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Taxes



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



Published: Fri, 17 Nov 2017 00:00:00 -0500

Last Build Date: Fri, 17 Nov 2017 13:31:08 -0500

 



House Republicans Just Passed a Major Tax Reform Bill

Thu, 16 Nov 2017 14:42:00 -0500

House Republicans passed a major overhaul to the tax code today(image) . The bill passed 227 to 205 on a party line vote, with a handful of Republicans, mostly from high-tax blue states, joining Democrats in opposition.

The House plan cuts taxes by roughly $1.5 trillion over the next decade, with tax reductions for both businesses and individuals. The plan would slash the corporate tax rate from 35 percent down to 20 percent, and would condense the current seven individual income tax brackets into four while expanding the child tax credit and doubling the standard deduction.

The lower corporate tax rate would be a permanent change. However, a new $300 tax credit dubbed the "family flexibility credit" that is intended to help middle would expire in 2023, leading one analysis to find that, after that year, only 40 percent of Americans would pay lower taxes under the plan—and 22 percent would pay more.

The House legislation also reduces or eliminates many major deductions, including carve outs for medical expenses, cars, moving, tax preparation, and student loan interest. The plan gets rid of the state and local tax deduction for income and sales tax would be eliminated, and caps the deduction for property taxes.

That deduction provides the biggest benefit to residents of high-income, high-tax states that tend to vote Democratic—hence the handful of GOP blue state defectors. Unlike the revised Senate tax plan that was released earlier in the week, it does not repeal Obamacare's individual mandate to purchase health coverage.

Although some Republican representatives grumbled about the plan's treatment of various deductions, the passage of a tax bill in the House was never really in question. Republicans will now move forward with a related bill in the Senate, where passage is far less certain. Senate Republicans plan to pass the legislation with only Republican votes and a simple majority. They hold just 52 seats, which means they can lose just two votes (Vice President Mike Pence would break a tie).

But one Republican, Sen. Ron Johnson (R-Wisc.), has already said he will not vote for the plan. Sen. Bob Corker (R-Tenn.) has said he will oppose any plan that substantially increases the deficit, which potentially puts him in the "no" camp as well. And while the decision to repeal Obamacare's individual mandate helps to offset the budgetary effects of the Senate plan's tax reductions, it also ties the tax bill to health coverage, which, as we saw this summer with the failed health care overhaul, could complicate the vote math too. The possibility of losing a GOP senator in the Alabama special election next month adds a further wrinkle.

Indeed, at this point, the GOP's tax reform effort looks remarkably similar to its health care push. After some initial complications, the health care bill eventually passed in the House, despite some GOP objections. Senate leadership tried to rush a health care bill to vote, but found themselves stymied by a handful of holdouts. The same dynamic could play out again with tax reform.

Republicans are generally more comfortable with tax policy than with health care, and, after the failure of their first major legislative initiative, are feeling an awful lot of pressure from supporters to pass some sort of tax legislation. So I suspect the odds of some sort of tax bill passing are better than the odds of health care were. But the bumpy process so far makes clear it won't be easy. Passage in the House is a significant first step, but the tax bill still has a long way to go.




Simpler Tax Simplification

Wed, 08 Nov 2017 00:15:00 -0500

As you read this, President Trump's tax plan is being debated. Congress will change it. Where this ends, no one knows. I want two things: 1. Simplification. 2. More money in private hands. Trump offers some of both. His cuts would leave more money in private hands, where it will be used more efficiently. Politicians' spending decisions already put us $20 trillion in debt; they shouldn't be trusted with more money. Cutting the corporate tax rate isn't popular (rich people!), but a cut is needed. Economic growth is really important. It's stifled when America's taxes are higher than other nations'. Trump also offers some simplification. Good. The more complex the rules, the more time we waste hiring accountants and the more time lawyers spend fighting over who qualifies for what. Trump would double the personal exemption (fewer people will itemize) and kill the "death tax," deductions for local taxes and the alternative minimum tax. It's a start. But that's not nearly good enough. Heck, the "simplification" bill itself is 400 pages long. Americans spend about 7 billion hours trying to comply with today's tax rules. That's the equivalent of 3.7 million people working 40-hour weeks. What a waste. I spend hours filling out forms and forwarding paperwork to an accountant. I distort my spending and investments because of tax rules. What a waste. America's first 1040 form was four pages long. Today's code is more than 3.7 million words. No one understands it. Even the tax specialists get things wrong. Yet parts of Trump's plan make taxes more complex: He increases the child tax credit and creates a new credit for nonchild dependents. It may be fair to help people who care for helpless adults, but each new deduction creates complexity and parasites who feed off it. As usual, some rich people will game that credit, and some poor people will never figure it out. Far better to lower everyone's taxes to, say, 15 percent, by getting rid of all deductions. Then we could focus on creating wealth instead of filling out forms. But good luck with that, President Trump. Today's tax deductions are the main reason we've got a huge culture of lobbyists. One of the most unfair tax breaks is the mortgage interest deduction. It encourages rich people to buy more homes than we need. It exacerbates housing bubbles. Trump merely proposed cutting the maximum deduction to half-a-million dollars. But even that has the swamp creatures screaming, "Unfair!" Jerry Howard of the National Association of Home Builders says he will fight that "tooth and nail." He claims it "is a direct assault on the American dream of homeownership." Bunk. Canada has no mortgage deduction, yet Canada's homeownership rate is higher than the United States'. The big mortgage deduction is welfare for the rich. But people like Howard have clout. Homebuilders and mortgage bankers give politicians money. Likewise, even some Republicans in high-tax states like New York and New Jersey now are whining about losing state tax deductibility. They fear voter backlash in their districts. Once again, Congress ends up fighting over who gets the biggest cuts instead of the overall tax haul and size of government. Ideally, tax cuts should be accompanied by even larger spending cuts to avoid expanding that $20 trillion debt. But that's not happening. How about a variation on Trump's two-for-one regulation rule (cut two regulations for each new one you propose)? Cut two dollars from the budget for every dollar in tax reduction. That way we won't end up deeper in the hole. The best way to avoid Washington's spending getting out of balance is to avoid giving them our money in the first place. I'm rooting for a tax law so simple that everyone understands it, and one that will keep as much money as possible out of government's hands. That's the best formula for a growing economy. COPYRIGHT 2017 BY JFS PRODUCTIONS INC.[...]



