Pure Potency Pricing

“British Prime Minister David Cameron will propose . . . that British retailers charge a minimum of 40 pence (63 cents) per unit of alcohol. A unit is the equivalent of 10 milliliters of pure alcohol.”

American taxes on alcohol depend on the form it comes in:  alcohol in beer is taxed less than alcohol in liquor, with wine in between.  Cameron’s policy of treating all alcohol alike has a lot of theoretical appeal.  Why doesn’t he propose taxing it?  Do pro-business leanings explain his desire to see the money to people in the alcohol business?

Quote is from Paul Sonne and Jeanne Whalen, Cameron Wants Brits to Pay More for Alcohol in Bid to Curb Drinking, WSJ, March 23, 2012, http://online.wsj.com/article/SB10001424052702304724404577297814271968518.html?KEYWORDS=alcohol+unit

 

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How the Roth IRA got its name

When Senator Roth introduced a bill for an individual retirement account with no upfront deduction, part of the superficial appeal was that the revenue damage to the budget came outside the budget window.  He called it the IRA Plus.  My boss at the time (1988 or 1989 or 1990), Senate Finance Chair Lloyd Bentsen, said that PLUS  stood for “Pay Later, Uncle Sam.”  That retort became Tax Notes’ quote of the week.  The name IRA Plus disappeared, and Senator Roth’s name got attached to what became the Roth IRA.

UPDATE: It was 1989, according to https://en.wikipedia.org/wiki/Roth_IRA.

 

Football Bounty Payments: Tax Law to the Rescue

The New Orleans Saints NFL team supposedly paid cash bounties to defensive players who injured opponents.  http://www.nytimes.com/2012/03/03/sports/football/nfl-says-saints-had-bounty-program-to-injure-opponents.html?hp.  I doubt that those payments were reported as income by the recipients, or reported to the IRS by the payors.  If the justice system can’t convict the batterers, the tax system may be able to go after them.  Like Al Capone.

Revenue neutrality doesn’t mean static receipts

We need a term to describe changes in tax laws that leave the government bringing in the same amount of revenue (as in earlier periods) given changes in the economy.  Revenue neutrality means something else:  changes in tax laws will result in the government bringing in the same amount of revenue if economic circumstances DON’T change.  Budget neutrality and deficit neutrality mean pretty much the same thing as revenue neutrality.

A government may need a certain amount of revenue to do what it does, that is, it may need static receipts — even when the economy grows or shrinks.  In a shrinking economy, tighter tax rules or higher rates are needed to produce static receipts.  (Now that may be oversimple:  government may need higher receipts in bad times for unemployment benefits and the like.  But I’m disregarding that need for now.)

So what’s the term for tax law changes that produce static receipts in a changing economy?  Funding neutrality?  Receipts neutrality?  Steady revenues?

Greek Revenuers Cutting Off Noses To Spite Faces

Struggling to balance its budget, Greece is reducing spending by cutting tax collection efforts:

“As a result of the austerity measures putting some tax officers on reduced pay, we have 5,500 fewer tax office jobs,” said tax officers’ union head Charalambos Nikolakopoulos.

http://www.cnbc.com/id/45814079

Reduced pay is not the same as fewer jobs, but still. . .  “Greek tax officials walked off the job Thursday at the start of a 48-hour strike to protest salary cuts and other austerity measures, as the government struggles to meet revenue targets demanded by the crisis-struck country’s international creditors.”  How do they think they’ll get paid?

I’m for higher taxes, but I understand the need for spending cuts.  Public employee unions can overplay their hands.

“Repatriation Tax Holiday”: Choosing Words Strategically

“Tax Repatriation Holiday”:  Choosing Words Strategically

[A more legible .pdf  version of this posting is downloadable at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1963951.]

“The real goal . . . is to determine what ‘story’ a client wishes to tell about his product and then find a word that evokes it—and spurs the impulse to buy.”[1]

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Tax policy turns on terms.  Witness the deliberate and effective popularization of the term “Death Tax.”[2]

Now, the “product” being offered in H.R. 1834[3] is a temporary, targeted 85-percent dividends received deduction:  an ultra-low tax rate on foreign earnings that U.S. multinationals have trapped in offshore subsidiaries, most often in tax havens.[4]  Its common name is “Repatriation Holiday.”[5]

Continue reading “Repatriation Tax Holiday”: Choosing Words Strategically