GOVERNANCE - Inflation Reduction Act

"How Democrats coalesced around the Inflation Reduction Act" PBS NewsHour 8/8/2022

Excerpt

SUMMARY:  After working through the weekend, Democrats are on the cusp of passing an historic, half-trillion dollar spending package.  It's a mere fraction of what President Biden first sought more than a year ago, but significant nonetheless.  Lisa Desjardins is here to unpack what's in the deal and how party leaders managed to shepherd it to the finish line when losing a single vote would have sunk it.

 

 

"What the reconciliation bill would do to boost clean energy and combat global warming" PBS NewsHour 8/8/2022

Excerpt

SUMMARY:  If the House passes the Inflation Reduction Act in the coming days it will lead to by far the biggest investment the federal government has made on tackling climate change.  Several estimates have indicated the initiative may mean a 40 percent reduction in America’s carbon emissions by 2030 from 2005 figures.  Paul Bledsoe of the Progressive Policy Institute joins William Brangham to discuss.

 

 

"Senate Majority Leader Chuck Schumer discusses Democrats’ major climate and health bill" PBS NewsHour 8/9/2022

Excerpt

SUMMARY:  President Biden on Tuesday signed the bipartisan CHIPS Act into law, just days before his top health care, tax and climate change bill known as the Inflation Reduction Act heads to the House, where it's likely to pass after proceeding through the Senate along party lines.  Senate Majority Leader Chuck Schumer, who played a key role in getting the bill passed, joins Judy Woodruff to discuss.

 

 

"How the Inflation Reduction Act could affect your taxes" PBS NewsHour 8/10/2022

Excerpt

SUMMARY:  There’s a $1 trillion gap between what Americans owe in taxes and what the government collects.  The Democrats’ budget deal would unleash nearly 100,000 new IRS agents to round up all that missing money.  Former IRS Commissioner John Koskinen joins Lisa Desjardins to discuss the impact the crackdown on tax evaders will have on the nation’s bottom line.

 

 

"Democrats celebrate legislative win in passing of climate, health and tax bill" PBS NewsHour 8/8/2022

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SUMMARY:  Congressional Democrats are celebrating a landmark legislative victory after passing the Inflation Reduction Act, which President Biden is set to sign into law this week.  Meanwhile, the Justice Department is investigating Donald Trump for potentially violating the Espionage Act after classified documents were found in his home.  Special correspondent Jeff Greenfield joins Geoff Bennett to discuss.

TAX PLAN - The Republican Grift

Wiktionary:

• Noun
• grift (plural grifts)
• A confidence game or swindle.

"Who really benefits from GOP’s tax overhaul is battle point as House passes its bill" PBS NewsHour 11/16/2017

Excerpt

SUMMARY:  It's a big step for Republicans' tax overhaul plans, the House voted 227 to 205 to pass its version of the bill.  While a new analysis suggests that the plans would increase taxes for middle and lower-income Americans, Republicans deny that idea.  Lisa Desjardins reports and Judy Woodruff gets perspectives from Rep. Kevin Brady (R-Texas) and Rep. Lloyd Doggett (D-Texas).

TRUMP AGENDA - The War on the American People

IMHO:  The following highlights the ongoing war against everyday Americans by Trump and the Republican Congress.  If you are NOT rich, you get the shaft.

"How cutting off subsidy payments to insurance companies would affect Obamacare" PBS NewsHour 4/24/2017

Excerpt

SUMMARY:  In the debate over health care reform, President Trump must now decide whether he will continue to make payments to insurance companies in order to cover out-of-pocket costs and deductibles for low-income consumers.  Judy Woodruff speaks with Robert Laszewski, president of Healthcare Policy and Marketplace Review, about the ramifications of cutting off those subsidy payments.

"An argument for how Trump's tax plan could exacerbate inequality" PBS NewsHour 4/26/2017

Excerpt

SUMMARY:  President Trump's tax reform blueprint calls for eliminating the alternative minimum tax and the estate tax, cutting all itemized deductions except for mortgage interest and charitable giving, and getting rid of taxes on the first $24,000 if a couple's earnings.  How does that affect tax revenue?  William Brangham gets reaction from Jared Bernstein of the Center on Budget and Policy Priorities.

"Why the U.S. pays more for health care than the rest of the world" PBS NewsHour 4/27/2017

Excerpt

SUMMARY:  Why are American health care costs by far the highest in the world?  Journalist and former practicing physician Elisabeth Rosenthal chronicles how we got here in her new book, "An American Sickness."  Economics correspondent Paul Solman talks with Rosenthal about the forces driving high prices and what could be done to bring costs down.