Americans Keep Setting New Records for Renouncing Citizenship, and Tax Reform Threatens to Make it Worse

Tue, 07 Nov 2017 15:31:00 -0500

One of the biggest arguments in favor of tax reform is that it's an opportunity to get rid of bad laws and human-harming regulations that virtually no non-self-interested observer can defend with a straight face. A welcome fix in the House's current tax-reform package, for example, is the removal of bonds for the construction of professional sporting stadia from the tax-exempt status granted to municipal bond-finance of actual infrastructure. So why on earth does the Republican Party's opening bid for tax-code overhaul not include the end of worldwide income taxation on U.S. citizens (even if they live and earn their money abroad), nor repeal of the odious Foreign Account Tax Compliance Act? After all, both promises are right there in the 2016 Republican Party Platform: The Foreign Account Tax Compliance Act (FATCA) and the Foreign Bank and Asset Reporting Requirements result in government's warrantless seizure of personal financial information without reasonable suspicion or probable cause. Americans overseas should enjoy the same rights as Americans residing in the United States, whose private financial information is not subject to disclosure to the government except as to interest earned. The requirement for all banks around the world to provide detailed information to the IRS about American account holders outside the United States has resulted in banks refusing service to them. Thus, FATCA not only allows "unreasonable search and seizures" but also threatens the ability of overseas Americans to lead normal lives. We call for its repeal and for a change to residency-based taxation for U.S. citizens overseas. The United States is the only country besides Eritrea to tax the income of its non-resident citizens. If you were born to an American parent (or in the U.S. proper) but have lived and worked the bulk of your life elsewhere, the Internal Revenue Service still has a claim on your salary, even though you consume zero government services. That's just wrong, and should be stopped. Meanwhile, FATCA-repeal bills were introduced in both chambers of Congress back in April by Freedom Caucus Chair Rep. Mark Meadows (R-N.C.) and Sen. Rand Paul (R-Ky.), but both have yet to move beyond committee. The Republican Party has controlled Congress since January 2015, yet can't screw up the courage to deliver a simple repeal of a lousy law. With each passing day of inaction, the number of Americans renouncing their own citizenship rather than deal with the ridiculously onerous and punitive tax-filing requirements continues to set new records. Last week, the Treasury Department came out with its quarterly name-and-shame list, putting the 2017 tally of passport-burners at 4,448. At that pace we should break last year's record of 5,411 by just after Thanksgiving. Congratulations, America! Not only does the tax reform proposal thus far fail to provide any relief to the estimated 8.7 million Americans living abroad (who are routinely shut out of financial institutions, since foreign banks don't exactly enjoy playing errand-boy to the I.R.S.), it may rub salt in the wound. Max Reed, a cross-border tax lawyer in Vancouver, Canada, who writes frequently and well about such issues, says "it will make matters worse for some US citizens in Canada and keep it the same for others." Some of Reed's preliminary findings: * New punitive rules that apply to US citizens who own a business. Currently, most US citizens who own a Canadian corporation that is an active business don't pay tax on the company's profits until they take the money out. The House plan changes this. It imposes a new, very complicated, set of rules on US citizens that own the majority of a foreign corporation. The proposal would tax the US citizen owner personally on 50% of the entire income of the Canadian corporation that is above the amount set by an extremely complex formula. At best, this will make the compliance requirements for US citizens that own a business extremely complicated and expensive. At worst, this will c[...]



