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Minneapolis Star-Tribune

Wayne Cox (CTJ Board President): Minnesota's corporate tax? Not a problem

Calculate it honestly, and it isn't high. Yet some wish to manipulate that fact.

By WAYNE COX

April 26, 2010 - 6:48 PM

The Twin Cities needs to get better at producing jobs, mostly by taxing business less. That was the call to arms issued recently by the Itasca Project, a group of CEOs with a track record of sound civic guidance. It invited others to pitch in.

I have a solution, a guaranteed way to make Minnesota one of the 15 states with the lowest amount of taxes on business and to reduce corporate income tax payments to a third of the 9.8 percent corporate tax rate. It would ensure that jobs performance in Minnesota leads the nation, and it would make Minnesota's venture capital investment 10 times greater than Wisconsin's.

The secret? Do nothing.

Ernst & Young and an association of 600 corporate tax attorneys decided a few years ago to tally up business taxes honestly. In each state, they add up all state and local taxes imposed on business, including the corporate income tax and the extent to which the individual income tax falls on business owners. They measure all those taxes paid as a portion of private business activity in the state. Then they rank each state.

The association, called the Council on State Taxation (COST), found last month that Minnesota had the 15th-lowest amount of business taxes paid as a portion of business activity, about the same as the year before.

But isn't Minnesota's corporate tax rate at 9.8 percent the second-highest in the nation, or, as Gov. Tim Pawlenty likes to say, "third-highest in the world"? COST, in one of its earlier findings, said that, because of various deductions, Minnesota businesses actually pay on average only about 30 cents on the dollar of that 9.8 percent rate. It's like going into Macy's and getting a little sticker shock at the manufacturer's suggested retail price until you notice the sign over the rack that says "70 percent off the marked price."

Didn't Minnesota just lose more jobs last month? It did. But the federal Bureau of Labor Statistics also found that Minnesota and the Twin Cities each led the nation in decline in unemployment rate over the last year.

Minnesota has 10 times more venture capital than Wisconsin? Exactly, says Price Waterhouse, the bible for these figures.

The Itasca Project said Minnesota has an "uncompetitive tax structure." It doesn't. It wouldn't have succeeded so well over the years if it did.

But sadly, the Itasca Project, a group that does much good, has elected to throw its lot in with those who run down the street yelling, "Don't buy at Macy's. Their manufacturer's suggested retail prices are horrible."

I have often wondered how much better the state's jobs performance might have been in recent years had it had a governor and a business lobby a little less obsessed with badmouthing Minnesota.

So how does the project make its argument? Same as always -- by referencing the usual suspect suspects. The antitax lobby has set up a number of groups such as the Tax Foundation and the Small Business Survival Council that exist almost solely to produce "rankings" to punish states that use a corporate income tax or an individual income tax. In these rankings, South Dakota, with no corporate income or individual income tax, is almost always No. 1. Minnesota is always near the bottom.

This is a longstanding con. I reviewed one of these "rankings" 25 years ago in a CitiBusiness article. Then, as now, South Dakota was No. 1 and Minnesota was near the bottom. I found that high rankings were not associated with high job growth. I wrote: "Welcome to the Alice in Wonderland world of state business climate rankings, where the states that get the rankings seldom get the jobs."

Twenty-five years later, South Dakota is still No. 1, and it isn't much closer to Minnesota economically than it ever was.

It's all there on Minnesota's state website. Just Google "compare Minnesota." Use the interactive feature to see how Minnesota's business taxes are lower than Florida's. Learn all the things about Minnesota's great business climate that Pawlenty and the Itasca Project apparently don't want you to know.

The business leaders are correct that Minnesota needs to deal with a perception that Minnesota taxes businesses highly. They need to become part of the solution instead of part of the problem. And by closing deductions and credits, Minnesota could have a lower corporate income tax rate that mirrored more closely its actual collected rate.

What should the Itasca Project do? Easy. Acknowledge that actual taxes aren't the underlying problem. Then work a whole lot harder to find what really is depressing Minnesota's jobs and wages -- because something is.

Wayne Cox, of St. Paul, is executive director of Minnesota Citizens for Tax Justice.

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Dayton Daily News

By Martin Gottlieb | Wednesday, April 21, 2010, 09:56 AM

April is said to put dread in the hearts of the American people, taxing them in more ways than one. The anger and frustration associated with April 15 used to be expressed by comedians and in social settings. Now it’s done in political demonstrations. This year, from Cincinnati to Dayton to Columbus, lots of Ohioans went to hear speakers decry the effect of taxes on freedom, on the American ideal. Complaints about taxes are the only thing more certain than death and taxes.

Here, however, after all the complaints have been heard again and again, are a few other points about how the federal income tax — and the process of paying it —Â affects actual Americans:

About 47 percent of households don’t even have enough income to owe federal income taxes. This point, too, has come in for a fair share of attention lately.

Somehow, though, its existence doesn’t dent the consciousness of those who portray April 15 as a universally shared nightmare.

The exclusion of low-income people from this tax makes the overall tax burden fairer. Low-income people do pay state and local taxes, which can hit the poor hardest.

Think about sales taxes, for example. If you have to spend every dime you make, you pay the sales taxes on a bigger percentage of your income than if you can afford to put some money away. (And you hope to see that latter money grow.)

Or look at state and local income taxes. When Ohio “reformed” its tax code in 2005, the main idea was reduction in the income tax and in its progressivity. Progressivity — the degree to which rates are higher on those with more income — is considered a bad thing at the state level. That makes the progressivity of federal income taxes all the more important.

Low-income people also pay Social Security taxes, starting with the first dollar they earn. This hits them harder than the very affluent, who don’t pay on income above a certain point.

So, bottom line, those who don’t pay federal income taxes do pay as much of their income in taxes as any other class. (Citizen for Tax Justice, among others, has run the numbers.)

A lot of people are trying to sell the notion that the federal income tax is out of control. Baloney. The stimulus that was passed last year entailed cuts for most people. The George W. Bush years saw repeated cuts. Even before that, the burden was falling as a percentage of income. Reported the Center on Budget and Policy Priorities, “The Treasury data show that in 1999, the typical family of four with two children was paying a smaller percentage of its income in federal income taxes than at any time since 1966.”

