Original Post

October 20,2011

by Jay Fitzgerald

Corporations and individuals supporting a simpler ``flat tax'' system had better be careful what they wish for. They may find that it simply costs them more.

Replacing the nation's complicated tax code with a single flat rate has again moved to the forefront of political debate as three Republican presidential candidates - Herman Cain, Rick Perry, and Newt Gingrich - have made such proposals the economic centerpieces of their campaigns.

While most economists and tax specialists agree these proposals would simplify the tax system, they add that many working families and corporations would end up paying more. Corporations may be in for the biggest shock. They could lose a number of very attractive tax deductions, credits, and other provisions that currently drive down tax bills.

The net result: higher corporate taxes.

``There are going to be big winners and big losers,'' said Martin Sullivan, an economist and editor at Tax Analysts, a nonprofit organization that specializes in tax issues. ``Some people and companies that currently don't pay taxes are going to get hit. They're going to start paying more in taxes.''

The idea of simplifying the current US tax code - by slashing taxes to one flat rate for everyone - has been around for a while. California Governor Jerry Brown, a Democrat, proposed a flat tax when he ran for president in 1992. Magazine publisher Steve Forbes, who ran for president in 1996 and 2000, famously made the flat tax his main campaign issue when he sought the GOP presidential nomination.

Neither Brown nor Forbes won the party nomination, and most other flat-tax proposals have ended up going nowhere as well once they hit Congress.

As with earlier plans, this latest round of flat tax proposals would lower the highest tax-rate brackets and eliminate numerous deductions, write-offs, and other special provisions stuffed in the nation's cumbersome and convoluted tax code.

Economists and tax accountants say these proposals share another feature common to flat tax systems: They tend to mostly benefit the rich, who would see their taxes substantially lowered, while some poor and working-class people would be hit with tax increases as they get bumped into a higher, one-size-fits-all tax rate

Perhaps the best known of the recent flat tax proposals is Cain's 9-9-9 plan. The former pizza chain executive has proposed a 9 percent individual tax, 9 percent business tax, and 9 percent national sales tax.

By slashing the top individual and corporate tax rates to 9 percent from 35 percent and imposing a new national sales tax, the wealthiest Americans - the top 1 percent of incomes - could average a $210,000 a year tax decrease, according to the nonprofit Citizens for Tax Justice in Washington. About 60 percent of taxpayers could end up paying an average of $2,000 more, the group estimates.

Cain has fired back that his tax-code plan has been unfairly analyzed and that it protects those living below the poverty level.

Nearly half of Americans currently pay no federal income taxes, due largely to various exemptions and credits, said Roberton Williams, a senior fellow at the Urban-Brookings Tax Policy Center in Washington. About half are poor. The other half includes Americans of all incomes taking advantage of deductions, credits, and loopholes, Williams said.

Some critics of the current tax code say it's not right that so many Americans pay no federal income taxes at all. Everyone should pay at least something, they argue.

Adding a national sales tax - there is none now - would ensure that everyone pays. ``Without question, more people will be paying taxes with a national sales tax in place,'' Williams said of Cain's 9-9-9 plan.

The tax proposals by Perry, the governor of Texas, and Gingrich, a former US House speaker, are hybrid plans that each contend would mean no tax hikes. Both plans would allow taxpayers to keep using the current system if they determine it would be cheaper than a flat tax.

But individuals and corporations alike could opt to file under a flat tax rate - 20 percent under Perry's plan.

Perry's plan would preserve deductions for mortgage interest, charitable giving, and state and sales taxes. The standard exemption would rise about $3,000 to $12,500.

Gingrich's plan calls for reducing the corporate rate to 12.5 percent, down from its current high of 35 percent. Like Perry, Gingrich would give individual taxpayers a choice: File under the current system or pay a flat tax of 15 percent, whichever is cheaper.

By giving taxpayers the option of sticking with the current system, Perry and Gingrich can argue their plan won't raise taxes on anyone.

But if some filers want to avoid the long form and file a simple flat tax, they could end up paying more.

Under Perry's flat tax, for instance, an individual earning $43,000 a year would see annual taxes increase by about $500, according to the Tax Policy Center. In contrast, someone earning more than $149,000 would see taxes fall by nearly $6,000 a year.

As for business, only larger corporations are supposed to pay federal income taxes at rates as high as 35 percent.

But about two-thirds of these corporations pay no taxes after taking advantage of numerous tax exemptions, deductions, and write-down provisions, Williams said.

A flat tax would mean some corporations won't be able to avoid taxes, assuming their deductions are eliminated, he said.

Most economists and tax specialists agree the tax code needs to be simplified to make it more fair, and hopefully spur economic growth.

``It would eliminate uncertainty and needless complexity,'' said Daniel Massucci, a certified public accountant at Massucci & Associates in Connecticut.

But, he added, people should not fool themselves into thinking everyone will be happy under a flat tax.

``Some people's taxes will go up,'' he said. ``Some people's taxes will go down.''

Original Post

October 28, 2011

by Kevin Wack

WASHINGTON - An IRS proposal to require U.S. banks to report the interest earned by certain foreign depositors has revived a decade-old fight in the battle over how far authorities should go to fight tax evasion.

It is an issue with much more emotional resonance than most matters that come before the House subcommittee on financial institutions. At a hearing Thursday, witnesses who oppose the proposed regulation said that it might lead to kidnappings in foreign countries, while a supporter of the IRS proposal argued that its opponents have a vested interest in shielding criminals.

Under the proposal, banks would have to report interest earned in individual accounts by a category of individuals known as non-resident aliens. Often these people spend part of the year in the United States, but they are citizens and residents of another country.

Bankers, particularly those in Florida and Texas, which have a large share of deposits from residents of Latin American countries, argued the plan may spark a flurry of withdrawals from American banks, hurting lending and potentially imperiling institutions that rely heavily on foreign deposits.

"I don't understand why this was proposed at a time when our economy is soft and we're trying to create jobs," said Alex Sanchez, president and chief executive officer of the Florida Bankers Association.

But supporters argue the plan would allow the IRS to catch tax evaders in other countries. Interest on foreign bank deposits is not taxable in the United States, but the money in those accounts could be evidence of tax evasion in another country. If the IRS had information on such bank accounts, they could share it with authorities in nations with which the United States has tax treaties.

Rebecca Wilkins of Citizens for Tax Justice, which supports the regulation, said that people who are paying taxes in their home countries have nothing to fear.

"Only depositors who are tax evaders, money launderers, drug dealers, human traffickers, other criminals will have an incentive to move their funds," she said.

But the witnesses who opposed the IRS regulation said that it would require banks to invest in new technology. Their arguments got a sympathetic hearing from both Republican and Democratic members of the subcommittee.

"Why should we be worried about collecting taxes for other countries?" asked Rep. Blaine Luetkemeyer, R-Mo. "That's not our problem, is it?"

But Wilkins argued that it is in the interests of the United States to help other countries recover the taxes they're owed. She cited an estimate from a 2008 Senate report that the United States loses approximately $100 billion each year to tax evasion, and said that American officials need to be able to show that they're helping other countries fight tax evasion in order to expect help in return.

Ten years ago, the IRS attempted to impose the same regulation, but it received blowback from Congress. The regulation that the IRS ultimately adopted in 2002 limits the rule's application to depositors from Canada.

Canada is a safer, less corrupt place than Mexico and Venezuela, the only two nations in the Western hemisphere that have tax-sharing treaties with the United States, opponents of the regulation argued. They and their congressional supporters said that if the U.S. government shares personal financial information with authorities in those countries, the account holders and their relatives could be the targets of kidnappers.

"For us to think that Mexico and Venezuela under Hugo Chavez respect our privacy laws is absurd," Sanchez said.

House Financial Services Chairman Spencer Bachus made a similar argument.

"Now, every day we read about a kidnapping in some of these countries, and in some cases the death of the victim. Do we really want this blood on our hands?" he asked.

But Wilkins responded forcefully to that argument, saying: "I want to tell you, the U.S. already has blood on its hands."

"For every dollar of tax revenue that is taken out of the governments of developing countries, it impairs the ability of those countries to provide health and safety measures, to feed its citizens, to provide sanitation, to provide health care, to provide military and police that is not corrupt," she said. "Every time we facilitate a dollar coming out of those economies, we have blood on our hands."

Neither side in the debate was able to cite an estimate on the amount of bank deposits that would leave the United States as a result of the IRS proposal. The plan's opponents said they have pressed U.S. officials for a cost-benefit analysis, but the government has never produced one.

Thomas Cardwell, former commissioner of the Florida Office of Financial Institutions, cited a survey that found that at 16 state-chartered banks in Florida, 41% of the deposits were from non-resident aliens.

"What would happen if these deposits, or some subset of them, were lost?" Cardwell asked. "A deposit run of 15% would put an institution in jeopardy."

Wilkins responded that she thinks the risk of a lot of capital leaving the United States is small.

"But you don't know that?" asked Rep. James Renacci, R-Ohio.

Wilkins acknowledged that she didn't have solid numbers, but said that her opponents don't, either.

The IRS regulation was proposed back in January, but it has yet to be finalized. Opponents of the plan include the Independent Community Bankers of America and the American Bankers Association.

"Individuals have a choice among solvent, stable banking systems in which to keep deposits, which are easily transferred from one country to another," the ICBA said in a statement submitted to the subcommittee. "Any adverse change in terms may be enough to make them revisit their choices, or at a minimum, demand higher rates."

Bills to stop the regulation have been introduced in both the House and Senate. The House bill was referred to the Ways and Means Committee, which has yet to act on the measure.

Original Post

October 27, 2011

by Megan Poinski

Although the next legislative session is still a couple months off, it's becoming apparent that new taxes will be one of the central issues before the General Assembly.

The Blue Ribbon Commission on Maryland Transportation Funding formally recommended a 15-cent per gallon gas tax increase phased in over three years, pushing the state's total tax to 38.5 cents. After that, they recommended, the tax should be increased annually based on inflation. Proceeds would be used to fund transportation needs.

Additionally, doubling or tripling the "flush tax" - the water and sewer fee collected to fund Chesapeake Bay cleanup - was proposed to the Governor's Task Force on Sustainable Growth and Wastewater Disposal. The average residential fee is currently $30 per year, and Natural Resources Secretary John Griffin recommended increasing that to $90 per year.

Business groups are looking at the tax proposals - both of which have been tossed around for years - and putting together their positions on them. Neil Bergsman of the Maryland Budget and Tax Policy Institute said that he's not going to guess what happens when all of those proposals get to the legislature for its 90-day session early next year.

"I haven't had a lot of luck predicting what they're going to do until 80 to 85 days into the session," he said.

No increase in gas tax

The Blue Ribbon Commission on Maryland Transportation Funding was established by legislation to come up with recommendations for new and sustainable ways to keep funding Maryland's transportation infrastructure. (Here is a list of its members.)

As Maryland's road conditions and traffic tie-ups have gotten worse, state transportation finances have dwindled and federal money is certain to be cut. The commission analyzed the funds the state needed to get transportation back on track - about $870 million in new revenues - and how to get them.

The commission's final report, which will be delivered to Gov. Martin O'Malley and the General Assembly next week, looks at a combination of tax and fee increases on transportation services. The 15-cent gas tax increase is the largest piece of the new revenues, and has generated the most discussion.

For years, business groups like the Maryland Chamber of Commerce, the Greater Washington Board of Trade, and the Greater Baltimore Committee have pushed a gas tax increase to improve transportation funding. Better transportation infrastructure makes Maryland a better place to do business, they reason. More business means a better overall economy for the state.

Ellen Valentino, the state director of the National Federation of Independent Business said she hasn't heard any support for raising the gas tax from her members. Small businesses are struggling in the slow economy, she said.

"Right now, the priority to our members is that they want to keep their doors open," Valentino said.

Kim Burns, president of Maryland Business for Responsive Government, said that protective measures need to be taken before a gas tax increase can be considered. The commission's top recommendation is protecting money in the transportation trust fund, which is supposed to be used for transportation, from being redirected by the governor or legislature. Previous legislation to protect this money has been unsuccessful.

"The commission draft report acknowledges such protections are not a sure thing, but that likely won't slow the legislature down from passing these tax increases in January without the necessary guarantees to the taxpayer," she said in a written statement.

Increased gas tax seen reasonable

Carl Davis, a senior policy analyst with the Institute on Taxation and Economic Policy, said that the gas tax increased proposed by the commission is a good idea and nearly in line with some recommendations he is finalizing on a report.

Davis figured out that if the average Marylander pays 15 more cents per gallon of gas, he or she would end up paying about $78 annually in increased gas taxes. This amount of an annual increase, he said, is "absolutely reasonable" to cover the state's transportation needs in today's costs.

A study published earlier this year by national transportation research group TRIP reinforces Davis' findings. It found that Maryland drivers spend an average of $2,296 annually in added maintenance, gasoline and safety precautions because of the conditions and congestion of the state's roads. More money for transportation would help fix those problems.

"Paying about $77 a year pales in comparison with that," Davis said.

Davis said that if the state had indexed the tax rate to construction costs back when it was last increased in 1992, it should be about 15.8 cents higher than it is now - meaning that the recommendation is on the right track.

Original Post

October 25, 2011

by Bernie Becker

To some, Rick Perry’s new flat-tax proposal is a bold step that will give the economy a well-needed jolt.

But to others, the Texas governor and GOP presidential candidate is offering an alternative that will not only bring in significantly less revenue than the current tax system.

It’s also far from a guarantee, these analysts say, that Perry’s flat tax would make life easier for many taxpayers.

Perry unveiled his new economic proposal – which also proposes entitlement changes and rolling back government regulations – in South Carolina on Tuesday.

On the tax side, Perry’s proposal has broad differences with the 9-9-9 plan pushed by Herman Cain, his rival for the GOP nomination. But the plan also swerves away from flat tax proposals previously offered by Steve Forbes, the magazine publisher and 1996 presidential candidate who endorsed Perry recently.

The Texas governor, unlike Forbes 15 years ago, would make the flat tax optional, allowing taxpayers to choose whether they want to stay with the current system. The candidate’s flat-tax rate would also be 20 percent, while Forbes wanted to implement a 17 percent rate. The Perry proposal would additionally still feature deductions for mortgage interest, charitable contributions and state and local taxes. Like the Forbes plan, it features a large standard exemption as well – $12,500 for an individual and each of his or her dependents.

Because taxpayers will be able to choose their system, the governor may be insulated from the sort of criticism that Cain has gotten for his plan, which installs a 9 percent national sales tax and levies individual and corporate income at the same rate.

According to the Urban-Brookings Tax Policy Center, the 9-9-9 plan would amount to a tax hike for 84 percent of households.

Under the Perry plan, many low-income taxpayers could choose to remain under the current regime, which offers refundable tax credits like the Earned Income Tax Credit.

Wealthier taxpayers, on the other hand, would almost certainly pay less under the flat tax structure, given that the current top individual rate is 35 percent and that the plan also scraps taxes on long-term capital gains.

“This looks like a sizable tax cut for most Americans, except for the 42 percent who currently pay no income tax. And they wouldn’t have to pay any more.” said Scott Hodge, president of the conservative-tilting Tax Foundation.

But Perry’s rollout also appeared to open him up to the charge that, despite his campaign’s claims to the contrary, the plan does not necessarily simplify the filing process for many taxpayers.

Roberton Williams of the Tax Policy Center declared that it likely wouldn’t be immediately apparent to many middle-class taxpayers whether they were better off under the flat tax.

The proposal also doesn’t specify whether taxpayers would be allowed to freely switch back-and-forth between the current system and the flat tax over the years.

“If you believe in the flat tax, you should just do it," Williams said. "And if you’re worried about low-income families, there are other ways to help them.”

Analysts have also declared that, in an era of soaring deficits, the plan would almost certainly bring in less revenue, at least in its early years.

“How could it not?” asked a release from the liberal Citizens for Tax Justice. “If taxpayers are offered an alternative way to file, we assume they will choose this alternative only if it lowers their tax bills. The result will be, inevitably, a loss of revenue.”

Perry also proposes to slash the top corporate tax rate to 20 percent, down from its current 35 percent, and move to a so-called territorial system, which would essentially only tax corporations on profits made within the U.S.

To ease that transition, Perry also proposes temporarily allowing multinationals to bring offshore profits home at a 5.25 percent rate.

The Tax Foundation’s Hodge said the governor’s corporate tax proposals would also likely lose revenue, at least at first.

The Treasury Department, in 2007, said that eliminating a wide array of tax credits and deductions would still only pay to get the corporate rate down to about 28 percent – well above Perry’s preferred rate.

But Hodge also said that Perry’s proposal would spark economic growth and make American companies more competitive in the global marketplace – making it, in his mind, well worth the trade-off.

“I’m generally reluctant to say that tax cuts pay for themselves,” Hodge said. “But this is about as close as you’re going to get.”

But Williams, a senior fellow at the Tax Policy Center, said that, while the plan might help the economy grow in the long-term, he couldn’t say how quickly that might occur.

“This would allow corporations to keep more money. But they’re not short of money right now,” said Williams, noting reports that businesses and banks were already sitting on piles of cash.

Original Post

October 26, 2011

by Ewen MacAskill

Top thinktanks claim flat-rate plans – used by countries in 'terminal crisis' – will not benefit lower-earners

The wealthiest Americans stand to gain most from the flat tax unveiled by Republican presidential candidate Rick Perry, according to the Tax Policy Center, one of the country's leading independent tax bodies.

The thinktank inserted itself into the middle of the Republican nomination campaign last week when it concluded, after crunching the numbers, that Herman Cain's tax plan would mean increases for 84% of taxpayers.

Cain subsequently revised his flat-tax plan.