The NFL Wants to Block Tax Reform Because It Would End a Common Stadium Subsidy

Sun, 05 Nov 2017 11:10:00 -0500

The tax reform bill unveiled this week by House Republicans would do away with the federal tax exemption for municipal bonds, commonly claimed by states and cities to subsidize the construction of stadiums. The National Football League is gearing up big time to lobby against it, The Wall Street Journal reported this week. Municipal bonds were made tax exempt in 1986 as a way to encourage investors to buy them at lower interest rates, saving cities money when they need to build new infrastructure or make expensive repairs. While the bonds are designed for building roads, sewer systems, and schools, cities have issued more than $13 billion in untaxed bonds for stadium projects since 2000, according to a recent Brookings Institute estimate. That tax break is "an unseen subsidy," according to Victor Matheson, a sports economist at the College of the Holy Cross, who is critical of using public money for stadiums. "It's a tax break that we never get to vote on, and it's one that don't even think about and don't see," he told Reason in June. There's bipartisan support for directing the exemption specifically for public infrastructure, rather than multi-billion dollar playgrounds for multi-millionaire athletes and billionaire franchise owners. Sens. Cory Booker (D–N.J.) and James Lankford (R–Okla.) in June introduced an independent piece of legislation to prohibit local officials from using municipal bonds for stadium projects. If that prohibition becomes law—either on its own or as part of a revamped federal tax code—those "unseen subsidies" would go away and the cost of those projects would increase. So, too, would public opposition to spending public money on stadiums. "It's something that the NFL will oppose because we believe that the construction of new stadiums and renovations of stadiums are economic drivers in local communities," NFL spokesman Joe Lockhart tells the Journal's Andrew Beaton. The 32 team owners who make up "the NFL" in this context are allowed to believe whatever they want, but the idea that new stadiums or renovations are economic drivers is not supported by facts. A landmark study published in 2000 by the Journal of Economic Perspectives reviewed 36 major metropolitan areas that had built stadiums for professional sports teams and found that, on the whole, they represented a drag on the economy. More recently, a 2015 study by the Stanford Institute for Economic Policy Research, found that "NFL stadiums do not generate significant local economic growth, and the incremental tax revenue is not sufficient to cover any significant financial contribution by the city." Local governments, however, continue to put taxpayers on the hook for football stadiums. In his book The King of Sports: Football's Impact on America, Gregg Easterbrook, a journalist and longtime critic of taxpayer subsidies for the sport, says taxpayers have covered more than 70 percent of the total cost of NFL stadiums built in the past two decades. Maybe we're heading toward the end of that tradition. President Donald Trump, in between tweeting criticisms of NFL players kneeling during the national anthem to protest police abuse, has whacked the NFL for taking advantage of special loopholes in the tax code. "Why is the NFL getting massive tax breaks while at the same time disrespecting our Anthem, Flag and Country? Change tax law!" Trump tweeted in October. Why is the NFL getting massive tax breaks while at the same time disrespecting our Anthem, Flag and Country? Change tax law! — Donald J. Trump (@realDonaldTrump) October 10, 2017 President Barack Obama proposed eliminating tax exemptions for municipal bonds attached to stadium projects as part of his 2015 budget plan, but Congress didn't bite. Maybe, as part of a comprehensive tax reform bill, that component has a better chance of reaching Trump's desk. For decades, the NFL operated as a tax-exempt entity—insert joke here about football being a religion in much of America—because it was technic[...]



Five Important Details from the GOP Tax Plan

Thu, 02 Nov 2017 15:45:00 -0400

Republicans have been talking about reforming the tax code since well before the start of the year. Today we finally got a look at their proposal. Here's five important details from the bill—with the important caveat that just about everything in it could be subject to change after it is introduced: 1. Fewer Income Tax Brackets The current individual income tax system has seven brackets, with rates ranging from 10 percent to 39.6 percent. The highest bracket applies to income over $418,000 annually for individuals, or $470,000 annually for married couples. In the GOP tax bill, those seven brackets would be collapsed to four brackets, with rates of 12 percent, 25 percent, 35 percent, and 39.6 percent. The highest rate would kick in at $500,000 for an individual or $1 million for a married couple filing jointly. Most people would see a small income tax reduction, though some people might end up paying a slightly higher rate depending on where they fall on the current spectrum. Republicans propose collapsing seven tax brackets into four. See the rates and brackets in the bill. https://t.co/jU5Sw7MKKX — Wall Street Journal (@WSJ) November 2, 2017 But that's not the most important detail for individuals and families. The bigger news is... 2. A Much Higher Standard Deduction Yes, the government is going to let you keep more of your own money. How generous, right? Currently, individuals can claim a standard deduction of $6,350 and married couples get a deduction of $12,700. Under the House GOP plan, the standard deduction would rise to $12,000 for individual filers and $24,000 for married couples. That means more people will likely choose to take the standard deduction instead of itemizing their deductions, which Republicans say will simplify the tax filing process. But does it really? About 70 percent of Americans already use the standard deduction, and high-income earners tend to be the only ones who itemize. A higher deduction is nice for everyone, of course, but it won't make much of a different in how most people put their taxes together. 3. No Changes for 401(k) Savings, But a New Cap on the Mortgage Deduction As I wrote yesterday, there was a fair bit of speculation about whether the Republican tax plan would lower or eliminate the current deduction for retirement savings, which encourages people to, well, save for retirement. The bill released Thursday makes no changes to how 401(k) plans operate, so that deduction remains in place. But another major deduction in the current tax code—the one that allows homeowners to subtract mortgage interest from their taxable income—would be altered. Republicans would cap the mortgage interest deduction at $500,000 for new home loans starting next year. That's something the construction industry will almost certainly lobby to change as the tax bill goes forward, but it would affect only about 5 percent of all homebuyers. Only about 5% of US mortgages are over $500k. But take a look at where they are in the US... (good chart via @NLIHC) pic.twitter.com/fAybZajulY — Heather Long (@byHeatherLong) November 2, 2017 4. Corporate Income Tax Rate Cut From 35 Percent to 20 Percent Maybe the most important part of the tax bill, politically, is the proposed cut to the corporate net income tax. The current rate of 35 percent would be reduced to 20 percent, something Speaker of the House Paul Ryan (R-Wisc.) said today will be essential to keeping America competitive in the global economy. This has been the centerpiece of the Republican tax agenda since last year's election (and indeed longer). If there is one thing that unites the varied factions of the Republican Party, it's the notion that taxes on American businesses should be reduced. All the changes—mostly rather mild changes—to the individual income tax system are best understood as a way to sell this corporate income tax cut to voters. But that doesn't mean that cutting the corporate tax rate is a bad idea. America [...]



