It's NOT A Tax Increase - You Just Have To Pay More Taxes

We tax all the others and pass the revenue on to you

WSJ.com quotes Ms. Pelosi on TCFR (tax cuts for the rich): "The sooner they are repealed, the less negative impact they'll have on our deficit." On CNN's Late Edition, Pelosi scolds that raising the marginal rate from 35% to 39% for the $250,000 tax bracket is "not a tax increase. We're repealing something they should never have had in the first place."

Does anyone else worry about government arbiters of what we should and "should never have had"? And wasn't that a previous congress's determination of what we should have? Do only Ms. P's opinions have value today? Guess so. Bush Derangement Syndrome.

And BTW... didn't TCFR increase revenue? If they did, how can it also be true that "The sooner they are repealed, the less negative impact they'll have on our deficit." Negative impact on deficit is Washington-speak and hard to get your mind around. Granting the benefit of the doubt, this might mean "the less our deficit will be." Since Ms. P is smack in the middle of creating the greatest fiscal deficit the free-market world has ever known -- which can only be paid down by future revenue or a catastrophic devaluation of the dollar -- why single out a policy that has increased revenue?

Ms. P's colleague Dick Durbin opines "The Obama administration believes that increasing taxes on any Americans at this point may not be the right medicine... " So Dick P sees paying more in tax as a tax increase? Dick, have you met Nanci?

Which is it?

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Can anyone tell me, citing primary sources, how much the bailout/stimulus is going to cost and what it's going to be used for?

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Catastrophic currency devaluation: Zimbabwe just introduced a $50 billion bill. Fifty billion Z-bucks. It's enough to buy two loaves of bread. Today. If you can find anyone with two loaves to sell. Zimbabweans are already used to being paid at least twice a day so that they can buy some basics at mid-day before the prices go up again. That's what happens when inflation is 231,000,000%. Yes, 231 million per cent. It's what happens when someone steals everything of value, everything, in an entire nation.

A Zimbabwean economist says (same link) "I am not really sure what these notes would be for," he said. "No one now accepts the local currency. It is a waste of resources to print Zimbabwe dollar notes now. Who accepts a currency that loses value by almost 100 percent daily?"

But they're printing it anyway? It's only money. Or not.

(Same link): "In August, the RBZ slashed ten zeros from the currency. But the zeroes have bounced back with more vigor." Ten zeroes look like this: 0,000,000,000. That was before the new $50B bill. Add the ten zeroes back on and it is a $50... I don't know what numbers with 20 zeroes are called? Bazillions, maybe? I thought that number was only from Calvin and Hobbes.

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Now it looks like the bailout/stimulus package may easily total 2 tril... (not quite bazillions yet) and we're not talking Z-bucks here... are we? Are you surprised that we have $2T available? How can we reconcile that with tax cuts for 95% of Americans? If we confiscated every cent from the top 5% of us (see Zimbabwe) how short would we still be and who, then, would repay it. Repay. You know, give money and interest to whomever is footing the bill for all this? And is that where we're heading?

What we need is some $50B bills. It's only money.

We tax all the others and pass the revenue on to you

The world economy is contracting. Will there be enough money to do all the things we've come to take for granted? Europe is already suffering from Russia's energy aggression as Russia has successfully changed its position from being an energy market player to being the market. There's no other way to understand 232% increases in the wholesale price of natural gas to Ukraine. Well, that and Viktor Yushchenko is pro-west.

If it's true that economic expansion if fueled by "new money" -- money that is created by successful cutting-edge innovation and investment -- then where will our new money come from now? And if there is no new money, how will we fund what used to be discretionary spending?

There are going to be tax increases, no matter how much you make or who you voted for or what you believe about how much government should spend and on what. They're coming because the new administration can't be seen to back off on its promises to tax everyone but you.

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Consumption taxes? Lots of noise about consumption taxes these days. VAT, national sales tax, things like that. Accompanying clamor about how much such taxes might raise. $500BB from a 5% national consumption tax of some sort according to one estimate. It's regressive, sure, imposing similar tax rates on dissimilar income groups, even after allowing some "critical" items to be exempt. But you didn't really think the poor and middle class weren't going to kick in a share did you? They will, despite assurances of tax cuts for 95% of American families. Wait and see on this one. Tax cuts for the poor and middle class? Sucker.

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Sin taxes: Write it down in BIG letters. If you engage in any sort of behavior that is seen by someone else as socially undesirable -- smoking, drinking, gambling come to mind -- the government will think the harder it is to defend the easier it will be to tax. Big increases are coming for all the traditional sin taxes. If you make your living catering to any of those penchants, think about a career change.