For 2008, out of 155 million individual returns filed, 90 million were done online. The IRS says more than 70 percent of those were done by professionals doing people’s taxes.

It’s a shame the code is so complex that professionals are necessary. Still, these stats dispose of the image of a people burning midnight oil in a desperate effort to understand incomprehensible forms and bureaucratic rules.

Of those filing for themselves, many use simple forms. Software programs have made even moderately complex returns easy, allowing people to fill in the same blanks every year. And many people simply have confidence in their ability to handle situations involving math and rules.

As April 15 was approaching, the IRS reported that 80 million Americans — about half of those filing personal returns — had received tax refunds. The average refund was almost $3,000.

That doesn’t tell you how much people are paying, of course. But it is another does big dent in the notion that April 15 is universally experienced as hell.

Let’s end with a couple of polls, which are best used only as supporting material. At a time when public frustration with Washington is at a high, the IRS is an exception. A Pew study finds the IRS has a favorable rating, 47 percent, that’s up 9 points, more than any agency since 1997. For a tax agency, that’s remarkably high.

Sixty-two percent of Americans say they are treated fairly by the tax code, another remarkable number, when you contemplate the special insight we all have into the universe’s tendency to victimize us more than others.

The same CBS/New York Times poll put the question to 881 people who describe themselves as Tea Party tax protesters. Even 50 percent of them say they’re treated fairly; 42 percent said no; 6 percent didn’t know. Surprising.

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Jonathan Chait April 19, 2010 | 4:04 pm

Good column by Ezra Klein on the Republican war on the Internal Revenue Service:

    In the late '90s, the Republican-controlled Senate Finance Committee held a series of dramatic hearings in which individuals sat behind screens and haltingly, tearfully, told stories of IRS persecution. Some of the stories featured genuine misdeeds. Others fell apart upon later examination (Robert McIntyre, the director of Citizens for Tax Justice, remembers one in particular where it turned out the witness was living off his employee's payroll taxes).

    But the trials worked to demonize the IRS. The result was the IRS Restructuring and Reform Act of 1998, which made enforcement more difficult and began a long cut in the IRS's collection resources.

    A report released by Citizens for Tax Justice shows that between 1995 and 2005, the IRS's budget was slashed by a fifth. Between 1995 and 2003, its enforcement division lost 36 percent of its staff. They were barred from conducting research on tax evasion, which meant they lost the ability to keep up with new tricks that accountants had discovered to game the tax code. More bizarrely, audits of the poor increased, through a special program meant to ferret out Earned Income Tax Credit fraud, but audits of people making more than $100,000 fell from 210,000 in 1996 to 92,000 in 2001—despite the fact that there were 80 percent more income filings over $100,000.

I suppose this behavior flows naturally from an ideological premise that deems anything that decreases tax revenue a positive good. But of course, decreasing tax revenue by creating a deterioration in tax compliance is insane. Why not make the IRS more effective and use the offsetting revenue to cut tax rates? At some point political ideology becomes incompatible with the the effective working of a modern administrative state.

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The Times-Standard
Posted: 04/17/2010 02:06:53 AM PDT

With most Americans having filed tax returns this week, North Coast Congressman Mike Thompson, D-St. Helena, reminded his constituents of 25 different tax cuts totaling more than $800 billion passed by this Congress.

”We have focused on cutting taxes for ordinary Americans,” Thompson said in a press release. “And, it's worked. According to IRS figures, the average tax refund this year is $3,000, which is nearly 9.4 percent larger than last year's average. The Recovery Act was the largest tax cut in history, and it's making a difference for working families.”

A report released this week by the Citizens for Tax Justice shows that since January 2009, 98 percent of American families have seen their taxes cut, according to the release from Thompson's office. The cuts saved working families and individuals an average of $1,158 on their tax returns, according to the release.

Bruce Bartlett, President Ronald Reagan's domestic policy advisor, stated that “federal taxes are very considerably lower by every measure since Obama became president,” according to the release.

Thompson highlighted several tax cuts he thought were making a particularly important impact on local communities:

* The Making Work Pay tax credit -- Ninety-five percent of working families received this credit of $400 for an individual or $800 for married couples filing jointly in 2009, and will continue to see these benefits in 2010, according
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to the release. In Thompson's congressional district, almost 250,000 families are benefiting from the credit.

* Tax credits for college expenses -- Provides eligible families and students with up to $2,500 in tax savings.

* Tax credits for energy efficient renovations -- Taxpayers are now eligible for up to $1,500 in tax credits for making energy-efficient improvements to their homes, such as adding insulation and installing energy-efficient windows.

* Alternative Minimum Tax -- Some 26 million middle-class families are protected from the alternative minimum tax, including 45,000 filers in the 1st Congressional District. The tax was originally designed to affect only the very wealthy, but has not been adjusted for inflation since it was originally written.

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The Lexington Herald-Leader

An old political maxim, that voters never notice a tax reduction and never forget a tax increase, is at least half borne out by a new poll.

Most Americans don't know they got a tax cut last year, according to a New York Times/CBS News poll.

Seventy-nine percent said the Obama administration had raised taxes or kept them the same.

Only 12 percent knew that most Americans are paying less in federal income taxes.

The tax cuts are a result of the stimulus package enacted early last year to pump more cash into the economy.

Ninety-eight percent of working families and individuals got a tax cut, saving them an average $1,158 on the tax returns that were due this week, according to Citizens for Tax Justice, a research group that advocates for fair taxes for middle- and low-income families and for reducing the federal debt.

In Kentucky, the lowest 20 percent of earners (average income $9,110) got an average tax cut of $502, mainly because of new or expanded tax credits.

The top 1 percent in Kentucky (average income $769,270) got an average tax cut of $3,644 mainly because of relief from the alternative minimum tax.

It's probably a safe bet that most Americans also don't know that federal taxes are lower now than they have been in most of our lifetimes.

This year's tax-deadline day inspired Tea Party rallies, named for the famous colonial tax rebellion, including gatherings in Lexington and Louisville at which Republican Senate candidate Rand Paul was the star.

William G. Gale, a senior fellow at the Brookings Institute and co-director of Urban-Brookings Tax Policy Center, said "it is ironic if not bizarre that the Tea Party got going during a time when federal taxes were at their lowest in about 60 years."