The Trump Tax Plan Is Government as Usual

Wed, 01 Nov 2017 15:38:00 -0400

Donald Trump has declared "with tax reform, we can make it morning in America again" and that "revising our tax code is not just a policy discussion — it is a moral one, because we are not talking about the government's money – we are talking about your money, your hard work." The Republican tax plan, which would cut rates for individuals and small businesses, sounds like good policy, but it's not. Before we get lost in details and political infighting, it's worth laying out what effective tax reform actually looks like. The hallmark of a good tax code is that it doesn't attempt social engineering via revenue collection.. It's our money and the government shouldn't be telling us how to spend it or what to spend it on. And yet our tax code is larded up with all sorts of incentives for certain types of purchases—such as the mortgage-interest deduction, which is defended on the grounds that owning a home is morally and culturally superior to renting. It's not by the way, and the result is market distortions that saddle families that would be better off renting with mortgage debt. Trump's tax plan keeps the mortgage interest rate deduction--and the one for charitable giving, which is another example of social engineering. Another distortion in the tax code is that individuals can deduct the cost of their state and local taxes from their federal bill, effectively allowing jurisdictions like New York and California to get away with charging their residents more than they would otherwise. To its credit, the Trump plan at least attempts to do away with this practice, although it's doubtful this idea will survive the legislative process.. The most important principle for tax reform is that revenue should cover the actual costs of government so that citizens can actually make an informed decision about what services they're willing to pay for. On this score, Trump's plan is sadly business as usual. First, it would take even more people off the tax rolls. There are already over 40 million households that pay no federal income tax at all and the president brags that his plan would add another 31 million to that total. As Chris Edwards of the Cato Institute writes, "taking more people off the tax rolls is not a good way to keep the government limited. If something is 'free,' people will demand more of it." And the problem is much bigger than that. For decades now, the feds have been spending far more in any given year than they take in via taxes. Last year, for instance, the government spent 20 percent more than it took in and between 2009 and 2013, it spent 33 percent more than it brought in. Hence annual deficits and ballooning national debt. This is like government by Groupon: Every year, we're getting such a great deal, of course we want more and more stuff. We'd be stupid not to. Where does Trump's plan land on this topic? Who knows? Every tax reform promises to either be revenue neutral or to increase the government's haul. In many cases, neither outcome is close to being truthful. More to the point, after years of accumulating debt we need to focus on government spending first and foremost. In 2016, the feds took in about $3 trillion in taxes. That should be the absolute spending limit—instead of the nearly $4 trillion Congress is talking about. Taxes aren't the price we pay for civilization—they're the price we pay for government. And until we bind the two together, we'll be spending more and more money that we don't have on things we almost certainly wouldn't want if we had to pay full price for them. Produced by Todd Krainin. Written and narrated by Nick Gillespie. Cameras by Jim Epstein. Subscribe to our YouTube channel. Like us on Facebook. Follow us on Twitter. Subscribe to our podcast at iTunes.[...]



A Clash of Visions Over Taxes

Wed, 01 Nov 2017 12:01:00 -0400

House Republicans unveil their tax-cut package Thursday, which means the spot price for liberal shibboleths like "giveaway to the rich" and "hypocrisy on the deficit" is about to hit the roof. Which is only fair. Conservatives don't exactly trip over themselves to embrace Democratic policies, either. The package will include lots of numbers. That will give critics plenty of ammunition with which to explain why this particular set of tax proposals does not deserve to pass. And maybe it doesn't! The trouble is that such arguments raise a question: What set of tax cuts would liberals consider worthy of passing? Judging by their usual objections, those on the left want to see tax cuts that help the poor, and maybe the middle class, but not the rich. This sounds swell, but it short-circuits just about all tax cuts of any sort. That's because the bottom 50 percent of earners in the U.S. pay only 2.7 percent of the revenue collected through income taxes. The top 1 percent of earners, who enjoy 15 percent of all pre-tax earnings, pay 38 percent of all federal income taxes. Some kinds of tax reform can benefit the poor but not the rich, such as expanding the earned income tax credit. But the EITC is not a tax cut. It is a subsidy—i.e., a government handout—based on a person's earnings and family size. It's a good policy that encourages people to work and has helped lift many people out of poverty, which is a noble enterprise. It's just not a tax cut. Actual tax cuts simply don't stir the hearts of garden-variety liberals. They are to many liberals what reductions in carbon-dioxide emissions are to so many conservatives: something that might conceivably be nice in a perfect world, but nothing you'd hold a pep rally for. To see what does stir the liberal heart, consider the Congressional Progressive Caucus' "People's Budget." This is the budget for all of those whose souls have been a rainy, bleak November for as long as they could remember, because the federal government isn't spending nearly enough money. Thus the People's Budget would impose more than $7 trillion in tax hikes, raise the top rate to 49 percent, cut defense spending, and then jack up spending just about everywhere else: infrastructure, health care, job training, and so on. It even proposes a pilot program to hand out diapers. Talk about the perfect metaphor. If enacted, the People's Budget would raise the federal government's take of GDP from 17.8 percent of GDP to 22 percent, and raise federal spending from 20.7 percent of GDP to 25.3 percent. Outlays haven't been that high since WWII. The GOP tax package and the Progressive Caucus' People's Budget capture sharply different visions of the correct allocation of resources. But they also capture an even more important question: Who should do the allocating—the government, or the people who made the money in the first place? The more modest approach holds that since you earned your paycheck, you ought to decide how it gets spent as much as possible—even if other people think you're doing it wrong. The more expansive approach says it's ridiculous to let a CEO buy yet another $12,000 wristwatch when parents in Appalachia or the Bronx can't even scrounge up the money for asthma medication so their kid can breathe. Both of these are pretty decent arguments. Some liberals take issue with the idea that a person—or at least certain persons—really earn their paychecks. We are all just products of circumstance, goes the argument. Some people are lucky enough to be born with good genes and into good environments, so they go to good schools and get good jobs and make a good living. Even if they work very hard (goes the argument), persistence is either genetic or learned—so it's a product of luck, too. Since the rich person never really earns his fortune, he is not entitled to keep it. Hence any level of confiscatory taxation is perfectly fine. This is p[...]



