not currency, but you still owe taxes on any profits made by selling bitcoin.) A motion to quash the IRS's subpoena against Coinbase was filed this week in U.S. District Court for the Northern District of California in the name of the anonymous John Does the IRS is trying to track down, by Coinbase customer Jeffrey K. Berns. Berns wants the IRS stopped, the motion says: on the grounds that the IRS has no legitimate purpose in seeking the requested documents from Coinbase concerning its users, enforcement of the IRS Summons would constitute an abuse of process as the IRS does not currently have the ability to enforce compliance with its 2014 virtual currency guidance, and the categories of requested documents are so overbroad such that the IRS Summons would require the disclosure of a substantial amount of information and documents that are not relevant to the IRS's stated purpose in issuing the IRS Summons.... The motion, filed by lawyers with the firm Berns Weiss LLP, relies on some precedent: More than 40 years ago, the Supreme Court stated that the duty of the District Court with respect to an IRS summons was "to see that a legitimate investigation was being conducted and that the summons was no broader than necessary to achieve its purpose." United States v. Bisceglia.... The Supreme Court expounded on the District Court's role by stating, "[o]nce a summons is challenged it must be scrutinized by a court to determine whether it seeks information relevant to a legitimate investigative purpose and is not meant 'to harass the taxpayer or to put pressure on him to settle a collateral dispute, or for any other purpose reflecting on the good faith of the particular investigation.'" The summons at issue here was not sought by the IRS with respect to any "particular investigation," and the IRS has made no attempt to narrow the information covered by the summons to reflect its stated goal of confirming compliance with the tax laws. Instead, based on three isolated incidents and scant other facts, the IRS seeks that Coinbase identify over 1 million American citizens that have transacted in virtual currency and to provide data on every single transaction by those 1 million clients over a 3-year period. The IRS Summons is certainly not what the Supreme Court envisioned. Further, the breadth of the summons, which seeks substantial personal information that is not at all relevant to tax compliance issues, and which could expose these clients to significant risk of having their identity and funds stolen by hackers who have succeeded previously in hacking the federal government, including the IRS, numerous times, makes it easy to conclude that the IRS is engaging in abuse of process. Berns' lawyers note that Coinbase is also trying to fight the IRS, but that its customers have an independent interest in the matter, obviously. The motion makes much of the fact that, despite ample proof in a public comment period that many citizens find the IRS's existing rules regarding virtual currencies confusing, that: Despite the demonstrable need for clarifying virtual currency tax guidance, the IRS has opted not to issue a single word of virtual currency guidance since promulgating admittedly insufficient guidance more than two years ago. Having been unable, or unwilling, to issue such new guidance, it is hard to believe that the IRS has now issued the IRS Summons for a legitimate investigatory purpose. After all, if the IRS admits that it has not properly informed taxpayers of the virtual currency taxation rules, how could it now reasonably seek to review the records of over one million taxpayers for virtual currency tax compliance purposes? The motion furth[...]
Tue, 13 Dec 2016 09:46:00 -0500Gas drilling companies tapping into the rich Marcellus shale formation that lies beneath wide swaths of Pennsylvania have to pay an "impact fee"—basically a tax, based on how much gas each well produces—to the state. As the name suggests, the fee is supposed to help the government mitigate the potential environmental impacts of gas drilling. The state government skims some money off the top and the rest gets redistributed to counties and municipalities in parts of the state where gas drilling is taking place, theoretically to fund government-run ecology efforts or to rebuild infrastructure stressed by the influx of drilling companies and the people who work for them. You can debate whether handing money to the state government is really the best way to counteract the potential environmental consequences of drilling for natural gas, but that's for another day. For today, let's focus on how governments in Pennsylvania have handled some of that money that they've demanded from gas drilling companies. In the name of protecting the environment, remember. An audit of impact fee revenue released earlier this month shows that North Strabane Township spent more than $32,000 of its impact fee revenue on what basically amounts to a giant party. Impact fee money was used to rent a bouncy house ($4,250) and to pay for a performance by former American Idol contestant Adam Brock ($1,200). (As an aside: It says something about your status as a reality television singing sensation when you're three-and-a-half times less expensive than a bouncy house.) "I'm pro-people having fun at the holidays," Eugene DePasquale, the state's auditor general said, according to State Impact PA, a project of NPR. "But the impact fee was used for a bouncy house. Come on, that's crazy." Township officials told State Impact PA they believed spending money on fireworks, a bouncy house and a former American Idol contestant was acceptable because the law creating the impact fee lets towns use the money for "parks and recreation," and they were apparently using a generous definition of recreation. The bouncy house might have been the most ridiculous expense, but state auditors say Pennsylvania counties and municipalities wasted millions of dollars in impact fee revenue. DePasquale said 24 percent of all impact fee spending by local governments was considered "questionable" by state auditors. Other misuses of the impact fee revenue might not be known because some municipalities didn't fill out forms saying how they planned to use their cut of the dough. Bradford County used $2.4 million in impact fee revenue to cover operating expenses of a correctional facility, including paying employees' salaries and buying office supplies. The same county used $90,000 of impact fee cash to build a portable boat dock. Susquehanna County used $5.2 million on payroll for the county district attorney's office and bought the DA a new car (valued at $29,000). Thanks to Pennsylvania's gas drilling fee, judges in Lycoming County got newly refurbished offices, Green County built a new swimming pool, and Cumberland County built baseball fields. There's nothing wrong with swimming pools and baseball fields, of course, and one could argue that it might be better for those things to be paid for with tax dollars coming from gas drilling firms instead of from the pockets of local residents. Still, the whole point of the so-called "impact fee" was that it would be an, you know, impact fee—not a slush fund for local officials to blow on parties and new cars for prosecutors. When there is a real need for those dollars—in the event, say, of a well blowout or a massive spill of fracking fluid—the state will have to find more money to deal with the actual impacts of gas drilling. Taxpayers will be put on the hook for costs that should be covered already and lawmakers will argue that the state should seize more money from gas drillers to cover the next disaster. Then North Strabane Township can upgrade to th[...]