In the Times/CBS poll, 62 percent of those who identified themselves as Tea Party supporters also said they think that Social Security and Medicare are worth the cost to taxpayers.

Social Security, Medicare and national defense are by far the biggest items in the federal budget. If we're going to keep paying for them and balance the budget, tax increases are inevitable.

For all the conservatives out there who can't bear the thought of anyone paying more to the federal government, perhaps another widely forgotten fact will provide some solace: President Ronald Reagan raised taxes several times in the early 1980s to tame a spiraling deficit. He still became the patron saint of free marketeers everywhere.

Read more: http://www.kentucky.com/2010/04/16/1226417/rebelling-against-lower-taxes.html#ixzz0qw2HbYl8

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James Werrell - The Rock Hill Herald

It's the day after April 15 — Tax Day! — and we're all destitute, our pockets picked clean by Uncle Sam. Right?

Naw! Quit your whining. It's almost certain you got a tax cut this year.

Why? Because the federal stimulus bill that the Tea Partiers hate so much reduced federal income taxes for 98 percent of all working families and individuals, according the Citizens for Tax Justice, a nonpartisan think tank.

Ninety five percent of working families got a tax credit of $400 for an individual or $800 for a married couple. And they will get that same credit in 2010.

The Tax Foundation, another nonpartisan think tank, analyzed the tax burden for the average American and found that it was lower than it has been at any point since 1971.

In all, the stimulus package included $300 billion in tax cuts, one of the largest tax cuts in history. And, instead of going to the wealthiest 3 percent of Americans, as the Bush tax cuts did, this time the money was spread among nearly all middle-class families nationwide.

Read more: http://www.kentucky.com/2010/04/16/1227123/commentary-quit-whining-about.html#ixzz0qvradF3q

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The movement bashed health-care reform and taxes on the steps of the State Capitol Thursday. But critics say it's misinformed.

By Bill McCarthy
bmccarthy@wyomingnews.com

Moses Lee, organizer for the Tax Day Tea Party rally, address a large group of at a rally held at the Wyoming State Capitol on Thursday. Andy Carpenean/Boomerang photographer

CHEYENNE -- Trustin Hasenauer announced at the Tax Day Tea Party protest here Thursday that he is a candidate for U.S. president.

He won't be on the ballot for some time, though.

You have to be at least 35 to run, and he is 6. But as soon as he is 18, he said, "I'm going to register and vote them out," drawing a roar from the about 300 people who attended.

Trustin's dad, M. Lee Hasenauer, organized the protest in front of the State Capitol on the day federal taxes were due.

Hasenauer said he called his son to the podium that "no politician has ever stood on" because the rally is supposed to be fun and educational for old and young alike.

To that end, the podium held copies of the Constitution, the Declaration of Independence and the Bible.

Julie Cantrell also brought her four children, ages 2 to 13, to the rally. Two held signs that when combined said: "A dollar is a dollar, no matter how small."

She said she is concerned about the new health-care reform law, the deficit and inflating prices on necessities such as food.

Cantrell said she is teaching her children that there are consequences to actions, and her family will suffer the consequences of government spending too much money.

Like tea party protests across the nation, people with conservative values voiced concerns about health-care reform, the national deficit and what they say is a growing tax burden.

But Bill Luckett, executive director of the Wyoming Democratic Party, said the protesters are educating their children and followers with fiction.

"These people were nowhere to be found when George W. Bush and the Republican Congress turned a balanced budget into a record deficit so they could give tax cuts to the rich," Luckett said.

When the Democrats won the presidency and Congress, "these people started rallying, supposedly to complain that they are, 'Taxed enough already,' although (President Barack) Obama and the Democratic Congress gave tax cuts to 98 percent of working families."

Luckett cites a study by Citizens for Tax Justice and separate analysis by William Gale, head of the Tax Policy Center at the Brookings Institution.

He said Republican partisans are putting out bad information.

"It is very frustrating to see so many people misinformed" about taxes, Luckett said.

Tea party protesters said their movement is nonpartisan, however.

"If this were a Republican event, I wouldn't be here," said Frank Smith of Cheyenne.

He held a sign calling for nullification of health-care reform and calling on the Wyoming Legislature to hold a special session to join states suing the federal government over the new law.

Gov. Dave Freudenthal, a Democrat, has said joining the lawsuit would be an expensive gamble, and Wyoming will be bound by the result without having to pony up.

Several speakers urged the crowd to call the governor's office to try to change his mind.

Smith said he is an independent and there were many other independents and Libertarians in the crowd.

Local radio conservative talk-show host Dave Chaffin said tea party attendees are unfairly painted as a bunch of right-wingers and out-of-touch Republicans who only want to "bash Democrats."

"They're not," Chaffin said. "They're Americans."

Luckett sees partisanship, though.

"Like so many of their other claims, the facts dispel the notion that they're nonpartisan. They are, in fact, primarily right-wing Republican activists," he said.

He cites a New York Times/CBS poll released Thursday saying that of the 18 percent of Americans who say they are tea party supporters, 54 percent are registered Republicans, and only 5 percent are registered Democrats.

Maureen Hurley sees the underlying problem stirring the protests as erosion of respect for traditional and patriotic values that are no longer being taught to American children.

An important case in point, she said, is that local schools from elementary to colleges do not teach history on Veterans Day.

"Veterans Day is a recognized holiday in the state of Wyoming," she said. School districts show it as only a "planning day," she said, with kids getting half of a day off.

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Wednesday, April 15, 2009

As thousands take part in "tea party" rallies across the country, newspaper and blog commentators are already sounding off -- and the reviews are mixed. The purpose of the parties -- organized via the Internet by former House Speaker Newt Gingrich's American Solutions and former House Majority Leader Dick Armey's FreedomWorks, among other groups and individuals -- is to protest against what organizers perceive as high taxes and excessive federal spending.

The effort's online hub -- Tax Day Tea Party -- has video of the ongoing parties. Left-leaning Think Progress, a wing of the Center For American Progress Political Action Fund, has a list of GOP lawmakers who have signed on to speak at the "radical anti-Obama" events.

So is there a surge in voter anger over taxes? Gallup recently published a poll showing that 61 percent of Americans think they will be paying their "fair" share in taxes this year, according to the progressive group Citizens for Tax Justice. But 39 percent of those who make less than $30,000 think their federal income taxes are "too high," though many of them don't actually pay federal taxes, according to Citizens for Tax Justice. See report here.