TAXES - Big Money Tax Filing

"Filing Taxes Could Be Free and Simple.  But H&R Block and Intuit Are Still Lobbying Against It." by Jessica Huseman, ProPublica 3/20/2017

The makers of TurboTax and other online systems spent millions lobbying last year, much of it directed toward a bill that would permanently bar the government from offering taxpayers prefilled filings.

Here's how preparing your taxes could work: You sit down, review a prefilled filing from the government.  If it's accurate, you sign it.  If it's not, you fix it or ignore it altogether and prepare your return yourself.  It's your choice.  You might not have to pay for an accountant, or fiddle for hours with complex software.  It could all be over in minutes.

It's already like that in parts of Europe.  And it would not be particularly difficult to give U.S. taxpayers the same option.  After all, the government already gets earnings information from employers.

But as ProPublica has detailed again and again, Intuit — the makers of TurboTax — and H&R Block have lobbied for years to derail any move toward such a system.  And they continued in 2016.

Intuit spent more than $2 million lobbying last year, much of it spent on legislation that would permanently bar the government from offering taxpayers prefilled returns.  H&R Block spent $3 million, also directing some of their efforts towards the bill.  Among the 60 co-sponsors of the bipartisan bill, then congressman and now Health and Human Services Secretary Tom Price.

The bill, called the Free File Act of 2016, looks on the surface to be consumer-friendly.  It makes permanent a public-private partnership in which 13 private tax preparation companies — called the “Free File Alliance” —have offered free online tax filings to lower- and middle-income families.  The Free File Alliance include both Intuit and H&R Block.

But the legislation would also permanently bar the IRS from offering its own free alternative.

Intuit has repeatedly warned investors about the prospect of government-prepared returns.  “We anticipate that governmental encroachment at both the federal and state levels may present a continued competitive threat to our business for the foreseeable future,” Intuit said in its latest corporate filings.

Sen. Elizabeth Warren, D-Mass., offered a bill last year that would have actually allowed the government to start offering prefill tax returns.  While Intuit did not lobby against Warren's bill — presumably because the legislation had little chance of success — tax giant H&R Block did.  (H&R Block did not respond to a request for comment.)

Neither Warren's bill nor the Free File Act made it out of committee.

Very few of those eligible for the industry's no-charge filing program actually use it, perhaps because the system is confusing and pushes people toward paid products.

While the Free File Alliance says 70 percent of U.S. taxpayers can use the service, less than 2 percent of all individual tax returns were filed through the program in last year, according to a National Taxpayer Advocate's report to Congress.

“Let's call the so-called Free File Alliance what it really is — a front for tax prep companies who use it as a gateway to sell expensive products no one would even need if we'd just made it easier for people to pay their taxes,” said Warren in a statement to ProPublica.  Warren's office put out a report on the issue last year that repeatedly cited our coverage.

In an emailed statement the Free File Alliance's executive director, Tim Hugo, said that the alliance does not automatically push paid products to those that use the Free File program but the taxpayer does “have the option of 'opting in' to receive additional information and offers from the tax preparation company they have selected.”

He said that the lack of awareness of the program is “unfortunate,” and placed blame on the IRS.  While the tax agency previously had a large budget to advertise the Free File program, “today that budget is $0, making it difficult to reach the general public,” he said.

In response to Warren's bill, the Free File Alliance warned in press release that allowing the IRS to prep returns would create “a tremendous and potentially harmful conflict of interest for the American people by enshrining the roles of tax preparer, tax collector, tax auditor and tax enforcer in one entity.”

Hugo is also a state legislator in Virginia, which canceled its own cost-free system of tax filing in 2010 and replaced it with a “Free File” bill connecting taxpayers to private companies.  Hugo serves on the committee that green-lighted the legislation.  Hugo said he saw no conflict of interest here, as the Free File program he represents is federal, not state, and he recused himself from voting in the committee and on the floor.

Joseph Bankman, a law professor in tax law at Stanford Law School said arguments about government overreach are false.  Participation is voluntary and actually gives taxpayers the upper hand, forcing the government to “show its hand.”

“Now you know what the government knows,” Bankman said, who added that there are multiple ways taxpayers could benefit.  “If there's a mistake that goes in your favor, maybe you don't call attention to it.”  Also, everyone would receive the returns — including the millions of Americans who are due tax refunds but don't get them because they don't file.  In 2012 alone, the IRS said more than 1 million Americans did not receive their refunds — amounting to $950 million — because they did not file.