Roberton Williams, an analyst at the centre, said on Wednesday the centre had asked the Perry campaign to provide more details of its tax proposals in order to carry out a similar number-crunching exercise. The centre, which sent its first impressions to the campaign to allow its financial experts to respond, is to make its findings public.

Perry, who is trying to revive his election chances after a series of poor debate performances, revealed on Tuesday in South Carolina a plan for a flat 20% rate on income and corporate tax. Complicating the issue, he said taxpayers would have the option of remaining with the existing system or switching to his 20%.

Williams, a former staffer at the non-partisan Congressional Budget Office, which provides information to members of Congress, said: "We do not know all the details, but there are a couple to things we can conclude. The most obvious is that, as a lot of of people are able to choose, the plan will definitely lose revenue.

"The counter-argument from the [Perry] campaign is that the economy will grow rapidly. We have heard that before and it is not true. It is going to lose revenue.

"The second thing is the wealthy will make out very well. They will drop from 35% income tax to 20% … It means the wealthy will pay a lot less tax than now."

For a single person earning $30-40,000, it would make sense to remain with the current system, according to the centre. But for higher earners who are married, for example, it would be better to opt for Perry's scheme.

Perry did not say whether people could switch back and forward on an annual basis, or would have to commit to one or other scheme. He did not set out a timetable, either, for the phasing out of some existing tax exemptions he was planning to scrap.

"It is going to be hard to accomplish a balanced budget, if at all," Williams said.

The centre, which is run by the Urban Institute and the Brookings Institution, is planning next year – once the Republicans have a candidate – to provide a calculator that will allow everyone to work out whether they will pay more tax under Obama or his Republican rival.

Mark Blyth, a professor of international political economy at Brown University, said that flat taxes have been introduced sparingly round the world. "Usually when countries contemplate introducing flat taxes, it is when they are in terminal crisis. What Perry is suggesting is the US is on the same level as Estonia, Azerbaijan and Russia in the 1990s. It is amazing that is the image he wants."

Blyth added: "By definition, it is regressive."

The Citizens for Tax Justice group, in a statement, agreed, describing the plan as complicated, one that would result in massive tax cuts for the richest Americans.

"This would not make anyone's life easier on tax day — except the wealthy Americans whose investment income would be exempt from taxes under Perry's optional flat tax. These lucky taxpayers would quickly find that the optional 'flat tax' actually has two tax rates: 0% for the investment income that mostly goes to the rich, and 20% for the types of income that most of us depend on," the group said.

Citizens for Tax Justice added: "What would stop taxpayers from simply switching back and forth each year, depending on which set of rules results in lower taxes? It's unclear how Perry's plan would address this, but some previous versions of this proposal claimed to address this by forcing taxpayers to choose which system to file under and then locking them into that choice for years to come.

"They would be allowed to change their minds one time during their lives and could also change whenever their filing status changes because they become married or divorced."

Like the Tax Policy Center, it is to produce estimates of the impact on taxpayers at different income levels as details become available.

"But even the limited details available now make clear that this plan is not designed to help the working class," the group said.

Original Post

Groups say funds needed for roads, transit, pollution cleanup

Two groups charged with figuring out how the state can pay for new roads, a cleaner Chesapeake Bay and other key functions of government suggested the same basic answer Tuesday: Marylanders should be asked to dig a little deeper into their pockets.

A blue-ribbon commission on transportation and a committee looking at sewage and growth issues both urged Gov. Martin O'Malley and the General Assembly to come up with more revenue. One recommended a 15-cent-a-gallon increase in the state's gasoline tax, while the other called for tripling Maryland's so-called "flush tax" to $90 by 2015.

The transportation panel also backed a series of higher fees that would affect every Marylander who owns a car or rides the bus or subway. It proposed higher transit fares, a 50 percent increase in vehicle registration fees and doubling the emission inspection fee to $28. Advocates contend revenue increases are necessary to deal with a backlog of deferred projects, including roads, bridges and transit systems.

A committee of a 28-member task force appointed by the governor to tackle sewage and growth issues recommended that the state raise in two stages the $30 annual "flush fee" that all Maryland homeowners pay to help clean up the bay. Under the proposal, the annual fee would rise to $60 next year and $90 in 2015.

The first increase would close a looming $385 million gap in funds to upgrade sewage treatment plants. The second would help local officials pay for cleanup work they're being required to perform over the next several years under the federal government's bay "pollution diet."

Any increases in taxes and fees are certain to face determined opposition in Annapolis, but the governor and General Assembly leaders have said they would give the recommendations serious consideration. O'Malley signaled this month that he might support a gas tax increase. He also has said an increase in the flush fee – formally known as the Bay Restoration Fund – deserves consideration.

"We're going to take a look at everything," O'Malley spokeswoman Raquel Guillory said Tuesday, "particularly as it helps address our infrastructure needs, and to create jobs."

Chairman Gus Bauman said the transportation panel decided to spell out proposals to the legislature in detail rather than make general recommendations.

"It's got to be something specific and real and not just a bowl of mush," he said.

Both the transportation and the sewer panels were set up to make recommendations at a time when state revenues aren't growing fast enough to meet the state's needs. .

Senate President Thomas V. Mike Miller Jr. has said he would push for a transportation revenue package during the 90-day legislative session that begins in January, but has called the suggested 15-cent increase too high.

House Speaker Michael E. Busch was out of town Tuesday and couldn't be reached for comment. He has previously expressed skepticism about a gas tax increase, but spokeswoman Alexandra Hughes said he would take the commission report under consideration.

Any increase in Maryland's 23.5-cent-a-gallon gas tax would be the first since 1992. Transportation advocates contend that the buying power of that revenue has eroded seriously in the intervening two decades, leaving the state an estimated $870 million a year short of what it needs to keep up with necessary spending on highways, mass transit and other projects.

"We've got a serious problem. The federal spigot is running dry," Bauman said.

Anticipating complaints that money raised for transportation would be used for other purposes, the commission urged lawmakers to adopt a strict guarantee that those revenues would not be diverted to balancing the state's budget.

The transportation commission did not take a formal vote on its report but adopted its recommendations by consensus.

Not joining in the general agreement was panel member Lon Anderson, public affairs director for AAA. Anderson complained that the commission's recommendations put too much burden on motorists while failing to identify an alternative source of funding for transit systems.

"The way it's going, the commission has found the state's new ATM … for transportation, and it's motorists," he said.

But Bauman insisted the proposed increases represent a fair balance.

"This proposal does not put a burden on motorists," he said. "All transportation users are going to share this burden."

Carl Davis, resident tax expert at the nonpartisan Institute on Taxation and Economic Policy, said a 15-cent gas tax increase would cost the average Maryland driver $77.55 a year. But he said the hike is justified because almost half of the buying power of the gas tax has been eroded by inflation over the years. A 15-cent increase, he said, would just about restore the gas tax to its 1992 level in real terms.

Gradually tripling the sewage fee would underwrite new pollution controls at nine of the state's 67 largest sewage treatment plants, plus a handful of medium-sized wastewater plants outside of major metropolitan areas. It would also increase state funds for replacing failing household septic systems and help pay for planting trees, creating rain gardens and other projects to reduce polluted runoff from urban and suburban streets, lawns and parking lots.

The full task force did not vote on the proposal endorsed by its committee. The task force's recommendations are not due until Dec. 1.

Del. Maggie McIntosh, co-chair of the task force, who has previously weighed in favor of doubling the flush fee, said the additional funds would create badly needed jobs.

"You've got 39 percent unemployment in the building trades in the Baltimore area," noted McIntosh, a Baltimore Democrat who heads the House Environmental Matters Committee. Improving wastewater treatment plants and other infrastructure projects are "the kind of thing that grows jobs," she added.

Del. Anthony J. O'Donnell, the House Republican leader, said he couldn't support any increase in the flush fee.

"Some of the problems these folks are dealing with are real problems, and I understand that. But the solution cannot be to tax citizens more and more," said O'Donnell, who represents Calvert and St. Mary's counties. "We're in the worst economic times since the Great Depression. People are out of work, people can't pay their bills, credit card and mortgage defaults are through the roof."

What emerged from the transportation panel's nearly two years of deliberation were specific proposals, setting the stage for what could be a lively debate over the state's highway and transit priorities.

The commission recommended:

•A 15-cent increase in the gas tax, phased in by 5 cents a year over three years. The panel urged that at the end of that period the tax be indexed to inflation.

•A 50 percent increase in the vehicle registration fee, expected to raise $165 million.

•An increase in the vehicle titling tax from 6 percent to 6.5 percent, or the elimination of an allowance for traded-in vehicles that has reduced the amount car buyers owe. Either is expected to raise $70 million.

•An increase in Maryland Transit Administration fares, which have remained frozen during the O'Malley administration. The panel's recommendation echoes a call by the legislature for the agency to increase fares to move closer to its statutory goal of paying for 35 percent of its expenses with fares. The increases -- which would affect bus, light rail, MARC and metro service -- are expected to raise $26 million.

•An increase in the fee for a vehicle emissions inspection from $14 to $28, expected to yield $22 million.

The commission urged the legislature to amend the state Constitution to bar transfers of these transportations revenues for non-transportation purposes. In the interim, the panel urged lawmakers to adopt strict statutory limits permitting borrowing from the transportation trust fund only in an emergency and with a plan for repayment.

Original Post

October 25, 2011

by John Pepitone and Christie Walton

A new group wants Kansas to join nine other states that don't have an individual income tax. Supporters claim states like Texas, Tennessee and Florida are growing faster and creating new jobs because they don't have an income tax. A proposal to eliminate the state income tax is getting the attention of many Kansans.

Supporters say it would grow businesses in the Sunflower State and attract a lot of new jobs. Governor Sam Brownback says eliminating the income tax will encourage population growth and attract businesses that bring new jobs.

"The biggest group of folks who pay the highest tax burden in this state are small business owners and those are the folks who create the wealth in this state," said Ashley McMillan. "So, why are we taxing those folks more than others? This is a good way to allow more capital to be spent on hiring people and increasing jobs."

McMillan leads the group Kansans for No Income Tax. She believes Kansas can replace income tax revenue through growth by closing loopholes in tax code that favor special interests. She says the state shouldn't have to hike property taxes or sales taxes to compensate. Democrats aren't buying it.

"My worry would be that if you eliminate the income tax altogether, keep in mind that is $2.7 billion out of $6 billion state general fund state budget," said Rep. Paul Davis. "If you look at all services state government provides you're talking about lopping off over 40 percent. That's a big, big number."

The Institute on Taxation and Economic Policy, a non-partisan think tank, says if Kansas raises sales taxes to cover a quarter of the lost revenue from an income tax repeal, the poorest 40 percent of Kansans will pay more in state taxes.

Kansas may not be the only state considering phasing out its income tax. Supporters of the movement say a similar measure is expected to be on a referendum in Missouri.

Original Post

By James Oliphant

October 25, 2011

The reviews are coming in on Rick Perry’s flat tax plan—and even some conservatives are giving it a thumbs-down.

Take Alan Viard of the American Enterprise Institute in Washington. He finds the plan confounding in several ways.

First, there’s the idea of giving taxpayers a choice to stay in the current system or opt for Perry’s 20% flat tax. So much for the idea of junking an unpopular tax code rife with loopholes and tax breaks, Viard said.

“It makes no sense from a policy perspective,” Viard said. “If the new system is the better system in which to raise revenue, then everyone should be in it. It's not better to have two systems.”

Jon Huntsman Jr., Perry's rival for the GOP nomination, agreed.

"Unlike my plan to clean out the tax code entirely, Gov. Perry takes the easy way out by leaving in place a broken system,” Huntsman said. "Because his plan is optional it will maintain our outdated system of deductions and credits.”

And despite Perry’s pledge to do away with the costs related to deciphering the byzantine tax code, the dual system would likely require many taxpayers to calculate their liability under both systems, adding to, not reducing, their burden, said Viard, who gave Perry credit for releasing a "provocative" proposal.

Perry’s plan, which he unveiled earlier Tuesday in South Carolina, calls for an optional across-the-board tax rate of 20% for individual and corporate taxpayers. That’s the flat part. What’s not so flat is Perry’s decision to preserve popular deductions, such as those for mortgage interest, charitable gifts and state and local taxes.

He would also eliminate the estate tax and do away with taxes on investment income, which would disproportionately benefit wealthier Americans.

“The goal of my cut, balance and grow plan is to unleash job creation to address the current economic crisis, while generating a stable source of revenue to address our record deficit and put our fiscal house in order,” Perry said in a speech in Gray Court, S.C.

Basically, Perry is giving every taxpayer something. If your taxes are lower under the current plan, that’s fine. It they’re lower under his flat tax (as they would be for many higher-income Americans), that’s good, too.

It’s likely why Steve Forbes, the flat tax guru who helped Perry write his plan, called it a “win-win.”

Except there appears to be one clear loser: the federal government. Viard says Perry’s plan appears engineered to deprive the government of significant revenue. “It’s a starve-the-beast mentality,” he said.

Many conservatives would be just fine with that. But Viard points out that it’s possible that Perry’s plan would produce even less revenue than 18% of the gross domestic product, which is the level at which Perry wants to cap federal spending. (Herman Cain's 9-9-9 tax plan, by contrast, is close to being "revenue-neutral," Viard said.)

Currently, the federal budget comprises about one-quarter of the GDP. Many economists believe it would be near impossibility to scale the size of the government back down to a level close to 18 %. To do so would require a radical restructuring of entitlement programs, the widespread elimination of federal jobs, and perhaps a substantial reduction in the military budget.

Perry, in his speech, did suggest that he was willing to tackle entitlement reform, suggesting it was time to raise the eligibility age for Social Security and Medicare.

But National Review’s Reihan Salam still wasn’t impressed, calling Perry’s plan “an embarrassment.” He said the plan shouldn’t be called a flat tax, but instead an “alternative maximum tax.”

“Essentially, what Perry has done is reverse the Buffett Rule,” Salam wrote Tuesday. “He has guaranteed that no American will ever pay more than 20% of her income in federal taxes. Indeed, affluent homeowners living in high-tax jurisdictions like New York City and Los Angeles earning up $499,000 will likely pay much less than that, as they’ll continue to have access to the mortgage interest, charitable and state and local tax exemptions.”

The Tax Policy Center doesn’t seem too wild about Perry’s plan either, with the center’s Howard Gleckman calling it a “remarkable free lunch-for-all plan” that scores a 10 on the “pander-meter.”

“At first glance it looks like an attempt to be all things to all people—big tax cuts combined with a promise to balance the budget with– this being campaign season—huge unspecified cuts in spending,” Gleckman wrote.

And you would expect the left-leaning Citizens for Tax Justice to be down on Perry’s plan. And you would be right.

“This would not make anyone’s life easier on tax day — except the wealthy Americans whose investment income would be exempt from taxes under Perry’s optional flat tax,” the group said in a statement. “These lucky taxpayers would quickly find that the optional ‘flat tax’ actually has two tax rates: zero percent for the investment income that mostly goes to the rich and 20 for the types of income that most of us depend on.”

President Obama’s reelection campaign also weighed in, saying that Perry’s plan is simply an effort to reduce taxes for the wealthy.

“The belief that middle class Americans will benefit if we just give another special break to those at the top was long ago discredited, which is why the president is fighting to create jobs now, restore economic security for the middle class and extend a tax cut that would give the typical middle class family $1,500 per year,” campaign spokesman Ben LaBolt said.

Perry was asked to address whether his plan would end up being a giveaway to the wealthy in an interview with CNBC Tuesday. His response? “I don’t care about that. What I care about is them having the dollars to invest in their companies.”

Original Post

October 24, 2011

by By Khalid Naji-Allah

The Occupy Movement is sprouting up all across the country -- even forcing its reality into the homes of corporate CEO's and bankers. And, as the Movement has grown, thousands of people have left the comforts of their homes in order to become participants.

But what drives people to do this? Why are they willing to sleep outside without the luxuries they are so accustom to? Why are folks willing to risk arrest?

A statement from R&B singer Boosty Collins comes to mind: "People have sold out and now we have to re-learn ourselves because we went for the almighty dollar," Collins said. "Now we've got to get a balance. I love money, a lot of people love money, but we worship it instead of worshiping God and spirit," he continued. "That's what we had, that's what we lost and we got to come back to it."

While CEOs are earning record-breaking salaries, many of the protesters believe that the almighty dollar has influenced a "give me more money" society where the rich conquer and the middle class and poor suffer.

According to a study by the Institute for Policy Studies, a District-based liberal think tank, the ratio between the average worker's salary and the average CEO's salary stands at 325-to-1. The study also found that among the nation's top firms, CEO's pay last year averaged more than $10 million - an increase of 27.8 percent over 2009. That is in comparison to the average American worker's pay in 2010, which was just over $33,000.

Citizens for Tax Justice, conducted a study on tax avoidance among the Fortune 500, and identified 12 corporations that have paid 1.5 percent on $171 billion in profits.

With behavior like this, we see why folks are fed up with a system that protects the rich and (continuosly) beats down the poor.

Original Post

October 24, 2011

by Travis Waldron

After telling former pizza magnate Herman Cain — proponent of the 999 tax plan — that he’d be glad to “bump plans with you, brother,” Texas Gov. Rick Perry (R) is set to release his own flat tax plan tomorrow. While many details of the plan are still unknown, it is expected to take similar form to the flat tax pushed by Steve Forbes, CEO of Forbes Media, when he ran for president in 1996. Forbes officially endorsed Perry today and helped draft Perry’s version of the flat tax.