After the jump, also see a sampling of what the pundits and bloggers are saying.
-- Amy Harder

• "The tea partiers' stance on the issues is a little mysterious," scoffs Thomas Frank in the Wall Street Journal. "But outrage is outrage, the party organizers probably figure; who will know the difference?"

• Marc Cooper of USC also expresses bewilderment and derision in the Los Angeles Times: "The Tea Party movement, more than anything else, is a rather garish display of a Republican right that seems to have lost not only the national elections but also any semblance of political bearings."

• The Atlantic's Chris Good points out that House Minority Leader John Boehner, R-Ohio, and NRCC chairman Pete Sessions, R-Texas, have already issued statements applauding the protests. "Perhaps [the lawmakers are] seeking to ride the wave of media attention and purported grassroots conservative economic populism."

• In another Journal op-ed, author Glenn Harlan Reynolds (who's covering the protests for the organizers) speculates that "the tea-party movement will have an impact on the 2010 and 2012 elections, and perhaps beyond" -- possibly even resulting in "a new third party that may replace the GOP."

• Rick Moran, a blogger at Right Wing Nuthouse, is concerned that "the rhetoric about what the tea parties will accomplish will not match the reality of what actually occurs."

• Hot Air's Ed Morrissey picks apart a new poll that suggests Americans are actually more satisfied today than in the past about taxes.

• The American Spectator's Andrew Cline opines that "of all the outrages that led to Americans organizing 'tea parties' today," the greatest is "Washington's gradual convincing of the American people that giving so much of their income to the government is just and fair."

• The NextRight's Patrick Ruffini applauds the online organization showcased by these events: "The messier, more unpredictable, and more freewheeling examples of online activism -- from the Ron Paul campaign to tea parties -- have been on the right. The right's is a different model. One that the left -- and many of our friends [on] the right -- do not completely understand yet."

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The Tax Man Should Cometh

April 15, 2010

by Ezra Klein

How I learned to stop worrying and love audits.

I come not to bury IRS agents but to praise them. That's not a popular argument coming so soon after tax day. In fact, it's not a popular argument in American politics, period. But I'm not here to win friends. I just want to pay less in taxes.

You can generally judge exactly how unpopular something is by a political party's desire to tie the opposition to it. So it's telling that the GOP is now attacking Obama's health-care law because it will … create jobs at the IRS (and I thought they were worried about unemployment?). "You can't run," warned the grim announcer on a recent RNC advertisement. "There is no place to hide. Over the next few years, IRS agents will begin to multiply." Newt Gingrich was kind enough to offer up numbers. "One of the things in the health bill is 16,000 additional IRS agents," he warned.

As FactCheck.org exhaustively showed, that's not "one of the things in the health bill." Actually, there's virtually nothing in Gingrich's statement that's true. The bill does not say the IRS should hire 16,000 new agents. That's from a press release from the Republican staff on the House Ways and Means Committee that was a misleading extrapolation from a Congressional Budget Office report. The CBO report said that the IRS would need $5 billion to $10 billion to administer the bill. Republicans took $10 billion, divided by the cost of an agent's salary, and said the bill would employ that many agents. Apparently, none of these people need desks. Or office space. Or special IRS badges.

In reality, the bill won't require hiring many new agents. Most of the new work will be administering tax credits to low-income individuals and small businesses. That's a job done by IRS employees, not "agents." But misleading math aside, it's worth challenging our apparent consensus that IRS agents should be viewed with the same fearful contempt we normally reserve for bookies and investment bankers.

Every year the IRS collects data on "the tax gap." The tax gap is the difference between the taxes the agency knows it's owed and the taxes the agency has actually been paid. In fiscal year 2008, the tax gap was $345 billion. That's about 14 percent of the total taxes collected that year. And you know who makes up that shortfall: those of us who didn't dodge our taxes.

As long as we're going to have a tax system, we may as well make sure we're all paying our share. But the GOP has conducted a long campaign to defang the IRS's ability to do that. In the late '90s, the Republican-controlled Senate Finance Committee held a series of dramatic hearings in which individuals sat behind screens and haltingly, tearfully, told stories of IRS persecution. Some of the stories featured genuine misdeeds. Others fell apart upon later examination (Robert McIntyre, the director of Citizens for Tax Justice, remembers one in particular where it turned out the witness was living off his employee's payroll taxes).

But the trials worked to demonize the IRS. The result was the IRS Restructuring and Reform Act of 1998, which made enforcement more difficult and began a long cut in the IRS's collection resources.

A report released by Citizens for Tax Justice shows that between 1995 and 2005, the IRS's budget was slashed by a fifth. Between 1995 and 2003, its enforcement division lost 36 percent of its staff. They were barred from conducting research on tax evasion, which meant they lost the ability to keep up with new tricks that accountants had discovered to game the tax code. More bizarrely, audits of the poor increased, through a special program meant to ferret out Earned Income Tax Credit fraud, but audits of people making more than $100,000 fell from 210,000 in 1996 to 92,000 in 2001—despite the fact that there were 80 percent more income filings over $100,000.

No one likes being audited, of course. But no one likes paying unnecessarily high taxes, either. And enforcement does work. Eric Toder, a tax-policy expert at the Urban Institute, says that each dollar spent on IRS agents returns about four or five dollars in recovered taxes.

There's a good argument to be had over whether taxes should be higher or lower. But everyone agrees they should be fair. When they're not, it raises taxes for those willing to pay them and increases the sense that the system is rigged. We can do better, but first we'll need some agents.

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04-15-10

On Thursday, a wave of protesters, upset with overly-burdensome taxation by the federal government, are descending on the nation's capital to express their displeasure.

But does their anger reflect the truth about today's tax rates?

After all, neutral economists insist that, under the Obama administration, the overwhelming likelihood is that your tax burden has gone down, not up. Even conservative economic analysts acknowledge that there really is no basis for middle- and working-class Americans to believe that they're suddenly paying more.

"The only tax I think that has been put in place so far is an increase in the federal cigarette tax. I can't think of another Obama tax that has gone in place so far," said Chris Edwards, Director of Tax Policy Studies at the conservative Cato Institute. "I would say that people are angry because big taxes are coming down the road because of the gigantic deficit built up under Bush and continued under Obama."