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Fun taxes: If you enjoy something that not everyone can enjoy, the more restricted it is the easier it less will be the opposition to taxing it. Yachting? Travel? Fast cars? Doesn't matter what, you're going to pay more than your fellow cubicle-dwellers when you do it.

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Dems and Repubs alike, we just ponied up $800BB or so to shore up failing giants or stimulate the economy or whatever, with massive amounts more coming within days. Now Fortune tells us today ... Um, it's gonna be a while before that starts to work. It is? We're spending -- call it a trillion and try not to cry -- and it's gonna take a while? How much would it take to start it working today? We're spending a tril and no one is demanding anything to show for it? Are you freakin' kidding me? No wonder some of it is going for dividends and bonuses for failure. No one is saying STOP!

But hey, no sweat, Ms. Pelosi will make up for it by repealing tax cuts for the rich. Down with TCFR! Let's review how that's going to happen, according to her: restore upper tax rates to 35 and 39% from 33/35. But since that's a net tax revenue reducer, not an enhancer, you can't get there from here. "Run that by me one more time." (Willie Nelson again.)

Nancy Pelosi: Making America pay for California.

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If we could tax without consequence we would just raise taxes to meet our budget requirements, right? But that isn't the way it works. The wrong people wind up paying disproportionate taxes, people with money don't invest it, even move it out of the reach of government, productivity declines, along with revenue.

Then what? If some tax cuts increase revenue, isn't it rational to cut those taxes and enjoy the increased revenue? The current answer seems to be, not if it looks unfair to an influential voting bloc.

Doing the Math

We tax all the others and pass the revenue on to you

MSNBC reports a scheme in Guyana to avoid $250K in customs duty by importing Venezuelan beer as soft drinks. Reading on we learn that at least one customs official received $350K to look the other way. Doing the math a little, wouldn't you WANT that scheme to continue? "We're gonna give you 350 large but you're gonna have to let us off the hook for that $250K in customs duty." As Willie Nelson sang, "Run that by me one more time" ...

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Virginia checks in: The Washington Post reports "Unpaid Taxes Hurting Virginia". I like how they personalize tax admin there: The governor "hired 55 workers at a cost of $1.2 million to help recoup the unpaid taxes." Maybe they should compare salaries with the new Wisconsin tax collectors. And we read further "Some Virginia legislators acknowledged that the state's method of tax collection and use of private collection agencies deserve further scrutiny during the economic downturn." But before the downturn it was OK to farm out those jobs?

In DC itself, "which is facing a $152 million budget gap, nearly 39,000 taxpayers owed $72 million at the end of 2008. In Maryland, which faces a budget shortfall of $1.9 billion, 182,000 residents owe $530 million as of this week."

Also in DC "When revenues are falling short of estimates, there is nothing like collecting past-due taxes to help out," said Stephen Cordi, the District's deputy chief financial officer. Do you think? Where have these people and their AHA! moments been? Hasn't this been part of their job all along?

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The Nigerian state of Ogun has introduced a novel method of keeping track of who owes what: Taxpayer ID numbers! Hey, that might just work. Um, what did they used to use? They might be a little late to the party but at least they got there.

Unlike, say, Findlay, Ohio. There the city fathers and mothers wrestled with their city income tax. What to do? The used to divide it 75-25, general fund to capital improvements, with 3% of that 25% going for flood projects. Now it's 81-19 EXCEPT for their novel concept of "windfall tax collection". They define that as "business income tax collections that exceed the auditor's estimate". Well sure, EXCEPT that "Such windfall money will be divided evenly, with half going to the rainy day fund and half to capital improvements. But when the balance in the rainy day fund reaches $1 million, all windfall collections will go to capital improvements." ... Does this make sense to ANYONE? I thought of several comments but instead, I'll just let you dwell on this yourselves ... "You just pay the money, we'll figure out what to do with it."

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In Florida, "Polk County Tax Collector Joe Tedder's office, in cooperation with the Central Florida Development Council, will accept payments penalty-free in February ... Depending on the type of business involved, the tax, formerly known as an occupational license, costs between $30 and $300 a year ... During the amnesty there will be a $10 collection surcharge, which means the business owners will pay between $40 and $310." No penalty, nosiree. That there's a "collection surcharge" is what it is.

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An editorial at readingeagle.com (PA) tells us of the borough with 70 -- seventy! -- borough property tax collectors and some school districts with their own tax collectors. School districts? They're looking at a proposal to let the banks collect property taxes and do away with the collectors. Banks, free, open regular hours - collectors, commissions, open when they want to be. Hey, that might work.

