STUMP » Articles » Taxing Tuesday: Spitting in the Wind in Illinois, I Hate the NY Legislature, Stupid Tax Ideas, and More » 2 April 2019, 07:47

Where Stu & MP spout off about everything.

Taxing Tuesday: Spitting in the Wind in Illinois, I Hate the NY Legislature, Stupid Tax Ideas, and More  

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2 April 2019, 07:47

Illinois GOP Senators seek two-thirds vote hurdle for all future tax increases

Republican state senators in Springfield want to require any tax increase get support from two-thirds of lawmakers before it could be implemented, a proposal that opponents called a “desperate stunt” to combat a push to change the flat income tax to a progressive one.

State Sen. Dan McConchie, R-Hawthorn Woods, said so far this year lawmakers have proposed $4.5 billion in tax hikes.

“Including income tax, bag tax, gas tax, marijuana tax, a vaping tax, expand [the] sales tax to include services, sports betting, and I think I’m probably missing one or two,” McConchie said at a news conference Tuesday with other Republican state Senators.

There’s also proposed increases in the state tax on tobacco products, a bill that would add a tax to all financial transactions and others. McConchie said he wants two-thirds approval from lawmakers to increase any tax. McConchie filed Senate Joint Constitutional Amendment 12 to do so.

State Sen. Don Harmon, D-Oak Park, said the proposal was a ploy to protect wealthy people and to combat the push for a progressive income tax.

Mmmm.

Yeah, you go with that.

Think Big Illinois, a group supported by Pritzker which advocates for a progressive income tax structure, said McConchie’s proposed hurdle was a “desperate stunt” meant to protect only wealthy donors from higher income tax rates.

“It’s not surprising that Republicans are using every trick in the book to protect the wealthy donors they rely on to fund their campaigns, but Illinois needs a fair tax to modernize our tax code and bring in much-needed revenue, which will go toward helping solve our budget crisis and fund critical programs, including our schools,” Think Big Illinois Executive Director Quentin Fulks said in a statement.

Americans For Prosperity Illinois State Director Andrew Nelms said McConchie’s proposal would protect everyone.

“If you’re going to increase taxes on anybody, via any avenue, it should require additional conversation and a higher threshold,” Nelms said.

McConchie said if the higher threshold is good for states like California or Wisconsin, it should be good enough for Illinois.

Whatever. This would barely be a speed bump for the profligates in Springfield.

I STILL HATE THE NY LEGISLATURE

WSJ: New York’s Pied-a-Terre Politics

Another day, another scramble for more tax revenue in progressive America. The latest episode in New York City is worth noting because it illustrates America’s current politics of envy and the illusion that soaking the rich has no economic consequences.

The idea is what the politicians are calling a pied-a-terre tax — which is French for “give me your money, fat cat.” New York’s political wizards began pushing the idea after Chicago hedge-fund operator Ken Griffin spent $238 million for a penthouse on Central Park. What could be politically better than taxing the rich who live elsewhere most of the time?

Proposed tax rates would start at 0.5% a year on property value over $5 million, with gradations thereafter up to 4% on value that exceeds $25 million. Mr. Griffin would thus be hit with a tax of more than $8 million a year for his penthouse. “A lot of these individuals,” said State Senator Brad Hoylman, a Democrat sponsoring the bill, “are evading contributing to the city’s infrastructure.”

To the contrary, these owners pay property taxes, and they already pay a 1% “mansion tax” on the purchase of properties valued above $1 million. That’s roughly the median price of a Manhattan flat. To the extent they don’t live in New York most of the time, the owners subsidize the city’s infrastructure.

New York City’s comptroller thinks the tax would raise about $650 million a year, though independent estimates are substantially lower. Democrats insist they need the money to fix decrepit public services like the subway. Where have we heard that before?
…..

The latest word is that these realities are causing the pied-a-terre tax to lose support in Albany budget talks. Instead, the politicians are looking at another transfer tax on expensive apartments. “There are a number of real estate, high end real estate, taxes called the pied-a-terre tax, but you could do it a number of ways. It could be a transfer tax; it could be an annual tax,” Mr. Cuomo told a radio show this week, calling the tax “justifiable.” In progressive America, no tax is ever enough.

So that was from 4 days ago.

