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All articles with the "Taxes" tag.

Published: Mon, 23 Apr 2018 00:00:00 -0400

Last Build Date: Mon, 23 Apr 2018 04:41:37 -0400


The Supreme Court Eyes Online Sales Taxes

Thu, 19 Apr 2018 00:01:00 -0400

If you think internet companies aren't paying any taxes for online sales and that's killing bricks-and-mortar retailers and states' budgets, you, my friend, have been duped. Nothing could be further from the truth. The internet isn't a tax-free zone, nor is the lack of revenue the issue with state budgets. There is, however, a battle about whether state and local governments should be allowed to collect taxes from out-of-state companies. A 1992 Supreme Court decision, Quill Corp. v. North Dakota, reaffirmed a previous decision that a business must have a significant presence in a state before that state can require it to collect sales taxes. That means a mother selling handcrafted goods on Etsy doesn't have to collect sales taxes from her consumers unless they are physically located in her state. However, Amazon collects sales taxes from customers in all 45 states that have a statewide sales tax because of its vast distribution network. Most state lawmakers want to see Quill overturned, allowing them to force out-of-state companies to collect sales taxes on their behalf. This argument was just heard by the Supreme Court in the case of South Dakota v. Wayfair Inc. If the states were to win, they would be able to reach into the pockets of that mom selling her paintings on Etsy, even though she may live on the other side of the country, didn't elect other states' officials, and never agreed to those states' tax laws. More tragically for consumers, tax competition among states would also be lost if Quill were overturned. Under the new regime, online consumers—no matter where they shop or what they buy—would lose the ability to shop around for a better tax system. Without the competitive pressure and the fear of losing consumers to lower-tax states, lawmakers would not feel the need to try to rein in their sales tax burden. It's that pressure, which limits their tax grabbing abilities, that these lawmakers resent and want the Supreme Court to put an end to. Some of them probably hope that more revenue would alleviate the need to put their financial house in order. They would be wrong. According to the Kaiser Family Foundation, 33 states faced shortfalls in fiscal 2017 and/or fiscal 2018, even though revenue collection has been growing in most states. That's because the more states collect in revenue the more they spend. Besides, states are overestimating the revenue they'd get from the taxes. Internet sales are still a small share of overall sales, and taxing them wouldn't make much difference. According to a 2017 report by the Government Accountability Office, online sales represent less than 10 percent of retail sales. Also, the 100 biggest online retailers already tax roughly 90 percent of their sales. Desperate lawmakers shouldn't expect to collect any more than 2 to 4 percent of total state and local government tax revenues this way, according to the GAO, were Quill to be reversed. A reversal would, however, jack up compliance costs for small online retailers, which, unlike Amazon, tend to have razor-thin profit margins. Imagine suddenly having to enforce taxes for the nation's 12,000 tax-collecting jurisdictions. Talking to NPR on the morning of the South Dakota v. Wayfair hearing, a Republican state senator from South Dakota, Deb Peters, laughed at the notion that anyone would get hurt. According to her, free software provided to online retailers by the majority of desperate states would make that cost zero. This is questionable. As an eBay representative noted on NPR in response that morning, "in Minnesota, blankets are taxable, but baby receiving blankets are not taxable. In Texas, deodorant is taxable, but deodorant that has an antiperspirant is not." Tax software isn't that precise, and compliance would still have to be handled on a case-by-case basis. Repeat this for thousands of items and compliance is definitely not "free." There is a lot to be lost in the Wayfair case. If Quill were to be overturned, compliance costs could skyrocket for many retailers, and good principles of taxation would be thrown out the[...]

