Worse, ethanol is not being sold to us because it will make America energy independent. It is being forced on the nation, even with all the problems that have already become apparent, because the party in power is locking in the lobbyist monies and farm state votes. And that’s not just my opinion; it’s also the opinion of David G. Victor, director of the Program on Energy and Sustainable Development at Stanford and an adjunct senior fellow of the Council on Foreign Relations, as published in the Houston Chronicle on April 15 of this year.
In fact, the corruption of our legislative body is so pervasive that, when Reuters Business discussed how we could immediately get more ethanol just by dropping the 54-cents-per-gallon import tax on Brazil’s ethanol, the person quoted as saying that “Congress has a backlog of important bills” and “won’t have time in this legislative year to deal with controversial legislation” (such as reducing tariffs on ethanol from Brazil), was nobody we elected. No, it was Jon Doggett, vice president of the National Corn Growers Association. Now tell me: Who is really calling the shots?
Category: Taxes
E85
E85 is the designation for a fuel that combines 85 percent ethanol with 15 percent gasoline. E85-compatible—or flex-fuel—vehicles can run on E85 or regular unleaded gasoline. Because the alcohol in E85 can break down rubbers and plastics used in typical internal-combustion engine fuel systems, vehicles must be specially modified to allow its use. And to obtain maximum power from higher-octane E85, engines must be tuned to run on it, or be able to adjust timing and the air-to-fuel ratio when running on E85.
Supporters say the alternative fuel is environmentally friendly, reduces dependence on fossil fuels and imported oil, and takes advantage of America’s surplus of agricultural crops, like corn, that can be readily converted to ethanol for use in E85.
Critics note insufficient ethanol production facilities exist to significantly offset the nation’s appetite for fuel, that refineries aren’t adapted to producing E85, and that E85 is harder to transport because its corrosiveness means it cannot flow through existing gasoline pipelines. In addition, in most states E85 costs about the same as unleaded regular while costing the driver up to 15 percent in fuel-economy penalties because it does not pack the same explosive punch as gasoline.
The Ghost of Tax Day Future
Closing the spending gap shown us by the Ghost of Tax Day Future with tax increases would eventually require all taxes on average to increase by more than 50%. Such a tax increase is not simply a larger check made out to “U.S. Treasury.” Economic research suggests that larger governments are associated, all else equal, with slower economic growth because of the tax and regulatory burdens associated with a larger state. Using the estimate of Eric Engen of the Federal Reserve Board and Jonathan Skinner of Dartmouth College, meeting our entitlement spending wave through tax increases would ultimately depress our annual rate of economic growth by about a full percentage point.
That such tax increases would build up over many years does not dull the observation that tax increases of this magnitude would carry serious consequences for our future living standards. Their sheer size would restrain incentives for innovation and flexibility, and the entrepreneurship and productivity growth that have characterized relatively strong U.S. economic performance. Indeed, the “tax increase” shadow could ultimately crowd out about as much of the rate of growth as the productivity growth boom of the past decade has contributed.
Judge Presses Companies that Cut Off Legal Fees
Federal judges are beginning to question why companies are cutting off legal fees to their executives when they become caught up in criminal investigations.
The judge in the tax-shelter trial of former tax professionals at KPMG last week ordered a hearing to determine whether prosecutors had improperly put pressure on the accounting firm to stop paying the defendants’ legal bills. Last month, a federal judge in New Hampshire granted five former executives of Enterasys Networks a three-month reprieve in their trial after he questioned whether there was undue influence to cut off their legal payments. (The company has since restored them.)
The questions have emerged as other companies, including Symbol Technologies and HealthSouth, have stopped paying former executives’ bills for lawyers.
The AMT Shell Game: Why Bush’s Tax “Cuts” Aren’t
Over at Slate, Daniel Gross is explaining, once more, the role the Alternative Minimum Tax continues to play in the Bush administration’s deceptive tax policies.