This is what actually passed: ‘Mansion tax’ on pricey NYC real estate included in state budget

The pied-à-terre tax is dead; long live the “progressive mansion tax.”

As part of the 2020 budget that was agreed upon by the New York state Senate and Assembly, as well as Gov. Andrew Cuomo, a proposed tax on pricey second homes is no longer. In its place instead is a progressive tax on luxury real estate with a top rate of 4.15 percent, to be enacted for properties valued at $25 million or higher. That would be combined with a transfer tax, levied when a multi-million dollar home sells, according to the New York Times.

That’s opposed to the proposed pied-à-terre tax, which would have levied an annual, graduated tax of up to four percent on second homes costing $5 million or more. It was projected that such a tax could generate at least $665 million in revenue for the city each year. According to Cuomo’s office, the adopted “mansion tax” will generate $365 million each year, to be put straight into the dedicated “lockbox” for the MTA—the same one where funds generated by the new congestion pricing surcharges will go.

“Lockbox”. Sure. My big fat ass.

This is a stupid tax idea – either one is – and let’s see why.

Instead Of Pied-à-Terre Tax, New York Gets ‘Volatile’ Mansion Tax Expansion

During last-minute state budget sausage-making over the weekend, New York legislators pulled the plug on the pied-à-terre tax and instead agreed on two one-time taxes that could subject the city’s transit funding to a more unreliable revenue source, according to one policy expert.

“Those two taxes are very volatile,” said James Parrott, director of economic and fiscal policies at the Center for New York City Affairs who wrote the proposal on which the pied a terre tax bill was based. “One thing we know from New York’s fiscal history is that transaction taxes are the most volatile that we have.”

The plan, which is intended to help finance the city’s much-needed subway repairs, calls for two taxes on luxury property transactions. It would expand the so-called “mansion tax,” which currently applies a flat 1% percent tax to all sales $1 million and up. Beginning in July, the state plans to impose a charge of 1.25% for homes selling between $2 million and $3 million, and topping out at 4.15 percent on sales over $25 million. The plan would also raise the state transfer tax to 0.65% from 0.4% for properties that sell for more than $3 million.

Legislators have said the new plan should raise $365 million, which will secure about $5 billion in bonds for mass transit. But the volatility of the revenue negatively impacts the amount the city can raise through bond sales, according to experts. Cuomo’s budget director Robert Mujica had estimated that the pied-à-terre tax could raise as much as $9 billion through the sale of bonds.

Parrott said revenue volatility is not a “fatal” flaw. The state will simply have to manage revenue over the luxury market’s cycles.

There is a huge problem with New York state revenue sources.

This past weekend, the state comptroller put out a press release: New York State Comptroller DiNapoli: Wall Street Profits Rose in 2018, But Bonuses Fell. You might think that an odd thing for a state comptroller to put a press release out about — what is it his business how the Wall Streeters did in bonuses, etc.? [Whlie I don’t get bonuses that big, I have been receiving net bonuses that are higher than what I made as a full-time adjunct for NYU. That’s not just a result of inflation.]

Here is why it’s important:

Securities-related activities are a major source of revenue for both the state and the city. DiNapoli estimates that the securities industry accounted for 18 percent ($14 billion) of state tax collections in state fiscal year (SFY) 2017-18 and 7 percent ($4.2 billion) of city tax collections in city fiscal year (CFY) 2018.

New York state has a boom-and-bust revenue problem to the extent it depends on a frothy sector. California has a similar problem, with their boom-and-busts coming from tech IPOs.

It is not a good idea to put on more taxes on that frothy part of the state’s revenue sources – not only because they could go elsewhere, but because the cyclical nature of these revenues. You get a bunch of $$ when times are good… and the politicians want to then spend it on fun stuff like free college for all!

But then comes the bust…. state revenues drop…. and all of a sudden, not only do you not have the fun money, you are not able to cover normal operating costs, like, oh, running the subways.

That is not smart.

I remarked that it was not clear to me that anybody on the NYC council have financial experience, and I doubt it even more of those in the NY legislature. Those who know finance actually do it. It’s more lucrative.

New York has been able to hold it together somewhat, unlike Illinois, because it still is a very attractive place to come to.

I don’t know how much longer this will last.

STUPID TAX IDEAS: WEALTH TAX, SODA TAX, TRANSACTION TAXES

National Review: Why Europe Axed Its Wealth Taxes

I seriously do not need to quote past the subhed:

They raised little money and were a beast to administer.