When It Comes to Taxes, the Government Always Wants More

Wed, 18 Apr 2018 00:01:00 -0400

The cable bill was the last straw, says Kristin Tate. "That's the one that really made me mad." Comcast included $36 in charges for mysterious things like "utility tax" and "government access fee." That motivated her to research obscure taxes and put what she learned in a new book, How Do I Tax Thee? A Field Guide to the Great American Rip-Off. Rip-off? Even limited government needs some taxes to fund basic functions. "Yes," says Tate. "But politicians are cowards. Instead of creating a tax, they magically create these little fees (so) they don't have to tell their voters they raised taxes." Voters don't often notice the sneaky taxes. Yesterday was "Tax Day." It was April 17 this year because April 15 fell on Sunday and Monday was Emancipation Day. But by calling April 17 "Tax Day," the media miss the big picture. Income taxes make up less than half the tax most of us pay. We also must pay payroll tax, corporate tax, gift tax, gambling tax, federal unemployment tax, gas tax, cable and telecom taxes, plane ticket tax, FCC subscriber line charges, car documentation fees, liquor and cigarette taxes, etc. People can't keep track. For my latest YouTube video, Tate asked people, "What's your tax rate?" Tourists in Times Square said that they thought they paid about 20 percent. But they left off the hotel taxes, airline taxes, etc., that push Americans' total tax load to almost 50 percent. When you pay those hidden taxes, you may assume they go toward useful things, but Tate knows her taxes pay for government waste. "Extreme inefficiencies, pensions that are to die for—these amazing salaries that these public workers get that are just laughably above market." New York City's average subway worker makes $155,000 a year. Politicians suggest their extra taxes go, not to fund those big salaries and "pensions to-die-for," but to pay for the specific services for which the taxes are named. Tate says that's rarely true. "Cable bills and cellphone bills both have an 'Enhanced 911 Fee.' Consumers were told 911 fees were necessary to make upgrades to emergency communication needs. (But) after it was updated, instead of taking away the tax, it just stayed there." Chicago doubled cellphone fees to fund its Olympics bid. The Olympics rejected Chicago—but the tax remained. Now Mayor Rahm Emanuel wants to raise it again. More. They always want more. "New York City has an eight-cent 'bagel-cutting tax,'" says Tate. For some reason, unsliced bagels are not taxed. California has a 33 percent tax on fruit bought through a vending machine. Maine imposes a one-and-a-half-cent per pound tax on blueberries shipped out of state. Because these taxes sound petty, governments disguise them, says Tate, using "important-sounding language—like 'documentation fee,' 'service charge,' or 'equalization fee.'" But most of the money raised just goes to the general budget. "Wisconsin just renamed its 911 fee the 'Police and Fire Protection Fee,'" says Tate. "But actually, none of that money directly goes to fire or police protection. Instead it goes straight into the state's general fund." And they still can't fund the pensions the politicians promised government workers. Tate adopted two dogs and then learned that New York City imposes a $34 per year "pet licensing fee." "I won't pay it," says Tate. "I am technically breaking the law." She's braver than I am. I try to follow government's stupid rules. And if I broke them, I wouldn't announce it. I figure the IRS is eager to punish government critics like me. "I'm totally comfortable talking about that," said Tate. "They can come track me down." They may. Governments go to great lengths to collect taxes. "Seattle purchased lists of people buying pet food and mailed them threatening letters," says Tate. "The county's pet-licensing agency made more than $80,000." Governments should drop the pretense and just charge one huge "everything tax." Of course, then taxpayers might wake up and realize what's been done to us. That's one thing politicians don't want.[...]

IRS Website Crashes on Tax Day

Tue, 17 Apr 2018 15:00:00 -0400

(image) On Tax Day of all days, key pages of the IRS's website are down. Last-minute filers looking to view their tax information online, make a payment, or figure how much they owe are being greeted with an alert saying: "This service is currently unavailable. We apologize for any inconvenience."

The timing is a bit awkward, and not just because of the deadline for filing those returns is today.

Just last week, the agency released a glowing press release about its new "mobile-friendly" site designed to "help people who need last-minute tax information." (The press release is still reachable, but most of the purportedly helpful links in it are down.)

If that weren't bad enough, Acting IRS Commissioner David Kautter also testified today before the House Oversight Committee, where he had the unpleasant task of telling lawmakers about the technical problems.

So far there's no word about when the agency's website will be back online. Kautter reportedly assured the legislators that those unable to file their taxes because of the agency's mistakes will not be penalized. The commissioner told reporters that the agency had already received some 120 million of 150 million expected returns, leaving about 30 million possibly affected.

IRS spokesperson Sarah Allen tells NPR that taxpayers should not panic and "continue filing their tax returns as they normally would."

Elsewhere at Reason: Brian Doherty notes some of the wasteful expenditures that will gobble up your tax return this year, from Doggie Hamlet to Tomahawk missiles. Looks like we can add broken tax-collecting websites to the list.

