Tag: tax

Lost Our Way

Seth Anderson1 Comment

Whipped Into A Frenzy

Bob Herbert, in his last column1 for the NYT reports:

So here we are pouring shiploads of cash into yet another war, this time in Libya, while simultaneously demolishing school budgets, closing libraries, laying off teachers and police officers, and generally letting the bottom fall out of the quality of life here at home.

Welcome to America in the second decade of the 21st century. An army of long-term unemployed workers is spread across the land, the human fallout from the Great Recession and long years of misguided economic policies. Optimism is in short supply. The few jobs now being created too often pay a pittance, not nearly enough to pry open the doors to a middle-class standard of living.

Arthur Miller, echoing the poet Archibald MacLeish, liked to say that the essence of America was its promises. That was a long time ago. Limitless greed, unrestrained corporate power and a ferocious addiction to foreign oil have led us to an era of perpetual war and economic decline. Young people today are staring at a future in which they will be less well off than their elders, a reversal of fortune that should send a shudder through everyone.

The U.S. has not just misplaced its priorities. When the most powerful country ever to inhabit the earth finds it so easy to plunge into the horror of warfare but almost impossible to find adequate work for its people or to properly educate its young, it has lost its way entirely.

(click here to continue reading Losing Our Way – NYTimes.com.)

We are failed by our leaders – both political and business – and desperately need a new infusion of ideas and commitment to restoring our country.

For instance, General Electric, the largest corporation in the U.S., paid less than zero in corporate taxes last year – receiving a tax credit of $3,200,000,000 to use to avoid paying future taxes. And they are not alone, far from it, as we’ve mentioned a few times before:

While General Electric is one of the most skilled at reducing its tax burden, many other companies have become better at this as well. Although the top corporate tax rate in the United States is 35 percent, one of the highest in the world, companies have been increasingly using a maze of shelters, tax credits and subsidies to pay far less.

In a regulatory filing just a week before the Japanese disaster put a spotlight on the company’s nuclear reactor business, G.E. reported that its tax burden was 7.4 percent of its American profits, about a third of the average reported by other American multinationals. Even those figures are overstated, because they include taxes that will be paid only if the company brings its overseas profits back to the United States. With those profits still offshore, G.E. is effectively getting money back.

Such strategies, as well as changes in tax laws that encouraged some businesses and professionals to file as individuals, have pushed down the corporate share of the nation’s tax receipts — from 30 percent of all federal revenue in the mid-1950s to 6.6 percent in 2009.

(click here to continue reading G.E.’s Strategies Let It Avoid Taxes Altogether – NYTimes.com.)

I’ll let Mr. Herbert get the last word:

A stark example of the fundamental unfairness that is now so widespread was in The New York Times on Friday under the headline: “G.E.’s Strategies Let It Avoid Taxes Altogether.” Despite profits of $14.2 billion — $5.1 billion from its operations in the United States — General Electric did not have to pay any U.S. taxes last year.

As The Times’s David Kocieniewski reported, “Its extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore.”

G.E. is the nation’s largest corporation. Its chief executive, Jeffrey Immelt, is the leader of President Obama’s Council on Jobs and Competitiveness. You can understand how ordinary workers might look at this cozy corporate-government arrangement and conclude that it is not fully committed to the best interests of working people.

Overwhelming imbalances in wealth and income inevitably result in enormous imbalances of political power. So the corporations and the very wealthy continue to do well. The employment crisis never gets addressed. The wars never end. And nation-building never gets a foothold here at home.

New ideas and new leadership have seldom been more urgently needed.

Footnotes:
  1. I’m saddened by this, he has long been one of my favorite OpEd columnists [↩]

Walker Manufactured Budget Shortfall To Attack Unions

Seth Anderson0 comment

Hoan Bridge Milwaukee

A Teabagger lying? How unusual! Scott Walker is a stain.

Wisconsin’s new Republican governor has framed his assault on public worker’s collective bargaining rights as a needed measure of fiscal austerity during tough times.

The reality is radically different. Unlike true austerity measures — service rollbacks, furloughs, and other temporary measures that cause pain but save money — rolling back worker’s bargaining rights by itself saves almost nothing on its own. But Walker’s doing it anyhow, to knock down a barrier and allow him to cut state employee benefits immediately. Mad In Madison: Wisconsin Workers Protest Against Governor’s Budget Proposals

Furthermore, this broadside comes less than a month after the state’s fiscal bureau — the Wisconsin equivalent of the Congressional Budget Office — concluded that Wisconsin isn’t even in need of austerity measures, and could conclude the fiscal year with a surplus. In fact, they say that the current budget shortfall is a direct result of tax cut policies Walker enacted in his first days in office.

 

(click here to continue reading Wisconsin Gov. Walker Ginned Up Budget Shortfall To Undercut Worker Rights | TPMDC.)

Our Lady of the Green

and The Madison Cap Times adds:

Unfortunately, Walker has a political agenda that relies on the fantasy that Wisconsin is teetering on the brink of bankruptcy. Walker is not interested in balanced budgets, efficient government or meaningful job creation. Walker is interested in gaming the system to benefit his political allies and campaign contributors.

