STUMP » Articles » Taxing Tuesday: Let's Soak the Rich...Hey, Where Are They Going? » 12 February 2019, 03:20

Where Stu & MP spout off about everything.

Taxing Tuesday: Let's Soak the Rich...Hey, Where Are They Going?  

by

12 February 2019, 03:20

Before I begin with the tax stuff, I feel like preening for a moment: one of my most useful skills is that I can learn from other people’s mistakes. I can watch someone do something ill-advised, see the result, and then say “Hey, I don’t need to try that out! That’s going to end in disaster!”

To be sure, I’ve made my own mistakes because I haven’t seen everybody else’s mistakes. But I’ve watched things happen directly, and I’ve read news and history books and been able to draw some conclusions.

Unfortunately, politicians don’t fall into that category.

Editorial from the Chicago Tribune: Yes, the Illinois Exodus is ‘as serious as a heart attack.’

Illinois residents are fleeing for more economically hospitable states. They go to Texas, Florida and other Sun Belt states because job prospects are better, tax burdens are lower and the weather is more temperate. The Exodus is real. It’s damaging Illinois. And it may be getting worse.

The warning comes from a fellow sufferer, otherwise known as the governor of New York. Democratic Gov. Andrew Cuomo reports that New York state income tax revenue last year came up short by a projected $2.3 billion. Cuomo partially blames the departure of wealthy residents from his high-tax state in the wake of federal tax reform, which put a limit on the amount of state and local taxes that can be deducted on federal income tax forms.

When New York, already expensive, put an even higher tax burden on residents, some New Yorkers who could afford to leave did so. In Cuomo’s memorable phrase on Monday: “Tax the rich. Tax the rich. Tax the rich. We did that. God forbid the rich leave.”

Heck, Connecticut has a special group tasked with watching rich people leave (or threaten to leave) and to beg them to stay.

We fear heart attacks, but we also see a potentially positive outcome in Springfield if Democratic Gov. J.B. Pritzker and the Democrat-controlled General Assembly absorb the right lesson from New York. The unfair federal subsidy of affluent Illinois households is dead. Those households will pay more in federal taxes — a reflection of the high taxes levied by their state and local governments. That means there is a newly compelling reason for the governor, legislators and local officials statewide to manage budgets responsibly and reduce their high tax burdens.

But if the profligate ways continue, there will be trouble ahead: If state and local officials insist on ever-higher spending and then raising taxes, residents will rebel. Even more will leave this state. And as Illinois’ population continues to shrink, a higher tax burden falls on everyone who remains.

Gov. Pritzker, remember the words of your colleague, the governor of New York: “Tax the rich. Tax the rich. Tax the rich. We did that. God forbid the rich leave.”

Well, at least they’re probably not leaving for New York.

But if they’re leaving for Indiana… is that a kick in the teeth?

NEW YORK EXODUS

Look, people leave NY as well.

Gov. Cuomo’s Right: The Rich Are Leaving High-Tax New York

Last year, the study said, 61.5% of New York movers left the state; just 38.5% moved in. Among those who left, 41% earned $150,000 or more. Just 8.4% earned less than $50,000.

From 2010 to mid-2017, New York had a net outmigration of over 1 million people, more than any other state. No, they’re not all rich. But many are.

And recent changes in the deductibility of federal taxes certainly hasn’t helped high-tax states like New York. The wealthy have choices that others don’t.

Last year, a study by Wallet Hub looked at states ranked by their total tax burden. New York came out on top. Our own report compared the Wallet Hub data with Census data from 2007 to 2016. New York lost 1.3 million citizens, more even than California, which lost just under a million, and Illinois.

High Taxes As Punishment
No, not all the people who left New York were rich. But many were. And recent changes in the deductibility of federal taxes certainly hasn’t helped high-tax states like New York. As we said, the wealthy have choices that others don’t. One of those choices is to move if taxes become not merely burdensome, but punitive. That’s what’s happening in New York.
….
In short, high taxes drive people away; low taxes attract them. It’s simple economics, yet so many Blue States don’t get it.

Cuomo, to his credit, does get it. Many high-income taxpayers are leaving New York for low-tax states, tired of paying the state’s bills and then being demonized leftist activists for being “rich” and told they must give more. He knows that sending the wrong signals could lead to a mass exodus of higher-income residents from his state, one that would leave a massive hole in the budget.

That’s the road to fiscal insolvency. When those who pay the bills leave, the bills no longer get paid.

Ya don’t say?

via GIPHY

IT’S A TRAP

Senate Dems slam Cuomo’s claim about new millionaires tax

Gov. Cuomo claims the state Senate is pushing to pass a new tax on millionaires — an assertion immediately denounced as “fake news” by the Democrats who control the legislative body.

He also accused the Senate Democratic leadership of trying to scuttle the $3 billion incentive deal with Amazon to open a new headquarters in Long Island City, Queens.
….
One of them proclaimed, “Stop the Senate’s effort to pass the millionaires tax.”

Cuomo complained that the new federal tax code that caps state and local tax deductions (SALT) on wealthy New Yorkers has triggered a drop in state tax revenues.