A More Infuriating Way to Think About Your Tax Burden

Tue, 17 Apr 2018 10:45:00 -0400

When people talk about the burden of government programs that clearly don't benefit all, most, or even necessarily very many of the taxpayers on the hook for them, you often see their costs calculated in per capita terms across the whole population. Put that way, they seem laughably tiny, not worth even thinking about. Public broadcasting, for example, costs just $1.37 per citizen each year—far less than you pay to avoid getting kicked out of Starbucks every day. But money is fungible, so you can conceptualize the relationship between what you pay in taxes and any given government program or expenditure in a far more infuriating way. Consider, on this magic day of civic responsibility, that every penny of your federal income tax burden this year (and that of any number of other poor suckers with your same income) is going to some relatively small and insignificant government program. Here are 17 recent government expenditures, ranked from smallest to largest, that some of you may resent your taxes going to. (Not all of these programs expend all their money in one calendar year—but again, money is fungible.) Their costs are calculated in terms of how many citizens with a given taxable income (according to this handy 2017 tax table, which you should bookmark if you just started trying to deal with your 1040 this morning) it takes to pay for the expenditure. For those with taxable incomes higher than $100,000, where the tax table cuts off, the average tax burden for folk within a given range of adjusted gross income is derived from this IRS data (from 2015, the most recent year they offer). • EPA chief Scott Pruitt's absurd $43,000 soundproof booth? Every cent of the tax paid by 22 suckers with taxable incomes of $16,000 will go to pay for it. • Doggie Hamlet. It would be cheap and easy to fill this entire list with specific bits of arts funding. Those who cannot or would not enjoy the art themselves, and who are aware that lots of arts projects manage to support themselves with paying customers or willing patrons, can feel aggrieved by such expenditures. But let's just pick one colorful example, Doggie Hamlet, a live performance that, as described in The Los Angeles Times, "involves a flock of sheep, three herding dogs, six human performers, a few scattered pelts, plenty of green grass and very little (if any) Shakespeare." The Times notes that "Narrative threatened to emerge at points in the production but never really took hold. When language was used, it wasn't always easy to discern what was being said. Speech ultimately seemed no more consequential than bleating or barking." The eccentric show has received, via the New England Foundation for the Arts, $45,000 of our money. That's the total tax burden of five of the sort of $50,000-taxable-income folk who might be apt to trouble themselves to see it. • Legal education for Department of Energy employees. According to a 2017 report from the inspector general for the Department of Energy, the department "paid for 29 college courses, totaling approximately $138,000, for a general engineer to obtain a law degree." The report concluded that most of these courses "were unrelated to his position at the Department," even though the rules governing such payments for employee education "required training be applicable to workplace responsibilities and be mission-oriented." That lucky public employee enjoyed the full 2017 tax payments of 36 Americans with taxable income of $28,000, folk who would likely be hard pressed to pay for their own legal education. • The Chesapeake Bay Journal. The EPA has been giving $325,000 a year to this publication, which, as Reason contributing editor Walter Olson notes, "was extensively covering proposed EPA budget cuts and framing them as threats to the bay." While not all of the publication's mission was dedicated to coverage that pleased the EPA, elements of that payment did involve some self-reflexive lobbying for its own mission, eating up the entire [...]

Facebook’s Use of Data May Annoy You, But IRS Handling of Your Sensitive Information Is Truly Chilling

Tue, 17 Apr 2018 10:10:00 -0400

As we argue over the propriety of Facebook hoovering up personal (but not especially sensitive) information that users voluntarily gave to the social media company, it's a good time to remember that many of us are right now surrendering delicate details of our life to an even less trustworthy entity—the Internal Revenue Service (IRS)—and we have no choice. Using a feature of Facebook that was abandoned in 2015, third-party apps were, for several years, able to compile fairly detailed profiles on users who installed them. Among other destinations, the information made it to political campaigns for use in targeted electioneering (variously characterized as innovative when the Obama campaign bragged about its tech savvy, and nefarious when it benefited Trump). This info-siphoning struck many people as creepy as hell (almost certainly why Facebook killed the feature three years ago), but it was based on freely surrendered data through a service that nobody was compelled to use. Anybody uncomfortable with Facebook's policies can just close their account (or creatively populate it with bogus info). By contrast, you can't just walk away from IRS demands for the details of your finances, your business, your property, and your family. The tax agency gets very pissy, indeed, if you turn up your nose at demands for information, warning that "the IRS may assess penalties to taxpayers for both failing to file a tax return and for failing to pay taxes they owe by the deadline." Boris Johnson, when he was mayor of London (you, know, in the U.K.), was slapped with an enormous tax bill by the United States IRS because he was born in this country, though he left by the age of 5. The only way he was able to escape threats of arrest should he ever return to the land of his dimly remembered childhood was to pay the tab and then renounce his American citizenship. The purposes to which the IRS turns that extracted data are more chilling, too—and that's just if we're talking about the intentional funding of an ever-metastasizing state that exists to push you around and turn out your pockets to fund its efforts to become yet pushier. By comparison, targeted political messages at which you roll your eyes before scrolling by are nothing but minor annoyances. You have nobody to blame but yourself if you actually pay attention to those ads. But the IRS has a pretty impressive history of not just putting coercively extracted information to questionable uses, but also of storing it carelessly, leaking data through every possible conduit, and hiring employees who appear to only marginally prefer a career in tax collection over knocking over liquor stores. That is, it might be fun to see Mark Zuckerberg field a battery of ill-informed and frankly stupid questions from those members of our society diagnosed as senators. But it would be much more productive if a long line of IRS employees stood behind him, awaiting their turn. Ryan Payne, for instance could have taken a few moments to field some questions about the course of events that led the former IRS agent to plead guilty earlier this year to using other people's Social Security numbers—information acquired during business audits—while applying for a loan and a bank account. For their part, Della Ornelas and Randall Ruff could have delved into their long and mutual interest in combining tax collection with fraud—shared tastes that led them first to multi-decade careers at the IRS, to marriage, and then prison. Maybe senators could have pressed representatives of The Treasury Inspector General for Tax Administration about their puzzlement, expressed in a February report, as to why "the IRS issued more than $1.7 million in awards to 1,962 employees who had a disciplinary or adverse action… Some of these employees had serious misconduct such as unauthorized access to tax return information, substance abuse, and sexual misconduct." And then there are the over 700,000 Social Security[...]