To achieve that end, he has proposed a $137 million budget “repair” bill that he intends to use as a vehicle to:

1. Undermine the long-established collective bargaining rights of public employee unions, which have for 80 years been the strongest advocates for programs that serve the great mass of Wisconsinites, as opposed to wealthy elites and corporate special interests.

As Racine’s Democratic state Rep. Cory Mason says, the governor’s bill is designed not with the purpose of getting the state’s finances in order but as “an assault on Wisconsin’s working families and political payback against unions who didn’t support Gov. Walker.”

2. Pay for schemes that redirect state tax dollars to wealthy individuals and corporate interests that have been sources of campaign funding for Walker’s fellow Republicans and special-interest campaigns on their behalf.

As Madison’s Democratic state Rep. Brett Hulsey notes, the governor and legislators aligned with him have over the past month given away special-interest favors to every lobby group that came asking, creating zero jobs in the process “but increasing the deficit by more than $100 million.” Actually, Hulsey’s being conservative in his estimate of how much money Walker and his allies have misappropriated for political purposes.

(click here to continue reading Walker gins up ‘crisis’ to reward cronies.)

run, run, run, run, run

There’s a PDF here that was written by the Legislative Fiscal Bureau, explaining in detail these misappropriations. Or as the authors put it:

Annually, this office prepares general fund revenue and expenditure projections for the Legislature prior to commencement of legislative deliberations on the state’s budget.

In the odd-numbered years, our report includes estimated revenues and expenditures for the current fiscal year and tax collection projections for each year of the next biennium. This report presents the conclusions of our analysis.

Amazon and Texas Taxes

Seth Anderson0 comment

Ready for a scotch

I guess Governor Quinn still hasn’t decided whether to sign the Illinois Amazon affiliate killing bill yet. Meanwhile, Amazon is in a fight with another state, namely Texas.

The planned closure of an Amazon.com Inc. distribution center in a suburb here has opened a debate about whether taxes or jobs is the better answer for Texas’ tattered budget.

The online retailing giant said last week that it would close its center in Irving due to a dispute with the state comptroller, who is demanding that Amazon pay $269 million in sales taxes it should have collected on goods sold to Texas residents.

…

The Supreme Court ruled in 1992 that businesses without a physical presence in a state are not obliged to collect taxes on the goods they sell there.

Since then, states have been trying to get Congress to change the law or have been seeking a way around it. A coalition of states has lobbied Congress to force online retailers to collect some taxes—so far without success. Some states, including Illinois and New York, broadened the definition of “physical presence” to include online retailers who pay commissions for referrals by local partners.

Illinois lawmakers recently passed a similar bill, which awaits the governor’s signature. Amazon has responded to the various laws with lawsuits or by cutting ties to the local businesses.

(click here to continue reading Amazon’s Exit Spurs Tax Fight in Texas – WSJ.com.)

Pink Light Over Boeing

Seth Anderson0 comment

Pink Light Over Boeing

Boeing, one of our corporate overlords.

Behold, 2007’s expenditures, estimated. These numbers have gone up several percentage points since then:

Total Purchases: $306,521,269,483

Rank Parent Company Total Air Force Army Navy
1 Lockheed Martin Corp. $27,320,616,068 $13,134,039,297 $4,129,352,342 $9,368,161,063
2 Boeing Co. 20,861,418,122 9,066,016,130 4,571,754,905 5,047,577,486

(click here to continue reading Top 100 Defense Contractors (8/15/07) — GovExec.com.)

And for a little perspective:

Top Ten Miliitary Spending 2009

2009 defense budgets, by nation, showing just the top ten. Notice how much bigger the U.S.’s percentage is…

This is a list of countries by military expenditures. The list is based on the Stockholm International Peace Research Institute (SIPRI) database which calculates military expenditures in 2009 (in constant 2008 US$)

Rank↓ ↓ Country↓ Military expenditure, 2009[2]↓ % of GDP, 2008↓
1 United States United States 663,255,000,000 4.3%
2 People's Republic of China China 98,800,000,000 2.0%
3 United Kingdom United Kingdom 69,271,000,000 2.5%
4 France France 67,316,000,000 2.3%
5 Russia Russian Federation 61,000,000,000 3.5%
6 Germany Germany 48,022,000,000 1.3%
7 Japan Japan 46,859,000,000 0.9%
8 Saudi Arabia Saudi Arabia 39,257,000,000 8.2%
9 Italy Italy 37,427,000,000 1.7%
10 India India 36,600,000,000 2.6%

 

Even in these lean economic times, the right of Boeing, Lockheed Martin and similar companies to make obscene profits is sacrosanct, and Obama’s 2012 Budget gives Defense a 5% increase. Domestic programs must be sliced to balance the federal budget, but defense contractors remain fat.

Defense Secretary Robert Gates already has revealed the Pentagon will seek $553 billion in its 2012 Pentagon budget plan — the largest request ever — and slower growth than planned over the next four years. He also has revealed proposals to end several major weapons programs, including the Marine Corps’ Expeditionary Fighting Vehicle (EFV).