IRS Rehired Employees Previously Fired as Security Risks

Fri, 27 Oct 2017 15:35:00 -0400

(image) Millions of Americans' personal information may be vulnerable to hackers, thanks to the Internal Revenue Service's carelessness.

Not only has the agency been using an outdated security system, but it has rehired hundreds of employees previously fired for wrongdoing or performance issues, according to testimony by J. Russell George, the Treasury's inspector general for tax administration.

According to an audit published this year by George's office, the IRS has been expanding online tools for taxpayer use without taking key steps to guarantee the safety of taxpayers' information. One out of three Americans files their taxes online on their own.

George said the IRS has not fully implemented monitoring tools to prevent and detect computer hacks, is not monitoring its computer networks effectively for suspicious activity, and operates outmoded computer systems.

This is particularly important, George said, in light of the recent Equifax breach, which exposed the Social Security information of 143 million Americans and could vastly increase the risk of identity theft.

The IRS it relies on a 50-year-old technology, called the Individual Master File, that runs on outdated code. A replacement system—the Customer Account Data Engine 2, or CADE 2—has been plagued with delays and has no "scheduled or planned completion date," George said.

Because of the highly sensitive nature of tax returns and the risk of identity theft, George's office also conducted an audit of the procedures the IRS takes when it hires employees. In the 15-month period from January 1, 2015, to March 31, 2016, the IRS hired 7,500 employees—of whom 2,000 had worked for the tax agency previously. Of those rehired employees, about 200, or 10 percent, had been previously fired for conduct or performance issues, including several who had willfully failed to file their own taxes and four who were under investigation for unauthorized access to taxpayer information.

IRS officials defended themselves by saying it would be "cost prohibitive" to check the performance of former employees. When challenged, George said, the agency could not document that checking would be expensive.




Cities Try to Avert 'Transit Apocalypse' With Taxes on Uber, Lyft

Tue, 24 Oct 2017 14:40:00 -0400

Mass transit agencies across the country have been having a hell of a time paying for their creaky and often ill-used bus and light rail lines. A couple of cities have come up with a novel solution: tax the transportation services that riders have been using instead. Yesterday, San Francisco's Transportation Taskforce 2045 produced a proposal to impose a fee of $.20 to $1 per trip on ride-sharing services such as Uber and Lyft. The revenue would be used to shore up the city's Muni bus system and to pay for a bunch of bike lanes and streetscaping projects. Chicago Mayor Rahm Emmanuel has a similar notion. His 2018 budget includes a $.15 tax on ride-share trips, with the revenue earmarked to fund the Chicago Transit Agency. "We will be the first city to tap the ride-share industry for resources to modernize our transportation system," he told Chicago's city council. Behind the rhetoric about "modernization" and building transit systems for the future is an attempt to prop up antiquated forms of public transportation that are increasingly irrelevant to today's urban centers. According to a new study by the Cato Institute's Randal O'Toole, per capita transit ridership has been on a slow but steady decline for the past 50 years. In 1970, the average urban resident took 50 transit trips a year. By 2016, John Q. Citydweller was taking 39, even though politicians directed more than a $1 trillion to the construction and operation of new rail lines, street cars, and fleets of public buses over that period of time. The raw number of public transit riders has also been in decline over the past three years. Between 2014 to 2016, transit ridership fell 4.4 percent. In the first seven months of 2017, it was down another 3 percent. O'Toole pins this decline on lower gas prices and the rise of ridesharing services. A 2017 survey conducted by researchers at Berkeley found that a third of ride-share users would have taken public transit were Uber and Lyft were not available. As transit gets squeezed from the outside by cheap and convenient competitors, transit agencies are buckling under the internal pressure of long-deferred maintenance and underfunded pension and health liabilities. New York's subway system is looking at a $6.3 billion maintenance backlog. D.C.'s WMATA needs to spend $17.4 billion over the next 10 years to fix the maintenance backlog in Washington's Metrorail system. In 2015, the Federal Transit Administration estimated that the transit industry as a whole had a $89.8 billion backlog, a number O'Toole considers "conservative." Meanwhile, the Chicago Transit Agency has $1.5 billion in unfunded pension obligations—almost as much as its $1.8 billion operating budget. Boston's unfunded pension and health care benefits are double its operating budget of $1.6 billion. These huge liabilities require agencies to spend an incredible amount of money they don't have on things that will at best prevent transit service from degrading further. As a fix, O'Toole suggest that transit agencies "stop wasting money on expensive and noncompetitive transit services and focus on providing basic, cost-effective services for those who need transit the most, while putting their economic houses in order by reducing maintenance backlogs, debts, and unfunded obligations." In other words: Stop building new rail lines, and replace the current lines with bus services as they outlive their usefulness. Instead of grappling with these long-run problems, transit agencies are exacerbating them by building costly light-rail extensions that fail to attract riders. The debt-ridden, fire-prone Washington Metro thought it would fix its problems with the fancy new Silver Line. It didn't, and now the region is building a $2.65 billion Purple Line to service the area's Maryland suburbs. Seattle's $54 billion transit expansion is expected to net ar[...]