California Wants to Tax Gun Sales to Pay Therapists to Watch for School Shooters

Mon, 16 Apr 2018 13:50:00 -0400

(image) California Assemblyman Jim Cooper (D–Elk Grove) has introduced a bill that would impose a new excise tax of an unspecific amount on the sales of guns and ammunition, with the proceeds being deposited in a new School Gun Violence Prevention Fund. The money would pay for middle and junior high schools to hire counselors whose primary job is to stop would-be shooters before they strike. The tax would also fund grants to California's high schools to pay for additional on-campus police officers.

Public middle and junior high schools would be required to hire the counselors.

"A lot of these kids have trouble, especially in the middle school and high school years, and we really want to target them," Cooper tells a Sacramento-area NBC affiliate. "We are not banning guns or ammunition, but we would tax that. And to me that's a small price to pay."

Given that his bill does not specify how high the new tax will be, it's a little premature to call it a small price. It's also unclear what exactly the taxpayers would be buying.

Nickolas Cruz, the perpetrator of the Parkland shooting, received counselling services from a school therapist. In 2014 he reported to a counselor that he'd been having violent dreams about killing people. Health professionals evaluated him again in 2015 after he posted Snapchat videos in which he cut himself and announced his intention to buy a gun. Neither examination was enough to prevent the terrible shooting.

And ineffectiveness isn't the only risk here. The counselors and police officers funded by the grants may prove overly aggressive in singling out students with potentially violent tendencies. School officials have a natural tendency after a crime like this to see potential threats or infractions everywhere, to the detriment of students' civil liberties.

Gun owners have reacted negatively to Cooper's proposed legislation, calling it unjust that they should have to bear the entire burden of funding new school safety measures.

Given the practical difficulties in Cooper's bill and its lack of detail regarding tax rates, the assemblyman's proposal looks more like political theatre than a real attempt to improve school safety. California politicians are not above this, particularly when it comes to guns. State treasurer (and gubernatorial candidate) John Chiang has suggested divesting the state's pension fund from sporting goods store that sell firearms. Los Angeles City Councilman Mitch O'Farrell sponsored a resolution asking city staff to look into boycotting companies that do business with the NRA.

This anti-gun grandstanding may be good politics in much of California, but it is remarkably bad policy.

Stossel: The Great American Tax Ripoff

Tue, 10 Apr 2018 10:45:00 -0400

Tax Day gets a lot of attention, but John Stossel says that attention is misleading, because the April 17 deadline is only for income tax. That's just a fraction of the taxes that Americans pay.

You probably know about property, payroll, and sales taxes, but there are also lots of hidden taxes. Kristin Tate reports on them in her new book, How Do I Tax Thee? A Field Guide to The Great American Ripoff.

Tate found a hundred hidden taxes—a rifle tax, airplane and hotel taxes, dog license fees, a blueberry tax in Maine, a sliced bagel tax in New York City (whole bagels aren't taxed), and so on.

Our camera followed her as she asked people if they knew about these taxes. Few did.

When people did know about them, like the dog license fee, they assumed it went to cover the public costs of dogs. But, Tate says, "in most cities it doesn't go to dogs. It just goes to the general fund like all of these other fees."

Stossel assumed 911 fees went to maintain the emergency system. But Tate says they usually don't.

"In most states and cities the 911 fees just go to general funds," she said. In Chicago, "they hiked their 911 fee in 2008. The reason for the hike was to fund their Olympic bid."

But when Chicago lost its Olympic bid, the 911 fee hike stayed in place.

"Once they put [taxes] there, they almost never go away," Stossel suggested.

"Absolutely not. Government only grows," Tate said.

The views expressed in this video are solely those of John Stossel, his independent production company, Stossel Productions, and the people he interviews. The claims and opinions set forth in the video and accompanying text are not necessarily those of Reason.

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Remy Shows Cardi B Where Her Taxes Go

Fri, 06 Apr 2018 11:50:00 -0400

After Cardi B launched an anti-taxation tirade against Uncle Sam on Instagram, Remy took on the challenge of explaining what's happening with all her money.

'Bodak Yellow' parody written and performed by Remy.

Shot and edited by Austin and Meredith Bragg.

Mastered by Ben Karlstrom. Beat by JEOnTheButtons.
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Thirty grand for a table
where Ben Carson loves to eat
640 dollars for the
Louboutin of toilet seats

So many whips you'd think
you were watching Fifty Shades of Grey
Plus the seven billion every year
we send to TSA

I don't dance no
I make tummies move
See I don't gotta dance
I make tummies move

800 thousand for the homeless
Not the homeless–monkey drool
Plus 80 million for a hotel
but that hotel is in Kabul

You say you
wanna know where it go?
Let's find out and see
Cardi B

Billion dollars gone
Don't know where it be
It in the club?
That's what happens when you
give to D.C. spenders
As much a chance of getting paid back
as Evan McMullin's vendors

Forty grand for an app
that shows an arrow every time
Ain't seen an app so overvalued
since that time I purchased Vine

Plus billions more that we give
To folks we deem are really smart
For a pyramid that tells you
"Don't forget to eat your carbs!"