The authors of the federal Free File bill have repeatedly voiced fears of big-government interference.

In an opinion piece for The Daily Caller and on his site, Rep. Peter Roskam, R-Ill., said “making the tax collector also the tax preparer creates an inherent conflict of interest while forcing citizens to relinquish control of their taxes to the government.”

Since the 2008 election cycle, Roskam has taken in more than $32,000 in donations from Intuit's political action committee and Intuit employees.  He received a far smaller amount, $2,500, from H&R Block — all for the 2016 election cycle.  Roskam's office did not return a request for comment.

HHS Secretary Price received only modest donations from Intuit, $3,500 since 2008 — $2,500 of which came six days after the Free File Act of 2016 was announced.  He received $2,000 total from H&R Block.  (Price's office did not respond to a request for comment.)

The bill's Democrat co-author, Ron Kind, from Wisconsin, has taken in more than $29,000 from Intuit and its employees since 2008.  He received $3,000 from H&R Block.

In a statement, Kind said he is “open to working with anyone” to find ways for “hardworking Wisconsin families” to file their taxes with ease.  “At the same time, I want to make sure that Wisconsinites can access programs, like Free File, that they have come to depend on.”

When asked for details on how many Wisconsinites actually rely on the program, given that few of those who qualify for it actually use it, a spokesperson for Kind did not respond.

IRELAND - The Apple Wars

"European Union: Apple owes Ireland nearly $15 billion in back taxes" PBS NewsHour 8/30/2016

This is also a Greed File.

Excerpt

SUMMARY:  After uncovering an illegal deal, the European Union ruled that Apple pay over $14.5 billion in back taxes to Ireland.  The EU's antitrust regulator found that the country and the tech giant had made an agreement that allowed Apple to pay less than 1 percent in corporate tax for over a decade.  Apple plans to appeal the decision.  Hari Sreenivasan speaks with EU Commissioner Margrethe Vestager.

HARI SREENIVASAN (NewsHour):  The European Commission ruled today that Ireland must collect $14.5 billion in back taxes from Apple.  The announcement fueled new tensions between the U.S. and Europe over the role of multinational corporations, how they are taxed, and whether it should be considered a subsidy.

The antitrust regulator for the EU said Ireland had given Apple a sweetheart tax deal for well over a decade, with special laws that effectively allowed Apple to pay less than 1 percent corporate tax.  The EU accused Apple of setting up two companies in Ireland with a head office that only exists on paper.  The profits from European stores all go to the Ireland head office and are essentially untaxed.

Apple said it would appeal the decision and denied the characterization.  In a statement, the company's chief executive, Tim Cook, said the European Commission is trying to — quote — “rewrite Apple's history in Europe, ignore Ireland's tax laws and upend the international tax system in the process.”  The company has more than $200 billion in cash.

I spoke with Commissioner Margrethe Vestager, who announced the decision.

Ms.  Vestager, thanks for joining us.

First off, what gave Apple an edge in Ireland that was unfair in the eyes of the EU?

MARGRETHE VESTAGER, European Commission:  Well, we have a long longstanding prohibition of state aid, which means benefits, advantages to a selected company.

And that may come in any form, as a piece of land, a favorable loan, a grant or a tax benefit.  And, of course, any member state can have their own tax legislation.  We would never question that.  But the thing is that you cannot give a specific company a benefit or an advantage which is not open to other companies.

HARI SREENIVASAN:  Is there evidence that this was specific to Apple and not to all the other companies that are doing business in Ireland?

MARGRETHE VESTAGER:  Yes, it is.

This arrangement is due to two things which are none of our concern, how Apple is organized and the Irish tax legislation.  But the thing that is specific is two tax rulings — are two tax rulings that are directed specifically to Apple.

And tax rulings are, by nature, specific because they are directed from the government or from the authorities to a specific company.  And this is only for them.  It is not for other companies.

TAXES - Understand Tax Brackets

"Do YOU understand how tax brackets work???" by Brainwrap, Daily KOS 11/19/2012

Note: This is a repost of a diary of mine from about a year and a half ago; I was inspired to repost it by Jed's current diary, Prospect of earning more than $250,000 terrifies business owner, because Obama.

Basically, a HUGE part of the problem with trying to have any rational discussion about tax policy is that there's a huge number of people who don't have a basic understanding of what "marginal tax rates" are.

To put it simply, there's a whole lot of people out there, including some who are very intelligent and/or successful professional types, who believe that if their income nudges them over into the next-higher tax bracket by even $1.00, that this somehow means that the entire amount they owe in taxes goes up to that percentage.