And yet, Thursday is expected to bring a range of hotly-charged rhetoric over the damage this 'tax-and-spend' president has done to the general public's bottom line.

A look at the numbers tells a different story. For starters: the non-partisan Center for Budget and Policy Priorities reported on Wednesday that "Middle-income Americans are now paying federal taxes at or near historically low levels." How low? The average family of four right now is paying 4.6 percent of its income in federal income taxes -- the second lowest percentage in 50 years.

A report from the White House Council of Economic Advisers, meanwhile, asserts that the president's economic stimulus package has sent more than $200 billion in tax relief and other benefits to mainly middle- and lower-income families since its passage.

Citizens for Tax Justice, a self-described non-partisan organization, released a report on Tuesday that read: "The 2009 economic stimulus bill actually reduced federal income taxes for tax year 2009 for 98 percent of all working families and individuals." This total includes the 95 percent of working families that will or have received tax credits in the range of $400 to $800.

The health care bill passed by the administration, meanwhile, includes a tax credit that could cover up to 35 percent of the premiums a small business pays to insure its workers. The Recovery Act, meanwhile, included such tax breaks as a $1,500 credit for home energy improvements, and an $8,000 credit for first-time home buyers.

It has been a buffet of tax breaks and credits offered by this administration (occasionally to the chagrin of progressive economists, who want more focus on stimulative federal spending).

Yet polling numbers indicate that Americans are barely aware of these developments. Indeed, a good chunk of the country believes it has been saddled by this administration with tax hikes. Back in mid-February, a full 24 percent of respondents to a CBS News/New York Times poll said that their taxes had increased under Obama. Fifty-three percent said they had stayed the same. Only 12 percent thought their taxes had gone down.

"Belief is triumphing over reality," explained Bob McIntyre, director of Citizens for Tax Justice. "Part of it is they watch the wrong television shows and believe it. Part of it is the tax cut that went to almost everybody, the making work pay credit, was dribbled out... people didn't get a check. They paid lower taxes and might not have noticed it.

"It is like arguing whether Jesus rose from the dead," McIntyre concluded. "If you believe it, you believe it."

On Thursday, those who don't believe it will be making their voices heard. At least four separate demonstrations are being planned around the capital in honor of tax day, including two protests next to Congress, an online broadcast "tax revolt" and another rally at the Washington Monument. They will, however, be countered by a start-up group called "The Other 95%," which will descend on D.C. on Thursday to protest "right across from Tea Party rally." It should be an interesting, if not occasionally wonky, show-down.

"Obama passed 25 separate tax cuts," Sheryl Stein, founding member of "The Other 95%" said in a statement announcing the group's plans, "including $300 billion in middle class tax cuts -- one of the largest in history - as part of the stimulus package. Unlike President Bush's 2001 tax cuts, which went to the wealthiest 2.2%, President Obama's tax cuts overwhelmingly benefit working and middle class families -- in fact, 95% of all Americans."

And there is some indication that Americans are satisfied, generally speaking, with the current trade-off between their tax burden and the benefits that government provides. "Just ahead of Tax Day, a new New York Times/CBS News poll finds that most Americans regard the income taxes that they will have to pay this year as fair, regardless of political partisanship, ideology or income level," the Times reported.

Perhaps even more surprising, though, is that even among the 18 percent of Americans who say they support the Tea Party movement, more than half call their own income tax fair. Sentiment turns more sour, however, among the smaller group of Tea Party supporters who are active in the movement. Most of them, 55 percent, regard the income tax they have to pay as unfair. Thousands of Tea Party supporters gathered in Boston today for a rally near the original site of the Boston Tea Party.

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Around this time every year, people start making all kinds of ideologically motivated claims about taxes. So I thought it might be worthwhile to diffuse a few myths. Let's get right to it:

We're taxed to death! Well, no. In fact, when you look at American tax rates compared to those of other countries, we have extremely low taxes. This graph, using data from the Organization for Economic Co-operation and Development, shows that among industrialized countries, we rank near the bottom in taxes paid. It's a little hard to see, but the U.S. is over there on the right, with only the Japanese, Turkish, and Mexicans paying less in taxes than us:

But the hard-working rich are paying all the taxes! Again, no. The rich pay much more in federal income taxes, which are actually progressive. But federal income taxes are only one of the many taxes we pay. Add in payroll taxes, sales taxes, excise taxes, and property taxes, and you get a very different picture, one in which the poor pay a little less, but once you move into the middle class, every income group pays about the same proportion in taxes. The good folks at Citizens for Tax Justice made a picture:

But Barack Obama is killing us with his taxes! Wrong. In fact, through the stimulus bill, Obama cut, repeat, cut taxes for 98 percent of working families. While the health-care bill includes some tax increases on the wealthy, those haven't taken effect yet, and won't affect most Americans. But most Americans have already gotten their Obama tax cuts. Here's how much they got, again courtesy of CTJ:



So to sum up: Americans pay much less in taxes than citizens of similar countries; people at all income levels pay about the same amount in taxes, except for the poor who pay slightly less; and Obama cut your taxes.

But there's one other thing to keep in mind on tax day: Your tax dollars buy stuff. Some of it is stuff you may not like, but a lot of it is stuff you like a lot. Like police, and firefighters, and roads, and bridges, and schools, and food inspectors, and health care for your grandmother, and veterans' benefits, and cancer research, and all the other stuff that makes us a civilized society and gives the future an opportunity to be better than the past. So instead of grumbling on tax day, why not take the opportunity to say, "This is a day to celebrate. I am a proud American, and I'm doing my part."

-- Paul Waldman

Posted by Paul Waldman on April 15, 2010 12:48 PM

spe(See original post)

Wednesday, April 14, 2010 - 4/15/10

Santa Fe is among cities across the country where a Tax Day tea party is planned today, the federal income-tax filing deadline.

Local speakers are expected during the event, set for 5 to 7 p.m. on the Santa Fe Plaza, an announcement said.

"The Santa Fe T.E.A. (Taxed Enough Already) Party is a local nonpartisan grass-roots group of citizens who are giving concerned voters throughout Northern New Mexico an opportunity to voice their concerns about lack of fiscal responsibility at all levels of government, wasteful spending of the voters' tax dollars, the expanding and unsustainable debt, and the unconstitutional expansion of the Federal Government into areas delegated to the states, and individuals," said a news release issued by Shelyl Bohlander.