The state’s top one percent of income earners generate nearly half of the state’s income tax revenue, thanks to New York State’s progressive tax code that taxes wealthier New Yorkers at a higher rate.

“We have people leaving because of SALT,” he said.

“In what possible logic would you think it’s time to pass a millionaires’ tax. Now the Senate says we should increase [taxes on] the millionaires.”

Cuomo said New York would be able to “count on one hand the number of millionaires left in New York” if taxes go up.

….
But a spokesman for Senate Majority Leader Andrea Stewart-Cousins said the governor misrepresented her position.

“Not sure where the Governor is getting his ‘fake news’ from but Senate Democratic Majority Leader Andrea Stewart-Cousins has made it clear we are not looking at raising taxes,” said spokesman Mike Murphy.

….
The Legislature and governor would have to sign off on a New York City-only millionaires’ tax.

“The leader and the deputy leader should get on the same page. His tax was introduced three days ago,” said Cuomo senior adviser Rich Azzopardi.

Oh, so it’s only in New York City.

Come on, I don’t want Bloomberg to actually move to his North Salem estate. Dang.

More soak the rich stories:

Well, it “could”… but dear lord, you idiots, who do you think will have the easiest time to avoid taxes (legally)?

Maybe what this “soak the rich” crap is coming from is because the politicians don’t think the billionaires are bribing, sorry, funding campaigns, enough.

TAX TIME

So, yeah, Stu revived my Macbook and I started working on my taxes. Ugh, it really is going to be gut-wrenching this year, for a variety of reasons, but the most obvious one is dealing with the SALT cap (which I most definitely hit.) The main reason, though, is I had been doing it on my Macbook Pro all these years… and the drive died. Stu tried to revive it, and I had gotten through doing most of my federal return… and it died again. Dammit. So we’re trying it on a different computer. The preliminary results, thus far, is 4 figure refunds in total (that’s federal, New York, and Connecticut). I’m not pleased – I could have used that money last year.

I can understand why all my tax pro friends will be doing brisk business this year.

So does the Wall Street Journal: Trump Tax Law Spurs Job Creation…for Tax Lawyers and Accountants

WASHINGTON — In 2017, Congress passed the Tax Cuts and Jobs Act. Many of the jobs it is creating, it turns out, are in the tax industry.

The overhaul continues to generate thousands of jobs for tax professionals as companies analyze the law and rely on tax experts to do all the work flowing from the legislation and Internal Revenue Service rules, according to lawyers and executives at tax firms. Business is unusually strong and should remain robust for years, they say.

U.S. accounting firms crossed the one million-employee threshold last year, according to the Labor Department. Job growth in the sector in the first year of the law was 3.6%, the second-strongest year in the current expansion.

Deloitte Tax LLP grew by 10% this fiscal year and expects another 10% bump next year. KPMG LLP says it hired twice as many experienced employees in 2018 in its U.S. tax practice as it did the year before.

“Tax-reform legislation and all the implementing guidance have been very good for tax practices,” said David Noren, a partner at McDermott Will & Emery LLP. “It’s created just a whole lot of new complexity, and it’s given us mountains of new guidance to figure out and to deal with.”

Republicans sold the law to the public on the premise that the new system would be simpler, and that is true for many individuals. Many companies, however, are encountering complex new provisions that create demand for sophisticated tax advice and seasoned experts who can do the work.

“Everyone we make an offer to has multiple offers,” said Craig Hillier, Americas director of international tax services at Ernst & Young LLP.

Firms are seeking accountants and lawyers, but they’re also competing for people who can do data analysis and build technical models.

“There’s no doubt that the talent wars in tax have definitely heated up,” said Will Williams, tax national managing partner at KPMG.

Well, maybe that should be my next specialty… I love thinking about taxes.

REFUND IS JUST GIVING BACK MONEY YOU COULD HAVE HAD EARLIER

Yes, yes, I know various people say “don’t bitch at the over-withholders”, and if one’s refund is a few hundred dollars, then yay. That’s not too bad.

But when it’s more like $15,000 (which happened to me one year and I was PISSED) – then you really should be looking more closely at this stuff.

So when I saw that people were getting smaller refunds than prior years, I thought it was a good thing.

But most people are idiots with numbers.

Millions of Americans could be stunned as their tax refunds shrink

Millions of Americans filling out their 2018 taxes will probably be surprised to learn that their refunds will be less than expected or that they owe money to the Internal Revenue Service after years of receiving refunds.

People have already taken to social media, using the hashtag #GOPTaxScam, to vent their anger. Many blame President Trump and the Republicans for shrinking refunds. Some on Twitter even said they wouldn’t vote for Trump again after seeing their refunds slashed.

The uproar follows the passage of a major overhaul to the tax code in December 2017, which was enacted with only Republican votes and is considered the biggest legislative achievement of Trump’s first year. While the vast majority of Americans received a tax cut in 2018, refunds are a different matter. Some refunds have decreased because of changes in the law, such as a new limit on property and local income tax deductions, and some have decreased because of how the IRS has altered withholding in paychecks.