The flat tax proposal will likely fall short of generating the same amount of government revenue as the current tax structure, as most all flat tax plans do. What it will do, however, is provide a huge windfall to wealthy individuals like Forbes, whose net worth is already about $430 million. In fact, Citizens for Tax Justice analyzed the plan Forbes’ proposed in 1995 and found that it would give him a total tax break worth $1.9 billion over 30 years:

Taking Forbes up on his suggestion, Citizens for Tax Justice, a non-partisan research group, has updated its earlier analysis of Forbes’s personal tax savings from his proposed 17% flat tax. CTJ’s new, more “dynamic” analysis looks not only at Forbes’s current annual savings from his flat tax, but also at his long-term tax savings. Over the long term, CTJ estimates that Forbes’s tax savings from his flat tax would total approximately $1.9 billion.

At the time of CTJ’s analysis, Forbes earned about $1.6 million annually, and his flat tax plan would have cut his annual tax liability by more than half. But the bulk of Forbes’ savings would have come from investments., as the Forbes plan exempted interest, dividends, and capital gains from taxation. Meanwhile, the 17 percent flat tax Forbes proposed would have blown a $200 billion hole in the federal budget, and its benefits wouldn’t have been shared by low- and middle-income Americans — two-thirds of its proposed tax reductions would have gone to those earning more than $200,000 a year. In order to avoid adding to the deficit, the Forbes plan would have had to include a massive tax hike on the poor.

Perry’s plan won’t come out until tomorrow, but if it is similar to the Forbes plan, the implications are clear: it will be yet another Republican plan that requires poor and middle-class Americans to shoulder the cost of a humongous tax cut for the rich.

Original Post

October 21, 2011

by Amy Bingham

First there was a 59-point plan, then a 9-9-9 plan and now a third tax reform strategy is being tossed into the ring: a flat tax.

Think of the plan GOP presidential candidate Rick Perry will announce next week as the halfway point between Mitt Romney’s extensive 161-page economic proposal and Herman Cain’s simplistic 9s.

Like Romney’s plan, Perry’s apparently retains portions of the current tax code, such as the payroll tax. But similar to Cain’s plan, it scraps the majority of the multi-thousand-page code in favor of a simpler, single-rate system.

“I want to make the tax code so simple that even [Treasury Secretary] Timothy Geithner can file his taxes on time,” Perry said Wednesday.

A flat tax might do just that. Proponents of the decades-old proposal say that filing taxes under a flat tax system would be so simple the entire tax form would fit on a postcard.

The premise of a flat tax is to streamline the current system of loopholes and deductions and replace it with one rate that individuals and businesses at all income levels will pay. Similar to both Cain’s and Romney’s plans, a flat tax eliminates taxes on interest payments such as capital gains and dividends, as well as the estate, or “death,” tax. 

“It is essentially protecting people from taxes on their investments as a way of encouraging more business development and the expansion of jobs,” said Roberton Williams, a senior fellow at the non-partisan Tax Policy Center. “That’s the intention.”

Williams said about half of the tax filers that will see a lower tax burden because of these exemptions are in the top 1 percent of income earners and make more than $2.2 million per year.

Steve Wamhoff, the legislative director at Citizens for Tax Justice, said he does not support a flat tax because it amounts to a “consolidation of loopholes for investment income and grants one big exemption for the rich.”

“Clearly, it seems like the unstated goal is to make the overall tax system less progressive,” Wamhoff said. “Almost seems like they are trying to make the rich pay less and the poor pay more.”

While Cain’s plan provides no exemptions for low-income workers, flat taxes rarely apply to people at the lowest end of the income scale. So while low-income workers might lose deductions such as the Earned Income Tax Credit and deductions for having children that knock many of them off the income tax rolls, they might be able to exempt most or all of their wages up to a certain threshold from being taxed.

“Just about every flat tax plan assumes relatively generous family allowance,” said Dan Mitchell, a senior fellow at the libertarian Cato Institute. “Under the current system the poor don’t pay any tax, and under a flat tax the poor don’t pay any tax.”

High income people would be most impacted by flat taxes because their rates would likely drop by about 15 percent or more, depending on the flat tax rate Perry settles upon.

Proponents of the flat tax claim that lowering taxes on the rich and eliminating the double taxation that comes from capital gains and dividends taxes will encourage people and businesses to invest, thereby jump-starting the economy.

“We don’t want rich people putting money into municipal bonds,” Mitchell said. “We want them creating the next Microsoft and Apple to grow the economy.”

Mitchell said that Cain’s 9-9-9 plan and the flat tax plan that Perry is expected to propose are “both equally good” for economic growth.”

“Cain’s plan is based on the notion that you are going to have a low tax rate and no double taxation,” Mitchell said. “So the underlying theory of Herman Cain’s plan is the exact same as the underlying theory of the flat tax.”

Mitchell said the “drastic difference” between the plans is that 9-9-9 gets rid of payroll taxes, which fund Social Security and Medicaid, and makes up for the lost revenue by instituting a 9 percent national sales tax.

The tricky part lies in the politics of passing such drastic overhauls of the tax system, Mitchell said.

“I would bet money that I will live my entire life and we’ll never have a flat tax in America,” he said. “I hope I’m wrong, but there are just so many special interest groups.”

Mitchell said implementing a flat tax or any sweeping tax reform is an “enormous undertaking” because America has “100 years of barnacles on the income tax with all of its different loopholes and preferences, every one of which has a special interest group attached to it.”

Original Post

October 20, 2011

by Catalina Camia

A leading Tea Party ally believes Rick Perry's call for a flat tax could be a boon to the GOP presidential candidate.

Dick Armey was a key proponent of the flat tax when he was House majority leader in the mid-1990s. Today, he is chairman of FreedomWorks, a grassroots group closely aligned with the small-government Tea Party movement.

Armey said in an interview that he's anxious to see Perry's tax-plan details, which the Texas governor will unveil in a speech Tuesday, Oct. 25 in South Carolina.

"If he shows a real conviction it can be a big boost to his campaign," Armey told USA TODAY. "He really has to keep it flat -- no exceptions."

Perry told a Nevada audience earlier this week that he wants to scrap the entire tax code and replace it with a flat tax -- just one rate for every person regardless of their income.

"I want to make the tax code so simple that even Timothy Geithner can file his taxes on time," said Perry, joking about the Treasury secretary, who didn't pay his taxes in full when he was at the International Monetary Fund.

Perry's flat tax would stand in contrast to GOP rival Herman Cain's plan, which calls for a 9% national sales tax, 9% corporate tax rate and 9% income tax on individuals.

Perry is currently lagging in national polls for the GOP nomination, behind Cain and Mitt Romney.

Critics of a flat tax, such as the advocacy group Citizens for Tax Justice, have said such proposals end up cutting taxes for the wealthy while raising taxes for the middle class and people at lower income levels.

Romney said today the flat tax has some positive features, but he wonders if it would end up raising taxes on the middle class.

Armey and Sen. Richard Shelby, R-Ala., didn't get very far in Congress with their flat tax proposal but the former Texas congressman says things have changed.

The flat tax also is a central component of magazine publisher Steve Forbes' 1996 presidential campaign. Forbes is on the board of the FreedomWorks foundation.

"I always said we would pass this into law when America beats Washington, when the grassroots activists and the general interests beat the special interests," Armey said in the interview. "The majority in the House today is a conservative majority, it's not a Republican majority."

Armey, an economics professor by training, said he'd be happy to consult with Perry on the flat tax. But he pointed to his 1996 book on the flat tax as a guide for Perry on how to counter critics of his upcoming plan.

"An awful lot of people make a living from tax complexities and they don't want that to end," Armey said.

Original Post

October 20, 2011

by Michael D Shear

Mitt Romney may be in a fierce battle with Rick Perry at the moment. But he’s also got to worry about President Obama.

A “super PAC” that supports Mr. Obama’s re-election is set to begin showing a tough new web video Thursday morning that accuses Mr. Romney — a multimillionaire — of wanting people like himself to pay less in taxes than teachers, police or construction workers.

“Romney is worth as much as $250 million. But he only paid about 14 percent in federal taxes last year,” the video, produced by Priorities USA Action, says. “That’s less than what many middle-class American families pay. American families who are struggling to make ends meet.”

The video is an effort by Mr. Obama’s allies to capitalize on what they see as a weakness for Mr. Romney should he win the nomination: his wealth.

The PAC based Mr. Romney’s tax bill on an estimate by Citizens for Tax Justice, a left-leaning group. Gail Gitcho, a spokeswoman for the Romney campaign, was asked about the estimate by Time magazine this month and declined to release Mr. Romney’s tax return. “That is something they will decide should he win the nomination,” Ms. Gitcho said.

After last week’s New Hampshire debate, where Mr. Romney called Mr. Obama’s proposal for a temporary payroll tax cut a “Band-Aid,” the Democrats pounced. They accused Mr. Romney of not understanding how much the tax cut could mean for the middle class.

Now, the ad is taking even more direct aim at Mr. Romney’s opposition to the payroll tax increase by linking it to his personal financial situation.

“He doesn’t see the big deal with letting taxes go up by $1,000 for hardworking Americans,” the video says. “That’s the Romney rule.”

In response to the video, Ms. Gitcho said in an e-mail: “Mitt Romney has a tax plan that cuts taxes for the middle class. This is another pathetic attempt by President Obama’s political machine to distract attention from their nonexistent record on creating jobs. Just this morning, we learned that an unprecedented 26 million people are unemployed, underemployed or have stopped looking for work – and President Obama has no plan to deal with it. Barack Obama put forward a second stimulus bill that has been rejected by Congress, and he has yet to offer any alternative.”

Officials at the PAC said they would spend “tens of thousands” of dollars to place the video on social video sites as the first phase in an effort to keep the pressure on Mr. Romney. The video ends with the phrase, “It’s time to repeal the Romney rule,” and links to www.theromneyrule.com.

Original Post

October 20, 2011

by Alex Altman

Herman Cain isn’t the only candidate vowing to junk the unwieldy federal tax code and replace it with a simpler structure. On Wednesday, speaking to attendees at the Western Leadership Conference in Las Vegas, Rick Perry announced that implementing a flat tax would be one of the centerpieces of his plan to spur economic growth. “It starts with scrapping the three million words of the current tax code, and starting over with something much simpler: a flat tax,” Perry told attendees at the Western Leadership Conference in Las Vegas.

Perry withheld key details of his plan, which he’ll unveil in a speech next week. But embracing the flat tax is a move fraught with risk. Perry becomes the highest-profile presidential contender in history to hook his Oval Office hopes to the flat tax, a controversial idea that has ricocheted around the right for decades but which is derided by opponents as a regressive system that slashes taxes for the wealthy while increasing them for nearly everyone else.

The flat tax has multiple variations, but the basic idea is to replace the progressive scale presently in use with a single, fixed rate and jettison deductions, credits and taxes on income accrued through investment. Since being popularized by a pair of Stanford economists in the early 1980s, the flat tax has intermittently surfaced in presidential campaigns, often as a way for second-tier candidates to capitalize on frustration with the byzantine tax structure by urging an uncluttered fix. Steve Forbes’ 1996 presidential bid is a famous example of this phenomenon, but not all the candidates who used the flat or fair tax as a springboard have been conservative — as Steve Kornacki notes, Jerry Brown harnessed its appeal to great effect in the 1992 Democratic primary, and in the Senate Arlen Specter was a recent proponent.

In recent years, amid historically low tax rates and the rise of the Tea Party, the issue has become a rallying point on the right, as investors decrying outsize, redundant tax burdens clamor for ways to flatten and simplify the code. “The idea — even though it has been a while coming in the U.S. — has been gaining traction around the world, ranging in size from Albania to Russia,” Forbes told the Daily Caller. “So we’re catching up with the rest of the world.”

We don’t yet know what form Perry’s proposal will take, though Forbes, who’s advising Perry, indicated to the Daily Caller that like his own, it would include an exemption for low-income individuals. But it’s likely to provoke a familiar set of complaints from centrists and progressives who argue, as they did with Cain’s plan, that it would benefit the wealthy at the expense of ordinary taxpayers.

Flat tax plans are “clearly regressive,” says Steve Wamhoff of Citizens for Tax Justice, a non-partisan group which advocates on behalf of progressive tax policies. “They give huge tax cuts to the rich and the increases go lower and middle-income people.” According to Citizens for Tax Justice, the flat tax legislation floated by Specter in 2010 would have generated large cuts for the wealthiest 5% of the population and an average tax hike of nearly $3,000 for the remaining 95%. Cain’s 9-9-9 plan has been shredded by Bruce Bartlett and other analysts for similar reasons.

Unlike Brown or Forbes, Perry began his presidential bid as a heavyweight contender. Embracing a controversial idea may help him curry favor with conservatives — the Tea Party group FreedomWorks, whose chairman Dick Armey is a longtime flat tax advocate, is a leading proponent of the idea — but it could prove a liability in the general election, and Perry is already fighting the perception that a swaggering Texan will be a tougher sell next November than a polished technocrat like Mitt Romney. Polling on the flat tax is scant, though a 2005 survey by an anti-tax group called the Tax Foundation found broad support for the concept.

Next week’s speech will highlight one of Perry’s primary challenges as the race hurtles into its next phase. To this point, Perry’s campaign has been stalled in the introductory stage, his advisers stressing his bootstrap personal story, his cowboy mien, his rugged conservatism. To be sure, he’s spent plenty of time talking about his job-creation record in Texas and energy independence. But he’s done little to articulate a vision of how he would fit his Lone Star State policies to the national stage. Emphasizing personal characteristics rather than policy expertise — a not-so-subtle ploy to pummel Romney in the likability primary — has come at a price. Perry’s back story is growing familiar to voters, but they’re neither sure what he believes nor, apparently, whether they like him.

Take, for example, a fascinating new Washington Post/Pew Research Center poll that asked voters to list words they associated with the leading Republican presidential hopefuls. For Cain, the leading response was his “9-9-9,” his ubiquitous tax plan. For Perry, the overwhelming response was “Texas,” followed by “no,” “idiot/idiotic,” “conservative,” and “governor/governor of Texas.” In the wake of several weak debate performances, even staunch conservatives are expressing suspicions about Perry’s suitability for the presidency.

Whether a flat tax allays those concerns is an open question. It’s an idea in vogue on the right, and if packaged shrewdly, one can envision it finding favor with the millions of Americans weary of a complex code shot through with loopholes. It could be the spark Perry’s flagging campaign needs. But it will face a fusillade of criticism, and it’s propelled past presidential hopefuls only so far before it flamed out.

Original Post

October 20, 2011

by Adam Smith

Presidential candidate Herman Cain will campaign two days in Alabama this month, including a stop in Huntsville on Oct. 29.

Cain is slated to address the Alabama Federation of Republican Women at 7 p.m. at the Huntsville Marriott near the U.S. Space & Rocket Center.

“We are excited that Mr. Cain … will speak at our biennial meeting,” said Elois Zeanah, president of the AFRW. “Mr. Cain has been in Alabama before, and we find him to be an exciting candidate.

The same group will host an event Oct. 28 featuring Arizona Gov. Jan Brewer, who gained national prominence after signing a tough illegal immigration bill into law in her state. Tickets for the Brewer event are $75, while tickets for the Cain event are $100.

Cain will campaign at other stops while in Alabama, including appearances in Talladega and Birmingham on Oct. 28. Prior to his Huntsville visit, he’ll address the West Alabama Republican Assembly at 10:30 a.m. in Tuscaloosa.

Alabama’s Republican primary will be held March 13.

The Georgia native and former CEO of Godfather’s Pizza has been working to narrow the gap between himself and former Massachusetts Gov. Mitt Romney, seen by many as the likely nominee.

Cain, however, has gained ground in recent days. In a poll released Tuesday by CNN, 51 percent of those polled felt Romney would win the presidential nomination, compared to 18 percent for Cain. But 34 percent of respondents found Cain to be the more likeable candidate, compared to 29 percent for Romney.

Cain was also the candidate respondents most agreed with at 26 percent, compared to Romney’s 21 percent. Cain was also viewed as the candidate most likely to get the economy moving at 33 percent compared to Romney at 26 percent.

Much of Cain’s message has been built on his 9-9-9 plan, which would replace the country’s existing tax code with a 9 percent individual income tax, 9 percent business tax and a 9 percent national sales tax.

Cain said Sunday that his signature 9-9-9 tax plan would lower taxes for most Americans, but conceded some middle-class-Americans might pay more.

In a report released Monday by the Citizens for Tax Justice, the group said his plan would cost 60 percent of taxpayers $2,000 more in annual taxes while reducing the amount of taxes on the nation’s wealthiest 1 percent by $210,000.

The group also said Cain’s plan would be more costly than the tax cuts enacted under former President George W. Bush and that were recently extended under President Obama.

“Under current law, the federal tax system in 2013 will therefore generate more revenue and will be more progressive, because the Bush tax cuts (which disproportionately benefit the wealthy) will have expired,” the CTJ said in its report. “In other words, the Cain plan would be even more costly and regressive compared to the tax rules that will go into effect in 2013.”

— The Associated Press contributed to this report.

Original Post

October 19, 2011

by Zach Carter

WASHINGTON -- Rupert Murdoch's media conglomerate News Corp. lobbied in favor of the new Panama free trade pact, according to federal lobbying disclosure forms -- a pact that will make it more difficult for the U.S. government to crack down on Panama-related tax abuses. Panama is a notorious tax haven, and News Corp. also operates a subsidiary there. The company's flagship American news outlets -- The Wall Street Journal and Fox News -- reported extensively on the three free trade deals passed by Congress last week without disclosing the parent firm's lobbying activity.

In fact, News Corp. operates a total of 136 subsidiaries in nations identified as international tax havens by the Government Accountability Office -- jurisdictions where wealthy Americans and corporations can stash money to avoid paying U.S. taxes. One of those subsidiaries, Twentieth Century Fox Films, S.A., is located in Panama.