Organizers are encouraging participants to bring donations for the Food Depot. For more information, visit www.santafeteaparty.blogspot.com.

Meanwhile, U.S. Rep. Ben Ray Luján, D-N.M., on Wednesday issued a statement in advance of Tax Day highlighting a study by Citizens for Tax Justice, that says 99 percent of working families in New Mexico received a tax cut in 2009 through the American Recovery and Reinvestment Act, which the Northern New Mexico congressman supported.

He noted that among the tax cuts was a "Making Work Pay" tax credit that gave more than 94 percent of working individuals a $400 refundable tax credit.

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April 14, 2010

Santa Fe - A new report finds 99 percent of New Mexicans received some tax relief in 2009, leading some analysts to wonder where Tea Party activists' claims of tax tyranny are coming from. Tax Day protests are planned in New Mexico and around the country Thursday, April 15. Analysts say the common claim associated with the group - that the Obama administration is raising taxes as part of a socialist agenda - doesn't square with reality.

Gerry Bradley is a research director for New Mexico Voices for Children, which does tax policy work through its Fiscal Policy Project. He says the fact is that 99 percent of New Mexicans have actually received tax cuts through last year's stimulus package,  "Just take the middle 20 percent of the taxpayers in New Mexico. They're getting an average tax cut of about $650 dollars a year. So, it's a significant amount of tax relief."  Bradley says nearly every working New Mexican received some benefit on their 2009 income taxes, with the overall average amount being about a thousand dollars. The figures on tax relief in the stimulus package come from a new report by Citizens for Tax Justice, a Washington, D.C.-based think tank.

Bradley says many economists agree that the administration took steps that were necessary given the economic situation,  "Possibly what the Tea Party people don't understand is that in a recession, it's a good thing to increase government spending and cut taxes on consumers. And the Obama administration has increased government expenditures and cut taxes."

Bradley points out that the study shows that New Mexicans across a wide spectrum of income levels received tax relief in 2009, from tax credits for low-income households to alternative minimum tax benefits for higher-income earners.

The report is available at http://www.ctj.org/obamastaxcuts.php

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By Matthew Reichbach 4/14/10

Tomorrow is the deadline to file federal income taxes and taxes are on the minds of many Americans. A recent national poll shows that six-in-ten Americans expect their taxes to go up. Also comes the news of a study that found that 99 percent New Mexicans benefited from tax cuts related to the stimulus package.

The Gallup poll found that 74 percent of Republicans believed that their taxes would go up over the next 12 months while 49 percent of Democrats believed their taxes would be raised.

Just four percent of all Americans thought that their taxes would be lowered.

“President Obama cut federal income taxes for low- and middle-income Americans in the economic stimulus plan, and is looking to extend the Bush-era tax cuts on middle-income families in his 2011 budget,” Gallup wrote in discussing the poll. “Still, a majority of people in low- and middle-income households expect their taxes to be raised over the next 12 months.”

Gallup offered one possible reason for the widespread belief that taxes would go up. “Americans may perceive that the federal government will need to raise taxes to pay for its greater spending and rising deficits since Obama took office, including the recently passed healthcare legislation, with its price tag of just under $1 trillion.”

The head of the Congressional Budget Office, the non-partisan organization that makes budget estimates on legislation in front of Congress, still believes that the health care reform bill will cut the federal deficit. However, a USA Today/Gallup poll from late last month found that most believed it would increase the federal deficit.

The study by the DC-based public policy organization Citizens for Tax Justice examined the tax breaks in legislation passed by Congress and signed by President Barack Obama. CTJ found that the average tax benefit from the American Recovery and Reinvestment Act, or the federal stimulus package, was a cut of $1,012.

“The 2009 federal income taxes that come due on April 15 have been cut for nearly all working Americans, including Americans at all income levels, by the Recovery Act signed by President Obama last year,” the report states. “No legislation enacted during the Obama administration increased taxes for 2009.”

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by Matt Buhrman 04.14.2010

We spoke with Congressman Dave Loebsack regarding a report from Citizens for Tax Justice.

OTTUMWA, IOWA -- Tax Thursday is upon us. Federal income taxes are due each April 15th.

According to a new report from Citizens for Tax Justice, President Obama cut taxes with the American Recovery and Reinvestment Act. The report shows that in Iowa, taxes were cut for 99 percent of working families last year...including the top one percent. The breakdown by income level can be found in the CTJ report.

On Wednesday, we spoke with U.S. Congressman Dave Loebsack (D-Iowa) by phone from the U.S. Capital.

"Folks are hurting. The recession has taken its toll. I think we've got to continue to enact tax credits when we have the opportunity to do it. And we can strengthen Iowa pocketbooks and also make sure that we can inject demands back into the economy. We've got to get the economy moving. And certainly this is one way we can do it," Representative Loebsack said.

Working people in Iowa received over $1,100 on average from these tax breaks, according to the CTJ report.

The Congressman said that these cuts, in addition to the Making Work Pay Credit, should help to mitigate the economic downturn.

"In the middle of all this other discussion going on out there, keep in mind that in the Second District of Iowa, 221,000 families alone are benefiting from this Making Work Pay tax credit that we passed last year. It's very, very important," Representative Loebsack said.

Loebsack is scheduled to host a "Telephone Townhall" next Monday, April 19th, at 7 PM to hear your feedback on issues of concern. Citizens are encouraged to sign up at the website for Congressman Loebsack.

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April 14, 2010

Tax Refunds Up Ten Percent Compared to Last Year

Washington, DC – Congressman Henry Cuellar (TX-28) today announced that this tax day, April 15, 2010, millions of American families, businesses and hard-working Texans will see lower taxes and larger refunds thanks to the economic stimulus package passed by Congress in 2009, and the health care reform and jobs bills signed into law this year.

“These are record-setting tax cuts for 95 percent of the nation’s hard-working families,” said Congressman Cuellar. “For the majority of Americans, tax refunds are up an average of ten percent thanks to the unprecedented action we’ve taken to lower taxes. This puts hard-earned money back into the pockets of everyday people.”
The American Recovery and Reinvestment Act, also know as the “stimulus” package, has already provided over $160 billion in tax relief for families and businesses as a result of over 25 new tax cuts for individuals, homebuyers, small businesses and the self-employed.