That means the spending plan “will be anti-climactic in the broad sense,” according to one senior House defense aide.

Indeed, while Gates promised to cut $78 billion over five years, most of that reduction would take place in 2014 and 2015. As Center for American Progress senior fellow and President Reagan’s former assistant secretary of defense Larry Korb points out, Obama’s request is “5% higher than what the Defense Department plans to spend this year. In inflation-adjusted dollars, this figure is higher than at any time during the Bush years or during the Cold War.” In fact, the total military budget this year “comes in at a thumping $750 billion — an annual tax of more than $7,000 on every household in the country.” And while there are clear ways to cut $1 trillion from the Pentagon budget, it seems that many in the GOP have no intention of doing so.

(click here to continue reading ThinkProgress » Pentagon’s 2012 Spending Proposal Is ‘The Largest Request Ever’ Since World War II.)

These are only the budgeted amounts, the Pentagon manages to go over budget nearly every year since General Eisenhower was in office.

So are you willing to give $7,000 to the military this year? and more the year after? and more the year after that?

Evading Corporate Taxes in America

Seth Anderson1 Comment

Sketchy ATM Inside

We’ve discussed this before, but the bottom line is that corporations in the U.S. mostly don’t pay much tax because there are all sorts of clever loopholes and tax credits, and legal ways to evade taxation, and of course corporations take full advantage of them.

Of the 500 big companies in the well-known Standard & Poor’s stock index, 115 paid a total corporate tax rate — both federal and otherwise — of less than 20 percent over the last five years, according to an analysis of company reports done for The New York Times by Capital IQ, a research firm. Thirty-nine of those companies paid a rate less than 10 percent.

Arguably, the United States now has a corporate tax code that’s the worst of all worlds. The official rate is higher than in almost any other country, which forces companies to devote enormous time and effort to finding loopholes. Yet the government raises less money in corporate taxes than it once did, because of all the loopholes that have been added in recent decades.

“A dirty little secret,” Richard Clarida, a Columbia University economist and former official in the Treasury Department under President George W. Bush, has said, “is that the corporate income tax used to raise a fair amount of revenue.”

Over the last five years, on the other hand, Boeing paid a total tax rate of just 4.5 percent, according to Capital IQ. Southwest Airlines paid 6.3 percent. And the list goes on: Yahoo paid 7 percent; Prudential Financial, 7.6 percent; General Electric, 14.3 percent.

Economists have long pleaded for an overhaul of the corporate tax code, and both President Obama and Republicans now say they favor one, too. But it won’t be easy. Companies that use loopholes to avoid taxes don’t mind the current system, of course, and they have more than a few lobbyists at their disposal.

 

(click here to continue reading The Paradox of Corporate Taxes in America – NYTimes.com.)

Republican Spending Cut Proposal

Seth Anderson0 comment

When First Into This Country

Some more specifics on the proposed Republican slice and dice we mentioned yesterday.

The Republicans’ blustery budget-slicing rhetoric that marred the midterm elections has finally come to pass — only, when you break it down, it kind of looks like they have no idea what they’re doing. The Republican Study Committee announced its plan yesterday to cut spending to the tune of $2.5 trillion over the course of ten years. While that number will certainly resonate with their base, the problem is they don’t specify how they’ll do that. The specific programs and allocations they wish to gut only amount to $330 billion, with the rest of the cuts coming from “discretionary spending limits through 2021 at 2006 levels on the non-defense portion of the discretionary budget.” This is, as the Wonk Room put it, “hand-waving” that, in practice, would result in huge cuts to popular programs like Pell Grants, the National Park Service, the Coast Guard and more.

However, the cuts they do have specified aren’t exactly programs we’ll easily take on the chin. Predictably, they want to sever huge numbers from the budgets of programs for the arts, including $445 million from the Corporation for Public Broadcasting and $167.5 million from the NEA. Further, the federal workforce, high speed rail grants and DC’s transit authority (the Metro), healthcare administrative costs and more. Not on the table, predictably, is the defense budget, which is a gusher of money that most members of the GOP refuse to cauterize

(click to continue reading GOP Introduces Insane $2.5 Trillion Budget Cut Proposal, But Stumbles and Mocks Specifics | AlterNet.)

and

So what we have here, in essence, is a document concluding that $330 billion in specific cuts plus some hand-waving equals $2.5 trillion. It’s the underpants gnome theory of federal budgeting.

What the GOP leaves out is the real consequence of reducing all non-defense discretionary spending to the 2006 level. Such a cut would mean significant reductions in Pell Grants, federal highway funding, the National Park Service, federal education funding, cancer research, Immigration and Customs Enforcement, the Drug Enforcement Administration, the FBI, the Coast Guard, and the Secret Service. Here are some specifics*:

  • Pell Grants: About $14.9 billion in cuts
  • National Park Service: $600 million
  • Immigration and Customs Enforcement: $2.9 billion
  • Secret Service: $300 million
  • Coast Guard: $2.6 billion.
  • National Institutes of Health: $5 billion
  • Federal Prison System: $1.5 billion.