News Corp. is not alone, of course. Panama has a total annual economic output of just $26.7 billion, according to the World Bank -- less than two-tenths of one percent of the size of the U.S. economy (and about 45 percent less than the $44.75 billion stock market value of News Corp.). Nevertheless, Panama has attracted more than 400,000 offshore corporations thanks to its zero-percent tax rate and some of the strictest bank secrecy laws in the world.

The Securities and Exchange Commission requires U.S. corporations to disclose the names and locations of all their subsidiaries. But companies do not have to disclose other information that is critical to determining whether an offshore subsidiary exists for any purpose other than tax avoidance, such as the total assets and liabilities of the subsidiary.

So while News Corp. operates just one subsidiary in Panama, compared to 16 in the Cayman Islands and 26 in the British Virgin Islands, SEC filings do not indicate how significant the company's Panamanian activities are.

"A long list of tax haven subsidiaries might indicate a lot of nefarious activity, but you really only need one," said Rebecca Wilkins, senior counsel at the nonprofit Citizens for Tax Justice. "News Corp. might use a single Panama subsidiary to avoid taxes on $3 or on $3 billion. We need sales, profits, tax payments and employees reported on a country-by-country basis to get a good picture of what the multinational is really doing."

According to the company's latest annual SEC filing, News Corp. has $8.6 billion in "undistributed foreign earnings" that it plans to keep stashed abroad "indefinitely." Meanwhile, the company routinely has a U.S. federal income tax bill much lower than the oft-cited 35 percent corporate rate. Since 2003, the first year of tax data available in News Corp.'s SEC filings, Murdoch's company has paid an average federal tax rate of 15 percent, with rates below 5 percent in every year from 2003 to 2006 being offset by a big loss in 2009 and a 25 percent tax rate in 2011 (see note on calculations below).

Several other major news outlets operate subsidiaries in tax havens. CBS, for instance, has 72 subsidiaries in tax haven nations, while AOL, the owner of The Huffington Post, has two (AOL also has $15.7 million in undistributed foreign earnings permanently reinvested abroad). Neither lobbied directly on the trade deals.

The Panama trade deal was initially negotiated by President George W. Bush in 2007, but sparked a host of criticism for granting Panamanian exporters access to U.S. markets without combating the nation's tax avoidance schemes. Indeed, the trade agreement effectively bars the U.S. from cracking down on this activity. Under the agreement, the U.S. is not allowed to treat Panamanian financial services transactions differently from transactions in nations that are not known tax havens, and it cannot pursue some standard anti-money laundering techniques in Panama.

President Barack Obama attempted to assuage these concerns by reaching a Tax Information Exchange Agreement with Panama, but as HuffPost has reported, the deal relies on an outdated model that is unlikely to provide the Internal Revenue Service with enough information to crack down on abusive tax schemes, in part because it does not require that U.S. tax authorities be automatically notified when Americans deposit money in Panama.

In addition to its Panamanian subsidiary, News Corp. operates two subsidiaries in Colombia and three in South Korea, the two other countries with which Congress passed trade deals on Oct. 12. News Corp. lobbied on the Korea and Colombia agreements as well, according to lobbying disclosure forms.

Both Fox News and the Journal have reported extensively on the Panama and Korea deals without disclosing that their parent company was lobbying in favor of them. The Journal has also published multiple op-eds and editorials advocating for the agreements without disclosing its parent company's lobbying. The Journal declined to comment, and a spokesperson for Fox Broadcasting referred HuffPost to News Corp.'s corporate spokespeople, who did not respond to requests for comment.

Note: HuffPost calculated News Corp.'s tax rates by dividing the "current federal income tax" number reported in SEC filings by the company's total U.S. profits minus state and local taxes. In 2007, for instance, total state and local taxes of $69 million were subtracted from News Corp.'s total U.S. profits of $4.586 billion, resulting in a profit net of state and local taxes of $4.517 billion. Current federal income tax paid was $281 million. Divide $281 million by $4.517 billion to arrive at a 2007 federal income tax rate for News Corp. of 6.2 percent.

Original Post

October 19, 2011

by Michael Finnegan

Reporting from Las Vegas—

Herman Cain’s "9-9-9" tax plan lost some its trademark simplicity today when the Republican presidential hopeful carved out a sales tax exemption for the poor.

Cain’s revision of 9-9-9 came a day after rivals for his party’s White House nomination roundly criticized his signature plan to toss out the U.S. tax code and replace it with a 9% income tax, a 9% business tax and a 9% sales tax.

The former Godfather’s Pizza executive told a couple hundred party faithful here that his opponents were trying to confuse and scare voters by making them think a federal sales tax would put a new burden on millions of Americans. Cain was especially dismissive of the idea that a federal sales tax would harm the poor.

“We’re not going to throw the people at the poverty level under the bus,” Cain told an audience at the Western Republican Leadership Conference. “No, we’re not going to do that. But we’ve already made provisions for that. But I just hadn’t told the public and my opponents about it yet. So we’re going to take care of those who are less economically advantaged.”

Cain offered no details on how he would spare the poor from the federal sales tax. He suggested his decision to keep the exemption secret until today was a calculated strategic move.

“I wanted to wait until I got attacked on that for a while,” said Cain, whose plan was attacked Tuesday by rivals at a Las Vegas debate. “We already have a plan for that. But I wanted to see if they would come at that. They thought that it was going to be dead in the water. No.”

A recent analysis by Citizens for Tax Justice, a left-leaning think tank, found that under Cain’s 9-9-9 plan, the poorest 60% of taxpayers would pay an extra $2,000 while the richest 1% would get a $210,000 break.

In his remarks today at the Venetian casino resort, Cain reiterated that his plan would maintain income tax deductions for charitable donations. But he said he would still keep the plan simple and fair.

“Get this part,” he said. “No loopholes for anybody.”

Original Post

October 18, 2011

by Maggie Astor

Under Herman Cain's "9-9-9" plan, the bottom 60 percent of taxpayers would pay $2,000 more in taxes on average than they do now, while the top 1 percent would pay $210,000 less than they do now, according to an analysis released Monday by Citizens for Tax Justice, a liberal think tank.

Compared to current tax burdens, which were calculated based on a tax model from the nonprofit Institute on Taxation and Economic Policy, the analysis found that the poorest 20 percent of Americans would pay $2,073 more on average, the second-poorest 20 percent $2,524 more on average and the middle 20 percent $1,635 more on average per year under the "9-9-9" plan.

The plan was basically a wash for the second-richest 20 percent, who would pay $20 more in taxes on average each year. But 80th through the 95th percentiles would pay $4,507 less on average, the 96th through 99th percentiles would pay $20,983 less on average, and the top 1 percent would pay $210,129 less on average under Cain's plan.

For perspective, the amount of money that members of the wealthiest 1 percent would save each year under the "9-9-9" plan is more than four times the gross annual income of the average American, which was $49,445 (median) in 2010, according to the U.S. Census Bureau.

9-9-9: Only Top 20 Percent of Filers Would Benefit

Cain has been able to say that his plan would "reduce taxes" because, on average, it would: by $2,354, according to the Citizens for Tax Justice study. But averages (means) are skewed by outliers like that $210,129 figure, making it seem like the majority of people will pay less in taxes when in reality, it is only the top 20 percent of taxpayers that will benefit.

According to the study, the actual impact of the "9-9-9" plan on the majority of Americans -- the bottom 60 percent -- would be a $2,077 tax increase.

A separate analysis by Edward D. Kleinbard, a law professor at the University of Southern California, found that a family earning $120,000 in wages in 2010 would have paid $541 less in taxes under the "9-9-9" plan, while a family earning $50,000 would have paid $4,800 more: an increase of nearly 10 percent of their income.

Cain has brushed off these criticisms by saying that the disproportionate impact of a 9 percent national sales tax on the poor would be offset by the elimination of the payroll tax.

But the 9 percent corporate tax Cain proposes would apply only to revenue after investments, purchases and dividends paid to shareholders, meaning "there would be nothing left of a business's revenue to tax other than the revenue going toward wages," the Citizens for Tax Justice analysis concluded. "In other words, the 9 percent 'business flat tax' under Cain's plan actually seems to be a payroll tax." Meanwhile, low-income Americans would also pay more because of the elimination of the Earned Income Tax Credit and the Child Tax Credit.

"Businesses will tax all wages, because wages don't seem to be deductible," Roberton Williams, a senior fellow in the nonpartisan Urban Institute's tax policy center, told the International Business Times. "People, when they receive those wages, will pay another 9 percent tax on it, and then when they spend it, another 9 percent. That's a pretty big tax rate compared to what's currently seen for most of the population, and the obvious winners are the big guys who get a lot of their income from capital gains, which would not be taxed at all."

Whether the "9-9-9" plan would stimulate economic growth is a separate question, and many experts argue that it would. But when it comes to whether the plan is "regressive on the poor," as Cain denied, the answer is clearly yes.

Original Post

October 18, 2011

by Sheila Ring

The 9-9-9 tax plan by Herman Cain would mean the poorest 60% of taxpayers would pay an extra $2,000 while the richest one percent would get a $210,000 break.

This is according to an analysis conducted by left-leaning think tank Citizens for Tax Justice, reports The Los Angeles Times.

They found Cain’s plan would replace much of the existing tax code with a 9% individual income tax, a 9% business tax and a 9% national sales tax.

According to the analysis, all three of the tax types included in Cain’s plan would disproportionately impact lower-income Americans, reports The LA Times.

The 9% individual income tax would give the richest Americans -- who currently pay about 35% -- a tax break of almost $210,000.

On the other hand, the individual income tax of the poorest 20% of taxpayers would see an increase of $418, the analysis found.

Other research was carried out by Edward D. Kleinbard, a law professor at the University of Southern California, The LA Times reports.

He estimated that a family with wage income of $120,000 in 2010 would have paid about $541 less under Cain’s plan, while a family that earned $50,000 would have paid about $4,800 more.

“That’s an extraordinarily large tax increase as a percentage of income,” Kleinbard wrote in his report.

Cain’s argument is that the tax on income would be counteracted by the tax break that wage-earners would receive from the abolition of the payroll tax, reports The LA Times.

But Citizens for Tax Justice suggest the 9% business tax would effectively become a new form of payroll tax. The business tax would only apply to a company’s revenue after investments, purchases and dividends are paid to shareholders.

“As a result, it appears there would be nothing left of a business’s revenue to tax other than the revenue going towards wages,” Citizens for Tax Justice wrote in a summary of its findings.

“In other words, the 9% ‘business flat tax’ under Cain’s plan actually seems to be a payroll tax,” the group concluded, The LA Times reports.

According to the analysis, the business tax portion of Cain’s plan would mean a $7,663 break for the richest one percent. It would cost the poorest 60% of citizens about $1,376.

Similarly, the 9% national sales tax would again cost poorer Americans more, because the poor tend to spend all their money while the rich save much of theirs, reports The LA Times.

Original Post

October 18, 2011

by Danny Yadron

The spotlight will be on Herman Cain during the eighth Republican presidential debate Tuesday night, the first since the former Godfather’s Pizza CEO’s surprise first-place finish in the latest Wall Street Journal/NBC News poll.

How Mr. Cain handles the increased scrutiny might determine whether his campaign continues to gain momentum or whether he becomes the latest in a string of candidates who had a brief turn at the top of the polls.

Pew Research Center for the People and the Press survey released Monday found that 43% of Republicans and more than half of tea-party supporters say the debates have caused them to switch support among the GOP candidates. The next debate isn’t until Nov. 9–giving voters a long time to think about each candidate’s performance Tuesday.

The debate, sponsored by CNN and the Western Republican Leadership Conference, is taking place in Las Vegas and will begin at 8 p.m. EDT.

Here are four things to watch for as the night unfolds:

1. Herman Cain’s tax plan.

The phrase “9-9-9″ was mentioned some 25 times during last week’s debate on economic policy, more frequently than “Wall Street,” according to an analysis of the transcript. Expect candidates to again question Mr. Cain’s tax plan, which calls for a 9% corporate-tax rate, 9% personal-income tax and a 9% national-sales tax. An analysis by the left-leaning Citizens for Tax Justice concluded that the plan would benefit the wealthiest Americans while hurting low-income people.

But Mr. Cain has yet to face questions on other policy proposals. During a campaign stop Saturday, he proposed building an electrified fence along the entire U.S.-Mexican border, which would include a sign that reads, “It will kill you.” On Sunday, Mr. Cain said he was joking. He will also likely face more questions on his relative inexperience when it comes to foreign policy.

When the moderator at last week’s debate said Mr. Cain’s tax plan wouldn’t produce as much revenue as he said it would, the candidate responded, “The problem with that analysis is that it is incorrect. ” And recently, Mr. Cain has quipped that, “When they ask me, ‘Who is the president of Ubeki-beki-beki-beki-stan-stan?’ I’m going to say, ‘You know, I don’t know.’ ”

It’s unclear if Mr. Cain can get away with repeatedly using such answers at a nationally televised forum.

2. Is Rick Perry prepared?

Rick Perry has garnered such negative reviews of his past debate performances that the Texas governor has now started to joke about his debating abilities while on the stump.

He’s angered conservatives by suggesting people who don’t support a Texas law that extends in-state tuition rates to some illegal immigrants lack a “heart,” and he’s meanwhile failed to land clean punches on Mitt Romney.

Mr. Perry’s debate problems were illustrated last week when he was asked to contrast his views on health care with those of Mr. Romney. Rather than attacking the former Massachusetts governor for supporting an individual mandate–something conservatives detest–Mr. Perry started to talk about the need to give states block grants for Medicaid, the state-federal health care plan for the poor.

Meanwhile, Mr. Perry has fallen to a distant third place in national public-opinion polls. Does he try to avoid losing the debate and seek to reintroduce himself with voters, or does he go for Mr. Romney’s (or Mr. Cain’s) jugular?

A Perry spokesman didn’t immediately return a request for comment Monday afternoon.

3. Will Mitt Romney’s rivals target him?

Since Mr. Romney’s debate performances have received solid reviews, numerous media outlets have begun to suggest the former Massachusetts governor is the inevitable Republican nominee. He’s not prone to gaffes, he can think on his feet, and as this weekend’s campaign-finance reports demonstrated, he can certainly raise money. Other Republican candidates can seek to chip away at his lead, or they can gang up on Mr. Cain, the latest favorite of the most ideological conservatives, in hopes of replacing him at the top of the polls. (For instance, will any candidate mention Mr. Cain’s 2008 syndicated column in which he endorses Mr. Romney for president?)

4. How will the candidates respond to questions on the housing crisis and other economic issues? The debate, after all, is in Nevada, where unemployment and foreclosure rates are the highest in the nation.

As the Los Angeles Times reported on Monday, candidates have largely ignored the housing crisis on the campaign trail even though it is seen as one of the main hindrances to an economic recovery.

It will be interesting to see if that continues at a debate set in Nevada, where 60% of mortgages are underwater, the highest rate for any state, according to a recent study.

Washington Wire plans to live blog the debate.

Original Post

October 18, 2011

Cain’s plan would replace much of the existing tax code with a 9% individual income tax, a 9% business tax and a 9% national sales tax.

According to the analysis, all three of the tax types included in Cain’s plan would disproportionately impact lower-income Americans.

The 9% individual income tax would give the richest Americans -- who currently pay a tax rate of about 35% -- a break of almost $210,000 a year. But for the poorest 20% of taxpayers, Cain's proposed income tax change would mean an increase of $418 a year, the analysis found.

Another analysis by Edward D. Kleinbard, a USC law professor, estimated that a family with wage income of $120,000 in 2010 would have paid about $541 less under Cain’s plan, while a family that earned $50,000 would have paid about $4,800 more.

“That’s an extraordinarily large tax increase as a percentage of income,” Kleinbard wrote.

Cain has argued that the tax on income would be offset by the tax break that wage-earners would receive from abolishing the payroll tax.

But Citizens for Tax Justice suggests that the 9% business tax would effectively become a new form of payroll tax. The business tax would apply only to a company’s revenue after investments, purchases and dividends paid to shareholders.

“As a result, it appears there would be nothing left of a business’s revenue to tax other than the revenue going towards wages,” the group wrote in a summary of its findings. “In other words, the 9% ‘business flat tax’ under Cain’s plan actually seems to be a payroll tax.”

According to the analysis, the business tax portion of Cain’s plan would mean a $7,663 break for the richest 1% of Americans. It would cost the poorest 60% about $1,376.

The 9% national sales tax would again cost poorer Americans more, the analysis said, because the poor tend to spend all their money while the rich save much of theirs.

Original Post

October 18, 2011

by Max Brantley

Herman Cain is the hot Republican candidate at the moment, so Ernest Dumas' examination of some of his ideas is timely. His easy 9-9-9 tax plan? The details aren't so hot. More like appalling. 

He would replace all federal taxes—individual and corporate income taxes, and social security, Medicare, disability, unemployment, gasoline, cigarette and all other excise taxes—with three simple tax rates: 9 percent on personal income, 9 percent on business income and a 9 percent sales tax on all commercial activity. That sounds fair enough. There would be no exemptions and deductions. Well, only a few. Investment income—capital gains, interest and dividends, the income of the leisure class—wouldn’t be taxed at all. Your social security? Yes, tax it. As for the 9 percent business tax, it would apply only to the share of a company’s revenue that was spent on wages.

It would be a mammoth tax cut for the rich and corporations and a giant tax increase for the middle class, the elderly and disabled. For the 47 percent of tax filers whose incomes were so low after the standard deductions and credits last year that they owed no taxes, they would pay 9 percent of their gross income plus a 9 percent sales tax on everything they bought, from a haircut to a hospital visit. Citizens for Tax Justice put its calculators to work. The richest 1 percent of Americans would pay an average of $210,000 less a year while the poorest 60 percent would pay an average of $2,000 more. The government this year would take in $340 billion less. Add that to the national debt.

