STUMP » Articles » Taxing Tuesday: Time to Make the Donuts » 8 January 2019, 03:06

Where Stu & MP spout off about everything.

Taxing Tuesday: Time to Make the Donuts  

by

8 January 2019, 03:06

New year, and it’s time to get those tax returns started (I generally get mine done in February).

Here’s some tax stuff.

TAXES DURING THE SHUTDOWN

Of course, the shutdown may be over once this post actually runs, but whatever.

In a Shutdown, IRS Will Take Your Money, but Give No Refunds

With limited funding, thin-staffed IRS prepares for busy individual income-tax filing season

A prolonged government shutdown would likely delay billions of dollars in income-tax refunds.

The Internal Revenue Service is one of the agencies that now lacks funding, and the U.S. tax collector has been operating with about 1 in 8 employees under the shutdown plan it uses outside the tax-filing season.

During a shutdown, the IRS can continue activities that protect government property, and the agency may bring in more workers soon to prepare for the income-tax filing season. Even during a shutdown, the agency still processes some tax returns that include payments, keeps computer systems running and continues criminal investigations. But the IRS generally doesn’t conduct audits, respond to taxpayer questions outside the filing season or — brace yourself — pay refunds.

…..
The IRS hasn’t announced a start date yet for the 2019 filing season, the first under the tax law that Congress passed in 2017.
…..
If the shutdown drags on, early filers won’t receive the refunds they are expecting, a gap that could put pressure on congressional negotiators and President Trump to reach a deal.

By Feb. 2, 2018, the IRS had paid $12.6 billion in refunds to more than six million households. By Feb. 16, the IRS had paid $101.2 billion to nearly 32 million households. And by March 30, the IRS had paid $212 billion to 73 million households.

For many Americans, the tax refund is the single largest financial event of the year, and the people who tend to file early in the season are taxpayers who count on large refunds to pay down debt, catch up on bills or make major purchases. Those are disproportionately low-income households that benefit from the earned-income tax credit and other provisions that give them no income-tax liability or a net benefit from the income-tax system.

Okay, let’s be fair for a moment: the people for whom this is the largest financial event of the year are not getting a tax refund per se. They pay negative income taxes, but they can get this advanced to them throughout the year. It’s a once-a-year thing.

The people who receive the EITC cannot do as I do, which is try to get all my withholdings such that the net amount (two states and one federal) is as close to 0 as possible. And now, this sort of bullshit provides incentive to me to make sure that the ones I overpay are the states, and underpay is the fed (and no, I’m not trying to trip underpayment penalty… one year I had to pay that penalty… of about $12.)

Here’s another thing: for all we talk about some people not paying income tax, or having negative income tax, we need to look at it from a holistic point of view: these people receiving the EITC do pay federal tax — the biggest one is FICA, but they also have federal unemployment tax (which is smaller). So, I think it’s more fair if we look at taxation burden on households in this way.

I’m not even going to assume that nobody reading this receives the EITC. After all, Stu used to (before we got married.)

That said, if you’re one of the many people who over-withholds (and I mean by a non-trivial amount – in terms of % of your income), YOU’RE A SUCKER! That happened to me one year, and I vowed: NEVER AGAIN!

But yeah, if it’s a few hundred dollars, that’s not too bad.

Of course, the shutdown may be over before anything much real (most of us with W-2s can’t do a damn thing til February anyway.)

DAMMIT TRUMP: WH budget chief says what will happen with Americans’ tax refunds if the shutdown continues

IRS Will Pay Tax Refunds During Shutdown, Easing Pressure for a Deal

The Internal Revenue Service will issue refunds to taxpayers even if the U.S. government shutdown extends into the filing season, a decision that may reduce political pressure on Congress and President Donald Trump to reach a deal to reopen the federal government.

“Tax refunds will go out,” the acting director of the White House Office of Management and Budget, Russell Vought, told reporters at a briefing on Monday.

In previous shutdown contingency plans, the IRS would accept tax returns during the filing season, but refunds would be delayed until the government was funded. Vought said the administration is fixing what he called a problem faced by past administrations.

…
In the past, the IRS has said it couldn’t issue refunds during a shutdown based on its interpretation of the Antideficiency Act, the rules governing what type of government work is permissible during a shutdown to protect life and property.

However, given the political popularity of allowing refunds to be processed during the shutdown, it’s unlikely OMB would challenge the IRS’s decision.

Harrumph. I think they should be pressured to get their asses in gear.

And I do mean “they” — I thought Trump had vetoed something, but nope. President Donald J. Trump has vetoed 0 bills. [so far]

Congress has to actually pass something. That it can’t get a damn thing done ain’t Trump’s fault. They can always override a veto… if they can get their shit together.

STATES STILL WONDERING WHAT TO DO ABOUT 2017 TAX REFORM

In this long list of state/local government issues for 2019, taxes are in there:

Thanks in large part to 2017’s federal tax overhaul, state income tax collections soared in 2018. But the big unknown for lawmakers and budget directors this year is how much of that revenue bump can be relied on going forward.

Two forces resulted in unprecedented growth in income tax revenue, which swelled by 69 percent year-over-year in December 2017. The first was high-income earners and small businesses who held off on declaring what income they could from 2016 and 2017 in anticipation of an income tax cut last year. They got it, but it wasn’t as big as expected. The other force was taxpayers in high-tax states rushing to pre-file their 2018 taxes before the $10,000 cap on state and local tax deductions went into effect.

There’s evidence that some of that initial revenue bump will carry forward, as income tax revenues have continued to outpace expectations. During the first three months of 2018, for instance, income tax collections increased in 38 states, with 23 of them reporting double-digit growth, according to research by the Urban Institute’s Lucy Dadayan.