This problem is disturbingly widespread.  It's not just Republicans/right-wingers/Tea Party people; there's a lot of Democrats/progressives/other left-leaning folks who apparently don't "grok" the concept either.

With that in mind--and at the risk of sounding patronizing--here's a very basic demonstration of the problem and the reality:

Here's a modified version of the current Federal Income Tax Brackets (I've rounded off the numbers to make it easier to follow):

Taxable	Income Tax Rate
$0 - $10,000	10%
$10,000 - $30,000	15%
$30,000 - $80,000	25%
$80,000 - $200,000	28%
$200,000 - $400,000	33%
More than $400,000	35%

So, let's suppose that someone made $80,000 (taxable) last year, but makes $80,001 (taxable) this year.

(Note: I'm not even getting into deductions and all the other stuff; I'm just talking about the end-of-the-line taxable income for simplicity's sake)

The folks I'm talking about THINK that they paid 25% in taxes last year ($20,000), and they THINK that this year, because they made $1 more (pushing them into the 28% tax bracket) that they're going to owe 28% on everything ($22,400).

That is, they think that they owe an extra $2,400 in taxes even though they only made $1 more in income, and therefore are going to lose $2,399.

However, they're wrong about both what they owed last year AND what they'll owe this year.

Last year, they owed:

• 10% on the first $10,000 = $1,000
• 15% on the next $20,000 = $3,000
• 25% on the next $50,000 = $12,500
• = a grand total of $16,500

...as opposed to the $20,000 that they thought they owed.

This year, they'll owe:

• 10% on the first $10,000 = $1,000
• 15% on the next $20,000 = $3,000
• 25% on the next $50,000 = $12,500
• 28% on the next $1 = $0.28

= a grand total of $16,500.28

...or just $0.28 more than last year, not $2,400 more, and certainly not the $22,400 they thought they owed.

The same holds true at every level:  You're only paying the higher rate on any income ABOVE the threshold in question, not on EVERYTHING.

Hope this helps some folks when talking to others, and hope I didn't come off as a dick in doing so...

Addition:  Thanks to Addison in the comments for making this additional, very important point:

For those people who don't understand this, but aren't really affected by the marginal tax rate, you're not stupid, not dumb.  Not anymore than I'm dumb for not knowing how to fix an automatic transmission.  We all have our knowledge base, borne of experience.

But people who presume to speak as experts about business, who fail to understand something as relatively simple as marginal tax rates? That's like a farmer screaming at the president about dairy policy by talking about how the milk from the chickens he raises is taxed too much...

GREED FILES - The Private Tax System

"For the Wealthiest, a Private Tax System That Saves Them Billions" by NOAM SCHEIBER and PATRICIA COHEN, New York Times 12/29/2015

The very richest are able to quietly shape tax policy that will allow them to shield billions in income.

The hedge fund magnates Daniel S. Loeb, Louis Moore Bacon and Steven A. Cohen have much in common.  They have managed billions of dollars in capital, earning vast fortunes.  They have invested large sums in art — and millions more in political candidates.

Moreover, each has exploited an esoteric tax loophole that saved them millions in taxes.  The trick?  Route the money to Bermuda and back.

With inequality at its highest levels in nearly a century and public debate rising over whether the government should respond to it through higher taxes on the wealthy, the very richest Americans have financed a sophisticated and astonishingly effective apparatus for shielding their fortunes.  Some call it the “income defense industry,” consisting of a high-priced phalanx of lawyers, estate planners, lobbyists and anti-tax activists who exploit and defend a dizzying array of tax maneuvers, virtually none of them available to taxpayers of more modest means.

In recent years, this apparatus has become one of the most powerful avenues of influence for wealthy Americans of all political stripes, including Mr. Loeb and Mr. Cohen, who give heavily to Republicans, and the liberal billionaire George Soros, who has called for higher levies on the rich while at the same time using tax loopholes to bolster his own fortune.

All are among a small group providing much of the early cash for the 2016 presidential campaign.

Operating largely out of public view — in tax court, through arcane legislative provisions and in private negotiations with the Internal Revenue Service — the wealthy have used their influence to steadily whittle away at the government’s ability to tax them.  The effect has been to create a kind of private tax system, catering to only several thousand Americans.