Grope your pants and
take your money too
Grope your pants and
take your money too

The tax code is the worst thing scribbled
since Ben Affleck's back tattoo

Dear Politicians: Stop Taxing Us to Death

Wed, 04 Apr 2018 00:15:00 -0400

Soda will cost you more in Philadelphia, Seattle, Boulder, Colorado, and a bunch of California cities because politicians in those places voted to tax it. The social engineers claim soda taxes will "reduce obesity," "lower diabetes rates," "reduce medical costs," etc. But the politicians' main goal is to bring in money. Philadelphia city council members applauded wildly when their tax passed. But store owner Melvin Robinson says, "It's a bad tax." Robinson, who runs Bruno's Pizza, says the soda tax punishes his business. His customers quickly agreed. One I interviewed for my new YouTube/Facebook/Twitter video angrily said, "Who should pay $3 for a drink that they used to get for 99 cents?" Now, instead of buying soda at Bruno's, she buys from a store in the next town. That's easy to do because Bruno's is located right on an outer edge of Philadelphia. Customers just cross the street to save money. Do the politicians ever think about that? "(The tax) is for what we feel is a good reason," Philadelphia City Councilman William Greenlee told me. I thought he would talk about saving people from obesity. That would still be obnoxious and intrusive, but Greenlee gave another, simpler reason. "We need the money. Nothing else that we could come up with could raise that kind of funding." But the tax hasn't brought in as much money as they expected. Soda sales are down by more than 50 percent. That happens when people can escape taxes by crossing a street. Or by buying other, even less healthy things. Taxes often have unintended side effects. Although soda sales are down in Philadelphia, liquor sales are up. That surprised Greenlee. "I don't know about that," he laughed, "'cause we have a liquor tax, too!" Another problem: Soda taxes are regressive. They hurt poor people most. Even Bernie Sanders campaigned against Philly's soda tax, shouting, "You don't have to fund child care on the backs of the poorest people in this city!" "I didn't know Bernie opposed it!" Greenlee replied. "But remember, we're raising enough money to put 2,700 kids in pre-K." That was the city's justification for the new tax. Activists said thousands of kids would attend "high quality" preschool. 
I doubt that the schools are "high quality." Government work rarely is. It is expensive, certainly—Philly spends more than $6,000 per child; Catholic schools charge less than $5,000. Greenlee laughed at that, too, replying, "Priests and nuns don't work for that much money." Politicians love taxes on unhealthy things, and so do the media. Both applauded when Denmark taxed fatty food a few years ago. Today Show host Matt Lauer was thrilled. "Buy food that has a certain level of fat, they charge you extra! Do we like that?" His panel did. They clapped gleefully. But Danes behaved a lot like Melvin Robinson's customers do. They crossed a border to avoid paying more. Denmark quickly repealed its fat tax. But Philadelphia isn't repealing its taxes. People there already pay 44 different ones, including a nearly 4 percent city income tax. I said to Greenlee, "How can the city government not have enough money? They should be rolling in it!" "But there's a lot to do!" he replied. Politicians do love spending other people's money. Philadelphia gave $4 million of its new soda tax funds to the Office of Arts and Culture. That bureaucracy spent the money on things like "hip-hop teach youth empowerment and social issues." "Like we need that!" shouted Robinson, sarcastically. "People are trying to live!" Then he added, politicians should "stop stealing." I don't think they're stealing, but city council members make $121,000 a year, three times Philadelphia's median income. The mayor makes $218,000. That's not unique to Philadelphia. Politicians routinely make much more than people they allegedly serve. "Citizens should make more money," Greenlee said. [...]

Cardi B, Your New Libertarian Hero, Asks: 'Uncle Sam, I Want to Know What You Doing With My Fucking Tax Money!'

Fri, 23 Mar 2018 10:20:00 -0400

Cardi B, a rapper and Instagram celebrity best known for her hit "Bodak Yellow," posted a video on Instagram yesterday where she asks some hard questions about effective tax rates and government spending.

B notes that she is paying a 40 percent tax rate and not getting much for it. She asks for accountability, noting that "when you donate to a kid from a foreign country, they give you updates of what they doing with your donation."

By contrast, B has no idea what Uncle Sam is doing with her "fucking tax money." She speculates about possible uses for government revenues, but points out that "y'all not spending it in no damn prison," because incarcerated African-American men only receive "like two underwears, one jumpsuit for like five months." B wants transparency, demanding "receipts."

The video has been viewed over 4 million times since it was posted late last night.

In her work, B has talked about her experience as an entrepreneur, explaining that after her initial success, "I don't gotta dance, I make money moves."