Tue, 13 Dec 2016 00:01:00 -0500Thank you, California! For too many years, Arizona has led the pack—or at least taxed the hell out of it—with among the higher cigarette taxes in the West. "A cigarette tax higher than in neighboring states and cheaper prices on American Indian reservations have helped fuel a growing black market for cigarettes in Arizona," the Cronkite News Service reported in 2014. It's true that few of us actually paid that $2.00 per pack tariff for a pack of smokes; with every single state bordering us stealing less from smokers and a long, handy border with Mexico, half of all of the cigarettes sold in the state are smuggled from elsewhere, according to research by the Mackinac Center for Public Policy and the Tax Foundation. Many Arizonans avoid getting mugged by enjoying life on the receiving end of smuggling routes. But we could be benefiting by running goods in the other direction. And then Californians went to the polls on Election Day and hiked their cigarette taxes by $2.00 per pack. Business opportunities, here we come. California will rake in "[a]dditional net state revenue of $1 billion to $1.4 billion in 2017-18, with potentially lower revenues in future years" according to the state Legislative Analyst's Office. Potentially lower revenue? The analysis acknowledges that "revenue losses would occur due to lower consumption of tobacco products due to the higher excise taxes" although the decline in smoking "appears to have stalled in recent years." So legislative analysts acknowledge that a dramatic tax hike from 87 cents per pack to $2.87 is high enough to depress revenue over time. Actually, that's kind of a feature to the hike's sponsors, who sold it as a social-engineering measure to "save lives" by "getting people to quit or never start this deadly and costly habit" (which they deliberately make more costly, of course). That's a goal that inherently works against any promises of billions of dollars in raised revenue. But "revenue losses" might also result from Californian smokers purchasing cigarettes on the black market where higher taxes don't apply. After all, even at the old 87 cents per pack tax, a third of cigarettes consumed in the state have been smuggled in from elsewhere. There's no particular reason to assume that the black market in affordable smokes is going to shrink now that voters have self-righteously increased the cost of every pack by two bucks. And when that black market grows, it really should come as no surprise to state officials or California voters. "If Proposition 56 passes, California may open itself up as a more desirable cigarette smuggling destination as neighboring Oregon, Nevada, and Arizona all impose cigarette tax rates nearly $1 lower than the proposed California rate," the Tax Foundation's Morgan Scarboro warned before the measure's passage. "While California is no stranger to cigarette smuggling," noted Bloomberg BNA's Audryana Camacho after the election "the upcoming $2 increase may spur more activity as neighboring states have tax rates more than $1 lower than California's new tax." It's really not that hard to figure out. At a tax of 87 cents per pack, one-third of California's cigarettes are smuggled. At $1.66 per pack, 46 percent of New Mexico's cigarettes are smuggled. At $2.00 per pack, half of Arizona's cigarettes are smuggled. At a whopping $4.35 tax per pack of cigarettes, 58 percent of New York's smokes come from the black market where sticky fingered politicians can be avoided. It's almost like there's some sort of pattern here. California officials aren't entirely in the dark on the issue. "[T]he measure would provide additional funding…to support increased enforcement efforts to reduce tax evasion, counterfeiting, smuggling, and the unlicensed sales of cigarettes and other tobacco products," according to the legislative analysis. But using tax money to enforce compliance with the tax to raise more tax money isn't a new idea—it's occurred to lawmakers an[...]
Fri, 02 Dec 2016 21:11:00 -0500Bad 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 shou[...]
Fri, 02 Dec 2016 06:30:00 -0500The 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.[...]
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.
Mon, 31 Oct 2016 16:57:00 -0400If 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">[...]
Mon, 03 Oct 2016 14:05:00 -0400It'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[...]
Sun, 02 Oct 2016 12:15:00 -0400If 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 for[...]
Wed, 28 Sep 2016 11:30:00 -0400A 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.[...]
Thu, 22 Sep 2016 15:45:00 -0400Residents 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 wan[...]
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.
Wed, 07 Sep 2016 11:00:00 -0400New 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. [...]