The impact on their own fortunes has been stark.  Two decades ago, when Bill Clinton was elected president, the 400 highest-earning taxpayers in America paid nearly 27 percent of their income in federal taxes, according to IRS data.  By 2012, when President Obama was re-elected, that figure had fallen to less than 17 percent, which is just slightly more than the typical family making $100,000 annually, when payroll taxes are included for both groups.

The ultra-wealthy “literally pay millions of dollars for these services,” said Jeffrey A. Winters, a political scientist at Northwestern University who studies economic elites, “and save in the tens or hundreds of millions in taxes.”

Some of the biggest current tax battles are being waged by some of the most generous supporters of 2016 candidates.  They include the families of the hedge fund investors Robert Mercer, who gives to Republicans, and James Simons, who gives to Democrats; as well as the options trader Jeffrey Yass, a libertarian-leaning donor to Republicans.

Mr. Yass's firm is litigating what the agency deemed to be tens of millions of dollars in underpaid taxes.  Renaissance Technologies, the hedge fund Mr. Simons founded and which Mr. Mercer helps run, is currently under review by the IRS over a loophole that saved their fund an estimated $6.8 billion in taxes over roughly a decade, according to a Senate investigation.  Some of these same families have also contributed hundreds of thousands of dollars to conservative groups that have attacked virtually any effort to raises taxes on the wealthy.

In the heat of the presidential race, the influence of wealthy donors is being tested.  At stake is the Obama administration’s 2013 tax increase on high earners — the first substantial increase in two decades — and an IRS initiative to ensure that, in effect, the higher rates stick by cracking down on tax avoidance by the wealthy.

While Democrats like Bernie Sanders and Hillary Clinton have pledged to raise taxes on these voters, virtually every Republican has advanced policies that would vastly reduce their tax bills, sometimes to as little as 10 percent of their income.

At the same time, most Republican candidates favor eliminating the inheritance tax, a move that would allow the new rich, and the old, to bequeath their fortunes intact, solidifying the wealth gap far into the future.  And several have proposed a substantial reduction — or even elimination — in the already deeply discounted tax rates on investment gains, a foundation of the most lucrative tax strategies.

“There’s this notion that the wealthy use their money to buy politicians; more accurately, it’s that they can buy policy, and specifically, tax policy,” said Jared Bernstein, a senior fellow at the left-leaning Center on Budget and Policy Priorities who served as chief economic adviser to Vice President Joseph R. Biden Jr.  “That’s why these egregious loopholes exist, and why it’s so hard to close them.”

The Family Office

Each of the top 400 earners took home, on average, about $336 million in 2012, the latest year for which data is available.  If the bulk of that money had been paid out as salary or wages, as it is for the typical American, the tax obligations of those wealthy taxpayers could have more than doubled.

Instead, much of their income came from convoluted partnerships and high-end investment funds.  Other earnings accrued in opaque family trusts and foreign shell corporations, beyond the reach of the tax authorities.

The well-paid technicians who devise these arrangements toil away at white-shoe law firms and elite investment banks, as well as a variety of obscure boutiques.  But at the fulcrum of the strategizing over how to minimize taxes are so-called family offices, the customized wealth management departments of Americans with hundreds of millions or billions of dollars in assets.

Family offices have existed since the late 19th century, when the Rockefellers pioneered the institution, and gained popularity in the 1980s.  But they have proliferated rapidly over the last decade, as the ranks of the super-rich, and the size of their fortunes, swelled to record proportions.

“We have so much wealth being created, significant wealth, that it creates a need for the family office structure now,” said Sree Arimilli, an industry recruiting consultant.

Family offices, many of which are dedicated to managing and protecting the wealth of a single family, oversee everything from investment strategy to philanthropy.  But tax planning is a core function.  While the specific techniques these advisers employ to minimize taxes can be mind-numbingly complex, they generally follow a few simple principles, like converting one type of income into another type that’s taxed at a lower rate.

Mr. Loeb, for example, has invested in a Bermuda-based reinsurer — an insurer to insurance companies — that turns around and invests the money in his hedge fund.  That maneuver transforms his profits from short-term bets in the market, which the government taxes at roughly 40 percent, into long-term profits, known as capital gains, which are taxed at roughly half that rate.  It has had the added advantage of letting Mr. Loeb defer taxes on this income indefinitely, allowing his wealth to compound and grow more quickly.

The Bermuda insurer Mr. Loeb helped set up went public in 2013 and is active in the insurance business, not merely a tax dodge.  Mr. Cohen and Mr. Bacon abandoned similar insurance-based strategies in recent years.  “Our investment in Max Re was not a tax-driven scheme, but rather a sound investment response to investor interest in a more dynamically managed portfolio akin to Warren Buffett's Berkshire Hathaway,” said Mr. Bacon, who leads Moore Capital Management.  “Hedge funds were a minority of the investment portfolio, and Moore Capital’s products a much smaller subset of this alternative portfolio.”  Mr. Loeb and Mr. Cohen declined to comment.