Maryland City Raises Property Tax on Businesses by 800 Percent, in Bid to Attract More Businesses

Mon, 19 Mar 2018 16:45:00 -0400

Here's a good rule of thumb: If you want more of something, don't tax the dickens out of it. This principle appears to have eluded the town of Seat Pleasant, Maryland, which jacked up five businesses' property taxes by 800 percent as part of a scheme to attract more businesses to the community. Now two of the targeted companies are suing, claiming the small suburb—located just outside D.C—violated everything from their own charter to the U.S. Constitution when it imposed the tax. "It is backward economic thinking. It's borderline racketeering," says Steven Franco, who owns and operates the Discount Mart and is one of the plaintiffs in the suit. Franco saw his property taxes shoot up from less than $6,000 to over $55,000 in less than a year. This, he says, has had an "extremely adverse impact" on his business. "People's schedules have been cut. Profits have been almost depleted....One guy had to get laid off." Other plaintiffs in the lawsuit include married couple Si Quang Chen and Chang Lin Chen, who own a Chinese restaurant next to Franco's store. Their property tax bill went from $3,482 to $31,180. In May 2017, the Seat Pleasant council passed a yearly budget that included a special assessment to fund a "Special Revitalization District for Businesses." The tax was supposed to bring in about $252,864 a year, which would be used to spur economic development and develop a "stronger financial portfolio" for the city. According to Seat Pleasant's charter, a special assessment like the one levied on Franco and the Chens must be spent on specific improvements to the targeted taxpayers' properties—for example, by adding a sidewalk or sewer main. The city must also hold a public hearing on the assessment and give affected property owners a chance to appeal. But the budget document makes it clear that the assessment is intended to benefit the entire town. Menawhile, the lawsuit alleges that Franco and the Chens received neither a public hearing nor a chance to appeal. The suit also claims that the tax violates the Fifth Amendment to the U.S. Constitution's prohibition on taking property without due process of law. Mayor Eugene Grant, named as a defendant in the lawsuit, tells the local NBC affiliate that "all of these dollars are necessary for us to provide efficient and effective services for the residents of Seat Pleasant." Grant is a controversial politician, who held court for several months in a tent outside the Seat Pleasant City Hall after the city council voted to bar him from the building because of alleged hostile behavior toward city staff. In 2016, he engineered a takeover of the city council with a slate of candidates favorable to himself, in an election that sparked accusations of voter fraud. Grant has expressed a desire to redevelop the area occupied by the businesses that were hit by the assessment. Franco thinks the tax is intended to force him to sell his property to the city, which already owns sizable nearby lots. Grant had previously floated the idea of using eminent domain to seize Franco's property, according both to the lawsuit and to texts supposedly sent between Grant and Franco. (The texts have been posted to the website Franco, whose store sells everything from milk to computers to school uniforms, says that Seat Pleasant is already a difficult place to do business, setting aside the special assessment. Most Maryland personal property taxes—a tax paid on furniture, tools, and other movable property used in a business—are levied at less than 2 percent, with many towns and counties charging less than 1 percent or having no personal property tax period. Seat Pleasant's personal property tax, by contrast, is 15 percent, over six times the Maryland jurisdiction with the next-highest rate. Franco says that such hi[...]

Larry Kudlow Is a Big Upgrade for Trump's White House

Fri, 16 Mar 2018 00:30:00 -0400

President Donald Trump will reportedly name Larry Kudlow head of the White House National Economic Council. For fans of pro-growth policies—deregulation, low taxation, and open trade—it's great news for obvious reasons. Kudlow has been a decades-long champion of these ideas, and those with coherent philosophies tend to offer some stability and continuity. This administration could use more of those things, not less. Kudlow is also a noticeable upgrade over the outgoing Gary Cohn, not only because he has been a far more consistent voice for free markets—Cohn's support of carbon tax and a value added tax, and rumored moderating disposition on tax reform were all worrisome clues—but also because the syndicated columnist and former TV host is better equipped to sell those ideas to the public and lawmakers. Kudlow, it's been reported, also played a role in persuading senators to support tax reform despite the intense political opposition, and hysterical warnings about the bill's homicidal intent and supposed enduring unpopularity. His problem with the Trump tax bill was that it wasn't cut enough on the individual side. Of course, the hardest sell might be the president himself. "We don't agree on everything, but in this case I think that's good," Trump said of Kudlow this week. "I want to have a divergent opinion. We agree on most. He now has come around to believing in tariffs as a negotiating point." Trump hired Kudlow even though he co-wrote a piece for National Review only two weeks ago arguing that imposing tariffs on steel and aluminum imports is tantamount to imposing sanctions on your own country—"a crisis of logic." Kudlow, a former White House budget aide for President Ronald Reagan, has long held positions on NAFTA and trade in general that are diametrically opposed to the president's, which undermines the idea that Trump is rigidly opposed to any dissent within the administration. And if tariffs are indeed merely a "negotiating point," that's good news. While Kudlow immediately restores some balance in a White House that has picked up the protectionist rhetoric lately, it's highly unlikely that the propelling idea of Trump's electoral success will be shelved simply because he tapped a new adviser, no matter how convincing or compelling his arguments might be. It's worth considering, however, that Kudlow might mitigate some of the worst inclinations of the protectionist wing. Certainly, his presence doesn't hurt. It's worth noting that tariffs, though important, aren't everything. And on most issues, Trump has displayed a surprisingly traditional fiscal conservatism. Cohn, it seems, would have been much more liable to push Trump toward acquiescing on economic issues in pursuit of deals. So, the hardest hits by the news have been liberal pundits who are, despite all the talk of the Trumpocalypse, far more predisposed to being fans of the president's big-government inclinations than that of old-school fiscal conservatism. Many liberal columnists have already lined up to point out that Kudlow has made some bad predictions in the past. It's worth remembering that this puts him on par with just about every other economist who's ever appeared on TV or written a column or worked for government. Kudlow's rosy predictions seem predicated on an optimistic view that fails to consider the unpredictability of markets and world events. Economists—all of them—should stop trying to be seers. The idea that anyone who's failed to forecast a recession but been right about the big ideas should be disqualified from a job in Washington seems to be reserved exclusively for fiscal conservatives. And watching the agitated reaction from proponents of high taxes and highly regulated top-down economics should imbue conservatives with[...]