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If I hadn't already found my tag line, Steve Cordi's brilliance (above) might suffice: "When revenues are falling short of estimates, there is nothing like collecting past-due taxes to help out"

Do you think?

Still More California

I think I found my tag line for this blog:

"We tax all the others and pass the revenue on to you."

Jon Carroll, dimbulb columnist for SFGate, "the home of the San Francisco Chronicle", penned one of the dumbest columns I've ever read, titled The Stupid Zone. Thanks for the heads-up Joe. I had no choice but to respond thus:

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You wrote "The people who need the money the most are the people who will not be paying taxes at all...: Then you quoted Ed Quillen's sublimely libertarian notion: "If people can afford to build in Stupid Zones, let them. But let them cover their own risks." Are you immune to irony?

Change "build in Stupid Zones" to "drop out of school" or any other pet peeve of personal irresponsibility. Should the same consequence apply -- "But let them cover their own risks"? I agree with that sentiment for both irresponsible groups. Do you? The drop-outs are, of course, "the people who will not be paying taxes at all." One common consequence of personal irresponsibility is not having any money. Another is seeing your isolated, unprotected and uninsured home burn to the ground. We are, in general, responsible for the consequences of our choices.

And you really should get it right before you propose a national policy. The government only wishes it came first in matters of creditor priority. The general rule of "first in time, first in right" applies to most creditors including the IRS, presumably your whipping boy on behalf of feds in general.

Mr. Obama said during the campaign that taxes aren't about revenue, they're about fairness. That must have surprised a few tax policy wonks, but who cares about people who actually think about taxes (or creditors)? You are obviously not such a person. Will no one dare to ask "If taxes aren't about revenue, why have them at all?"

If taxes ARE about revenue, then shouldn't a rational tax policy create and collect more tax revenue than an irrational one? For instance, if lower tax rates on people who pay the most taxes will create more revenue than lower taxes on "people who will not be paying taxes at all", then isn't the former a more rational tax policy than the latter? It's a simple proposition: If you want more tax revenue to spend on the "people who need the money the most" then choose a tax policy that lends itself to increased revenue.

Your column has plenty of appeal but no merit. You also wrote "I actually have a swell plan for helping people in need." What I saw was "I have a Stupid Zone plan that I hope no one squints too hard at.

"We tax all the others and pass the revenue on to you."

Hire More Tax Collectors?

In the Milwaukee Journal Sentinel we read that by hiring 155 more auditors and tax collectors at a cost of $25 million over the next two years the state expects an additional $200 million in revenue over the same period, a net increase of $175MM for you non-math majors. They point to Minnesota, where a recent investment of $100MM in tax collection resulted in increased tax revenue of $900MM over an unspecified period ... As I've said, expect a tougher approach to tax arrears collection for taxpayers everywhere who can pay but won't. Taxing jurisdictions will simply have no choice.

In line with this, expect taxing authorities to lower the minimum amounts due that will send cases out for field enforcement. Don't assume that cases once flying below the radar will stay that way. New tax collectors will need smaller cases to work and learn on and there is a LOT of low-hanging fruit at, say, the $15-50K balance due level or so. Wisconsin tax arrears have grown by "more than 50%" since 2001. Look for this to be a recurring topic ...

Lots of talk of IRS reducing its collection efforts in light of the economic downturn. Simultaneous talk of state and local jurisdictions doing just the opposite. Anyone see any problems here? If IRS really does back off some and the states pick up the slack, isn't that a disguised state bailout? Underlying assumption, of course, is that their respective taxpayer universes somewhat overlap.

OR NOT ...

While in Union County, PA, county officials are discouraging local tax collectors from running for office by lowering their commissions. The tax collectors are fighting back, though. Among their arguments, they are more "personable" and "accessible" than the counties. The county says it can do the same job for $200K less. Maybe, but will they be "personable"?

Property taxes are, of course, the most brain-dead easy of all taxes to administer. If a county thinks it can save $200K by taking over then they could probably double that by adding "and doing it right".

In the same vein, farming out property tax collection to commissioned agents is almost a guarantee of abuse.

BTW, neither side mentions how it is going to improve tax admin. The county just wants to have it its own way, only cheaper. The collectors resent the county regaining the authority they have taken over. No studies mentioned, either. Loser? Joe Taxpayer.

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From Don't Mess With Taxes we learn that President-elect Obama's brand-new Performance Officer (don't start) and founder of the IRS Oversight Board (I said don't start) Nancy Killefer herself ran afoul of a $946 federal tax lien (nanny taxes) in 2005 but was "cleared shortly after". Uh-huh. "Cleared"? What the heck is that? Is that the same as "paid"? This would be a non-story if told in simple English, but "cleared"? And when did IRS start filing $946 Notices of Lien?