Ex-Presidents We Want to Drink With: Podcast

Mon, 23 Oct 2017 16:15:00 -0400

Last week, Barack Obama and George W. Bush emerged from the mothballs to criticize Trumpian dog-whistling and strategic incivility. Jimmy Carter, however, said he thinks Trump gets a raw deal from the press and appears to be plugging for a diplomatic posting. Was bipartisanship really better before Donald showed up? Did it accomplish anything?

On today's podcast, Reason's Nick Gillespie, Katherine Mangu-Ward, and Matt Welch discuss these issues, and the slain-soldier spat between Trump, White House Chief of Staff John Kelly, and Rep. Frederica Wilson (D-Fla.), which seems to be distracting the public from bigger, bloodier problems. Also: why Republicans can't sat they're anti-tax but not actually in favor of fiscal discipline, why Matt Welch may be pro-pirate, and which former U.S. presidents Katherine Mangu-Ward would like to drink with. The conversation was moderated by Andrew Heaton.

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California Tried to Seize Millions of This Inventor’s Fortune. He Fought Back. And Won: New at Reason

Mon, 23 Oct 2017 15:00:00 -0400

src="https://www.youtube.com/embed/rfyPZdSBwBQ" allowfullscreen="allowfullscreen" width="560" height="340" frameborder="0"> In the early 1990s, California tax authorities traveled to Las Vegas in pursuit of Gilbert Hyatt, an inventor who earned a fortune as the patent holder of the microcomputer. They staked out his home, dug through his trash, and hired a private eye to look into his background. He'd moved to Nevada in 1991, but California made a claim that the state was entitled to millions of his recent earnings. What transpired over the next twenty-five years is a story of greed, harassment, anti-semitism, and the abuse of power. And it wasn't the first time that the California tax agency has strong-armed a former state resident. What's so unusual about Gilbert Hyatt is that he fought back—and won. California's marginal income tax rates are the nation's highest, driving many wealthy residents to pack up and leave. Hyatt says he moved to Las Vegas because casino billionaire Sheldon Adelson, who had dreams of creating a version of Silicon Valley in Sin City, lured him there during a computer technology conference known as Comdex. No matter the reason, California didn't want to let him go. The state is often desperate for revenue to cover its out-of-control spending. In 1993, when tax agents began auditing Hyatt, California faced a budget deficit of $3.8 billion, the largest in the nation. The Franchise Tax Board itself faced huge cuts and even possible elimination. In 1992, Hyatt was contacted by the California Franchise Tax Board. A tax agent had read an article about the possibility of billions in royalties pouring in as electronics companies like Phillips and Sony started licensing Hyatt's technology. The agency launched an investigation. Ity concluded that his move was a sham and that he owed them more than $13 million in taxes, fees, and interest penalties. Hyatt, who says his father taught him to "never make a deal with an extortionist," decided to fight back and appeal the decision. This was the beginning of a decades-long battle between the wealthy inventor and the largest state tax collection agency in America. Shortly after the tax board opened the audit, an agent called Hyatt's lawyers and advised him that most people just settle because "wealthy or well-known taxpayers...do not want to risk having their personal financial information made public." Hyatt thinks the tax auditors believed him to be "paranoid" about his privacy because he was protective of the trade secrets contained in his home office. He believes the auditors exploited those privacy concerns to gain leverage. The Franchise Tax Board hired a private eye to interview Hyatt's former California neighbors, 22 of whom later testified that he did indeed move away after selling his house. They also sent letters of demand to his friends, former colleagues, and even his rabbi—letters that divulged personal information—including his social security number—and made everyone in his social and professional networks aware that he was under investigation for tax fraud. Two agents even road tripped to Las Vegas, staked out Hyatt's new house, rifled through his trash, and took what a whistleblower later described as a "trophy photo" of his home. This same whistle blower testified that her colleague, an agent named Sheila Cox, vowed to "get that Jew bastard." Hyatt ended up fighting a 25-year court battle and spending more than $10 million. The state of California spent more than $25 million in pursuit of Hyatt, according to the tax agency's spokesman. It all came down to a hearing before the Board of Equalization in August of 2017. Although he has a professional legal team, Hyatt decided to speak for himself. "I've waited 20 years for this [opportunity]," Hyatt told the board member[...]