Every dollar that is preserved in those programs and agencies means that a deeper cut has to be made somewhere else. The RSC also left the defense budget completely off the table.

(click to continue reading Wonk Room » What The Republican Study Committee Didn’t Say In Its Spending Cut Proposal.)

Republicans hate America, in other words, and want it to turn into a banana Republic as soon as possible.

And from Kate Sheppard of Mother Jones:

Rep. Jim Jordan (R-Ohio)’s Republican Study Committee on Thursday released a list of programs they’d like to see cut as part of the Spending Reduction Act of 2011. Clean energy, efficiency, rail, and climate programs were all atop the two-page list of cuts, reaffirming the fact that when Republicans say they want an “all of the above” energy plan, they really mean just coal, oil, gas, and sometimes nuclear.

On the cutting room floor, if the committee gets its way: the Applied Research program at the Department of Energy, Amtrak, and the Washington Metro, among other programs that help reduce energy use and develop new technologies.…

  • Energy Star Program. $52 million a year.
  • Intercity and High Speed Rail Grants. $2.5 billion a year.
  • Department of Energy Grants to States for Weatherization. $530 million annual savings.
  • Amtrak Subsidies. $1.565 billion annual savings.
  • Technology Innovation Program. $70 million annual savings.
  • Applied Research at Department of Energy. $1.27 billion annual savings.
  • New Starts Transit. $2 billion annual savings.
  • FreedomCAR and Fuel Partnership. $200 million annual savings.
  • Subsidy for Washington Metropolitan Area Transit Authority. $150 million annual savings.
  • Eliminate the National Organic Certification Cost-Share Program. $56.2 million annual savings.

Most of these are small changes in the grand scheme of things the federal government spends money on. Notably the list doesn’t include cuts to defense or, more pertinent to the energy conversation, cuts to our investment in highways. And our research and development expenditures for energy are already paltry compared to other federal programs.

(click to continue reading Republicans Target Energy Spending | Mother Jones.)

Teabagger Governor of Wisconsin Has Trouble With Math

Seth Anderson0 comment

El Mole Rachmim

We already ridiculed Scott Walker for his fundamental misunderstanding of complex mathematical concepts like percentages, and addition/subtraction, but James Warren of the New York Times adds:

As with family feuds, this ruckus has a history. It includes Mr. Quinn’s urging a Milwaukee train manufacturer to move to Illinois if Mr. Walker fulfills his promise to spurn $800 million in federal stimulus money and ditch a high-speed rail line linking Madison and Milwaukee.

The Illinois Senate president, John J. Cullerton, quickly obliged my request for relevant data. Even with the huge, “temporary” increases in Illinois, individuals and corporations are better off here than in Wisconsin — and in decent shape compared with Indiana, Missouri, Minnesota and Michigan, too.

According to the Tax Foundation, the Illinois personal rate of 5 percent compared with a sliding scale of 4.6 percent to 7.75 percent in Wisconsin, with anybody there earning $10,000 or above taxed at a minimum of 5 percent. The new Illinois corporate rate of 7 percent compares with Wisconsin’s 7.9 percent.

Mr. Walker doesn’t deny this but says he’ll get his rates down by 2015. Perhaps. But his rabble-rousing remains short on nuance.

As Chicago’s Metropolitan Planning Council underscored, taxes are important, but keeping an area competitive also involves quality of life, overall fiscal health, specific business incentives and intangibles like leadership. Quality of life includes the culture, restaurants and recreation that lure bright young people to Chicago.

(click to continue reading Wisconsin Sounds Off, but Misses the Point – NYTimes.com.)

 

Hey Republicans From Illinois – Go To Wisconsin

Seth Anderson1 Comment

Exit - Door County

If you are dumb enough to get your news solely from Fox News, and believe that impending tax increases in Illinois necessitate your move to Wisconsin, please, be my guest. And leave quickly so that the IL state’s IQ levels can increase at the same time that WI’s IQ levels decrease.

Wisconsin’s new Republican Governor Scott Walker has rushed to make hay out of the Illinois Assembly’s decision to raise individual and corporate tax rates, urging Illinois residents and businesses to move to Wisconsin. But, ironically, Illinois residents who move to Wisconsin should bank on paying higher taxes.

Conservatives like Walker have insisted on using the figure that Illinois is increasing taxes by a whopping 66 percent. While this is factually accurate, it’s misleading as it makes the tax increase seem much bigger than it actually is. Illinois tax rates will only go from 3 to 5 percent (hence 66 percent increase), representing a total increase in tax rates of just 2 percent. This will allow Illinois to solve a massive $15 billion budget deficit without gutting state programs. But even with this increase, tax rates for individuals will still be lower than in Wisconsin. Wisconsin has different tax brackets; the lowest income rate if you make over $11,000 is 6.15 percent. The highest rate is 7.75 percent.