The non-partisan organization Citizens for Tax Justice estimates these tax cuts saved individuals and families an average of $1,158 on taxes this year. The “Making Work Pay” tax cut, passed by Congress, reduced withholding on wages in 2009 for most individuals by $400 and $800 for married couples. The Recovery Act also provided the “American Opportunity Credit” of up to $2,500 for college tuition, plus first-time home buyer credits worth $8,000.

Health care reform included immediate tax cuts for the nation’s small businesses with fewer than 25 employees. If these businesses purchase health insurance for their workers and have average annual wages of $50,000 or less, they immediately qualify for tax credits of up to 35 percent of their employees’ premiums. Beginning in 2014, this increases to 50 percent of those premiums and it’s estimated that 60 percent of the nation’s small businesses will qualify for these tax cuts.

“Health care reform was the single largest health care tax cut in American history,” said Congressman Cuellar. “Beginning in 2014, 40 million families, including thousands in my district, will benefit from tax credits making health insurance affordable. This is unparalleled action for hard-working families.”

The Hiring Incentives to Restore Employment (HIRE) Act also provides a payroll tax holiday to businesses that hire unemployed workers and an income tax credit of $1,000 for businesses that retain those employees. Signed by the President this year, HIRE also includes small business capital expenditure tax credits of up to $250,000, letting small businesses benefit from tax cuts in these tough economic times.

“When you add up the benefits, there are more tax cuts for average Americans and small businesses,” said Congressman Cuellar. “This is good for our families and for those hard-working people at home.”

For a list of tax cuts included in the Recovery Act, health care reform, the HIRE Act and other legislation, please visit: http://majorityleader.gov/docUploads/TaxBreaks2010.pdf

To see the Citizens for Tax Justice report, please visit: http://ctj.org/pdf/truthaboutobamataxcuts.pdf

(See original post)

By Ezra Klein  |  April 14, 2010; 2:26 PM ET

As Jon Stewart details in the clip above, some in the media have fastened on a Tax Policy Center report saying that 47 percent of Americans pay no federal income tax. Is it true? In a very limited sense, yes, about 47 percent of households are owed more in federal help than they pay in federal income tax. But it's not because they don't owe federal income tax. It's because they're owed other money that runs through the tax code.

The Earned Income Tax Credit, for instance, is an income-support program created by Richard Nixon and expanded by both Ronald Reagan and Bill Clinton. The underlying idea came from legendary conservative economist Milton Friedman. So this is bipartisan stuff. And it was designed to run through the tax code rather than just send recipients a separate check. So if your income is low, you may (1) owe very little in income taxes, and (2) get a check through the EITC. The result isn't that you don't owe anything in federal income taxes, but that your income tax liability is wiped out by your EITC check. The critics of the tax code don't seem to know this, but their problem is with programs like the EITC -- of which there are many, some of which help the middle class -- not income tax brackets.

That accounts for a lot of the people who don't owe federal income taxes. But it doesn't account for the bigger dodge here: Why are we talking about federal income taxes at all?

I'm going to be charitable on this and assume that people are biased toward their own experiences rather than playing loose with the data. For upper-income folks -- journalists, television executives, congressmen, think tank employees -- the big hit is on income taxes, so they get pretty annoyed when they hear that lots of Americans don't pay any income tax. But their experience is not typical. Most people's tax burden has a very different composition. As David Leonhardt points out in a typically excellent column today, "about three-quarters of all American households pay more in payroll taxes, which go toward Medicare and Social Security, than in income taxes." And that doesn't even mention state and local income taxes.

So let's mention them. The following graph comes from a report (pdf) by Citizens for Tax Justice. It compares the share of the total tax burden -- that means income taxes, payroll taxes, state and local taxes, capital gains taxes, and so forth -- with the share of the total income for different groups. It's the single most important graph to understand our tax system.



Doesn't look so disproportionate now, huh?

By Ezra Klein  |  April 14, 2010; 2:26 PM ET

(See Original Post)

With VAT Tax on the Table, Progressives Sound Alarm

Volcker's Remarks Heighten Concern About VAT and the Working Poor

By Martha C. White 4/13/10 6:00 AM

When House Speaker Nancy Pelosi told Charlie Rose last October that a value-added tax was “on the table” as a possible way to solve the nation’s fiscal woes, the remark didn’t generate much interest. But as recent budget figures have put the depth of America’s problem into black and white, and with former Federal Reserve Chairman and White House adviser Paul Volcker nearly seconding Pelosi’s view recently, the idea of a VAT — already in use in nearly 160 countries — is gaining traction. And some progressives are sounding an alarm.

The prospect of a VAT is likely to be discussed by the fiscal commission established by President Obama. The Wall Street Journal’s opinion page has already sarcastically labeled the consortium the “VAT Commission.” At a recent event organized by the Scholars Strategy Network, a left-leaning think tank, an MIT political scientist floated the prospect of VAT as a solution to the federal revenue crunch. Volcker just last week fueled the fire even more, noting that a VAT tax was not as toxic an idea as it once had been. (Sen. Charles Grassley, R-Iowa, responded this week by coming out against the tax.) All the attention has not been welcomed by progressive groups, who worry that a VAT would unfairly burden the already-struggling working poor. “It crushes the low-income and the elderly,” said Robert McIntyre, director of Citizens for Tax Justice.

Since VAT is a tax on consumption rather than income or investments, it’s considered a regressive tax. Poor people, who tend to spend a higher percentage of their income than wealthier ones, are disproportionately affected by consumption-based taxes. In the U.S., regressive sales taxes are balanced out by a progressive income tax structure.

Proponents of a VAT, though, contend that it wouldn’t hurt lower-income Americans if implemented properly, and that the additional revenue it generates would prevent cuts to social-service and welfare programs.

Left-leaning think tanks such as the Center for American Progress express concern that adding a VAT to the country’s existing tax code or using it to replace the majority of the income tax, as Michael Graetz, Columbia University School of Law professor and author of “100 Million Unnecessary Returns: A Simple Fair and Competitive Tax Plan for the United States,” proposed to the Senate Finance Committee in 2008, would tip the balance in favor of the rich and drop a staggering weight on an already-struggling demographic.

