STUMP » Articles » Taxing Tuesday: France (Tries) to Tax American Companies and more SALT Cap Follies » 23 July 2019, 12:52

Where Stu & MP spout off about everything.

Taxing Tuesday: France (Tries) to Tax American Companies and more SALT Cap Follies  

by

23 July 2019, 12:52

I saw some of these stories in the last Taxing Tuesday, and I decided that I needed to look at this more closely.

WSJ: Why Macron Wants to Tax America First

He targets U.S. companies because he’s already taken as much as he can from the French middle class.

The main question to ask about France’s brazen tax grab on American tech companies is: How could anyone be so dumb? President Emmanuel Macron’s revenue ploy is eliciting howls from Washington — and for once President Trump has a point about “unfair” trade rules. France’s tax, carefully designed to target mainly American firms and exclude mainly French ones, is a red cape waved in front of Mr. Trump’s protectionist nose.

Mr. Macron’s digital tax — 3% on French sales, not profits, by tech giants — makes a lot more sense when you consider France’s screwy fiscal political-economy. This is what transforms a flamboyant bilateral policy spat into an instructive moment.

France is the most heavily taxed developed economy, leeching a total of 53.5% of annual output (and spending 56.4%). The U.S. government only sucks up 33.8% of gross domestic product.
…..
That fuel-tax fiasco also put paid to another alternative plan for solving Europe’s fiscal woes, which is to raise consumption taxes even higher. Since French social taxation is so blunt about where the revenue must come from, middle-class French voters know all too well how heavily they’re taxed. They won’t bear more taxation, even if they also won’t countenance less spending. France’s tax system is too honest for its own good.

What’s left is to attempt to tax someone else’s corporate revenues. America’s deeply unlovable but outrageously profitable tech giants are as good a place to start as any.

Two questions arise. First, in a world of globally mobile capital, is any government able to increase effective corporate taxes anymore? Can any government afford to do so from the standpoint of competitiveness?

Second, the tech tax assumes that the French consumer marketplace is so lucrative that American tech companies will continue trading there despite this revenue grab. How long will that remain true if French consumers are ever more worn down by the social and consumption taxes that fund Paris’s budget?

So, I looked up France’s GDP — and it’s up there when looked at on a total-country basis. Seems like it could be an attractive market that a tech giant would not want to miss.

Heck, if you look at GDP per capita, oh, wait, it’s not really all that far up there. It’s not only below the U.S. (which I expected), but also Germany, Israel, New Zealand, Canada, and more.

But ranking is not important — the GDP per capita in France is about $41,500; in the U.S., it’s about $62,400.

The U.S. GDP per capita is merely 50% higher than that of France. (cough)

Given that about 54% of the GDP goes into the government maw, redistributed to whoever, perhaps France really isn’t all that attractive of a market.

More pieces on the French digital tax:

Well, it’s easy to understand why Macron wants to tax those other guys, over there, not my own people who are already being soaked.

But I wonder about the legal repercussions. I mean, we’ve already got tariffs running around… and the U.S. is a far bigger market than France. It may be a good idea to make sure one’s goods are not unfairly priced in the U.S.

FUTILITY OF SUING THE FEDS

Again.

Governing: States Again Sue IRS Over Federal Tax Law

Connecticut, New Jersey, New York and a local government coalition allege that a new IRS rule unlawfully puts an end to their tax reform workarounds.

Three states and a coalition of local governments are suing the IRS and Treasury Secretary Steven Mnuchin over new regulations that block them from circumventing limits on tax deductions imposed by the 2017 federal tax overhaul.

Two separate lawsuits were filed Wednesday over IRS regulations finalized last month that ban residents from fully deducting their charitable contributions if they receive tax credits in return. Three Democratically controlled states, Connecticut, New Jersey and New York, have filed a joint lawsuit over the rules. A separate suit has been filed by the Coalition for the Charitable Contribution Deduction, a New York coalition of localities, school districts and professional organizations.

The lawsuits allege that the IRS overreached its authority when it closed states’ charitable deduction loopholes. That’s because the ban applies to long-established state-run trusts that give out tax credits in exchange for donations for things like environmental preservation and charter schools. Dozens of states — not just high-tax states or those controlled by Democrats — have these trusts.

And nobody cares. I’m fine with that loophole getting closed.