Bloomberg noted this yesterday: Absent from Walker’s sales pitch was the fact that Wisconsin’s top income tax rates remain higher than Illinois even under the increase … Walker hasn’t yet proposed lowering the state’s income or corporate tax rates. But this didn’t stop Fox New host Neil Cavuto yesterday from insisting that Illinois is experiencing a “tax storm.”

(click to continue reading ThinkProgress » Blog Archive » After Their Tax Increase, WI Gov. Begs Illinoisans To ‘Escape To Wisconsin’ Where Taxes Are Actually Higher.)

Illinois tax Increase

Seth Anderson3 Comments

Flag Waving

Illinois is in financial trouble, so there are two realistic options, not mutually exclusive1 – drastically cut spending, or raise taxes. I’m hoping the Illinois legislature is not planning to only raise taxes.

That said, despite all talk about percentage increases and so on, the actual dollar increase is not that jaw dropping, is it? I can’t say I’m angry about it, nor am I planning on moving my business to Indiana or Missouri, or somewhere without state income tax. I like it here.

The morning-after reality was this: The state portion of your personal income tax bill is likely to grow by about two-thirds after Gov. Pat Quinn follows through with his vow to sign legislation enacting big tax hikes.

If state taxes would have cost you $2,000 annually under the old rate structure, it’s likely your bill will now jump to about $3,300.

In Quinn’s first year as governor in 2009, he reported adjusted gross income of $157,122 and shelled out $4,468 in state income tax. If the new, higher rate had been in force, his personal tab would have approached $7,500.

(click to continue reading Illinois taxpayers wake up to new reality: 67 percent hike – chicagotribune.com.)

Digest that for a second, the Chicago Tribune is trying to get worked up over what is probably a few hundred dollars a year.2 What percentage of Illinois residents even make $150,000 a year? If you did, your tax went up a couple thousand dollars. I’m not sobbing. Illinois is still middle-of-the-road as far as state tax levels. Ranked 23rd (South Dakota is 1st, Alaska is 2nd, Wyoming is 3rd, and California is 49th, New York 50th, in a study of fiscal year 2011 tax rates by The Tax Foundation) and is probably going to be lowered, but still respectable.

I mean we all want free cheese, but sometimes it isn’t an option. Plus, if I’m not mistaken, if you submit an itemized federal tax return, you can deduct the tax you paid to the state.

I’m sure there is a bunch of waste in the state budget that I would cut out if I was in control of such things, but I don’t want state mental hospitals to close, don’t want bridges to collapse, CTA trains to be reduced, potholes to remain unfilled, etc.

–update, don’t forget that the Illinois legislature has also tried to bridge the budget gap with the short-sighted Amazon tax bill, as previously discussed.

Footnotes:
  1. and not counting the third option, do nothing and ignore the problem. Illinois does not want to follow the Texas model [↩]
  2. You can check specifically what the increase will mean to you in this handy-dandy tax hike calculator [↩]

Texas In Trouble

Seth Anderson2 Comments

Looking Up- Texas Capitol Building Austin

Ru-oh. How is Governor Good Hair going to spin this? I’m sure if Texas had seceded, this wouldn’t even be discussed in public. Too bad there isn’t an impeachment mechanism in Texas – Rick Perry has been leading Texas into its current sorry state for a long time.

Texas is expected to collect $72.2 billion in taxes, fees and other general revenue during the 2012-13 budget, down from the $87 billion used in the current two-year budget, Comptroller Susan Combs announced Monday. That puts the shortfall at $27 billion given that maintaining services would run $99 billion for biennium.
Collections for the current budget will come in $4.3 billion less than budgeted.
Click here to read the comptroller’s report (PDF)

Combs’ estimate dictates how much the Legislature will have to spend in the upcoming budget on education, prisons, health and human services and a slew of other state functions.

(click to continue reading Revenue estimate puts shortfall at $27 billion | Postcards.)

Tax Zealots – Amazon vs. Illinois

Seth Anderson14 Comments

Amazon - The Original Store

Amazon just emailed me:

We regret to inform you that the Illinois state legislature has passed an unconstitutional tax collection scheme that, if signed by Governor Quinn, would leave Amazon.com little choice but to end its relationships with Illinois-based Associates. You are receiving this email because our records indicate that you are a resident of Illinois. …

Please note that this not an immediate termination notice and you are still a valued participant in the Amazon Associates Program. But if the governor signs this bill, we will need to terminate the participation of all Illinois residents in the Associates Program. After that point, we will no longer pay any advertising fees for sales referred to amazon.com, endless.com and smallparts.com nor will we accept new applications for the Associates Program from Illinois residents.

The unfortunate consequences of this legislation on Illinois residents like you were explained to the legislature, including Senate and House leadership, as well as to the governor’s staff.

Over a dozen other states have considered essentially identical legislation but have rejected these proposals largely because of the adverse impact on their states’ residents.

Governor Quinn’s office may be reached here.

I had heard of this happening in other states, but this is the first mention I’ve heard about it happening in Illinois. Frack. I don’t make thousands of simolians using Amazon links1, but I do make enough to pay for the hosting of this blog.