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The Times of India reports on a company that goosed revenue and paid the taxes for years so as to shore up its value. Now... "OOPS, can we have our tax money back?" "A source in the (Income Tax) department insisted that the department may not even consider returning whatever extra tax that may have accrued as a result of the fudging of accounts." Fair warning: Do NOT invest in this company.

More California

More about California: At directorblue.blogspot.com we read this California Controller John Chaing quote --

"My office has projected that, in approximately 60 days, there will be insufficient cash available to meet all expenditures reflected in the 2008-09 Budget Act," stated a Tuesday letter from Controller Chiang to the directors of all state agencies. "To ensure that the State can meet its obligations to schools, debt service, and others entitled to payment under the State Constitution, federal law, or court order. California may begin, as early as February 1, 2009, issuing registered warrants...commonly referred to as IOUs...to individuals and entities in lieu of regular payments."

In lieu of regular payments meaning, of course, instead of payments.

Not only are the staties keeping your refund, they're using it to pay other creditors. You, having paid your entire tax bill plus some in advance, are at best an unsecured general creditor who will be at the bottom of the creditor barrel in case of a state bankruptcy. Could happen. Translation: There's nothing you can do about it. Poor you.

Too bad you're not part of "debt service, and others entitled to payment". Did you think you were entitled to that refund? Don't be silly. Turns out that the state may feel your pain (sure they do) but they're keeping your money anyway... to pay someone else. Did you notice that Mr. Chiang never even apologized? This is a gotcha on a grand scale.

Do you play the numbers at your local bodega? The odds are better than your state lottery (and, as it turns out, better than getting your tax refund on time) AND you're definitely gonna get paid in full and on time if you win. The Mob doesn't issue RWs. Vito has a certain image to maintain.

And how does a new Congress use its first day in session? We just learned that they... party in honor of themselves. This, after returning from their holiday break. Heck, the economy can wait. They're getting paid so who cares if you are? Do you really think that they're not partying on your tax money? Really?

Jan. 8 - 2009

Big surprise: In New Jersey "Ex-tax collection firm exec faces new indictment." Same woman is already under indictment for gifts to state tax officials. Some things -- national security and tax admin being just two of them -- simply do not belong in the private sector. Lawyer Robert Adler calls the accusations against Sandra Bielanski "Another arbitrary and political act" by the state attorney general. OK Bob, if you say so ...

No refunds in California: California is issuing IOUs, not refunds, to taxpayers who overpaid their 2008 taxes. They don't call them IOUs of course. They're "registered warrants". They're running a tab. One official said yesterday that people shouldn't treat their tax payments like savings accounts and expect to get refunds. Think about the hubris of THAT for a moment. Same guy says that of course, you won't be allowed to send in an IOU instead of a real check with your tax return. Oh yeah, not the same thing at all, is it? By the end of Feb more state creditors should expect to receive RWs instead of payment. I'm OK with California taxing ans spending however they choose, but when they ask the rest of America to foot the bill with a bailout, THERE I draw the line. What did the citizens of Ohio, Maine, South Carolina do to deserve THAT? ...

The National Taxpayer Advocate, described by the NY Times as the watchdog agency of the IRS, advocates fewer levies, seizures ... and liens. Liens? Don't they come into existence by operation of law when taxes remain unpaid after the three requisite steps of assessment, notice and demand and refusal or neglect to pay? Did they mean Notices of Lien? That's a forgiveable oversight when your local accountant or lawyer makes it but for the head of the IRS' "watchdog agency"? Please. Who's watching the watchdog?

Same source: "Ms. Olson also called on Congress to simplify the tax code radically..." Well, what else is a national watchdog to say? But Ms. Olson, will this be the first time you've had your heart broken? I'm sure they'll get right on that as soon as they figure out the $2 trillion stimulus and bailout packages ...

From the (London) TimesOnline, Sir Jeremy Beecham writes in "Sir, The simple fact about council tax collection is that bills could go up or services be cut if large numbers of people don’t pay." And what's more "It seems that, in terms of getting tough on council tax collection, town halls are damned if they do and damned if they don’t. " No kidding? You go, Sir J. Have you met Ms. Olson? ...

And here you probably thought that Sudan was among the most corrupt and despotic regimes on earth. No really, you did, didn't you? But noooo (thank you, John Belushi)... Bloomberg.com reports yesterday that the IMF "...praised Sudan for its fisal restraint and efforts to boost tax collection." And Mussolini made the trains run on time, too. This blog is going to be too easy to write if I don't have to make stuff like that up ...