But the 9-9-9 reform would be only to get working people used to paying a bigger share of the cost of government. After several years of personal adjustment, those taxes would be halted and the country would go to a 30 percent national sales tax on every single commercial transaction.

How's a $45,000 tax on a $150,000 house strike you? More on the jump. Entertaining guy. Terrible ideas.

SPEAKING OF THE HERMANATOR: He's apparently directing some campaign money to his company promoting his book. Wasn't there another political candidate who purchased copies of his own book with campaign or PAC money to give away at fund-raising and other functions?

By Ernest Dumas

Herman Cain may be only the Republican flavor of the week, but he is the frontrunner and he is actually going to campaign in Arkansas next week, seven months before the usually insignificant Arkansas primary. We are flyover country for all the others.

The theory goes that a firebrand populist government hater like Cain is just the kind of Republican who could not only fetch Republican votes but also overcome blue-collar racial bias in Arkansas. After all, he’s leading in places like South Carolina, where bigotry is still ascendant, and among corn-fed Iowans.

It is a nice theory. It might work if Cain could keep up the populist charade through a long campaign when people would start to look behind catchphrases like “fair tax,” 9-9-9 and “save social security” and see what Cain actually wants to do.

When Cain gets to Fayetteville for the Republican Lincoln Day address, he should take Route 94 a few miles over to Monte Ne, or as close as he can get to Coin Harvey’s underwater shrine, to find out what populism really is. Harvey defined it for 35 years though he was in his dotage in 1932 when he launched his only run for president as the head of the Liberty Party. Cain, in fact, would find Coin to have been an interesting fellow. As a young lawyer in his native West Virginia he successfully defended a white man who had violated the law by marrying an African American. Prove that the man doesn’t have any African-American blood, Coin told the jury. Cain is on a tour this month trying to sell his book, My Journey to the White House. In the midst of a long depression more than a century ago, Coin sold 12 million of his tract, Coin’s Financial School. Coin Harvey wanted to get even with the oligarchs of Wall Street and raise living standards of the common folks by coining unlimited silver and outlawing usury, which would lift people out of debt and put them to work.

Were Herman Cain not an African-American and something of an authentic self-made man, no one would hesitate today to call him an oligarch, certainly not a populist. His political career and his campaign for president are managed and heavily bankrolled by the billionaire Koch brothers and the rich boys club, Americans for Prosperity. They want to eliminate taxes on the rich and corporations, remove environmental restraints on the oil and gas industry, turn social security over to Goldman Sachs and Merrill Lynch and wipe out unions. Cain is their apostle but he is not their only Manchurian candidate. Even Mitt Romney, who a few years ago loved to tax corporations, is suitable. They know Cain will never be president.

One reason that Cain may be momentarily atop the polls is that, unlike Romney and all the rest except the iconoclast Ron Paul, he hasn’t changed his stripes to fit into the milieu. Well, not until this week, when Cain said he had been spoofing when he told cheering crowds that he would wall off Mexico with a high-voltage fence and electrocute Mexicans who tried to get through it. But unlike the others he even stands by his stance on social security. He would take a cue from Chile and require people to send part of their paychecks every week to stockbrokers to invest for them in lieu of social security.

Cain’s tax reform, which he calls 9-9-9, has helped raise him in the polls. Everyone loves simplicity. The phrases are appealing but the mechanics appalling. You have to assume that people would get it if it comes down to him and Barack Obama.

He would replace all federal taxes—individual and corporate income taxes, and social security, Medicare, disability, unemployment, gasoline, cigarette and all other excise taxes—with three simple tax rates: 9 percent on personal income, 9 percent on business income and a 9 percent sales tax on all commercial activity. That sounds fair enough. There would be no exemptions and deductions. Well, only a few. Investment income—capital gains, interest and dividends, the income of the leisure class—wouldn’t be taxed at all. Your social security? Yes, tax it. As for the 9 percent business tax, it would apply only to the share of a company’s revenue that was spent on wages.

It would be a mammoth tax cut for the rich and corporations and a giant tax increase for the middle class, the elderly and disabled. For the 47 percent of tax filers whose incomes were so low after the standard deductions and credits last year that they owed no taxes, they would pay 9 percent of their gross income plus a 9 percent sales tax on everything they bought, from a haircut to a hospital visit. Citizens for Tax Justice put its calculators to work. The richest 1 percent of Americans would pay an average of $210,000 less a year while the poorest 60 percent would pay an average of $2,000 more. The government this year would take in $340 billion less. Add that to the national debt.

But the 9-9-9 reform would be only to get working people used to paying a bigger share of the cost of government. After several years of personal adjustment, those taxes would be halted and the country would go to a 30 percent national sales tax on every single commercial transaction.

No, the Fair Tax adherents protest, it would be a 23 percent tax, not 30 percent. But that is mumbo jumbo. Here is how they reach 23 percent: You buy a house for $150,000. The national sales tax on the transaction would be $45,000, making the final price $195,000 plus local taxes and closing costs. See, the $45,000 would be only 23 percent of the final cost including the tax.

Using Cain’s methodology, Arkansas’s statewide sales tax is not 6 percent but a little over 4 percent. Not so high, is it?

Tea party crowds cheer when Cain and the Fair Tax’s other adherents say the IRS would be abolished. States would collect the taxes. But think what kind of bureaucracy the state would have to erect to enforce a law that requires everyone who sells something—from your lawn man to, as Huckabee liked to say, a prostitute, pimp or drug dealer— to collect and remit a mammoth tax on penalty of prosecution.

You want another tea party rebellion? Try that.

Original Post

October 17, 2011

by Vicki Needham, Bernie Becker, Erik Wasson and Peter Schroeder

Differing perspectives: The National Priorities Project and Citizens for Tax Justice, a pair of left-leaning groups, have unveiled a website detailing how much the Bush tax cuts have kept out of the Treasury since 2001. The verdict, as of press time: around $1.035 trillion.

On the other side of the spectrum, the conservative-tilting Tax Foundation held a briefing Monday to try to rebut the argument that companies often pay far less than the statutory U.S. corporate tax rate of 35 percent.

Including taxes paid to foreign governments, the group said, corporations pay roughly 33 percent — not too much lower than that statutory rate.

Original Post

October 17, 2011

by John D. McKinnon

A new analysis from a left-leaning think tank concludes that Herman Cain’s “9-9-9” tax plan would generate large tax breaks for the wealthiest Americans while adding to the tax bills of low-income people.

However, the analysis doesn’t appear to account for some provisions that people close to the Cain camp have said would be part of the plan. Those provisions could help soften the plan’s harshest effects for low-income people.

The analysis, from Citizens for Tax Justice, can be viewed here: http://www.ctj.org/pdf/cainplan.pdf

If the 9-9-9 plan were in effect today, the richest 1% of taxpayers “would each pay $210,000 less in annual taxes on average, while the poorest 60% of taxpayers would each pay about $2,000 more in annual taxes on average,” according to the analysis by Citizens for Tax Justice.

“Moreover, under the 9-9-9 plan, the United States government would collect about $340 billion less in revenue in 2011 alone,” it says.

Mr. Cain has surged in the race for the Republican presidential nomination, due in part to his tax plan. In its basic outlines, it would scrap the current tax code and replace it with a 9% individual flat tax, a 9% business flat tax and a 9% national sales tax.

The plan has been widely criticized by liberals who say it would shove more of the tax burden onto lower- and middle-income earners. Some conservative anti-tax groups and retailers also have raised concerns about the impact of the retail sales tax on the economy and their industry.

Mr. Cain’s campaign didn’t immediately respond to requests for comment.

Some tax experts said the CTJ analysis doesn’t appear to account for some as yet ill-defined provisions of the plan that could protect people living under the poverty line.

For instance, a firm that analyzed the 9-9-9 plan for the Cain camp assumed that it would include a refundable credit to help shield the poorest Americans from all three of the plan’s taxes, according to company president Gary Robbins. Another provision that’s mentioned in Cain campaign literature would provide deductions for companies and people in empowerment zones.

Some experts who generally agree with Citizens for Tax Justice say those provisions would only make the revenue problem even worse.

“When you add a big standard deduction or a [credit], you hemorrhage revenues,” said Ed Kleinbard, a law professor at the University of Southern California and a former chief of staff of the congressional Joint Committee on Taxation. “They have a huge problem here. The rock is their skewed distribution, the hard place [is] government revenues.”

Original Post

October 14, 2011

by Suzy Khimm

How much tax revenue has the United States lost due to the Bush tax cuts — and how much have top earners benefited? Working with Citizens for Tax Justice, a left-leaning advocacy group for progressive taxation, the National Priorities Project has created an online, running calculator that captures this mounting number each second. The group casts the figure as a “cost” in terms of lost government revenue, though it’s also the amount of money these individual taxpayers have saved.

According to Eric Toder, co-director of the nonpartisan Tax Policy Center, the figures “seem to be in the right ballpark,” in line with TPC’s own estimate of how much the top 1 percent and 5 percent of U.S. households benefitted from the Bush tax cuts. Here’s a screenshot from Friday afternoon, but go to the Web site directly to get a better (and more current) picture.

Original Post

October 14, 2011

by Jillian Berman

Tax cuts for America’s top earners are costing everyone, every hour of every day, a new report from the National Priorities Project finds.

Tax cuts for the wealthiest five percent of Americans cost the U.S. Treasury $11.6 million every hour, according to the National Priorities Project. America’s top earners will get an average tax cut of $66,384 in 2011, while the bottom 20 percent will get an average cut of $107.

The report comes as party leaders wrangle over the best way to curb the nation’s budget deficit, protesters around the world demonstrate against income inequality and corporate greed and Republican presidential candidates offer their economic plans to voters. Former pizza company CEO and Republican presidential candidate, Herman Cain, has been getting lots of attention in recent weeks for “999 Plan” which would cap the corporate, income and sales tax rates at 9 percent.

President Barack Obama unveiled his deficit reduction plan last month, which aims to curb the national debt through a combination of tax cuts and increased spending. The plan includes a proposal to increase taxes on millionaires -- the so-called Buffett rule, name for famed billionaire investor Warren Buffett. In an August op-ed in The New York Times, Buffett argued that lawmakers should put an end to tax breaks for the “super-rich.”

After Obama announced the proposal Republican leaders criticized the Buffett rule calling it “class warfare.”

Still, there are some Republicans who support increasing taxes on the wealthy. Former Federal Reserve Chairman Alan Greenspan -- a registered Republican -- told CNBC earlier this month that he supports allowing the George W. Bush-Era tax cuts for the wealthy to expire.

That could because the tax cuts are weighing on the national debt. The non-partisan Center for Budget and Priorities found that the the cost of tax cuts for upper-income earners is as big as the Social Security shortfallover the next 75 years. If the U.S. reverted to Clinton-era marginal tax rates, the U.S. Treasury would net an additional $72 billion annually, according to Citizens for Tax Justice.

In addition, increasing taxes on the wealthy could also help to narrow the widening wealth gap. The net worth of the bottom 60 percent of U.S. households -- about 100 million households -- is lower than that of Forbes 400 richest Americans. Tax cuts for the wealthy provided Americans making more than $1 million with a $128,832 benefit, while Americans earning from $40,000 to $50,000 got an $860 benefit on average.

Original Post

October 14, 2011

Washington, D.C.- This in today from Jo Comerford, Executive Director of the National Prioriteis Project, on how much the Bush tax cuts are harming the nation's economy:

National Priorities Project, with support from Citizens for Tax Justice, has launched www.costoftaxcuts.com.

A rolling counter depicts the amount of money lost to the U.S. Treasury as a result of tax cuts for the top 5% of U.S. wage earners -- $3.2 per millisecond. The site also features rolling counters for the top 1% and next 4% of households.

In total, the top 5% of wage earners live in 1.4 million households. They earn $477,453 per year, on average, and will receive an average tax cut of $66,384 in 2011. Conversely, the bottom 20% of wage earners will receive an average tax cut of $107 this year. The wealthiest 5% of Americans earn 33% of all U.S. income.

Between 2001 and the current projected end of the tax cut extension, tax cuts for the wealthiest 5% will cost the U.S. Treasury $1.184 trillion. If extended through 2021 as some lawmakers propose, the total cost will exceed $3.2 trillion.

www.costoftaxcuts.com also features a detailed look at the average income and tax cuts for the top 1% and the poorest 20%. Among the findings: the wealthiest 1% receive an average annual tax cut greater than the average income of the remaining 99% of U.S. households.

"If tax cuts for the wealthiest Americans are extended through 2021, the projected amount of additional foregone revenue to the U.S. Treasury over the next decade would exceed $2 trillion," notes NPP Executive Director Jo Comerford. "There is another number out there that is strikingly similar - the $2.1 trillion in total deficit reduction required under the Budget Control Act."

Original Post

October 14, 2011

By Alison Fitzgerald

Republican presidential candidate Herman Cain’s plan to create a national sales tax would hurt retailers, threaten economic growth and shift the tax burden onto the middle class and poor, tax experts and business groups said.

Cain’s so-called 9-9-9 plan, which would replace the current tax code with a system of three separate taxes of 9 percent each, has boosted his popularity among voters. The former chief executive officer of Godfather’s Pizza has surged in polls in recent weeks, and a Wall Street Journal/NBC News poll released this week put him in the lead.

Tax experts and business groups interviewed yesterday don’t like his tax plan as much as voters. They said it would shift the burden to middle-income and poor families and would hurt sales across the economy, at least in the short term.

“There will be a noticeable decline in consumer spending for some years,” said Rachelle Bernstein, vice president of the National Retail Federation, based in Washington, in an interview. “We know that that has an impact on consumer spending and GDP.”

Consumer spending accounts for about 70 percent of the U.S. gross domestic product.

Cain has proposed a 9 percent sales tax on all goods and services, another 9 percent on personal income and the third on corporate gross income. During the debate in New Hampshire sponsored by Bloomberg News and the Washington Post on Oct. 11, Cain said the proposal is his top policy goal.

Expanding Tax Base

“It expands the base,” he said during the debate. “When you expand the base, we can arrive at the lowest possible rate, which is 9-9-9.”

That expansion means that long-standing tax breaks, such as the mortgage interest deduction and the exclusion from income of employer-sponsored health insurance, probably would vanish.

Although Cain hasn’t released extensive details of his plan, it also would probably add a sales tax on many products and services, such as new homes, financial transactions and even doctor visits. Several business and trade groups contacted by Bloomberg News declined to comment on the plan because they didn’t want to take a position on the presidential race.

Impact on States

Michael Bird, federal affairs counsel for the National Conference of State Legislatures in Washington, said the sales tax, on top of what state and local governments already levy, could make it difficult for them to adjust their tax rates.

“Would the 9 cents create a ceiling, or would states say, now we have to lower our costs because the cost of goods and services are higher than a lot of people are comfortable with?” Bird asked. “It’s hard to say.”

Robert Dietz, an economist at the National Association of Home Builders, said new homes sales would see a double tax increase. The house itself would be subject to the 9 percent retail sales tax, and then buyers would have to pay tax on the interest on their mortgage, as opposed to now when they can deduct that interest from their income.

“Layering a new tax on top of the sale of a newly constructed home would certainly be bad for the housing market,” he said. Each new home creates the equivalent of three full-time jobs for a year, he said.

Trucking Hit Hard

Small trucking firms and drivers may be hit hard by a sales tax on fuel piled upon already-high excise taxes, such as the 24.4 cent-per-gallon levy on diesel fuel and a surcharge already applied to new heavy-duty vehicles, said Todd Spencer, executive vice president of the Owner-Operator Independent Drivers Association, which represents truckers under contract with larger U.S. companies such as Landstar Systems Inc.

Further taxing fuel “may be a hard sell for Mr. Cain at a time when diesel is headed back towards a $4 per gallon average,” Spencer said. “Adding a 9 percent sales tax and a 9 percent VAT (value-added tax) onto the 12 percent federal excise tax truckers already pay on new trucks and trailers would certainly cause them to think twice about buying new equipment.”

“There’s a lot in this plan that’s just kookie,” said Steve Wamhoff, legislative director at Citizens for Tax Justice, pointing out that it doesn’t tax dividends or inheritance at all, but does tax wages. “It makes the tax system much, much, much more regressive than it is today.”

The proposal would hit middle- and low-income people with a larger tax burden because they spend more of their money on food, clothing and household goods and have less left over to save and invest, which wouldn’t be taxed.

Increased Burden

Ed Kleinbard, a professor of tax law at the University of Southern California in Los Angeles, said Cain’s plan would increase the federal tax burden of a family of four making $50,000 a year by $5,100 to $13,500.

“It’s less money in most people’s pockets after tax and more money in the pockets of the wealthy,” said Kleinbard, a former staff director at Congress’s Joint Committee on Taxation.

The Cain campaign’s own analysis of the plan doesn’t address how it would change the distribution of the federal tax burden, other than including a provision for some sort of “poverty grant,” which Cain has described as a lower rate in targeted “empowerment zones.”

Long-Term Boost

Will McBride, economist for the Tax Foundation in Washington, said Cain’s tax plan would spur economic growth in the long run. While the 9 percent federal sales tax would depress consumption now, if consumers know they will have more money in their pockets in the future because of lower taxes, they will spend more.

“This is not a Keynesian plan; this is a long-term growth plan,” McBride said.

Even some conservatives that advocate for a simplified tax system disagree with Cain’s approach.