I guess it’s happening though:

A bill seemingly being fast-tracked by the Illinois General Assembly would add a new tax…

Beginning July 1, 2011, a retailer having a contract with a person located in this State under which the person, for a commission or other consideration based upon the sale of tangible personal property by the retailer, directly or indirectly refers potential customers to the retailer by a link on the person’s Internet website.

This is widely known as the Amazon Tax. Supporters include the state’s retail merchants. They claim it will raise $150 million a year in revenues. But the Tax Foundation begs to differ…

Word is that Illinois legislators are considering click-through nexus, also known as an “Amazon tax,” pushed by revenue officials who claim that it would raise $150 million a year in revenue. Such laws, nicknamed after their most visible target, require retailers that have contracts with “affiliates”-independent persons within the state who post a link to an out-of-state business on their website and get a share of revenues from the out-of-state business-to collect the state’s sales tax. They exist in New York, Rhode Island, North Carolina, and Colorado. […]

Illinois’s version is a traditional first-generation “Amazon” tax that targets affiliates. Contrary to the claims of supporters, Amazon taxes do not provide easy revenue. In fact, the nation’s first few Amazon taxes have not produced any revenue at all, and there is some evidence of lost revenue. For instance, Rhode Island has seen no additional sales tax revenue from its Amazon tax, and because Amazon reacted by discontinuing its affiliate program, Rhode Islanders are earning less income and paying less income tax. There’s no reason why Illinois wouldn’t suffer the same fate.

(click to continue reading Capitol Fax.com » Today’s lessons.)

What bullshit. Utter bullshit. Amazon isn’t going to pay the tax, and I’m not going to report the income anymore, because there won’t be any. How does this help close the monstrous budget gap in Illinois? It doesn’t.

Darth Vader

Bill Status of HB3659  96th General Assembly   Full Text Votes  View All Actions  Printer-Friendly Version

Short Description:  PROP TAX-PUBLICATION FEES

House Sponsors Rep. Patrick J. Verschoore – Dan Reitz – Brandon W. Phelps – Linda Chapa LaVia – Frank J. Mautino, Roger L. Eddy, Mark H. Beaubien, Jr., Michael K. Smith, Daniel V. Beiser, Harry Osterman, Mary E. Flowers, Greg Harris, Sara Feigenholtz, Lisa M. Dugan and Naomi D. Jakobsson

Senate Sponsors (Sen. John J. Cullerton – Christine Radogno – Jeffrey M. Schoenberg)

(click to continue reading Illinois General Assembly – Bill Status for HB3659.)

Idiots, all of them.

—-

I was going to make this into an info-graphic, but never got around to it. Anyway, here’s the text-only version:

Old system:
1. I see a film I like (or book, or musical instrument, or whatever), write about it, post a link to Amazon’s DVD, partially because they host an image of the DVD cover, partially because I want other people to watch the film too.
2. My aunt in California sees my post, clicks the link, and buys the DVD
3. Amazon (in Seattle) sends her the disc via UPS
4. I get a 3% commission
5. I report this income in my yearly federal and state taxes (and I do)
6. State of IL makes a little bit of tax revenue

New proposed system
1. I see a film I like, write about it.
2. my aunt in CA sees my post, goes to Amazon and looks for the DVD, buys it.
3. Amazon sends her the DVD
4. I get zero commission in IL
5. I don’t have this income to report on my taxes, so I don’t.
6. State of IL gets zero

Why is the proposed system better for the State of IL?

Footnotes:
  1. if you click a link I put up, and purchase an item from Amazon in the same web session, I get around 3-5% of the purchase price as commission [↩]

Social Security and the National Dept

Seth Anderson1 Comment

Forget-me-not Social Security

Matt Taibbi notes, in the midst of skewering Matt Bai:

Social Security was never the cause of the nation’s debt problems. This issue dates all the way back to the Eighties, when Ronald Reagan hired Alan Greenspan to chair the National Commission on Social Security Reform, ostensibly to deal with a looming shortfall in the fund. Greenspan’s solution was to hike Social Security tax rates (they went from 9.35% in 1981 to 15.3% in 1990) and build up a “surplus” that could be used to pay Baby Boomers their social security checks 30 years down the road.

They raised the SS taxes all right, but they didn’t save the money for any old Baby Boomers in the 2000s. Instead, Reagan blew that money paying for eight years of deficit spending and tax cuts. Three presidents after him used the same trick. They used about $1.69 trillion in extra Social Security revenue (from the Greenspan hikes) to pay for current-day goodies, with the still-being-debated Bush tax cuts being a great example. This led to the infamous moment during Bush’s presidency when Paul O’Neill announced that the Social Security Trust Fund had no assets.

Well, duh! That is what happens to a fund, when you spend 30 years robbing it to pay for tax cuts for Jamie Dimon and Lloyd Blankfein. It will tend to get empty. But of course this wasn’t presented to the public as being the consequence of too many handouts to wealthy campaign contributors: this was presented as a problem of those needy goddamned old people wanting to retire too early and being just far too greedy when it came to actually wanting their Social Security benefits paid out.