While value-added taxes are common throughout the rest of the world (including Europe, Canada and Australia), many Americans are still fuzzy about what exactly this tax is and how it works. A VAT is essentially a tax on all or nearly all goods and services. Many European countries exempt certain items such as groceries from VAT collection — a mistake, according to economists who counter that a laundry list of exemptions only serves to make the rate higher. What makes a VAT different from a sales tax is the way it’s collected.

The tax is levied on every company that participates in the development of a product, but each participant gets credit for the VAT that has already been paid. If a retailer in a country with a 10 percent VAT buys goods from a vendor, they pay an extra 10 percent on those goods. That retailer is then responsible for collecting 10 percent VAT on sales to customers. When each company in the supply chain pays taxes, though, they get to deduct the VAT they paid from what their customers paid. These somewhat complicated mechanics create a lengthy paper trail that thwarts would-be evaders. Since each company in a supply chain has to collect the tax, there’s also a certain degree of self-policing.

Although right-leaning lawmakers tend to favor regressive tax policies, some conservatives dislike the concept of a VAT because they worry it would inflate the size of the government. “Conservatives think VAT is a hidden tax and therefore a money machine,” said Gilbert Metcalf, professor of economics at Tufts University. In reality, analysts say that concern is overblown. The U.S. debt load has mushroomed so substantially that even adding a new revenue stream in the form of a VAT wouldn’t generate huge surpluses.

The cost of Social Security, Medicare and other entitlement programs is predicted to skyrocket in the coming decades. “The largest programs in the budget support older people,” said Eric Toder, a fellow at the Urban Institute and the Tax Policy Center.

For the nation’s working poor, that’s bad news, says Will Marshall, president of the Progressive Policy Institute. “What’s happening now is the automatic growth of entitlement spending is squeezing out space in the budget for everything else, which includes programs for low-income families.”

Toder and others dismiss the notion that ratcheting up existing taxes will be enough to fill the revenue gap. “You’re running against how high you can squeeze income tax. You don’t want to push it too much further. If you tax investment income too high, we’ll start seeing capital fleeing the U.S.”

If the administration and Congress do consider a value-added tax, some experts do hold out hope that it can be levied in such a way that doesn’t disproportionately impact the disadvantaged. While a VAT itself will never be progressive, there are ways to offset its burden on the poor. “There’s no reason low-income people should bear the burden of getting our nation’s finances in order,” said Columbia’s Michael Graetz. “There’s no inherent reason a VAT has to disproportionately burden low-income people,” he said.

Offering refundable tax credits for Americans living below a certain income threshold, for instance, would help equalize the burden. Graetz also proposed distributing debit cards similar to those on which food stamps are issued to lower-income consumers that would exempt a certain dollar amount of purchases from value-added taxation.

While many of the European VAT structures exclude necessities like food and clothing in the name of making the tax more progressive, many analysts say this just makes administration harder. Exempting certain categories of purchases also means that the rate on everything else is pushed higher. For instance, some European countries have VATs of up to 20 percent, a rate that can be attributed to numerous exemptions.

One of the most sweeping proposals is that put forth by Graetz, who suggests implementing a VAT of 10 to 14 percent and eliminating income taxes for households making less than $100,000 annually. Graetz, who also co-authored a book lambasting the 2001 repeal of the estate tax, maintains that his plan would simplify the tax process for 150 million Americans, and a combination of credits and offsets for lower-income people would keep them from bearing the brunt of the new tax.

While Graetz’s plan is revenue-neutral, he says it offers a better way to tackle the revenue crunch because a VAT is easier to increase than the current income tax. It would also relieve many current taxpayers of the annual burden of preparing and filing their returns. “Americans feel better about taxes that they feel they can pay without undue burden,” Andrea Louise Campbell, a political science professor at the Massachusetts Institute of Technology, wrote in a recent paper. “Easing payment not only helps public acceptance but also encourages compliance.” There’s also no way for the wealthy to avoid paying their share via tax shelters or accounting tricks, since the tax is collected at the point of purchase. This still isn’t convincing for some progressives. Yes, credits could offset the burden on America’s poor. But, they argue, those credits could be rescinded at the whim of a right-leaning Congress. “One concern has to be, will there be political pressure to eliminate those kinds of credits?” said Michael Linden, associate director of tax and budget policy at the Center for American Progress. “Having a VAT replace income tax entirely is a terrible idea,” he said. “If VAT becomes a solution it will have to be part of a larger tax system, ideally part of a larger tax reform effort.”

Graetz argues that draconian spending cuts in social and support programs would hurt low-income people more than an incremental tax increase. “You’ve got to look not just at the way revenues are collected but at the way those benefits are distributed,” he said. Credits or exemptions for the poorest Americans would protect them from paying a higher percentage of their income towards a VAT, and the revenues raised could keep social-service programs off the chopping block.

(See original post)

by Joan McCarter

Tue Apr 13, 2010 at 04:30:04 PM PDT

In time for tax day, Citizen for Tax Justice releases a new fact sheet [pdf] on your federal tax bill for 2009. It's good news, for 98% of working families.

    According to a recent CBS News/New York Times poll, the vast majority of Americans do not perceive that they have received a tax cut from President Obama. Asked if the President “has already raised taxes this past year,” 53 percent of those polled said that the President has “kept taxes the same,” and 24 percent think that the President has “raised taxes.” A mere 12 percent believe that the President has cut their taxes.

    This is an astonishing level of misunderstanding. The truth is that the major tax cuts enacted in the 2009 economic stimulus bill actually reduced federal income taxes for tax year 2009 for 98 percent of all working families and individuals. These tax cuts saved working families and individuals an average of $1,158 on the tax returns they will file by April 15. (The median tax cut was approximately $600.) [emphasis in original]

An astonishing level of people believe any lie the Republican party tells them. A sizable chunk of them probably still believe that Saddam Hussein was responsible for the 9/11 attacks. Turning around the "tax and spend" stereotype for Democrats is going to take a long time to dislodge. Even more important to dislodge will be the persistent idea that taxes somehow aren't critical to the functioning of government, of society.

At any rate, if you've been procrastinating on completing that return, get to it. You might very well have a better outcome than you've been expecting.

    * ::