John Prugh of Ewing Township, N.J., was irate when he completed his 2018 tax return this month and discovered his refund would be $3,000 less than what he received last year. Prugh considers himself “solidly middle class.”

$3,000 is a huge difference… but that also means he had been getting huge refunds years before. That is definitely not good.

The average tax refund check is down 8 percent ($170) this year compared to last, the IRS reported Friday, and the number of people receiving a refund so far has dropped by almost a quarter.

An IRS spokesman cautioned not to read too much into early data because it reflects only returns processed through Feb. 1, and the partial government shutdown caused delays in processing filings.

Early data can shift a lot, tax experts say, but there’s reason to believe frustrations could rise as more Americans complete their tax returns. The Government Accountability Office warned last summer that the number of tax filers who receive refunds was likely to drop for the 2018 tax year, while the number of filers who owe money would rise.

The GAO pointed to an IRS estimate that about 4.6 million fewer filers would receive refunds this tax filing season. Another 4.6 million filers were likely to owe money who had not had that experience in the past.

Okay, I can understand that, but I’ve been on both the positive and negative side… I’m used to having a really variable income, and not only because of bonuses. I dropped in income about $20K between 2017 and 2018, partly due to quitting teaching at UConn and partly because I got less income from my side business of doing webcasts for actuaries.

Many Americans may confuse their meager refunds as a sign that they paid more in taxes as a result of the Tax Cuts and Jobs Act. Generally, that is not true.

According to the Tax Policy Center, 80 percent of filers received a tax cut, and about 5 percent wound up paying more in federal income taxes. The tax cuts showed up in fatter weekly or biweekly paychecks for most Americans, but few people noticed, according to polling.

As I said, people are idiots. I did notice my net pay going up. Indeed, because I was concerned about the SALT cap, I decided to look at my withholding and decide to change… but then I held back. I knew my outside income had dropped, so I figured I should keep the same withholdings. My net increase was 2%.

So perhaps they should just not have adjusted the withholding tables and let people get $15,000 refunds as a surprise. Jeez.

“There’s a difference between taxes and your refund,” said Joseph Rosenberg, a senior research associate at the Urban-Brookings Tax Policy Center at the Urban Institute. “People generally got a piece of their tax cut last year gradually in the form of lower withholding on their paychecks.”

Many families received a tax cut, but their refunds are smaller this year because the IRS made major changes to the “withholding tables” — the amount the federal government recommends taking out of your paycheck for federal income taxes — in the new tax law.

The IRS attempted to set withholding levels so that more people would pay correct taxes, meaning they neither owe anything to the IRS at the end of the year nor receive a refund.

Which I wish they had done in prior years.

Many Americans prefer refunds, even though personal finance experts say it’s not a wise idea to get one.

“It’s a mystery why taxpayers seem to be comfortable — and even happy — with getting refund checks,” Rosenberg said.

It’s not a mystery to me. Most people simply don’t like thinking about numbers, and a big windfall is WOO HOO time!

The IRS encouraged Americans to review their withholding level last year, but few did. About 75 percent of filers received refunds in recent years. Many Americans appear to like getting a refund because they feel that if they received an extra $20 to $40 a week, they would spend it. But when they get a one-time refund of $1,000 to $2,000, they put it toward paying off credit card debt, paying down a mortgage or saving for retirement.

So here’s the deal: if you really want to make sure you get a huge refund, you can overwithhold. That’s what I did (inadvertently) the year I got a 5-figure refund.

Even if you have your exemptions at 0, you can ask to have extra go to the IRS in withholding. Or you can file quarterly — the IRS will not refuse your money.

“I am really frustrated with my refund this year. I was expecting good chunk of change. I was going to put it toward buying a car,” said Sal Ramirez, a 20-year-old packaging designer in San Gabriel Valley, Calif. He earns $45,000 and said he received a refund last year of more than $1,200 because he puts zero withholding on his W-4 form at work.

Ramirez just got his refund from the IRS, and it’s only $900 this year, almost certainly because of changes to the withholding tables. He figures he’ll need to save a few more months for a car.

YOU COULD HAVE BEEN SAVING THAT MONEY IN THE BANK ALL YEAR YOU POOR IMPULSE CONTROL PERSON.

Ramirez, who did not vote for Trump, couldn’t remember whether his total tax bill went up or down. He was just focused on his refund.

Well, I do. On my TurboTax summary for the 2017 filing, I had a 10.2% effective federal income tax rate (which didn’t include the SocSec tax and all that stuff). So I will simply compare that 10.2% against what I end up with this year.

YOU DUMMIES.

via GIPHY

(also, no wire hangers)

Yes, that’s the sort of thing that drives me into SHOUTING RAGE. People being idiots with money. It makes a lot of people rich, so yay for creating those billionaires taking advantage of your stupidity.

TAX STORIES

I sequestered the “soak the rich” stories to the list above, so here are the others:

Oh right, that stuff in Chicago… maybe that one is for tomorrow…. just a little update.

VIDEO IN LIEU OF TWEETS

I’m not doing tax tweets because that “my refund is so small” bullshit angered me so much.

So here’s a video from They Might Be Giants.


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