Ryan Ellis, tax policy director at Americans for Tax Reform, which advocates for lower tax rates and smaller government, said the plan introduced entirely new taxes that are expected to rise with time.

The business tax functions like a value-added tax, he said, where the inputs to a product are taxed along the way. “When you raise the VAT, it’s embedded in the price of the good so it’s a politically easy tax to raise,” he said. “The people who know tax policy in the conservative movement are not responding well to this.”

Not All Bad

Still, Ellis said the plan is better than the current system though not as good as some alternatives.

“It would radically simplify the tax system,” he said. “It would move the tax system toward a consumption base and it would do so at very much lower marginal tax rates.”

Most groups said they aren’t lobbying for or against 9-9-9 yet because it’s unclear whether it will become a viable proposal.

“In general, we are supportive of efforts to simplify the tax code,” said Jason Brewer, spokesman for the Retail Industry Leaders Association, based in Arlington, Virginia. “We are not in favor of a national sales tax. If in the primary season this becomes a hot topic, we will certainly weigh in more publicly,”

Original Post

October 13, 2011

by Nick Taylor

A Senate report has slammed the ACRO-backed overseas profit tax break for doing more to help execs’ pay packets than US employment...

Click for the rest of the story.

Original Post

October 12, 2011

by Ashely Portero

In response to the 99 percent movement, which has inspired the Occupy Wall Street protesters and their fellow picketers across the country, a group of right-wing bloggers have come together to issue their criticism of the protesters via a new Tumblr blog called "We are the 53 percent."

The blog, kicked off by conservative filmmaker Mike Wilson and conservative blogger Erick Erickson of RedState.org, aims to be representative of the 53 percent of Americans who pay more in federal income taxes than they receive back in deductions or credits. The figure is based on a report from the non-partisan Tax Policy Center that said 47 percent of Americans did not pay federal income taxes in 2009, an unusually high percentage due to the fall in incomes resulting from the Great Recession.

The Americans who do not pay income taxes are those who are either so poor that they are exempt, or those who are the beneficiaries of enough tax breaks and deductions to cancel out their income tax payments.

"53 Percent" Ignores Those Who Pay State, County, City and Payroll Taxes

The blog, however, does not emphasize the fact that the 53 percent figure only applies to federal income taxes. The introduction to the blog, clearly written in a way to mock the hippies and degenerates its creators believe are representative of the 99 percent movement, states: "So if you're like, totally gonna spread the word about being one of the 53 percent of people who actually, like, pay taxes in America and don't just, like, hang out protesting stuff all day ... like, here's the hashtaggy thingy," followed by the #iamthe53 used on Twitter.

The creators of the blog either do not understand taxation, or they simply do not care. Even the 47 percent of Americans who did not pay federal income taxes in 2009 still paid state, local and payroll taxes -- so, saying that only 53 percent of people paid taxes that year is a lie. Even the poorest Americans, those who make an average of $12,500 a year, still pay about 16 percent of their small earnings in taxes, according to Citizens for Tax Justice.

Moreover, data from the Institution on Taxation and Economic Policy indicates that in every state except for Vermont, the poor pay a higher percentage of their income in taxes than the wealthy. In Alabama, families making less than $13,000 a year pay almost 11 percent of their income in state and local taxes, compared with less than 4 percent for those who make $229,000 or more.

At the end of the day, yes -- the wealthiest Americans still actually pay more. But, $1,430 -- the average amount that the poorest Alabama citizens pay in annual state and local taxes -- means a lot more to someone making less than $13,000 than it does to the 4 percent of annual income that the highest earning citizens lose to state and local taxes.

The "We are the 53 percent" blog seems to be full of comments made by people who are part of the very 47 percent of Americans that the blog basically classifies as parasites. Many of the contributors appear to be students, the unemployed or the under-employed, who still end their stories by declaring "I am the 53 percent" even though, by their logic, they are not, if they were also exempted from federal income taxes due to their income bracket.

"53 Percenters" Receive No Federal Subsidies ... Assuming They Don't Drive

The contributors often boast about how they have worked themselves to the bone, often without vacations or benefits, but still have never turned to government social programs, implying that the kind of people who support the 99 percent movement simply want a free ride.

It would be interesting to see how many of those people have received unemployment insurance, Pell Grants, home-mortgage-interest deductions or any of the other government programs that many people have relied on as stepping stones to get to the state of financial independence the "53 percent" celebrate.

What they don't seem to understand is that the 99 percent movement is demanding those same things -- namely, the ability to receive an affordable education, affordable health care and a livable wage -- in short, all of the things that allow Americans to "pull themselves up by their bootstraps" (whether all of the protesters' demands are actually possible right now is another story).

These days, it is difficult for many low-income and middle-class Americans to obtain those basic services, especially with a national unemployment rate that doesn't seem to be budging.

The 99 percent movement is asking for reforms not only on Wall Street, but in the federal government as well, so that, once again, the U.S. will be a nation that is productive, employed and not overwhelmed with growing social tensions due to rapidly widening income-inequality rates. And then, maybe all of us -- even the righteous 53 percenters -- will be able to take a vacation once a while.

Original Post

October 12, 2011

by Andy Zajac

About 25 percent of millionaires in the U.S. pay federal taxes at lower effective rates than a significant portion of middle-income taxpayers, according to a legislative analysis.

Preferential treatment of investment income and the reduced impact of payroll taxes on high earners lets about 94,500 millionaires pay taxes at a lower rate than 10.4 million “moderate-income taxpayers,” representing about 10 percent of those making less than $100,000 a year, according to the report by the non-partisan Congressional Research Service dated Oct. 7.

The findings put the U.S. tax system in conflict with the so-called Buffett Rule, which says households making more than $1 million annually shouldn’t pay a smaller share of their income in taxes than middle class families, says the report, which analyzed 2006 Internal Revenue Service data.

The Buffett principle was proposed by President Barack Obama in September after billionaire Warren Buffett, the 81- year-old chairman and chief executive officer of Berkshire Hathaway Inc., said it was wrong that he paid taxes at a lower rate than 20 other people who worked in his office.

Obama has said the Buffett Rule should be a guiding principle of efforts to reform the U.S. tax code.

The Buffett maxim and broader proposals by Obama and Democrats to raise taxes on the rich have been criticized as “class warfare” by some congressional Republicans.

Voluntary Tax Payments

On Oct. 5, Louisiana Republican Representative Steve Scalise introduced H.R. 3099, the Buffett Rule Act of 2011, which would authorize the IRS to print a box on tax returns that filers may check if they want to voluntarily pay more tax.

Earlier this month, Senate Democrats proposed paying for Obama’s $447 billion jobs package with a 5.6 percent surtax on individual incomes exceeding $1 million. The jobs plan was sidetracked by the Senate yesterday after falling short of the 60 votes it needed to advance.

Yesterday, Buffett declined the request of a Republican congressman to swap tax returns and reiterated his pledge to publish the form if other billionaires would do the same.

The Congressional Research Service report found that, on average, millionaires paid federal tax at a 30 percent rate, while moderate-income taxpayers, defined as those earning less than $100,000, were taxed at 19 percent.

The overall average, though, “obscures a great deal of variation,” including the finding that 25 percent of millionaires pay lower rates than 10 percent of moderate earners, the report found.

The findings “would be considered a violation of the Buffett Rule, but not to the extent alluded to by Mr. Buffett,” the report says.

Payroll Taxes

The report says moderate-income taxpayers bear the brunt of the Social Security payroll tax because it applies only to the first $106,800 in wages.

The tax is set at 12.4 percent, split equally between workers and employers. The portion of the tax that employees pay was temporarily cut to 4.2 percent in last December’s tax bill. Obama’s jobs plan proposes another temporary measure that would reduce the employee share to 3.1 percent and cut an employer’s share to 3.1 percent on the first $5 million of payroll. An additional 2.9 percent tax for Medicare is levied on all wages.

In addition, the report says, a significant portion of millionaires derive income from dividends, capital gains or carried interest, all taxed at 15 percent. Ordinary income is taxed at rates ranging from 10 percent for low earners to a top marginal rate of 35 percent.

The report found that a relatively small proportion of business owners are millionaires and played down the impact of higher tax rates on job creation.

“The small share of taxpayers with small-business income in the millionaire category suggests that tax reform policies designed to ensure adherence to the Buffett Rule will affect few small businesses,” the report says.

The findings of the CRS study are similar to an analysis last month by the non-profit Citizens for Tax Justice, a labor- funded research group based in Washington.

Original Post

October 11, 2011

by By Ken McCall and Randy Tucker

Beyond the rhetoric, stats show the highest earners get income from sources taxed at a lower rate.

Progressive tax rates were designed to ensure that the wealthiest Americans pay more in federal taxes than lower- and middle-income workers.

With a maximum rate of 35 percent on wages, the more you earn the more you pay.

But there’s a catch: Many wealthy taxpayers get most of their income from investments, which are taxed at the 15 percent capital gains rate while the highest rates apply to only a fraction of their wealth.

Tax deals for the wealthy were among the main gripes of about 12 Occupy Dayton protesters gathered Tuesday at Courthouse Square downtown. Since Saturday, more than 800 area residents have joined the protest, organizers said, mirroring the Occupy Wall Street effort in New York.

“Where are the jobs?’’ asked Parris Hobbs, an Occupy Dayton organizer and personal banker. “I’m not anti-business, but too much wealth is concentrated in the hands of the wealthy in this country, and it’s not trickling down.’’

Matt Mayer, president of the right-leaning Buckeye Institute for Public Policy Solutions in Columbus, said protests against wealthy taxpayers are misguided and uninformed.

Mayer said that on average, wealthy taxpayers carry a disproportionate share of the overall tax burden and pay a greater percentage of their wealth in taxes than lower- and middle-income workers.

The Associated Press recently reported that households making more than $1 million will pay an average of 29.1 percent of their income in federal taxes this year, including income taxes and payroll taxes, according to the Tax Policy Center, a Washington think tank. Households making between $50,000 and $75,000 will pay 15 percent of their income in federal taxes.

“The data doesn’t support them (protesters),’’ Mayer said. “There’s a massive disconnect between what they think is the system and how the system actually works.’’

How the system works is at the heart of the nationalâÂ۬debate about the wisdom of tax increases on anybody, including the super-wealthy. While conservatives argue that increasing taxes on the wealthy penalizes job creators, others point to inequities in the current tax code because of how income is earned by those in different tax brackets.

It’s hard to pin down where the inequities might lie in Ohio because the Internal Revenue Service only reports state income tax data for returns up to $200,000, and those at $200,000 and above. It doesn’t break out results for those reporting income of $1 million or more, where most capital gains are concentrated. Still, the state data shows that the wealthier the taxpayer the more likely they are to have less of their income in salary and wages and more of it counted as capital gains.

In Ohio, only 57 percent of the income reported by taxpayers in the $200,000-and-above bracket came from salary and wages in 2009, based on a Dayton Daily News analysis of the latest IRS figures available.

By contrast, about 80 percent of all income reported in tax brackets of less than $200,000 was derived from salary and wages in 2009. Not all of the remainder is taxed as capital gains, but the majority of capital gains taxes is concentrated in the hands of upper-income earners.

While comparable state data is not available, fewer than 0.1 percent of Americans earning $1 million or more controlled more than half of all capital gains reported to the IRS, according to Sarah Webber, who teaches federal income taxation at University of Dayton. Webber thinks a focus on capital gains should be a part of an overhaul.

Stephen Wamhoff, legislative director of the nonprofit, nonpartisan Washington D.C.-based Citizens for Tax Justice, said his organization backs policies that would follow the Buffett Rule — named after billionaire investor Warren Buffet, who said his secretary pays a higher tax rate than him. “The Buffett Rule is not any specific proposal at this point,” Wamhoff said. “But we do agree that one of the things that tax reform should accomplish is to reduce or eliminate these situations where a person with income over a million dollars may end up paying a smaller percentage of their income in federal taxes than a middle-income person.”

Rob Scott, president of Dayton Tea Party, said the Occupy movement is short-sighted. “They’re throwing our job creators under the bus,” Scott said. “Seventy percent of all job creation in this nation has come from the small business sector. If you’re going to tax, you’re just stifling the little bit of job creation that we actually have had ... .”

Original Post

October 10, 2011

by Jackie Kucinich

WASHINGTON – Herman Cain's standing in the polls in the race for the Republican presidential nomination has risen with the growing popularity of his 9-9-9 tax plan, which has become such a signature issue for the former pizza company executive that the crowds who come to see him speak routinely cheer at its mention.

The plan, which calls for a 9% income tax, 9% national sales tax and 9% corporate income tax, would create tax equality and stabilize federal finances, Cain said.

"And it'll save all of us, collectively, $430 billion a year that we spend to fill out the stupid tax code — 9-9-9," Cain said at a speech in Washington last week.

Not so fast, say tax experts from all parts of the political spectrum. While Cain's plan has an appealing simplicity to Americans frustrated with the nation's labyrinthine tax system, it would dump a much heavier tax burden on low-income citizens.

Cain's campaign has not released enough specifics about the plan to determine whether it is progressive or regressive, said Will McBride, an economist with the nonpartisan Tax Foundation, but "any sort of movement to a consumption tax, which this is with the sales tax, is a move away from progressivity."

"Warren Buffett can't reasonably spend $40 million a year on consumption," he said. "It just happens that folks that make more money, they consume less of their income."

For the 46% of Americans who did not pay income tax last year, the 9% tax would mean an automatic increase, said Roberton Williams, a senior fellow at the non-partisan Urban Institute.

Even the elimination of the payroll tax for Social Security benefits would not be enough to prevent a tax increase for lower-income Americans, Williams said. That's because 23% of taxpayers pay no taxes or get a tax credit greater than the payroll tax, he said.

Meanwhile, Williams said, wealthier Americans would get a tax cut. "On the top end, 9% is a lot better deal than what people at the top end are paying," he said, adding that the Urban Institute estimates that those who make more than $1 million pay 18% in personal income taxes.

"Going to 9% is going to save them half; that's a nice savings," Williams said. "That's the income tax side: The rich will pay less; the poor will pay more."

Cain's plan would remove tax credits that help lower-income Americans, said Steve Wamhoff, legislative director for the left-leaning Citizens for Tax Justice. Those lost credits would include the earned income tax credit and child tax credit, Wamhoff said. "That stuff would all be lost with Herman Cain's plan," he said.

Cain defended the plan during a speech Friday in Washington, saying his ascent to "top tier" candidate status has put a "bull's-eye" on his back.

"Well, see, the critics are already trying to try and prove why 9-9-9 is not a good idea," he said. "When you see some of these reports talking about it won't do this and it won't do that and it won't do this and it won't do that, they have changed the assumptions. If you want to know what the assumptions are, why don't you come to me and my people, and we'll explain to you what the assumptions are. But they don't want to do that."

Cain's campaign did not return a request for comment.

It's also uncertain whether a consumption-based tax can coexist "alongside an income tax, no matter how low the rates," said Mike Franc, vice president of government studies for the conservative Heritage Foundation.

Also, Franc said, the rates would increase as the government needed more money. "Will a 9-9-9 plan inevitably over the years become a 15-15-15 plan, and ultimately a 30-30-30 plan? Or worse?" he asked.

Cain said on CNN Sunday that unnamed critics who said the plan would not raise enough money "are absolutely wrong because they did a static analysis. We had this done with the dynamic analysis with an outside independent firm, so they are making an erroneous assumption."

Kevin Hassett, director of economic policy studies at the American Enterprise Institute, said the plan would simplify the tax code and not sacrifice current tax revenue. "We'd have pretty high confidence that it could increase growth a lot," he said.

"This is a far more sophisticated plan than one might have expected, given that he is not a person that has been inside politics his whole life," Hassett said. "The Cain plan is really solid. The only criticism one could make is it's too bold or something like that."

Original Post

October 10, 2011

By Neil Munro

The millionaire tax being pushed by Senate Democrats this week would hit taxpayers in Democrat-dominated states almost twice as hard as those in Republican-dominated states, according to an analysis by The Daily Caller.

States that have elected two Republican senators tend to have much lower levels of economic inequality than states which have elected two Democratic senators. Democrat-dominated states tend to have higher percentages of very rich people, higher percentages of very poor people, and a lower percentage of middle-income people.

For example, the 5.6 percent tax on million-dollar earners will hit 0.7 percent of taxpayers in New York, 1.2 percent of taxpayers in Connecticut and 0.4 percent of taxpayers in Colorado, according to an Oct. 6 report by the left-of-center group Citizens for Tax Justice (CTJ).

On average, 2.9 percent of taxpayers in the 18 states that elect two Democratic senators would be forced to pay the millionaire’s surtax if it becomes law.

In contrast, only 1.7 percent of people in the 15 states that send two Republicans to the Senate would pay the surtax.

In the the 17 states that split their Senate seats, 1.73 percent of taxpayers would be billed the millionaire surtax, which would be applied to individuals or couples with an “adjusted gross income” of $1 million.

In Democrat-dominated Washington D.C., 0.9 percent of taxpayers would pay the tax. In adjacent Maryland and Virginia, 0.3 percent of people would get the surtax forms from the IRS.

Nationally, only 0.2 percent of taxpayers earn at least one million dollars per year, according to the report.

The tax bill is unlikely to become law, partly because of the GOP’s opposition to expanding government and raising taxes, but also because many Democrats are less interested in passing the tax than in using the votes as a campaign-trail talking point.

Democrats, including President Barack Obama, expect to use GOP opposition to help paint it as the heartless friend of Wall Street. Wall Street is based in New York, and many of its leading players live in New York or nearby Connecticut. Both states are dominated by Democratic politicians and both states send two Democrats to the Senate.