Tim Foley, a spokesman for the coalition, says it’s unlikely the new lawsuits will be consolidated into the existing one because they target different issues. One is the constitutionality of the SALT cap, the other is the charitable deduction rule. “Let’s say the constitutional lawsuit succeeds and removes the cap on SALT,” Foley says. “That’s obviously helpful, but it doesn’t do anything for the changes being made to the charitable deduction for programs that predate the passage of the federal law.”

The SALT cap is obviously constitutional (because setting it at $0 is obviously constitutional.) This is just a waste of my New York AND Connecticut state tax money. THANKS GUYS.

Charitable deduction rule – I don’t see them getting away from the quid pro quo issue.

The other policy the IRS cites is quid pro quo, which applies when someone donates to a charity and receives a small gift in return. That person is supposed to subtract the value of that gift when claiming the charitable contribution on tax forms.

And taking a state tax cut definitely has large value, if it’s taking you over the $10K SALT cap.

WSJ: Three States Sue Trump Administration Over Federal Tax Changes

Republicans in New Jersey opposed the litigation.

“This lawsuit is a political stunt and another waste of taxpayer money,” said Doug Steinhardt, chairman of the New Jersey Republican Party.

Municipalities in New Jersey have shown interest in setting up such programs but none has done so yet due to the IRS indicating last year that it would change the rule to limit their benefits, New Jersey Attorney General Gurbir Grewal said at the news conference.

In New Jersey and Connecticut, four out of 10 tax filers claimed more than $10,000 in state and local tax deductions in 2015, according to Moody’s Investors Service. In New York, it was more than one-third of tax filers.

Still, because of other changes in the tax law, the vast majority of taxpayers, even in those states, received tax cuts under the 2017 federal law.

Exactly. They just want a bigger tax cut than they got.

Well, tough shit.

I knew before I moved to New York (and before working in Connecticut) how high tax these states were. I could move back to lower-taxed North Carolina (I don’t want to). Why should North Carolinians have to subsidize my taste for high tax luxury?

TAX STORIES

Bwa ha ha. Let’s look at that last one:

Ways and Means chair Richard Neal, D-Mass., is taking a pass on a new N.Y. law allowing him to obtain info on the president’s finances.

New York Gov. Andrew Cuomo recently signed into law legislation designed to make it easier for Congress to obtain President Donald Trump’s state tax returns.

So far, the only Democrat able to use the law wants nothing to do with it.

It’s just one of a series of decisions that have landed House Ways and Means Chairman Richard Neal, D-Mass., in hot water with those on the left who feel the longtime lawmaker hasn’t done nearly enough to obtain the president’s tax returns.

Maybe he knows it’s a whole lot of nothing, and the point is the kabuki of asking Trump directly, getting refused, shouting “Contempt! Impeach!” and continue on.

Now, Neal says he won’t request the state returns by using the new New York law because he believes doing so would harm his efforts at obtaining Trump’s federal filings through the lawsuit, which could be tied up in the courts for years. Neal told Bloomberg News he thought requesting the state returns would boost the Trump administration’s argument that Congress only wants them for political reasons and that, as chairman, he does not “have jurisdiction over New York taxes.”

So, they have a lawsuit going on to try to get Trump’s federal returns…. a lawsuit that, for all we know, won’t wrap up til 2025 or later.

TAX TWEETS




I took a look at the April 2019 performance report, and it looks about 36 million people were on SNAP in that month. https://fns-prod.azureedge.net/sites/default/files/data-files/april-performance-report-2019. The point is to cut SNAP benefits from those who don’t qualify, due to having too high income.

Now, one could argue about the income level where it should be cut off. Current regs are 130% of poverty line for gross income (approximately), and below poverty live for net income. Maybe you consider that too low.

In any case, yes, some people would lose benefits if they had more frequent eligibility reviews.





Ah, maybe we need to cut spending, then.


So, there were tweets galore about this Super 30 film being tax free. What is this movie?

From IMDB:

Based on life of Patna-based mathematician Anand Kumar who runs the famed Super 30 program for IIT aspirants in Patna.

Okay. the wikipedia page looks quite messy, and Rotten Tomatoes has poor reviews of the movie. It sounds like Stand and Deliver, perhaps.

Well, evidently, the movie is tax free in Gujarat. I don’t know how one does that.


Related Posts
Taxing Tuesday: IRS Sends a Shot Across the Bow
Social Security: The Annual Trustee Report - Cash Flows, Tardiness, and Other Views
Public Finance: Full Accrual Accounting and Governmental Accounting Standards Board Testimony
| Main |