California Tried to Seize Millions of This Inventor’s Fortune. He Fought Back. And Won.

Mon, 23 Oct 2017 14:43:00 -0400

In the early 1990s, California tax authorities traveled to Las Vegas in pursuit of Gilbert Hyatt, an inventor who earned a fortune as the patent holder of the microcomputer. They staked out his home, dug through his trash, and hired a private eye to look into his background. He'd moved to Nevada in 1991, but California made a claim that the state was entitled to millions of his recent earnings. What transpired over the next twenty-five years is a story of greed, harassment, anti-semitism, and the abuse of power. And it wasn't the first time that the California tax agency has strong-armed a former state resident. What's so unusual about Gilbert Hyatt is that he fought back—and won. California's marginal income tax rates are the nation's highest, driving many wealthy residents to pack up and leave. Hyatt says he moved to Las Vegas because casino billionaire Sheldon Adelson, who had dreams of creating a version of Silicon Valley in Sin City, lured him there during a computer technology conference known as Comdex. No matter the reason, California didn't want to let him go. The state is often desperate for revenue to cover its out-of-control spending. In 1993, when tax agents began auditing Hyatt, California faced a budget deficit of $3.8 billion, the largest in the nation. The Franchise Tax Board itself faced huge cuts and even possible elimination. In 1992, Hyatt was contacted by the California Franchise Tax Board. A tax agent had read an article about the possibility of billions in royalties pouring in as electronics companies like Phillips and Sony started licensing Hyatt's technology. The agency launched an investigation. Ity concluded that his move was a sham and that he owed them more than $13 million in taxes, fees, and interest penalties. Hyatt, who says his father taught him to "never make a deal with an extortionist," decided to fight back and appeal the decision. This was the beginning of a decades-long battle between the wealthy inventor and the largest state tax collection agency in America. Shortly after the tax board opened the audit, an agent called Hyatt's lawyers and advised him that most people just settle because "wealthy or well-known taxpayers...do not want to risk having their personal financial information made public." Hyatt thinks the tax auditors believed him to be "paranoid" about his privacy because he was protective of the trade secrets contained in his home office. He believes the auditors exploited those privacy concerns to gain leverage. The Franchise Tax Board hired a private eye to interview Hyatt's former California neighbors, 22 of whom later testified that he did indeed move away after selling his house. They also sent letters of demand to his friends, former colleagues, and even his rabbi—letters that divulged personal information—including his social security number—and made everyone in his social and professional networks aware that he was under investigation for tax fraud. Two agents even road tripped to Las Vegas, staked out Hyatt's new house, rifled through his trash, and took what a whistleblower later described as a "trophy photo" of his home. This same whistle blower testified that her colleague, an agent named Sheila Cox, vowed to "get that Jew bastard." Hyatt ended up fighting a 25-year court battle and spending more than $10 million. The state of California spent more than $25 million in pursuit of Hyatt, according to the tax agency's spokesman. It all came down to a hearing before the Board of Equalization in August of 2017. Although he has a professional legal team, Hyatt decided to speak for himself. "I've waited 20 years for this [opportunity]," Hyatt told the board members before beginning his opening remarks at the 13-hour meeting in Sacramento. The board ultimately [...]



Why the Lights Are Still Off in Puerto Rico

Thu, 19 Oct 2017 16:00:00 -0400

Thursday President Trump awarded himself 10 out of 10 on the federal government's response to post-hurricane Puerto Rico. Perhaps. Regardless of how the president and FEMA have responded, Puerto Rico was set up for disaster well before Hurricane Maria hit. Revoked tax breaks, needlessly expensive imports, and crippling debt allled to a shoddy infrastructure that's still without power on most of the island.

On the latest "Mostly Weekly," Andrew Heaton explores: how did Puerto Rico get screwed over well before the lights went out, and how do we get them back on?

"Mostly Weekly" is hosted by Andrew Heaton with headwriter Sarah Rose Siskind.

Script by Sarah Rose Siskind with writing assistance from Andrew Heaton, Justin Monticello, and Brian Sack.

Edited by Austin Bragg and Siskind.

Produced by Meredith and Austin Bragg.

Theme Song: Frozen by Surfer Blood.

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Seattle to Amazon: Don't Leave Me, Baby