The GOP-led state with the highest percentage of millionaire taxpayers is Texas, where oil and high-tech business boosted the percentage of millionaires to 0.5 percent. That’s below the New York’s 0.7 percent, but much higher than the 0.3 percent scored by Democratic-dominated Maryland, Delaware, New Jersey and Washington state.

The next highest GOP states are oil-rich Oklahoma and Wyoming, where 0.3 and 0.4 of taxpayers would reach the $1 million income threshold.

In 10 Republican-led states, only 0.1 percent of taxpayers would pay the millionaire’s tax. In nine Democrat-dominated states, 0.1 percent of people would pay the tax.

The comparison is somewhat muddied by recent elections, which have made the GOP dominant in Virginia’s state house, despite the two Democratic senators who will likely vote for the bill.

Massachusetts’ state government is dominated by Democrats, but the 2010 election of Sen. Scott Brown takes it out of the Democrat-dominated column. If the tax passes, 0.6 percent of the states’ taxpayers would pay the surtax

In 27 states, only 0.1 percent of people would be hit by the taxes. In eight states, 0.2 percent of people would pay the tax, says the CTJ report,

Original Post

October 9, 2011

by Kathleen Pender

Almost half of California workers will face "significant economic hardship in retirement," says a new report from the UC Berkeley Center for Labor Research and Education.

The report defines significant hardship as having a retirement income that is less than 200 percent of the federal poverty threshold, a "well accepted measure in high-cost areas like California." In California, 200 percent of the poverty threshold for a single adult was $1,860 a month or $22,320 a year in 2009 dollars.

In 2007-09, about 37 percent of California retirees 60 or older had incomes below this threshold, according to Sylvia Allegretto, a co-author of the report.

Among workers today, almost 47 percent are likely to fall below that level in retirement, according to the report.

The risk is especially high for young workers: Almost 55 percent of workers 25 to 44 are at risk, compared with about 39.3 percent of those 45 to 54 and only 33 percent of workers 55 to 64.

The outlook is getting worse because incomes have stagnated and younger workers are more likely to have volatile 401(k)-style plans, whereas retirees and older workers are more likely to have more dependable defined-benefit plans, Allegretto says.

"If Social Security is weakened in any way, the probability that someone will fall under 200 percent will certainly grow," she adds.

The authors did not look at what percent of Americans are likely to retire in poverty but their findings "are pretty consistent with national studies," says Nari Rhee, a co-author of the report.

Fewer plans offered

They did find that Californians are less likely than the average American to be offered any type of retirement plan and to participate in one - especially if they work for a small private-sector employer.

From 2007 through 2009, only 52 percent of California workers were offered a defined-benefit plan or 401(k)-type plan, compared with 58.1 percent of workers nationwide.

The percentage of employees participating in a plan was 44.3 percent in California versus 49 percent nationwide.

At firms with fewer than 25 workers, only 19.7 percent were offered a plan in California versus 25.1 percent nationwide. But at firms with more than 1,000 workers 75.4 percent were offered a plan in California versus 76.6 percent nationwide.

The authors say their findings echo other studies showing Californians have less access to group health plans and other employee benefits. "California generally has greater income inequality and labor market inequality than the U.S. as a whole," Rhee says.

Public-sector workers were far more likely to be offered and participate in retirement plans than private-sector workers in California and nationwide. In California, 75.5 percent of government workers participated in a retirement plan versus 38.1 percent in the private sector.

Public-sector workers also were "much more likely to have a (defined-benefit) plan than are private-sector workers. This difference is mostly due to significantly higher union density," the report says. It notes that public-sector workers take a greater portion of compensation in the form of pension benefits.

The report, part of a larger study titled Meeting California's Retirement Security Challenge, was supported by several unions. For the full report, go to sfg.ly/p4qjWp.

Millionaire tax

At the other end of the spectrum, Citizens for Tax Justice last week estimated that 0.2 percent of households in California would be hit by the 5.6 percent surcharge on income over $1 million proposed by Senate Majority Leader Harry Reid and endorsed by President Obama.

Despite a concentration of millionaires in places like Beverly Hills and Silicon Valley, that's the same percentage that would be hit by the surtax nationwide.

The group said the proposed surcharge would affect the greatest percentage of people in Connecticut (1.2 percent), followed by the District of Columbia (0.9 percent), New York (0.7 percent), Massachusetts (0.6 percent) and Texas (0.5 percent).

The so-called millionaire tax would start in 2013 and help pay for Obama's American Jobs Act. It would replace his earlier plan to limit itemized deductions for couples making more than $250,000 and singles making more than $200,000.

The Reid plan would slap a flat 5.6 percent tax on adjusted gross income that exceeds $1 million (married or single) starting in 2013. For example, someone with $1.1 million would pay 5.6 percent of $100,000 or an extra $5,600.

The Tax Policy Center also estimates that the plan would hit 0.2 percent of households nationwide and cost them an extra $110,467 a year on average.

The proposed federal tax would affect more households in California than the state's 1 percent surcharge on taxable income over $1 million.

That's because the proposed federal tax would apply to adjusted gross income, which is income before most deductions and personal exemptions have been subtracted.

The state surtax applies to taxable income, which is smaller - sometimes much smaller - than adjusted gross income because it is after all deductions, personal exemptions and tax credits have been subtracted.

In 2009, about 31,000 California residents paid the state surtax, which funds mental health. That represented about 0.21 percent of all tax returns filed, but a smaller percentage of California households because many Californians don't earn enough to file a tax return.

Pros and cons

Roberton Williams, a fellow with the Tax Policy Center, says Reid's proposal has good and bad points. "One could argue that (millionaires) are better able to pay" higher taxes because their incomes have grown faster than everyone else's.

But their taxes would also go up substantially if all of the scheduled and proposed tax hikes take effect. The Bush-era tax cuts expire next year, and starting in 2013, a 3.8 percent Medicare surcharge will apply, generally to adjusted gross income over $250,000 (couples) or $200,000 (singles).

Today, people with more than $1 million in income pay 29.1 percent of it in federal taxes including income, corporate, Social Security, Medicare and estate tax, according to Tax Policy Center estimates.

By 2013, they would pay 39.7 percent. This assumes that the Bush tax cuts expire, the Medicare surcharge takes effect and the 5.6 percent surcharge passes.

"At some point (higher tax rates) affect people's behavior," Williams says. They could, as some argue, become less willing to create jobs. Or they might just put their income "in places it won't be subject to this high of a tax."

Given Republican opposition to any new taxes, Reid's plan is not likely to pass. But given the growing opposition to the top 1 percent of Americans, calls to tax the rich are not likely to subside.

Original Post

October 7, 2011

Op-ed by Mickey Hepner

EDMOND — Is it time to end the state income tax? Recently, the Governor’s Task Force on Economic Development and Job Creation recommended that the Governor “initiate a 10 year program to significantly reduce then ultimately eliminate the Oklahoma personal income tax.” Of course, the recommendation is not surprising. Ever since the Keating Administration, state Republicans have consistently lamented that the state’s personal income tax is a scourge on the Sooner state and an obstacle to our prosperity. Gov. Mary Fallin herself expressed support during the gubernatorial campaign for eliminating the personal income tax.

So, it is not a surprise when a group of her supporters makes this recommendation. While the recommendation to eliminate the income tax was not a surprise, I was surprised by the 1) weakness of their argument and 2) the tax increases the group suggested.

Perhaps it’s the academic in me, but when someone makes a proposal I expect them to provide some hard evidence in support of their cause. In this case, the task force offered no data, no economic impact analysis, no estimate of the impact on families. Instead the task force stated, “Some believe that a key to their (states with no income tax) relative prosperity is the lack of an individual income tax and that Oklahoma would enjoy faster growth if it reduced this source of revenue.” The group later added, that eliminating the personal income tax “could indeed be a game changer for Oklahoma.” Some believe? Could be a game changer? With this irresolute language, even the task force seems unconvinced.

What the task force does not mention, is that Oklahoma’s economy is outperforming many of the states that have already chosen to forego a personal income tax. Since 2000, Oklahoma’s economy (on a per-capita basis) is growing at the 16th fastest pace in the nation, and faster than six of the nine states that do not have a personal income tax (Florida, Nevada, New Hampshire, Tennessee, Texas and Washington). Other measures of economic performance relay a similar story. Oklahoma’s per capita personal income in the past 10 years has grown at the seventh fastest pace in the nation, and faster than eight of the nine states lacking an income tax (all except Wyoming). Finally, Oklahoma’s median household has grown over the last ten years at the third fastest pace in nation, better than eight of nine non-income tax states.

In short, Oklahoma’s economy is already outperforming the states without an income tax. Instead of us modeling them, perhaps they should be modeling their tax systems after ours.

More surprising than the lack of evidence offered by the task force, were the tax increases they proposed to replace the $2.5 billion in lost revenue from eliminating the personal income tax — an increase in property taxes (that should go over well), an expansion of the sales tax (tough news for Oklahoma’s families struggling to make ends meet), and the elimination of the state’s Child Tax Credit (sorry parents). Essentially, the task force is encouraging Oklahoma’s tax system to more closely resemble our neighbors just south of the Red River. Interestingly though, Oklahoma’s families would be the hardest hit under such a proposal. In fact, according to the nonpartisan Institute on Taxation and Economic Policy (www.itepnet.org), the tax burden faced by middle-class families in Texas is nearly three times higher than the burden placed on the 1 percent of Texans with the highest income. The poorest families fare even worse — facing a tax burden nearly four times higher than the highest-income Texans.

In the end a group of wealthy Oklahomans proposed cutting taxes for wealthy Oklahomans, and raising taxes on everyone else. Yes, this is class warfare and it is the poor and middle class that are under attack.



MICKEY HEPNER is the dean of the College of Business Administration at the University of Central Oklahoma. Hepner serves on the Executive Committee of the Board of Directors for The Oklahoma Academy.

Original Post

October 8, 2011

by Kathleen Hennessey

First they said it was couples making more than $250,000. Now they've proposed a 'millionaires tax.' Consensus is proving to be elusive.

President Obama and Democrats in Congress have aligned on a populist, "tax the rich" strategy for the 2012 campaign. Now they have to figure out exactly who that is.

It was clear they had not resolved the thorny question last week, as Senate Democrats unveiled a new "millionaires tax" to pay for the president's jobs bill. The proposal neatly replaced Obama's preferred funding plan and probably bolstered the bill's chances in the Senate. But it also appeared to depart from the party's previous characterization of "the haves we're asking to have less."

Obama and his fellow Democrats for years have described the wealthy as couples making more than $250,000 and individuals making more than $200,000 — 3% of U.S. households. By shifting away from that number in hopes of benefiting from the sound-bite punch of a millionaires tax, the administration may find it difficult to return to casting the broader net.

Since his presidential campaign, Obama and most Democrats have advocated allowing the George W. Bush administration's tax cuts to expire for incomes exceeding $250,000. The president used the same cutoff last month in outlining his plan to pay for the $447-billion jobs package.

Those efforts have not been abandoned, the president said, even as he endorsed the Senate Democrats' proposal.

But the smaller footprint of a tax only for people who make more than $1 million a year proved too appealing for Democrats. Facing a fierce campaign season in an ugly economy, raising taxes is a risky proposition. Raising taxes on the wealthy — a 5.6% tax on income exceeding $1 million — is far less so.

The Senate Democrats' plan would affect just two-tenths of 1% of U.S. households, according to the nonpartisan Tax Policy Center.

The shift marked a victory for Democrats from parts of the country where the cost of living is high. Families earning $250,000 in their regions, lawmakers argued, look more like middle-class, dual-income worker bees than tony yacht owners.

"They are not rich," said Sen. Charles E. Schumer (D-N.Y.), a leading proponent of the tax on wealthier people. "In large parts of the country, that kind of income does not get you a big home or lots of vacations or anything else that's associated with wealth in America."

But critics see a dangerous policy precedent in defining "the rich" by what they can buy, not by how their incomes compare with those of other taxpayers.

Households making a combined $250,000 are earning about five times the national average, according to 2009 census figures.

"These are people who are richer than almost everybody else. If that's not rich in a rich country like America, what could possibly be rich?" said Robert McIntyre, director of Citizens for Tax Justice, a left-leaning advocacy group.

Polling shows Americans have varied definitions of how much money is enough. A 2008 Pew Research poll found that, on average, Americans believed a family of four needed $70,000 a year to live a middle-class life.

But that number rose as respondents' incomes rose. People earning between $100,000 and $150,000 put the number at $80,000, in part because they were more likely to live in high-cost areas, researchers found.

There's no set definition in the policy circles either.

"There is economic literature on optimal taxation, but that ain't what motivates these decisions," said Jared Bernstein, an economist and former economic advisor to Vice President Joe Biden.

A host of political horse-trading and handicapping has long dictated how policymakers shape tax brackets.

Obama's threshold was based on broad principles, including the desire to leave the middle class untouched by higher taxes while collecting "enough" tax revenue, Bernstein said, although even he quibbles with the president's cutoff and suggests that a broader tax increase may be needed in the future.

Going in the other direction — aiming for incomes of $1-million-plus — would yield far too little revenue to fund "a recognizable government," Bernstein said. While the Democrats' surtax proposal may make sense to pay for a jobs bill, "it's actually quite important that $1 million does not become the new $250,000 when it comes to the permanent tax base," he added.

Democrats say they haven't given up on the lower number.

They may, however, be giving up on any hope that Republicans will concede.

"I'd vote for $250,000, but it may be that we don't have the votes politically," said Rep. Barney Frank (D-Mass.). "A million is better than nothing."

Original Post

October 7, 2011

by Bob Grover

When President Obama released his most recent plan to create jobs and address the national deficit, he proposed that wealthy Americans and corporations should pay higher taxes. Congressional leaders John Boehner, Mitch McConnell, and Paul Ryan responded with cries of “class warfare.”

Boehner and company must be desperate for a reason to explain why raising revenue from wealthy Americans and corporations is unfair. They are ignoring troubling economic trends that indicate growing income inequality. Former President Bill Clinton recently pointed out that 90 percent of income gains in the last ten years went to the top 10 percent of U.S. earners, and 40 percent of the increased wealth went to the top one percent. The middle class has actually lost ground in the same period. The only growth in this economy is the increasing number of families that have fallen below the poverty line. The Census Bureau recently released data indicating that almost 50 million Americans (nearly 1/6 of our population) are now in poverty.

Jim Wallace, writing for Sojourners, stated the issue very well: “So why is it when the top 1 percent of the country controls 42 percent of the nation’s financial wealth — more than 90 percent of the rest of us — and the ratio of CEO pay to average workers salaries is 400 to 1, it is NOT class warfare? Yet simply calling for a return of the highest-end tax rates to the 1990s levels IS?”

These same leaders who don’t want to raise taxes on the wealthy and on corporations counter with the erroneous claim that half of Americans pay NO taxes. They point to a recent finding by Congress’ Joint Committee on Taxation that reported 51 percent of households owed no federal income tax in 2009; however, 2009, as you’ll recall, was the year after the collapse of the stock market in fall 2008. The recession increased the number of Americans with low incomes, and the 2009 Recovery Act provided a tax credit for the first $2,400 in unemployment benefits, removing millions of Americans from the federal income tax rolls.

It also is important to identify the people are who don’t owe federal income tax in a given year. Some 70 percent of people who owe no federal income tax are low-income working households who simply don’t have enough income to pay taxes; however, these people do pay payroll taxes, federal excise taxes, and state and local taxes.

According to the Tax Policy Center, 35 percent to 40 percent of households owe no federal income tax in a more typical year. For example, in 2007 the figure was 37.9 percent. If we include payroll taxes, which fund Social Security, Medicare, and unemployment compensation, the number paying no federal taxes is much less; data from the Urban Institute-Brookings Tax Policy Center show only about 14 percent of households paid neither federal income tax nor payroll tax in 2009, despite the high unemployment and temporary tax cuts that year. This percentage would be even lower if federal taxes on gasoline and other items were taken into account.

Most of the people who pay neither federal income tax nor payroll taxes are low-income people who are elderly, unable to work due to a serious disability, or students. Moreover, low-income households as a whole do, in fact, pay federal taxes. Congressional Budget Office data show that the poorest fifth of households as a group paid an average of 4 percent of their incomes in federal taxes in 2007. This was not an insignificant amount, given the low incomes of these households; the poorest fifth of households had an average income of $18,400 in 2007. The next lowest fifth, with incomes between $20,500 and $34,300 in 2007, paid an average of 10 percent of their incomes in federal taxes. Even these figures understate low-income households’ total tax burden, because these households also pay substantial state and local taxes. Data from the Institute on Taxation and Economic Policy show that the poorest fifth of households paid 12.3 percent of their incomes in state and local taxes in 2010.

While the tax code needs revision to remove some of the deductions and to spread the responsibility for taxes through the various levels of income, the argument that the poor are not paying their share is false.

Neither is there credibility in the cry that raising taxes on the wealthy is class warfare. There’s a more appropriate term that applies, and we don’t hear it much these days: “greed.”

Original Post

Op-ed by Kimble Forrister

October 7, 2011

“Anytime we create more jobs, we get more people off the unemployment rolls and out of poverty,” state Sen. Del Marsh, R-Anniston, said in a recent Birmingham News profile of Alabama Arise. We agree. That’s why many items on Arise’s agenda this year (and every year) are designed to achieve both goals.

Alabama does not have to choose between improving the economy and making life better for its most vulnerable residents. It can do both. Many of Arise’s ideas to help low- and middle-income Alabamians would create hundreds of jobs in the near term. They also would strengthen the state’s foundation for future growth and make Alabama a better place to live and do business for decades to come.