I’ve mentioned the second item (how exactly were you planning on valuing high end art that’s been in the family for generations?) and the first is self-evident.

But okay, let me quote a little.

More than a dozen European countries used to have wealth taxes, but nearly all of these countries repealed them, including Austria, Denmark, Finland, France, Germany, Iceland, Ireland, Italy, the Netherlands, Luxembourg, and Sweden. Wealth taxes survive only in Norway, Spain, and Switzerland.

Before repeal, European wealth taxes — with a variety of rates and bases — tended to raise only about 0.2 percent of gross domestic product in revenue, based on Organization for Economic Cooperation and Development data. That is only 1/40th as much as the U.S. federal income tax raises.
….
In the 1970s, the British Labour government pushed for a national wealth tax and failed. The minister in charge, Denis Healey, said in his memoirs, “We had committed ourselves to a Wealth Tax; but in five years I found it impossible to draft one which would yield enough revenue to be worth the administrative cost and political hassle.”

I’m sure you think you could do better, being in the U.S. and all, but seriously, if Europe couldn’t implement it in a way that made sense, I highly doubt we could.

Here’s a part I didn’t think about:

And here’s the kicker: Since the base of wealth taxes is net wealth, debt is deductible. That allowed wealthy Europeans to jack up their borrowing and invest in the exempted assets to shrink their tax bases. If a wealth tax were imposed in the United States, the farm lobby would most certainly get farmland excluded. Then rich people would borrow heavily and invest in farmland, thus shrinking the tax base and distorting the economy.

Oh fun.

I do like his concluding paragraph:

If liberals want tax fairness, they should push to close existing income-tax loopholes. The tax exemption for municipal-bond interest, for example, would be a good target because it mainly benefits the wealthy. Closing such loopholes would reduce distortions and simplify taxation — the exact opposite effects of adding a wealth tax.

Oh man, touch the muni tax exemption at your own risk. But that touches my day job, so no more on that.

WSJ: Soda Tax Fizz Out: Philly politicians up for re-election have some regrets about the levy.

Philadelphia fought all the way to the Pennsylvania Supreme Court last summer to keep its soda tax. But primary elections are in May, and Democrats fighting to keep their City Council seats are having second thoughts. Other cities can learn from this spectacle of regret.

Councilwoman Maria Quinones Sanchez this month proposed to either slash the 1.5-cent-per-ounce tax or phase it out. And this month the City Council voted to conduct a study to show the economic consequences of the tax. Councilwoman Cherelle Parker, who faces two challengers, complained that soda-tax proponents like herself are now under “an insurmountable amount of heat” and described the study as “political weaponry.”

Any wounds will be self-inflicted, but Ms. Parker is right to fear the findings. The soda tax is destructive and was even intended as an act of revenge, according to a January criminal indictment.

Prosecutors say John “Johnny Doc” Dougherty, business manager of International Brotherhood of Electrical Workers Local 98, was displeased with Teamsters political ads that criticized him. So the labor boss allegedly pushed City Councilman Bobby Henon, who was on the union payroll, to support a soda tax and boasted that the policy “will cost the Teamsters 100 jobs in Philly.” Messrs. Dougherty and Henon deny wrongdoing. But a Teamsters Local 830 official says the number of job casualties among its members has been even higher.

Man, is that stupid.

Then there’s the toll on retail employees. Many Philadelphians have avoided the soda tax by buying groceries outside the city limit. A ShopRite supermarket near the West Philly borderline was forced to close on March 14 after sales plunged 23% since the tax took effect on Jan. 1, 2017. Brown’s Super Stores CEO Jeff Brown, who owned seven stores in Philadelphia, says the soda tax has forced him to eliminate more than 300 jobs through attrition. Before the levy his ShopRites were known for hiring workers with criminal records, but now those vulnerable job seekers have fewer opportunities.

The soda tax has also failed to create incentives for consumers to choose healthier drinks. Researchers from Stanford, Northwestern and the University of Minnesota studied Philadelphia’s soda tax and concluded earlier this year that it “does not lead to a shift in consumption towards healthier products” and had delivered “no significant reduction in calorie and sugar intake.” In 2017 the Tax Foundation discovered that in some cases Philadelphia’s tax had made beer cheaper than soda.

