How I got interested in tax

Right out of college in 1969, my first job was teaching French at maybe the best public high school in North Carolina.  I was making $6,300 a year, which seemed like a lot, since all-in costs at Davidson College had been around $2,000.  So I could afford to go to France in the summers.  The epiphany was when I found out I could deduct all my living expenses (I took some classes, did an internship or “stage,” and traveled).

Deductions for travel were later called a loophole:  “Congressional discussion of the 1986 revisions makes clear that a French professor who tours France to brush up on his language skills is not entitled to a tax deduction.”  http://chronicle.com/article/Tax-PlanningSabbatical/126293/.  They got me.  I was on the Joint Committee staff then, and don’t remember the change.  I don’t think I was involved.

I remember, as I was putting my documentation together to claim my deduction, my father telling me, “If you claim $12 a day, they’ll never question it.”  I was living low to the ground back then.

 

 

 

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Obama’s proposal on income from intangibles — the main part

“Under the [September 19 Obama Administration] proposal, if a U.S parent transfers an intangible to a controlled foreign corporation (CFC) in circumstances that demonstrate excessive income shifting from the United States, then an amount equal to the excessive return would be treated as subpart F income.  This would reduce the deficit by $19 billion over 10 years.”  http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/jointcommitteereport.pdf

Great.  But what is “excessive”?  How much income-shifting is OK?  This looks as vague as our old “commensurate with income” standard.  (I was always irritated when that standard was labeled “super-royalty.”  A salary commensurate with income is not a super-salary.)  Strike “excessive” and you’re getting somewhere.

Or “if a U.S parent shifts income from the United States by transferring an intangible to a controlled foreign corporation (CFC), then an amount equal to the income [from that intangible?] would be treated as subpart F income.”

The anti-tax crowd has it both ways. But so do I.

Advocates of a territorial system for international tax — where the USA would not tax any foreign income of U.S. corporations — say we should adopt it because the other major industrialized countries have it.

When it comes to a Value Added Tax, the fact that every other major industrialized country has one DOES NOT MATTER to those folks.

They are as consistent in their antipathy to taxation as I am in my sympathy for it.

Do we have a duty to discourage self-destruction by our fellow citizens?

This argument says “No one does.”:

“While the sales tax rate in North Carolina is 5.75 percent (plus another 2 percent in most localities), movies and other entertainment, alcoholic beverages, tobacco products, hotel rooms, and rental cars are all taxed at higher rates.

“In a free society the purpose of a tax system is simply to raise money for the operations of government. It should not be used to punish activities that are disfavored by politicians or to reward activities that politicians consider virtuous. Indeed, principles of both justice and economic efficiency would suggest that the tax system should be neutral with respect to people’s freely made choices.”

http://www.carolinajournal.com/articles/display_story.html?id=5982

That hard right view is as purely materialistic, in its own way, as Marxism.  Some of the folks on the hard right are believing Christians.  Are they buying this view?

Meanwhile, equating the government with “politicians” may be accurate in a way, but the tone of this argument shows little faith in our republican form of government.

How To Battle Obesity Among Children

Tax candy.

That will slow down the adults who supply them.  Or at least make them think.

This is almost common knowledge:

“Rather than subsidizing the production of unhealthful foods, we should turn the tables and tax things like soda, French fries, doughnuts and hyperprocessed snacks. The resulting income should be earmarked for a program that encourages a sound diet for Americans by making healthy food more affordable and widely available.”

A comprehensive proposal involves a lot of line drawing.  Even a tax on candy makes you decide about Kit Kats and Twix:  candy or not?  Here’s a definition that says not:

“Candy means a preparation of sugar, honey or other natural or artificial sweeteners in combination with chocolate, fruit, nuts or other ingredients or flavorings in the form of bars, drops, or pieces. Candy shall not include any preparation containing flour and shall require no refrigeration.”

http://www.streamlinedsalestax.org/uploads/downloads/PC%20Public%20Comment%20Responses/PC10011%20All%20Candy%20Rule%20Public%20Comments%20with%20Response.pdf

If that’s too complicated, we could just tax sugar.

Multinationals at the trough

The so-called repatriation tax holiday makes the tension between corporate power and the general interest crystal clear.

US multinationals are simply shifting profits offshore – and now they want to bring them back nearly tax-free.  It’s a travesty.  http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-shows-how-60-billion-u-s-revenue-lost-to-tax-loopholes.html.

The multinationals argue that getting this tax break will allow them to hire workers.  But this argument has three problems.  First, corporations have plenty of cash already.  Second, we tried this kind of amnesty before, in 2004’s Great American Jobs Act Tax Caper (see Charles I. Kingson’s article in the Tax Law Review) and they just distributed the cash to shareholders.  Third, if we let the multinationals get away with this money grab, they’ll be back again and again.  Plus all the conventional wisdom is that small companies are the ones that create the jobs.

If this is a done deal, Congress should at least (1) push to end future deferral of U.S. tax on foreign earnings to prevent future amnesties, (2) push for a repatriation rate of 20 percent or more, and (3) reject any face-saving tracing of funds: money is fungible, and tracing it is futile.

Somebody has got to pay for government.  Singling out huge multinationals for a tax break does not seem like a good idea right now.