Organizing one’s business as a partnership can be lucrative in its own right.  Some of the partnerships from which the wealthy derive their income are allowed to sell shares to the public, making it easy to cash out a chunk of the business while retaining control.  But unlike publicly traded corporations, they pay no corporate income tax; the partners pay taxes as individuals.  And the income taxes are often reduced by large deductions, such as for depreciation.

For large private partnerships, meanwhile, the IRS often struggles “to determine whether a tax shelter exists, an abusive tax transaction is being used,” according to a recent report by the Government Accountability Office.  The agency is not allowed to collect underpaid taxes directly from these partnerships, even those with several hundred partners.  Instead, it must collect from each individual partner, requiring the agency to commit significant time and manpower.

The wealthy can also avail themselves of a range of esoteric and customized tax deductions that go far beyond writing off a home office or dinner with a client.  One aggressive strategy is to place income in a type of charitable trust, generating a deduction that offsets the income tax.  The trust then purchases what’s known as a private placement life insurance policy, which invests the money on a tax-free basis, frequently in a number of hedge funds.  The person’s heirs can inherit, also tax-free, whatever money is left after the trust pays out a percentage each year to charity, often a considerable sum.

Many of these maneuvers are well established, and wealthy taxpayers say they are well within their rights to exploit them.  Others exist in a legal gray area, its boundaries defined by the willingness of taxpayers to defend their strategies against the IRS.  Almost all are outside the price range of the average taxpayer.

Among tax lawyers and accountants, “the best and brightest get a high from figuring out how to do tricky little deals,” said Karen L. Hawkins, who until recently headed the IRS office that oversees tax practitioners.  “Frankly, it is almost beyond the intellectual and resource capacity of the Internal Revenue Service to catch.”

The combination of cost and complexity has had a profound effect, tax experts said.  Whatever tax rates Congress sets, the actual rates paid by the ultra-wealthy tend to fall over time as they exploit their numerous advantages.

From Mr. Obama’s inauguration through the end of 2012, federal income tax rates on individuals did not change (excluding payroll taxes).  But the highest-earning one-thousandth of Americans went from paying an average of 20.9 percent to 17.6 percent.  By contrast, the top 1 percent, excluding the very wealthy, went from paying just under 24 percent on average to just over that level.

“We do have two different tax systems, one for normal wage-earners and another for those who can afford sophisticated tax advice,” said Victor Fleischer, a law professor at the University of San Diego who studies the intersection of tax policy and inequality.  “At the very top of the income distribution, the effective rate of tax goes down, contrary to the principles of a progressive income tax system.”

And while the lobbying clout of the wealthy is most often deployed through industry trade associations and lawyers, some rich families have locked arms to advance their interests more directly.

The inheritance tax has been a primary target.  In the early 1990s, a California family office executive named Patricia Soldano began lobbying on behalf of wealthy families to repeal the tax, which would not only save them money, but also make it easier to preserve their business empires from one generation to the next.  The idea struck many hardened operatives as unrealistic at the time, given that the tax affected only the wealthiest Americans.  But Ms. Soldano's efforts — funded in part by the Mars and Koch families — laid the groundwork for a one-year elimination in 2010.

The tax has been restored, but currently applies only to couples leaving roughly $11 million or more to their heirs, up from those leaving more than $1.2 million when Ms. Soldano started her campaign.  It affected fewer than 5,200 families last year.

“If anyone would have told me we’d be where we are today, I would never have guessed it,” Ms. Soldano said in an interview.

Some of the most profound victories are barely known outside the insular world of the wealthy and their financial managers.

In 2009, Congress set out to require that investment partnerships like hedge funds register with the Securities and Exchange Commission, partly so that regulators would have a better grasp on the risks they posed to the financial system.

The early legislative language would have required single-family offices to register as well, exposing the highly secretive institutions to scrutiny that their clients were eager to avoid.  Some of the IRS’s cases against the wealthy originate with tips from the S.E.C., which is often better positioned to spot tax evasion.

By the summer of 2009, several family office executives had formed a lobbying group called the Private Investor Coalition to push back against the proposal.  The coalition won an exemption in the 2010 Dodd-Frank financial reform bill, then spent much of the next year persuading the S.E.C. to largely adopt its preferred definition of “family office.”