Larry Kudlow, Trump’s New Economic Adviser, Is a Longtime Advocate for Low Taxes and Free Trade

Thu, 15 Mar 2018 10:30:00 -0400

On Thursday, economist and CNBC contributor Larry Kudlow was named the new director of the National Economic Council at the White House. Kudlow is a longtime advocate for low taxes, free trade, and looser immigration restrictions. Although he has softened slightly on the last two, I am hopeful he will use his new perch to continue to advocate forcefully for all of these positions. To many in Washington and New York, Kudlow is known for being one of first supply siders. He was a supply sider when supply side wasn't even a thing, and he has remained loyal to that way of thinking. In other words, he likes his and everyone else's taxes low—especially as they apply to capital. Needless to say, he was happy with the tax reform plan passed and signed into law last December, especially the reduction of the corporate tax rate from 35 to 21 percent. Kudlow is more politically savvy than I am, so he probably had more tolerance than me for the "middle class tax relief" part of the plan. In my humble opinion, if Congress and the president won't cut spending, they shouldn't implement tax cuts with no apparent economic growth payoff. When you are engaged in a tax policy battle, having Larry Kudlow on your side is an asset. He was, for example, quick to oppose the misguided Border Adjustment Tax last year, even if it meant going after longtime allies like House Ways and Means Chairman Kevin Brady (R-Texas) and Speaker Paul Ryan (R-Wis.). For months he was relentless in working his contacts here in Washington to stop the measure, as well as educating viewers on CNBC. His input on taxes will be welcome in the White House, since there is still a lot that can be done to make improvements to the recently passed tax plan. Making permanent some of the provisions which are currently set to expire should be one important priority. Hopefully, Kudlow will also remind the president and members of Congress to cut spending to pay for tax reform this time around. I assume he will also use this influence to address one of his longtime pet peeves: indexing the basis of capital gains to inflation. As he said on CNBC last summer: Consider this: You invest $1,000 and, after ten years, you sell that investment for $1,200. But if inflation averaged 2.5 percent in that period, the $1,200 you receive will be worth less in real terms than the $1,000 you invested. And yet, under current law, you will pay a tax on your $200 capital gain. The results of this policy can be perverse. "As has been well documented," writes Alan Auerbach, University of California economist, "realized capital gains may be subject to tax rates that easily exceed 100 percent of real gains in the presence of inflation." If he decides to use his influence to push for that change, he will get lots of support from the free-market tax movement. There are many good things to say about Larry Kudlow. But as it relates to this job, the best news of all might be that he is no Peter Navarro—the anti-trade Trump advisor. Unlike Navarro, who has said that he believes it's his job to confirm Trump's worst anti-trade instincts, Kudlow has been a consistent advocate for free trade. When he worked at the White House under president Reagan he used to call free traders like him The White Hats. As such he didn't hesitate to express publically his opposition to the president's recent decision to impose punishing tariffs on steel and aluminum. If there's a reason to worry, it's Kudlow's recent endorsement of targeted tariffs for China—a country he sees as a gigantic problem for the U.S. Kudlow recently said that he is "not opposed to targeted tariffs" against the country, which he called a "Trumpian way of negotiating." One can recognize the tremendous challenges posed by China an[...]

Home Pot Delivery Is Cool, but California's Taxes and Regulations Are Still Onerous