(click to continue reading Matt Bai’s Post-Partisanship | Rolling Stone Politics | Taibblog | Matt Taibbi on Politics and the Economy.)

Furthermore,

Social Security taxes are capped, which means that above a certain level (I believe it’s $106,000 this year) there are no additional taxes. Which means that Jamie Dimon pays a disproportionately small amount of Social Security tax — an arrangement that makes sense, if that money is only going to one place, i.e. back, later on, to the person who paid the taxes, in the form of Social Security benefits.

But if all that money is just going into a big pile to be stolen by a long line of presidents who are using it to pay for things like pointless wars and income tax cuts for their rich buddies, the Social Security cap means that this stealth government revenue source disproportionately comes from middle class taxpayers. Add in the fact that the proposed solution to the budget problem now is cutting Social Security benefits, and what you get is a double-screwing of middle-class taxpayers: first they see their Social Security taxes used to fund tax cuts for the wealthy, and then they see cuts to their benefits to pay for the fallout from that robbery.

Grist for the mill of your next argument with a right-winger clamoring to privatize Social Security. Of course, facts have never been very important to right-wingers.

State Budgets and Public Unions

Seth Anderson2 Comments

Add Drums to the Tumult

Seems to be an obvious focus for the upcoming Republican Congress to focus upon – starve the beast, drown it in a bathtub, right?1

There’s no question that Republicans have introduced a bill which would require more transparency on state public pensions, and that they hope this would provide a road map in the states for where they can cut budgets; namely, on the backs of public employees. That doesn’t mean it will happen in exactly that way, however. And the idea that the next Congress will overhaul the 30s-era law allowing states to go bankrupt seems fanciful to me.

But I don’t think states or municipalities need much help from the federal government in their desire to rewrite public employee union contracts. There has been a concerted effort for years to demonize and delegitimize public employee unions, from both Republican pols and the media in general. This has left a distorted impression about greedy union contracts and well-paid government functionaries. So the new class of Republican governors would certainly want to capitalize on that by pleasing the public, who now favor things like wage freezes (which Obama just instituted at the federal level) and furloughs and bigger pension contributions, punishing those workers. And they are animated by a general hatred of unions, which have maintained their strength in the public sector while fading away in the private sector.

Alongside that, there are legitimate budget problems in the states. The National Conference of State Legislatures estimates a $118 billion dollar shortfall in state and municipal budgets in 2011. And there are certainly some states and municipalities with currently unfunded pension liabilities. While federal aid could offset some of that, there’s no chance it will happen – expect the House to pass, early next year, a resolution basically forbidding “bailouts” of the states. At that point, state governments will either have to cut spending or raise taxes to balance their budgets, which almost all of them are constitutionally required to do. With public employees – or rather, cops, firefighters, nurses, teachers, the people who prepare your state tax refund, the people who get you your driver’s license, the people who get the roads and bridges fixed and basically secure your safe passage through the commons – seen in a negative light, they will in many states be lined up for cuts.

(click to continue reading In Unfolding War on Public Employees, State Lawmakers and Media Likely to Do the Work Themselves | FDL News Desk.)

PCBs

Especially when you read about cities like Hamtramck, MI, or Prichard, AL, or Central Falls, RI, or even Bell, CA

HAMTRAMCK, Mich. — Leaders of this city met for more than seven hours on a Saturday not long ago, searching for something to cut from a budget that has already been cut, over and over. This time they slashed money for boarding up abandoned houses — aside from circumstances like vagrants or obvious rats, said William J. Cooper, the city manager. They shrank money for trimming trees and cutting grass on hundreds of lots that have been left to the city. And Mr. Cooper is hoping that predictions of a ferocious snow season prove false; once state road money runs out, the city has set nothing aside to plow streets.

“We can make it until March 1 — maybe,” Mr. Cooper said of Hamtramck’s ability to pay its bills. Beyond that? The political leaders of this old working-class city almost surrounded by Detroit are pleading with the state to let them declare bankruptcy, a desperate move the state is not even willing to admit as an option under the current circumstances.

“The state is concerned that if they say yes to one, if that door is opened, they’ll have 30 more cities right behind us,” Mr. Cooper said, as flurries fell outside his City Hall window. “But anything else is just a stop gap. We’re going to continue to pursue bankruptcy until the door is shut, locked, barricaded, bolted.”

(click to continue reading In Michigan, Hamtramck Pleads for a Bankruptcy Option – NYTimes.com.)

and in Hamtramck, MI, the city certainly wants to focus cutting the budget on public employees:

Here, the urgent search for services to cut has turned all attention to a realm that is also emerging at the center of budget debates in cities and states around the country: the costs of salaries, benefits and pensions of public workers.

Mr. Cooper, the city manager, says that everything else that could be cut already has been, while the city goes on spending 60 percent of its total general fund to pay for its police and firefighting forces — 75 current police officers and firefighters and about 240 former workers and spouses now on pensions. Mr. Cooper said that an entry-level police officer costs the city about $75,000 a year in salary and benefits, and yet repeated efforts to renegotiate contracts have failed.