So expansive was the resulting loophole that Mr. Soros's $24.5 billion hedge fund took advantage of it, converting to a family office after returning capital to its remaining outside investors.  The hedge fund manager Stanley Druckenmiller, a former business partner of Mr. Soros, took the same step.

The Soros family, which generally supports Democrats, has committed at least $1 million to the 2016 presidential campaign; Mr. Druckenmiller, who favors Republicans, has put slightly more than $300,000 behind three different G.O.P. presidential candidates.

A slide presentation from the Private Investor Coalition’s 2013 annual meeting credited the success to multiple meetings with members of the Senate Banking Committee, the House Financial Services Committee, congressional staff and S.E.C. staff.  “All with a low profile,” the document noted.  “We got most of what we wanted AND a few extras we didn’t request.”

A Hobbled Monitor

After all the loopholes and all the lobbying, what remains of the government’s ability to collect taxes from the wealthy runs up against one final hurdle, the crisis facing the IRS.

President Obama has made fighting tax evasion by the rich a priority.  In 2010, he signed legislation making it easier to identify Americans who squirreled away assets in Swiss bank accounts and Cayman Islands shelters.

His IRS convened a Global High Wealth Industry Group, known colloquially as “the wealth squad,” to scrutinize the returns of Americans with incomes of at least $10 million a year.

But while these measures have helped the government retrieve billions, the agency’s efforts have flagged in the face of scandal, political pressure and budget cuts.  Between 2010, the year before Republicans took control of the House of Representatives, and 2014, the IRS budget dropped by almost $2 billion in real terms, or nearly 15 percent.  That has forced it to shed about 5,000 high-level enforcement positions out of about 23,000, according to the agency.

Audit rates for the $10 million-plus club spiked in the first few years of the Global High Wealth program, but have plummeted since then.

A Very Quiet Defense

Having helped foster an alternative tax system, wealthy Americans have been aggressive in defending it.

Trade groups representing the Bermuda-based insurance company Mr. Loeb helped set up, for example, have spent the last several months pleading with the IRS that its proposed rules tightening the hedge fund insurance loophole are too onerous.

The major industry group representing private equity funds spends hundreds of thousands of dollars each year lobbying on such issues as “carried interest,” the granddaddy of Wall Street tax loopholes, which makes it possible for fund managers to pay the capital gains rate rather than the higher standard tax rate on a substantial share of their income for running the fund.

The budget deal that Congress approved in October allows the IRS to collect underpaid taxes from large partnerships at the firm level for the first time — which is far easier for the agency — thanks to a provision that lawmakers slipped into the deal at the last minute, before many lobbyists could mobilize.  But the new rules are relatively weak — firms can still choose to have partners pay the taxes — and don’t take effect until 2018, giving the wealthy plenty of time to weaken them further.

Shortly after the provision passed, the Managed Funds Association, an industry group that represents prominent hedge funds like D. E. Shaw, Renaissance Technologies, Tiger Management and Third Point, began meeting with members of Congress to discuss a wish list of adjustments.  The founders of these funds have all donated at least $500,000 to 2016 presidential candidates. During the Obama presidency, the association itself has risen to become one of the most powerful trade groups in Washington, spending over $4 million a year on lobbying.

The political challenge for the agency became especially acute in 2013, after the agency acknowledged singling out conservative nonprofits in a review of political activity by tax-exempt groups.  (Senior officials left the agency as a result of the controversy.)

Several former IRS officials, including Marcus Owens, who once headed the agency’s Exempt Organizations division, said the controversy badly damaged the agency’s willingness to investigate other taxpayers, even outside the exempt division.

“IRS enforcement is either absent or diminished” in certain areas, he said. Mr. Owens added that his former department — which provides some oversight of money used by charities and nonprofits — has been decimated.

Groups like FreedomWorks and Americans for Tax Reform, which are financed partly by the foundations of wealthy families and large businesses, have called for impeaching the IRS commissioner.  They are bolstered by deep-pocketed advocacy groups like the Club for Growth, which has aided primary challenges against Republicans who have voted in favor of higher taxes.

In 2014, the Club for Growth Action fund raised more than $9 million and spent much of it helping candidates critical of the IRS  Roughly 60 percent of the money raised by the fund came from just 12 donors, including Mr. Mercer, who has given the group $2 million in the last five years.  Mr. Mercer and his immediate family have also donated more than $11 million to several super PACs supporting Senator Ted Cruz of Texas, an outspoken IRS critic and a presidential candidate.

