Would you ever agree to work overtime for free, indefinitely, creating profits for someone else?
I didn’t think so.
But that’s often what we do when we buy a product or service from companies. That’s because they can continue to make money off us by selling whatever personal information we give them in the course of the transaction. Your payback: more junk mail and greater risk of identity theft.
And now it looks very likely that tax preparers will be able to profit off clients in ways having nothing to do with taxes.
Thanks to proposed changes to the IRS’ privacy regulation of tax preparers, everyone from H&R Block to your local tax-prep shop may be allowed to sell their clients’ tax return information to any third party, including marketers and data brokers.
Mind you, they would need to get your consent, according to the proposed regulations.
Category: Taxes
The Case for a Consumption Tax
The debate over the choice between income and consumption taxation has been ongoing since the beginning of the modern economy, seemingly without end. Those who argue for an income tax usually claim that taxing capital income is central to a fair tax system because those with capital income appear to have a higher ability to pay. Moreover, reducing taxes on investment income would seem to reduce the progressivity of our tax system, a result that is particularly worrisome at a time of growing inequality.
AMT: Without a Fix, A Time Bomb
Avram Lank updates us on the latest Washington machinations over the Alternative Minimum Tax:
Inflation is the basic reason the AMT is spreading.
Many parts of the tax code are indexed for inflation, including brackets and personal exemptions. However, the AMT exemption is not. So over the years, as everyday people had larger, inflation-driven exemptions under the regular tax code, the gap narrowed between what they owed under it vs. what they owed under the AMT.
Congress addressed the narrowing gap by temporarily raising the AMT exemption in 2001 and 2003. But the last temporary fix expired in 2005, so many more people will feel its sting this year.
Fight Against Farm Subsidies
Scott Kilman and Roger Thurow:
A movement to uproot crop subsidies, which have been worth nearly $600 billion to U.S. farmers over the decades, is gaining ground in some unlikely places — including down on the farm.
In Iowa, one of the most heavily subsidized states, a Republican running to be state agriculture secretary is telling big farmers they should get smaller checks. Mark W. Leonard, who collects subsidies himself and campaigns in a white cowboy hat, told a room full of farmers recently that federal payments spur overproduction, which depresses prices for poor growers overseas.
“From a Christian standpoint, what it is doing to Africa tugs at your heartstrings,” Mr. Leonard told them. Last year, he helped humanitarian group Oxfam International in its anti-subsidy campaign by escorting a cotton farmer from Mali to church gatherings near his farm in Holstein.
A Magic Way to Make Billions
Donald Barlett and James B. Steele:
The wording is so bland and buried so deep within a 324-page budget document that almost no one would notice that a multibillion-dollar scam is going on. Not the members of Congress voting for it and certainly not the taxpayers who will get fleeced by it. And that is exactly the idea.
With Washington reeling from the Abramoff lobbying scandal and Republicans and Democrats alike pledging to crack down on influence peddling, with one lawmaker already gone from Capitol Hill because he traded favors for cash, you’re probably guessing this isn’t the best time for members of Congress to dispense a fortune in favors to their friends.
Guess again.
Do Americans Support a Gas Tax?
“A significant number would go along with an increase if it reduced global warming or made the United States less dependent on foreign oil, according to the latest New York Times/CBS News poll.
The nationwide telephone poll, conducted Wednesday through Sunday, suggested that a gasoline tax increase that brought measurable results would be acceptable to a majority of Americans.
Neither the Bush administration nor Democratic Party leaders make that distinction. Both are opposed to increasing the gasoline tax as a means of discouraging consumption, although President Bush, in recent speeches, has called for the development of alternative energy to reduce dependence on foreign oil.”
The Energy Outlook Changes
Muni WiFi Updates
Kristian Knutsen notes that Madison’s embryonic wifi service is planning to include a “walled garden” of free sites. I’d rather they not do this. The service should either be on or off, frankly. Rone Sege argues that we should not tax municipal wifi.
Consumer Debt Growth
The facts are indisputable – the consumer has grown increasingly levered just when interest rates are rising and the large amount of mortgages based on teaser rates are about to be reset.
The facts speak for themselves:
- Non-discretionary consumer spending (for items like food, energy, medical expenses and interest payments) which vacillated in the 44% to 47% range until 2000 has now risen to 54%.
- Household debt/household assets is at an all-time record high (up from 14% six years ago to nearly 19% today).
Paying Taxes: Sport or Folly?
Forgive me here if I take a position against taxes, but as you may know, it’s a bit of a favorite American pastime. It’s OK for everyone else to pay taxes, just don’t raise mine, and just don’t ask me to pay any more than my fair share. By the way, if I can figure out a way to avoid paying some of those taxes, don’t begrudge my deduction.
It’s admittedly a tough position to take knowing that lower tax dollars may mean that our men and women in green may not have enough armor, that the shuttle is built by the lowest bidder, our school teachers aren’t paid sufficiently, and on and on, all the way down to the pothole across the street that is now big enough to swallow my left front end if I don’t swerve in time to avoid it.
But I better stop before I talk myself out of complaining about taxes. Who hasn’t heard of the $400 hammer, after all?
This article about the IRS prosecuting lawyers who come up with tax shelters did more than strike me. It’s just plain wrong. Think about it. Congress passes laws that require us to pay taxes. Once you establish the rules and write them down, it’s up to the lawyers to figure out the loopholes and the way around them. The tax code fills up 24 megabytes of space on my hard drive, which on my iPod leaves only enough room for Stairway to Heaven and The Long and Winding Road. There really isn’t much difference between the songs and the code anyway, but I digress.
So, when enterprising lawyers go out there and successfully figure out how to shelter money from taxes, the IRS takes aim and prosecutes the lawyers for being smart enough to figure out what they did wrong when they wrote the code. I’m not sure if the lawyers are being prosecuted because they showed the ________ (fill in your own word) of the IRS and Congress to the rest of us or because the result of their work actually means less dollars in the government’s hands and more money in our hands.
Sure, there’s another way to look at it: the lawyers actually did something illegal that was precluded by the code, and they should be punished. As you can see just from these paragraphs, however, there’s no such thing as black and white in the Internal Revenue Service code. To prove that, all you have to do is look up section 61 that defines income and see what a mess the whole thing starts with.
If the IRS wants to collect money from us, how about making it simple? You know, just like it was when we were kids and dividing up the spoils from the lemonade stand: “One for you and two for me, one for you and two for me…”