But whether the revenue bump continues is really up to the states. Thanks to the overhaul, fewer dollars are subject to the state and local tax deduction. That will result in more income taxed at the federal level and higher overall tax bills. In at least 19 states, taxpayers who itemize have deductions that total more than the $10,000 cap. This includes traditionally high-tax blue states such as California, Connecticut, New Jersey and New York and more conservative states such as Nebraska, Ohio and Wisconsin. That will create more pressure than ever on lawmakers to fix the problem, says Rudy Salo, a public finance attorney at Nixon Peabody. “The vast majority of the country,” he says, “is going to feel the pain come April.”

Last year, Connecticut, New Jersey and New York created workarounds allowing taxpayers to fully deduct their state and local taxes, but the Internal Revenue Service issued regulations aimed at ending those loopholes.

Still, states have other policy options available. New York, in fact, has already enacted one involving a new payroll tax. But it’s a hard sell because it’s complicated to execute. So far, less than 0.1 percent of the state’s employers have taken it up. That could change this year as more taxpayers realize the full effect of tax reform.

I’m really interested in seeing those stories, and you know they’ll be coming. The types of people who may actually have to pay more in taxes are the types who probably know lots of press and TV news people.

You know, extremely high income people who like living in high-tax locales, like New York City.

The thing is — how to make this at all sympathetic to “normal” people? Because it takes very high income and high SALT deductions for people to have to end up paying more for 2018 tax year than they would have with 2017 tax rules.

What does happen is that people like me don’t get much of a benefit at all from that tax bill – and I’m fine with people in Texas not subsidizing my high-cost lifestyle.

Speaking of…

TAX FOUNDATION AGREES WITH ME: SOAK THOSE RICH

Okay, that’s not how they put it.

Eliminating the SALT Deduction Cap Would Reduce Federal Revenue and Make the Tax Code Less Progressive

Rep. Nita Lowey (D-NY) and Rep. Peter King (R-NY) introduced a bill in the House of Representatives to repeal the $10,000 cap on the state and local deduction (SALT). The SALT deduction cap was introduced as part of the Tax Cuts and Jobs Act as a means to broaden the individual income tax base and partially fund reductions in statutory tax rates. Repealing this provision of the TCJA would reduce federal revenue by more than $600 billion over the next 10 years. It would also almost exclusively provide tax relief to the top 20 percent of income earners, the largest tax cut going to the top 1 percent of earners.

How dare the Dems not soak the high income folks!!!

We estimate that eliminating the SALT deduction cap would have no impact on taxpayers in the bottom two income quintiles and a negligible impact on taxpayers in the third and fourth quintiles. These taxpayers currently benefit from the new large standard deduction. However, taxpayers in the top 5 and 1 percent of income earners would see an increase in after-tax income of 1.25 percent and 2.79 percent respectively. This estimate is for 2025.

2025?! Come on, y’all.

Why not something a little closer to home, huh? [I have no idea why they picked 2025]

SODA TAX TAXES LOW INCOME FOLKS IN MULTIPLE WAYS

WSJ editorial – A Soda Tax and Consequences:

When Philadelphia became the first major U.S. city to pass a soda tax in 2016, Mayor Jim Kenney said it would improve public health while funding universal pre-K. Two years in, the policy hasn’t delivered on that elite ideological goal. But the tax has come at the expense of working people and other vulnerable Philadelphians.

Proponents say the soda levy is technically a tax on distribution, but it functions like a regressive consumption tax as retailers pass the cost onto consumers. Between the Jan. 1, 2017, start date and Sept. 30, 2018, the city raised more than $137 million, and poor Philadelphians disproportionately bore the burden of the 1.5-cent-per-ounce levy.

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You don’t have to wait to observe the soda tax’s other economic consequences. On Jan. 2, Brown’s Super Stores announced the closure of a ShopRite on Haverford Avenue. The supermarket is close to the city limit, and customers discovered they could avoid the soda tax by shopping outside Philly.

Sales at the Haverford ShopRite are down 23% since the tax took effect, CEO Jeff Brown says, and the once-profitable store began losing about $1 million a year. Mr. Brown owns 12 other supermarkets, including six in Philadelphia besides the Haverford store. Overall sales at the locations within Philadelphia are down by more than 15% since the soda tax took effect. Mr. Brown has shrunk his workforce by 200 by not filling jobs when they go empty, and the Haverford ShopRite closure will eliminate 111 more jobs through attrition.

That means fewer opportunities for workers with a criminal record. Mr. Brown’s supermarkets employ more than 600 of them, with the majority in Philadelphia. Some of the ex-cons have become his most-valued employees.
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That gets no sympathy from the mayor. “Jeff Brown is a cry baby, basically,” Mr. Kenney told KYW Newsradio 1060 this week. He added that “if you can’t run a supermarket without soda sales, then something is wrong with your business practices.” Spoken like a true modern progressive.

Let them drink Vitamin Water.

What an asshat.

TAX STORIES

TAX TWEETS



You mean like how Obamacare was passed without Republican votes? Tell me more…





[Did anybody ever pay close to those rates, effectively? Remember all the tax exemptions/deductions of the 60s….]


By all means, talk up increasing taxes. Sounds great. You can start by not fighting the SALT caps. Tax the rich!


Of course, married couple householders with only one income-earner was also the standard then… not to mention some other things most people will agree sucked [I’m not saying a sole breadwinner in a married couple household with children sucks (as that’s what I have)… but others might not like it].


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