Wed, 18 Oct 2017 13:15:00 -0400

Cities hoping to host Amazon's second corporate headquarters have until Thursday to submit their bids. More than 50 jurisdictions have jumped at the opportunity already, promising increasingly extravagant incentives to the e-commerce company. On Monday, New Jersey Gov. Chris Christie offered Amazon $7 billion in tax incentives to set up shop in the Garden State. Local officials in Georgia have offered to let the company incorporate its own city. Tuscon even sent Amazon's CEO a 21-foot cactus. The only place not jumping for joy is the company's current hometown of Seattle, where politicians have reacted to the prospect of Amazon expanding elsewhere as if they were going through the phases of a bad break-up. Local officials greeted Amazon's initial announcement with an "I'll never let you go" kind of rage. One councilmember, Kshama Sawant, reacted by yearning "to take these behemoths into democratic public ownership." Some Seattle politicians are now expressing regret about such harsh words, and are promising to be a better partner to the company. Last Friday, five out of nine Seattle City Councilmembers—along with a clutch of county and state officials—sent a letter to Amazon. To the extent that the company's decision to expand elsewhere was based on "feeling unwelcome in Seattle, or not being included in some of our regional decisions," they wrote, "we would like to hit the refresh button." "Those of us who are signing onto this letter want you to know we have heard you," they added. "We also want you to stay with us and grow with us both in Seattle and with our sister cities across the state." To kickstart this new relationship, the politicians propose including Amazon in a series of taskforces targeting traffic, crime, and education. This letter is no doubt heartfelt. But it also misses the point, says Erin Shannon of the Washington Policy Center. "There needs to be a much bigger reset button for that letter to have any meaning," Shannon tells Reason, adding that the "city's anti-business climate is playing very likely a strong role" in causing Amazon to look for greener pastures. In 2014 the city passed one of the nation's first $15 an hour minimum wage laws. This was followed by onerous employee scheduling regulations, restrictions on running criminal background checks, and an infamous (and probably illegal) income tax. To draft this tax, Seattle hired John Burbank, director of the Economic Opportunity Institute, who once called Amazon a "sociopathic roommate" that the city was better off without.* And these are just the policies that have passed. Also in the works is a so-called Amazon tax, which would levy a yearly $100-per-employee levy on large companies. Amazon has tacitly acknowledged that policy factors are playing a role in its search for a home away from home. It lists "a stable and business friendly environment" as one of four key preferences for the site of its new headquarters. The company has also said it was looking for a good "cultural community fit" with "local government structure and elected officials eager and willing to work with the company", and it has encouraged bidding cities to include testimonials from other large companies. The Seattle City Council's letter is remarkable in how little it seems to understand these concerns. Rather than offering to improve the city's business climate, officials are asking for Amazon's help in mitigating the problems its growth has supposedly caused. For instance, the letter's section on the "gig economy" mostly bemoans the rise of contract workers in the tech sector, telling Amazon that "we would like to work with you, other employers, employees, and contract workers to establish new policies around fair wo[...]



Order Some More Avocado Toast: What Tax Reform Means for Millennials

Fri, 29 Sep 2017 13:25:00 -0400

Depending on which definition you're using, the generation of Americans known as "Millennials" started being born somewhere between 1977 and 1982. Suffice it to say that none of us were paying much attention to politics the last time Congress passed a comprehensive tax reform bill, in 1986. Though there's no way to know whether any tax bill will make it through Congress this year, Millennials have reason to be optimistic about reforms that lower rates and spur economic growth. But we should also be wary. America's fiscal policy could rob tax reform of its benefits if left unaddressed or made worse. First, the good. Probably the most obvious benefit of tax reform—for Millennials and for plenty of other Americans too—is the potential for simplifying the tax code. Republicans have promised that tax reform will make it possible to file your taxes on the back of a postcard, something they say can be done by ending special tax breaks and shortening the tax code. At present, the code is more than 4 million lines long and complying with it consumes more than 6 billion hours every year, according to the IRS' National Taxpayer Advocate. The economic and accounting burdens of complying with the tax code fall inequitably on smaller businesses and individual taxpayers, according to research by economists Jason J. Fichtner and Jacob M. Feldman of the Mercatus Center. "An overly complex and cumbersome tax code favors businesses and individuals who can afford well-paid accountants and lawyers," they wrote in a 2015 report. A simpler tax code is good for almost everyone, but it stands to help Millennials more than most. A 2016 survey commissioned by NerdWallet, a San Francisco–based personal finance website, found that 80 percent of taxpayers aged 18 to 34 say they're fearful about some aspect of preparing taxes, well above the 69 percent of people across all ages who said the same thing. Millennials might have an undeserved reputation for being easily frightened, but there's no doubt that the current tax code induces unnecessary stress. And Millennials are the group least likely, generationally speaking, to have access to tax help. "Millennials tend to have less experience with a deeply confusing tax code, less cash to seek professional help and less need for the more complicated returns that having children or a mortgage can bring," says Liz Weston, a personal finance columnist at NerdWallet. Tax reform carries other benefits for younger Americans. Done right, it means increased economic growth and more job opportunities. In the four different tax reform ideas floated last week by the Tax Foundation, projected GDP growth ranged from 2.2 percent to 7.1 percent. Wages are projected to grow too, by between 1.6 percent and 5.3 percent in the foundation's four scenarios. Lower corporate taxes—the GOP plan would cut the corporate tax rate from 35 percent to 20 percent—mean potentially lower costs for all consumer products, from avocados to iPhones. "Tax reform must be bold" for it to work, says David Barnes, policy director for the pro-market group Generation Opportunity. "It must make the tax code simpler, fairer, and more efficient by eliminating special interest tax credits and deductions." Still, tax reform carries plenty of risk. If Congress passes and Trump signs a tax reform bill that doesn't do anything to cut spending, it will only pile more debt onto younger generations. Already, each American owes about $62,000 as his or her share of the national debt—that's roughly 8,850 orders of avocado toast (average cost: $7)—and that amount will get larger if tax rates fall and spending doesn't. But does Congress even care about the deficit? The outlin[...]