The AMT is a bizarre parallel-universe of taxation with its own set of complex rules that differ from the normal IRS system. It was passed decades ago as an effort to prevent gazillionaires from using elaborate tax shelters to reduce their tax bills to zero. For many years it was easily ignored by the vast majority of Americans, and as recently as a few years ago the only non-super-rich people who worried about it were tech-industry types who’d hit the stock-option jackpot but played their cards wrong.
But the AMT was designed with its very own time-bomb: It was never indexed for inflation, and so each year the rising tide of inflation — even the slow, relatively benign inflation the U.S. has experienced in the last decade — lifts more and more middle-class Americans into its maw. The obvious answer is to fix it, either by repeal or by indexing it for inflation so it continues to apply only to the gazillionaires who were its original target. Shouldn’t be so hard, right?
IRS Examines Paypals Records to Uncover Tax Fraud
Interesting article this afternoon on Bloomberg: IRS Reviews PayPal Purchase Records to Find Offshore Accounts, by Ryan J. Donmoyer: The IRS is examining some electronic-payment transactions processed by EBay’s PayPal unit to find U.S. taxpayers who keep unreported income…
When the Little Guy Helped the Wealthy Keep Their Tax Secret
The problem came to light during a Senate investigation of the 1929 stock-market crash: Some of America’s wealthiest citizens, including the banker J.P. Morgan and his partners, were legally paying nothing in federal income taxes.
The solution, endorsed by majorities of both parties in Congress: Make individuals’ income-tax information public, and shame the evaders into paying their fair share.
Under the Revenue Act of 1934, anyone who filed a federal tax return would also complete another — pink — form, with his or her name, address, income, deductions and total taxes paid. Everything on the pink slips was public information, available to reporters, nosy neighbors or former spouses alike.
KPMG Tax Shelters: Judge Criticizes Prosecutors Case
Yesterday’s hearing in the complex KPMG tax shelter case brought about some interesting discussions:
- Reuters:
A federal judge accused prosecutors Thursday of overreaching in their attempt to show that former KPMG executives sold questionable tax shelters to wealthy clients.
Lawyers involved in the case expect U.S. District Judge Lewis Kaplan to reject defendants’ calls to dismiss the case.
The New York judge, however, faulted what he called the government’s “shameful” activity that led the accounting firm not to pay defendants’ legal bills, contrary to past practice. He also suggested that prosecutors drop some lesser counts.
- Lynnley Browning:
A federal judge raised questions yesterday about the prosecution of 16 former KPMG employees over aggressive tax shelters, criticizing prosecutors for what he called murky definitions of fraud and evasion.
The judge, Lewis A. Kaplan of Federal District Court in Manhattan, said he was confused by what prosecutors said was a conspiracy by the defendants to make and sell aggressive shelters that allowed hundreds of wealthy investors to evade $2.5 billion in taxes from 1996 to 2002.
“Frankly, I’m very bothered by it,” the judge said, saying the document “puts the government’s thumb on the scales” and raises questions about the Sixth Amendment constitutional right to legal representation.
No court has ruled the shelters illegal, but the I.R.S. has never considered them valid for deductions.
Nonetheless, Steven Bauer, a lawyer who represents John Larson, a former KPMG partner who is one of the 18 defendants, said prosecutors had withheld important information detailing, among other things, debate inside the I.R.S. over whether the shelters were legitimate.
Judge Kaplan ordered the prosecution to turn over any withheld information.
10 States Hardest Hit by the AMT
has released Who Pays The Individual AMT: State-by-State Estimates for 2006. Wisconsin ranks #6 – ouch!
Our Tax System: Higher Audit Rates for Lower Income Taxpayers
The Transactional Records Access Clearinghouse (TRAC) of Syracuse University reports today that only 30 of the nation’s 180,000 plus millionaires were subject to face-to-face audits in FY 2005. When only traditional face-to-face audits are considered, those reporting less than $25,000 in total positive income were six times more likely to be audited than all those reporting $200,000 or more in income. IRS continues to withhold from TRAC statistical data it has made public in the past that might explain the aberration.