Our members’ proposal to create a state Affordable Housing Trust Fund is one example of how low-income assistance and job creation can work hand in hand. The state needs more than 90,000 affordable homes to house people with extremely low incomes, according to the Low Income Housing Coalition of Alabama. The April 2011 tornadoes added to the shortfall of safe, decent and affordable housing, leaving 13,000 homes uninhabitable and damaging another 15,000.

An Affordable Housing Trust Fund could help provide safe, decent and affordable housing for thousands of these families by creating and maintaining homes for low-income Alabamians. These efforts would promote growth by helping to reduce community blight and by providing stability for people working to build better lives for themselves and their children. The trust fund also would help preserve or create jobs in the state’s home construction and repair industries, which are struggling amid a slumping real estate market.

Public transportation is another Arise issue where help for low-income people overlaps with economic growth. Many Alabamians who are unable to drive or can’t afford a car are largely cut off from a number of opportunities: jobs, health care, even visits to friends and family. Despite those unmet needs, Alabama is one of only four states in the country that provide no state money for public transit.

With even a small state investment in public transportation, Alabama could receive tens of millions of dollars of federal matching funds it now leaves on the table each year. That money could create hundreds of good jobs for people to establish and maintain rail lines, bus routes and shuttle services. A wider range of transportation options would benefit employers by giving employees more reliable ways to get to work. It also would make Alabama a more attractive place for businesses to locate and expand.

Arise long has pushed for stronger investments in other core public structures, like education, health care and child care, that would improve Alabama’s current and future business climate. More adequate K-12 and higher education funding could hold down growing college tuition costs and produce a more skilled labor force, one of the most important site-selection factors for prospective employers. Medicaid, ALL Kids and other public health services help workers have longer, more productive careers and are essential components of the state’s growing health-care industry. More affordable, high-quality child care would allow more low-income parents to enter and stay in the workforce.

Alabama could build a stronger economy by modernizing its upside-down tax system, a dead weight pulling against thousands of families as they work hard to get ahead. The state’s low- and middle-income households pay more than twice the share of income in state and local taxes that the richest 1 percent do, according to the Institute on Taxation and Economic Policy. Alabama also is one of only two states with no tax break for groceries. The state’s outdated tax system taxes low-income people even deeper into poverty.

Ending the state sales tax on groceries and over-the-counter drugs, as Arise has proposed for years, would help bring Alabama’s tax system into the 21st century. The state could offset that funding loss for education by limiting richer households’ deduction of federal income taxes on their state tax returns.

These changes would cut taxes for the vast majority of Alabamians and pump $325 million into the state’s retail economy, fueling new consumer spending that would help create jobs. They also would be a big step toward a more sensible, more humane tax system.

Reducing poverty creates jobs and improves lives. That’s why Arise is working hard on issue priorities that would strengthen Alabama’s economy and make the state we love a better place for everyone.

Kimble Forrister is executive director of Arise Citizens’ Policy Project, a statewide nonprofit, nonpartisan coalition comprising 150 congregations and organizations that promote public policies to improve the lives of low-income Alabamians. E-mail: kimble@alarise.org.

Original Post

October 6, 2011

by Jonathan Cohn

Remember when President Obama wouldn’t even utter the word “Republican”? Those days are long gone. And maybe, just maybe, the change in rhetoric is starting to pay off.

We’re now into week four of the administration’s campaign to promote its jobs proposal. And instead of dialing down the pressure, Obama has been dialing it up. One day after House Majority Leader Eric Cantor announced Republicans wouldn’t bring the proposal to a vote in the House, Obama on Tuesday criticized Cantor – and he did so by name:

Yesterday, the Republican Majority Leader in Congress, Eric Cantor, said that right now he won’t even let this jobs bill have a vote in the House of Representatives.

This is what he said. Won’t even let it be debated. Won’t even give it a chance to be debated on the floor of the House of Representatives. Think about that. I mean, what’s the problem? Do they not have the time? They just had a week off. Is it inconvenient?

Look, I’d like Mr. Cantor to come down here to Dallas and explain what exactly in this jobs bill does he not believe in. What exactly is he opposed to? Does he not believe in rebuilding America’s roads and bridges? Does he not believe in tax breaks for small businesses, or efforts to help our veterans?

A new ABC-Washington Post poll suggests that, so far, Obama's campaign is working. The public still think that the president, like Congress, is doing a lousy job overall. But public support for the elements of his jobs bill is high. And, more important, Obama has opened up a substantial gap with the Republicans over which party voters trust more to handle "job creation."

Of course, Obama and his allies still face a problem in the one chamber their party controls: The Senate. The “jobs” part of the proposal has been a pretty easy sell: Pretty much the entire caucus seems happy, or at least content, with the mix of tax breaks, public works spending, and aid to the states Obama has put on the table. But to pay for the jobs bill, Obama had proposed to raise taxes on families making more than $250,000, which rankled some senators, while closing loopholes that benefited certain industries, which rankled other senators.

But it looks like Senate Majority Leader Harry Reid, along with Senators Charles Schumer and Max Baucus, may be close to breaking that impasse. On Wednesday, they and the rest of the Senate Democratic leadership unveiled a new proposal, which the White House has since endorsed, to pay for the cost of the employment initiatives by levying a new surtax on millionaires.

Purely from a policy perspective, the millionaire surtax is not as elegant as Obama’s proposal. Among other things, the idea that we should think twice about raising taxes on incomes over $250,000, as Senator Charles Schumer has suggested, is absurd. (Eventually we'lll have to raise taxes on many more people than that.) Then again, Obama’s own proposal wasn’t perfect either. And both proposals still have a lot to recommend them, according to Steve Wamoff, legislative director of Citizens for Tax Justice:

neither of them are ideal but both are commendable in that they raise needed revenue in a progressive way. … Both Obama’s limit on deductions and exclusions and Senator Reid’s millionaire surcharge are extra provisions to be placed on top of a tax system that could be simplified a lot. But if lawmakers are finally talking about raising revenue and doing it in a progressive way, it’s hard to complain when we’re in such dire need for revenue to fund a jobs program.

OK, but what about the politics? Can this proposal unify the caucus? In an ideal world, it would. If it’s ok for Baucus (who actually wrote the proposal) and his Montana constituents, it should be okay for the rest of the Democratic delegation. But the votes of Democrats seeking reelection in conservative states, like Ben Nelson of Nebraska and Joe Manchin of West Virginia, are very much in doubt.

If even one Democrat breaks ranks, Republicans will inevitably claim that opposition to the jobs bill is “bipartisan.” That was the essence of the argument Senate Minority Leader Mitch McConnell made on Tuesday, when he offered to attach the jobs bill to another piece of legislation coming to a vote. He wanted to make the point that Democrats weren’t unified behind the president’s bill.

But whether or not the Democrats have every single member in line is less important than whether they have 50 votes to pass it – because if they have the 50 votes, then the obstacle to enactment won’t be Democrats. It will be Republicans. Remember, the only reason it takes the support of 60 senators, rather than 50, to pass legislation these days is that Republicans have decided to filibuster everything.

And that ought to matter to the voters. Everybody assumes Obama is campaigning hard for his jobs plan primarily to make a point to the voters about who stands for what, in advance of the 2012 elections. That’s probably true. But he’s adopted this posture because Republicans refuse to compromise. And if Republicans start to pay a political price for holding up popular legislation, there’s still a chance they will relent -- and pass legislation before the year is done.

It wouldn't be the whole proposal, of course, or anything close to it. But it might be something worthwhile.

Original Post

October 5, 2011

BY JIM DOOLEY

The Hawaii Tax Review Commission is soliciting the services of a consultant to study the fairness of Hawaii’s tax system and recommend changes, including the possible elimination of personal and corporate income taxes.

A national state-by-state analysis of taxes completed in 2009 and referenced on the Hawaii Tax Review Commission’s website found that Hawaii has the sixth-highest tax burden on poor residents, who pay twice as much of their income in taxes as do Hawaii’s wealthiest residents.

Those earning less than $18,000 per year paid 12.2 per cent of their income in state and local taxes, the study reported. Hawaii’s wealthiest – with an average income of just over $1 million per year – paid a tax rate of 6.3 per cent, said the report.

The study was conducted by the Institute on Taxation and Economic Policy and can be found here: 2009 tax study.

Lowell Kalapa, president of the Tax Foundation of Hawaii, noted that the 2009 study is somewhat dated and does not take into account recent changes to the state tax code, including suspension or capping of some deductions that were previously available to upper income taxpayers.

The state Tax Review Commission is convened every five years.

On Monday, the commission solicited bids from qualified economists and accountants to “prepare a comprehensive study of the Hawaii tax system with particular focus on whether the State's tax system is adequate to finance current and future needs of the State in the 21st Century.”

The study should include reform recommendations including “alternate tax structures” that would “generate sufficient revenues during economic downturns such as the Great Recession,” the commission said.

Among the possibilities to be addressed were:

should the exemptions from Hawaii's general excise tax and use taxes be retained?

should personal and corporate net income taxes be replaced with an expanded general excise tax?

The cost of the consultant study is projected to be between $100,000-$150,000.

The contract will be awarded December 29 and the final report must be submitted by June 30, 2012.

Original Post

October 4, 2011

All Things Considered

A group called Win America is pushing the government to allow companies to repatriate hundreds of billions of dollars in cash parked in offshore accounts. Normally, that money would be subject to a tax rate of up to 35 percent. But lobbyists are hoping to strike a deal that would temporarily lower the rate to about 5 percent. Bloomberg Businessweek Magazine published an article that shows how dozens of former congressional aides are part of this effort to help major corporations secure a massive tax break. Guy Raz talks to Jesse Drucker, an investigative reporter for Bloomberg.

Read the transcript or listen to audio here.

Original Post

October 2, 2011

by Wndy Sefsaf

While Alabama’s new immigration law will continue to be tied up in court for months, Judge Sharon Blackburn decided last week to allow major portions of it to be implemented.

Local police will begin to act as federal immigration enforcement agents by demanding proof of legal status from anyone who appears to be foreign. Public school administrators will begin checking the legal status of students and their parents. Murky new restrictions on contracts between the state government, private citizens and immigrants will begin.

Although supporters claim the law will solve Alabama’s economic problems and reduce crime, research shows that HB56 will actually do quite the opposite. This new law has the potential to inflict greater economic damage on Alabama by costing the state millions to implement and defend. And the crime argument simply doesn’t hold water. Since 1990, Alabama’s illegal immigrant population has risen from 5,000 to 120,000. Yet the violent crime rate in the state has fallen by more than a third.

Furthermore, restrictive immigration laws in other states have proven to reduce, not maximize, law enforcement effectiveness by diluting their resources.

The Alabama Legislature, even in these difficult times, failed to produce a fiscal note on the new immigration law, so the costs of the bill to the average Alabama taxpayer are unknown.

Numbers being touted by some Alabama politicians about the costs of illegal immigration are wrong and tell only half the story. While there is certainly a cost for illegal immigration, it’s important to remember unauthorized workers are taxpayers and consumers, too. In fact, they contribute a total of $130 million in income, sales and property taxes in Alabama, according to the Institute on Taxation and Economic Policy in Washington.

Also, the Perryman Group, an economic and financial analysis firm, estimated that if all unauthorized immigrants were removed from Alabama, the state would lose $2.6 billion in economic activity, $1.1 billion in gross state products and approximately 17,819 jobs, even accounting for adequate market adjustment time.

Additionally, similar laws in other states have had a chilling effect on state businesses, putting state-based industries that depend heavily on foreign talent and investments at risk. Alabama-based businesses would be no exception. The Korean automaker Hyundai, for example, has brought thousands of jobs to Montgomery. The German company ThyssenKrupp has built a $3.7 billion steel mill north of Mobile that will employ 2,700 workers when it is running at full capacity.

Alabama’s new immigration law sends a clear and decidedly un-American message that many of these foreign workers who live and work in Alabama are illegal until proven legal; guilty until proven innocent.

Meanwhile, Alabama’s law enforcement agencies, which are already struggling to manage current responsibilities in tough financial times, must decide how to shoulder the extra fiscal and administrative burden created under this new law. Reports show the Jefferson County Sheriff’s Office has already cut 20 percent or more of its budget this year, eliminating 145 deputy positions in order to make up the $3 million missing in this quarter’s budget. According to Tuscaloosa Police Chief Steve Anderson, the new law will also require officers to spend more time on basic traffic stops, not to mention potential court appearances, taking time away from solving real crimes and protecting communities.

Local schools and administrators will also have to bear the burden of enforcing Alabama’s draconian immigration law. They will be forced to spend time verifying paperwork rather than educating kids. As Principal Ed Burke of Crossville Elementary School in north Alabama told the National Education Association, “We don’t have the personnel to do all the work that is needed to find out which parents are legal. That’s my biggest concern — putting it off on the schools to police illegal immigration. I don’t think school is the place to do that; we don’t have the resources.”

There is no doubt that the federal government has failed to act on immigration. It is reasonable for Alabama legislators to look for a solution. However, HB56 in not the answer and Alabama has just entered dangerous territory.

While Alabama state legislators are responsible for this new law, they aren’t the first to be manipulated by out-of-state organizations. Anti-immigrant groups are attempting to convince state legislators that using their state and limited coffers to experiment with immigration legislation is a good idea and will win them votes. Unfortunately, it’s the communities and people of Alabama who have the most to lose when these new laws take effect. Alabama politicians should use their time and energy to force Congress to act rather than force Alabama taxpayers to pay for Congress’ inaction.

Wendy Sefsaf is communications director of the American Immigration Council in Washington. www.americanimmigrationcouncil.org

Original Post

October 2, 2011

by Michael Sherer

When Barack Obama talks about taxes these days, he likes to talk about Omaha billionaire Warren Buffett’s secretary. “Middle-class families shouldn’t pay higher taxes than millionaires and billionaires,” Obama announced last month in the Rose Garden. “Warren Buffett’s secretary shouldn’t pay a higher tax rate than Warren Buffett.” But if Mitt Romney is able to clinch the Republican nomination for President next spring, Obama will have a better example to talk about.

That’s because Romney, a wealthy man whose income mostly comes from long-term investments, is exactly the sort of “millionaire and billionaire” that Obama likes to hold up for scrutiny, since the source of Romney’s income allows him to pay a lower percentage of his money to the federal government each year than many middle-class wage earners.

Just how much Romney pays in taxes is, for the moment, a private matter. But his income is public knowledge. In August, Romney disclosed that in 2010 he and his wife made between $1.1 million and $2.8 million in royalties, salary, speaking fees and interest, most of which was likely taxed at a marginal rate of 35%, after accounting for deductions. The Romneys made an additional $5.5 million to $37.3 million from dividends and capital gains, which is generally taxed at a much lower rate of 15%.

Calculating the Romneys’ exact tax burden is not possible from the public records because of a number of factors, like the amount of money that Romney deducted from his taxes and the length of time that he owned investments, are unknown. But ballpark estimates are possible. Assuming that Romney declared roughly the same number of deductions as others in his income level and that his dividend and capital gains income qualified for the 15% bracket, Romney would have paid roughly 14% of his gross income in taxes to the federal government in 2010 according to Bob McIntyre, who crafts tax policy at the left-leaning Citizens for Tax Justice.

People who earn as much money as Romney typically make most of it in capital gains and often deduct more than they earn in royalties, salary and interest. In other words, they never pay the 35% rate that their income would be subject to if they just got a paycheck like most Americans.

And this is exactly the dynamic that Obama and Buffett have been talking about in recent weeks: For a select group of wealthy investors, the regular income tax structure simply does not apply. (Buffett claims to pay just 17% of his net income in taxes.) It pays to be an investor in a way that it does not pay to be a high paid actor or professional sports star. If Romney made the same amount of income in 2010 as he declared, but it all came as a direct salary, McIntyre calculates that he would have paid something closer to 30% of his net income in taxes. “There is no justification for it,” Obama said in the Rose Garden. “It is wrong that in the United States of America, a teacher or a nurse or a construction worker who earns $50,000 should pay higher tax rates than somebody pulling in $50 million.”

On the campaign trail, Romney has defended the 15% tax rate on capital gains, which is set to expire in the coming years. “The President’s party want to take from some and give to others,” Romney said in a recent debate. “That isn’t the way to lift America.” And while other Republicans running for President have proposed lowering or eliminating the capital gains tax for wealthy individuals, Romney has tried to cast himself as a defender of the middle class. His economic plan would maintain the 15% capital gains rate for those making more than $200,000 in total income, and eliminate any capital gains tax on those making less than $200,000.

Should Romney win the Republican nomination, he will face substantial pressure to release his own tax returns. Usually such disclosures are little more than formality, but in Romney’s case, it would land him in the middle of one of the biggest policy debates of this election season. Democrats long ago signaled their intent to cast Romney as a wealthy financier who is out of touch with the concerns of middle-class voters. “What Mitt Romney is going to have to explain to the American people is not just what he pays personally in taxes, but why he thinks the wealthiest Americans shouldn’t have to pay a dime more,” says Brad Woodhouse, a spokesman for the Democratic National Committee.

Gail Gitcho, a spokeswoman for the Romney campaign, declined to say whether Romney intends to release his tax returns. “That is something they will decide should he win the nomination,” she said.

So far Obama’s focus on wealthy people who pay less in taxes because they make their money from investments has been mostly rhetorical. He says that these people should pay just as much as a middle-class wage earner, but he has not put forward any hard numbers. Some middle class taxpayers also pay as little as 15% in net taxes, after taking deductions for their family, home mortgage interest and other expenses.

However, any tax reform plan put forward by Obama would likely have a significant impact on Romney’s returns. And perhaps more importantly, if Romney wins the nomination, Obama will have a great line to use in debates and on the stump. He wouldn’t just be running against Romney, he’d be running against the large tax advantage that a millionaire investor’s income provi