“They kind of have the Cadillac plan,” Mr. Cooper said, “and we’d kind of like the Chevy.”

The police and firefighters question whether the city’s bankruptcy talk is really just a scare tactic for negotiation. Earlier discussions with city officials, they say, have urged them to accept pay cuts, layoffs, increased worker payments to pensions and even a suggestion that officers might pay for part of their own bulletproof vests — all this while the city has opted not to increase taxes.

“Nobody likes the police until you need them,” said Jon Bondra, the incoming president of Hamtramck’s police union.

So we’ll see…

Footnotes:
  1. rough paraphrase of Grover Norquist’s infamous phrase: “I don’t want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub.” [↩]

Strapped Cities Hit Nonprofits With Fees

Seth Anderson0 comment

And yet, the US govt is fine with two active wars, and bases in hundreds of locations, and military budgets for planes, warships, SDI, etc., and tax-cuts for billionaires. Priorities, I guess. Though, religions are a business, and should be treated like a business. Small non-profits shouldn’t bare the burden alone.

Facing budget gaps and an aversion to new debt and taxes, states and local governments are slapping residents with an array of new fees—and some are applying them to nonprofits.

That marks a sharp departure from long-standing tax exemptions mandated by state law or adopted on the theory that churches, schools and charitable organizations work alongside governments to provide services to the community.

The issue is on display in Houston, where some flood-prone roads are in such disrepair that signs warn drivers, “Turn around, don’t drown.”

Houston’s taxpayers in November narrowly voted to adopt a “drainage fee” to raise at least $125 million a year toward the cost of improving roads and storm-water systems. The city will charge fees to property owners, and it won’t grant exceptions to churches, schools and charities.

The city has been tightening its budget. “We’re cutting up the city’s credit cards,” says Mayor Annise Parker. “Everyone who contributes to drainage issues has to share in the cost of correcting those issues.”

A number of groups—including schools, businesses, churches and senior citizens—are demanding exemptions. “We’ll defeat this,” says David Welch, of the Houston Area Pastor’s Council, who plans to lobby state legislators in January. “This is really a tax. It is the first time that churches would not be exempt from property taxes,” he says. Some opponents have filed suit claiming the ballot wording was misleading.

At a group called the National Council of Nonprofits, Tim Delaney, chief executive, says, “Governments are taking their public burdens and putting them on the backs of nonprofits, at a time when the demand for our services is skyrocketing.”

Some cities are charging religious groups property taxes on buildings no longer used for worship. Other localities are soliciting voluntary contributions. Albany, N.Y., recently passed an ordinance asking schools, hospitals and other nonprofits to contribute to city services.

…

As municipalities try to bridge budget gaps with fees that also hit nonprofits, some residents are kicking up a storm. Chicago and Dade City, Fla., scrapped proposals for drainage fees after protests from these groups. Cleveland suspended its proposal after community groups and businesses sued.

(click to continue reading Strapped Cities Hit Nonprofits With Fees – WSJ.com.)

Since the Republicans won the 2010 election with the help of the anti-tax know-nothings, let’s see how many more stories like this one we’ll read.

Illinois Seeks Sweet Sweet Wall Street Cash

Seth Anderson0 comment

Flag Waving

I knew Illinois budgets were out of whack, but didn’t quite realize how bad the deficits are, and how far behind Illinois is on meeting its financial obligations. Yikes. Illinois has been operating at a deficit since 2001, and each year getting deeper and deeper in the hole.

Times have gotten so tough for the Illinois state government that it has begun turning to Wall Street trading houses and hedge funds to help pay its bills.

The state owes more than $4.5 billion to vendors large and small, ranging from prison-cleaning crews to schools for the disabled. Tax shortfalls and pension obligations continue to leave the state light on cash.

Quietly, the state has begun reaching out to Wall Street and other investors with a novel plan to plug this shortfall. Instead of further tapping the public debt markets, Illinois is trying to tap private sources for short-term cash to repay vendors.

Such efforts reflect the pressure many U.S. states face and raise questions about the lengths some governments should go to in funding their operations. And they put Illinois, which has endured budget strains for a decade, in the uncomfortable position of pitching its fiscal problems as someone else’s profit opportunity.

The Illinois approach works like this: Investors take over the delinquent bills owed by the state to its vendors. Those vendors are due a 1% penalty each month after the state falls behind by 60 days. The financial investors make the vendors whole and are entitled to 1% monthly penalties until the state pays the investors back.

(click to continue reading Illinois Seeks Wall Street Cash – WSJ.com.)

Even though Illinois is constitutionally obligated to pay its debts, eventually, this seems like a bit of a risky investment. What if the state government can’t reign in spending, or agree to raise taxes? Illinois could just default on the bonds. One unnamed hedge fund declined for exactly this reason:

At least one prominent New York hedge fund passed on the opportunity, fearing that profiting from a cash-strapped state’s taxpayers and small vendors would appear unseemly. Another of its worries: The state mightn’t ultimately make good on its promises.