Mmmm, beer.

A ‘Tiny’ Tax on Trades Would Hobble Markets

Democratic lawmakers introduced a bill in March that could be a big disruption to U.S. financial markets. The proposed 0.1% tax on all financial transactions — trades in stocks, bonds, derivatives — may sound small, but it could make markets less stable and hurt small investors.

The purpose of the tax is to eliminate high-frequency trading: automated trades based on algorithms that predict market movement and attempt to seize quick arbitrage opportunities. Democratic Sen. Brian Schatz, one of the bill’s co-sponsors, alleges that financial firms use high-frequency trades to “skim profit off the top” for wealthy investors. The tax has been endorsed by presidential candidates Elizabeth Warren, Bernie Sanders and Kirsten Gillibrand, who point out that about 40% of revenue from the tax would come from the top 1% of households.

Yet the advocates overlook the breadth of smaller investors who depend on low-volume trading, which includes high-frequency trading. Each day, more than $1 trillion in securities are traded in the U.S., mostly by large investment managers that represent not only wealthy investors, but also 401(k) plans, public pensions and middle-income families. For these large investment firms, even a small tax is significant enough to affect trading strategy and raise costs. Such firms, for example, use the minimal cost of automated, high-frequency trading to reduce the need for paid traders, generating savings for investors.

Democrats also wrongly charge that high-frequency trading increases market volatility. In reality, high-frequency traders provide liquidity and have reduced the gap between bid and ask rates in almost every asset class.

The disruptive effect of transaction taxes is more than theoretical. The Chinese government has taxed trades since the early 1990s, and its gradual reduction of the tax on certain types of stocks offers an occasion to measure the tax’s effects. A 2014 study by University of Southern California finance professor Yongxiang Wang found that as the tax decreased, affected companies saw corresponding increases in capital investment, innovation and equity financing. So much for Mr. Schatz’s quip that small-scale trades have “little to do with the fundamentals of a company.”

I’m just tired of the Democrats taxing everything that moves, in hopes that it will stop moving, and trying to shove the money elsewhere, hoping that which hasn’t moved will move. Whatever. Just stop it.

MAYBE NOT-SO-STUPID TAX?

No, I kid. WSJ: Tax on Robocalls Makes Plenty of Cents

President Trump can become wildly popular going into next year’s election — by imposing a tax. Robocalls are the top sources of complaints to both the Federal Communications Commission and the Federal Trade Commission. There were nearly 50 billion of these nuisances in 2018, according to YouMail. No one likes them. A few months ago, 35 state attorneys general asked the feds to do more to address this blight.

Federal agencies don’t like robocalls either, but stamping them out is a Whac-A-Mole problem. As with most scams and irritating business practices, it’s easy to set up new companies, evade regulators, skirt legal definitions, and roll right along. Due process and freedom of speech also come into play. You can’t just name the bad boys and haul them off to jail.

So why not use the taxing power? Most taxes aren’t popular, but this one will be. Call it the Penny for Sanity Tax: a 1-cent tax on every call made. Fifty billion robocalls would cost $500 million — a powerful incentive to stop.

Because the tax would apply to all calls, it would avoid litigation about what can be legally disfavored. It would be impossible to evade by sneaking around classifications of calls. And it would not necessitate hiring more bureaucrats to enforce a complicated rule.

You and I would pay the tax too, on our legitimate phone calls. But we don’t make many calls, so the tax would be a pittance, hardly noticed among the many charges that appear on our monthly bills. Even a chatterbox who makes 50 calls a day would pay a mere $15 a month. And if a penny a call isn’t enough to stop robocalls, make it a nickel.

Oh, I see. A stealth phone tax. Tax per call.

I have a simple question: will political robocalls be similarly taxed? Because those assholes exempted themselves from Do Not Call lists. The worst robocalls I get are from politicians and political parties, grubbing for money. They are the worst at certain times of years, and in certain years, to be sure. But they will never allow this crap be applied to them.

Bah.

TAX STORIES

TAX TWEETS




So, I thought I couldn’t hate the NY legislature more. No, I lie. I knew I could. And they have it in themselves for even worse depravity.





THIS TIME WE’LL GET HIM! I SWEAR THERE’S RUSSIANS IN THERE SOMEWHERE!!!!



See y’all next week!


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