Fri, 02 Mar 2018 15:15:00 -0500

U.S. News recently ranked California's "quality of life" the worst in the nation, much to the delight of Fox News. (That metric was just one of eight used by the magazine, and California actually came in 32nd overall.) U.S. News assessed quality of life based on measures of the "natural environment" and the "social environment." One factor that was conspicuously excluded: Can you order marijuana online and have it delivered to your home or office that day? Stoney, based in Santa Ana, delivers cannabis products throughout the state, generally overnight. Delivery is free for orders over $50; otherwise it costs $8. In Orange County and Los Angeles, the company offers same-day service for $15. All you need is a credit card and an ID proving you are 21 or older. The website has a decent flower selection of about two dozen strains, plus concentrates, shatter, prerolled joints, edibles, and vape pens. It is not exactly an Amazon for pot, but it's the closest thing I've seen. California is one of just three states that currently allow home delivery of recreational marijuana. The other two are Oregon, which legalized recreational marijuana in 2014 and began allowing deliveries to consumers a year ago, and Nevada, which legalized recreational marijuana in 2016 and allowed home delivery under temporary regulations that lapsed at the end of last year but were renewed as of yesterday. Delivery to consumers is still banned in Colorado and Washington, the two states where voters approved legalization in 2012, although that may change in Colorado as soon as this fall. Alaska, which legalized recreational marijuana in 2014, does not allow home delivery either. In Massachusetts, where legal sales of recreational marijuana are expected to begin this summer, home delivery will be delayed at least until the fall and possibly later. In Maine legislators have yet to establish a system for licensing and regulating recreational sales. In Vermont and the District of Columbia, recreational use is legal, but sales are not. The home delivery option is one of the most consumer-friendly aspects of California's marijuana regulations, along with the allowance for on-site consumption at marijuana stores (subject to local approval). The taxes, by contrast, are decidedly unfriendly. They include $9.25 per ounce sold by growers, a 15 percent excise tax collected by retailers, local marijuana taxes, a 6 percent state sales tax, and local sales taxes. Taxes totaled 31 percent on my Stoney order, not including the levy on growers. At LAX CC, a marijuana shop in Los Angeles that has a big selection (77 strains and 40 concentrates on the day I visited), taxes add 35 percent to the retail price. If you include the wholesale tax, the effective rate on an eighth of an ounce, which was priced at $45 for most strains, is roughly 39 percent. According to new report from the California Growers Association (CGA), which represents small cannabis cultivators, "taxes were identified as the single greatest barrier to entry" in a survey of the group's members. The report argues that "current cannabis tax policy is propping up the illicit market, preventing compliance from good-faith operations, and contributing to price increases for patients and consumers." A legal eighth in California may cost two or three times as much as a black-market eighth. Taxes are not the only reason street dealers undersell state-licensed marijuana suppliers, who also bear regulatory costs that their illegal competitors escape. The CGA, which complains that "barriers to entry are impracticably high," says one problem is the sheer volume and complexity of state and local regulations. Seven state agencies, local building and fire codes, and local regu[...]

Thoughts on the New Constitutional Case Against Obamacare

Wed, 28 Feb 2018 23:35:00 -0500

On Monday, twenty Republican-controlled states filed a lawsuit challenging the constitutionality of the Affordable Care Act's individual mandate, which requires most Americans to purchase government-approved health insurance. The full text of the complaint is available here. The lawsuit contends that, if the mandate is invalidated, the Court must also strike down the entire Affordable Care Act, because the rest of the ACA cannot be "severed" from the mandate. The red state plaintiffs are right to argue that the mandate is unconstitutional. But they are probably wrong to conclude that a ruling against the mandate requires the court to eliminate the rest of Obamacare along with it. Back in 2012, Supreme Court ruled that the mandate is constitutional in its highly controversial decision in NFIB v. Sebelius. But Chief Justice John Roberts' controlling opinion for the Court only reached this conclusion by reinterpreting the mandate as a tax, thereby saving it from being declared unconstitutional. Roberts concluded that the mandate was not authorized by Congress' power to regulate interstate commerce, or by the the Necessary and Proper Clause, which gives Congress the authority to enact legislation that is "necessary and proper" for the execution of other federal powers granted by the Constitution. Thus, it could only be saved by ruling that it qualifies as a tax, authorized by the Tax Clause of the Constitution. Roberts listed several factors that led him to conclude that the mandate can be considered a tax. But a crucial one is that the violators were subject to a fine collected by the IRS. As Roberts put it, "the essential feature of any tax [is that] it produces at least some revenue for the Government." In December 2017, the GOP Congress enacted a tax bill that, among other things, abolished the fine previously imposed on people who disobeyed ACA health insurance mandate. The mandate itself remains on the books. But violators are no longer subject to any penalty. For this reason, the state plaintiffs in the newly filed case argue that the mandate can no longer be considered a tax. In the absence of a financial penalty, it no longer "produces" any "revenue for the Government." Indeed, it no longer even tries to do so. And if the mandate is not a tax and is not authorized by the Commerce Clause or the Necessary and Proper Clause (as the Court ruled in NFIB), then it is no longer within the proper scope of federal power authorized by the Constitution. The plaintiffs are absolutely right on this point. A tax that does not require anyone to pay anything is like a unicorn without a horn. It is pretty obviously not a tax at all. In fairness, the requirement of a monetary payment was not the only circumstance that Chief Justice Roberts considered in determining that the mandate qualifies as a tax. He also claimed that several other factors were relevant, such as that the mandate did not include a scienter requirement, that the penalty was not so high as to be "prohibitory," and that those who violate the mandate were not considered to be lawbreakers if they paid the fine. But, while the requirement of a monetary payment may not have been sufficient to prove that the mandate was a tax, it surely was necessary. You don't have to be a constitutional law scholar to understand that there can be no taxation without some kind of payment. In my view (see here and here), Roberts was wrong to conclude that mandate qualifies as a tax, even when it did impose a fine on violators. It was more akin to a penalty imposed for violation of a law, similar to fines imposed for violateing any number of other laws, such as those banning speeding or jaywalking. But it is even[...]