Another prominent donor is Mr. Yass, who helps run a trading firm called the Susquehanna International Group.  He donated $100,000 to the Club for Growth Action fund in September.  Mr. Yass serves on the board of the libertarian Cato Institute and, like Mr. Mercer, appears to subscribe to limited-government views that partly motivate his political spending.

But he may also have more than a passing interest in creating a political environment that undermines the IRS  Susquehanna is currently challenging a proposed IRS determination that an affiliate of the firm effectively repatriated more than $375 million in income from subsidiaries located in Ireland and the Cayman Islands in 2007, creating a large tax liability.  (The affiliate brought the money back to the United States in later years and paid dividend taxes on it; the IRS asserts that it should have paid the ordinary income tax rate, at a cost of tens of millions of dollars more.)

In June, Mr. Yass donated more than $2 million to three super PACs aligned with Senator Rand Paul of Kentucky, who has called for taxing all income at a flat rate of 14.5 percent.  That change in itself would save wealthy supporters like Mr. Yass millions of dollars.

Mr. Paul, also a presidential candidate, has suggested going even further, calling the IRS a “rogue agency” and circulating a petition in 2013 calling for the tax equivalent of regime change.  “Be it now therefore resolved,” the petition reads, “that we, the undersigned, demand the immediate abolishment of the Internal Revenue Service.”

But even if that campaign is a long shot, the richest taxpayers will continue to enjoy advantages over everyone else.

For the ultra-wealthy, “our tax code is like a leaky barrel,” said J. Todd Metcalf, the Democrats’ chief tax counsel on the Senate Finance Committee.  ”Unless you plug every hole or get a new barrel, it’s going to leak out.”

GREECE - Tsipouro Tax

"Greeks find tax hike on a traditional liquor hard to swallow" PBS NewsHour 10/30/2015

Excerpt

SUMMARY:  Amid the financial crisis, there's one EU-imposed austerity measure that's causing particular angst among Greek citizens; a tax hike on one of the country's favorite traditional liquors.  Greeks are worried that raising taxes on Tsipouro, a powerful, clear type of brandy, will hurt the industry and farmers.  Hari Sreenivasan reports.

HARI SREENIVASAN (NewsHour):  In a barn full of pungent fumes, Demetrios Papafigos is distilling, applying the techniques of monks who created this quintessentially Greek elixir in the 14th century.

This alcohol time capsule, in the central town of Tyrnavos, is at the heart of the latest tax dispute in a country that’s broke and under intense pressure to extract as much revenue as possible from its citizens.  Brewed from fermented grape skins, it’s a powerful (40-45% alcohol by volume), clear type of brandy, similar to Italy’s grappa, called Tsipouro.

DEMETRIOS PAPAFIGOS, Licensed Tsipouro home Brewer (through interpreter):  Tsipouro provides the grape growers with supplementary income.  Without it, the vineyards would have to be uprooted.  The vineyards wouldn’t survive otherwise.

They have only survived thanks to production of Tsipouro, because, during difficult times, when bad weather destroyed the crop, we could even distill damaged grapes and make some money.

HARI SREENIVASAN:  Fellow grape farmers from this close-knit community have joined Papafigos for lunch, washed down, of course, with Tsipouro.

If the European Union gets its way, the Tsipouro makers will have to pay double the alcohol excise duty, which is currently applied.  At the moment, the liquor enjoys a low taxation rate because it’s considered to be a traditional speciality, not one that’s mass produced.

And Antonis Giamelides, the technical director of the local cooperative, is deeply concerned.

ANTONIS GIAMELIDES, Technical Director, Tyrnavos Tsipouro Cooperative:  It’s a crazy situation.  We don’t know what will happen tomorrow.  If the excise taxes go up at that level, then it will destroy all the wine production in Greece, because these people will not be producing any grapes anymore, because it will not be profitable.

IMMIGRATION - Another Conservative Ad Distortion

"Immigration Ad Distorts ‘Tax Implications’" by Brooks Jackson, FactCheck.org 4/10/2015

A new TV spot claims Americans will be “stuck with the tax bill” for President Obama’s order giving legal status to millions of immigrants.  What bill?  Those immigrants will produce more in taxes than they will consume, according to the very authority cited by the ad’s sponsor.

The ad was announced April 7 by Californians for Population Stabilization, a group advocating tighter controls on immigration.  It is running only in Iowa and on national cable channels, the group said.  A spokesman said the cost of the ad buy is in the “six figures” and will run through April 15 — which is the deadline for filing federal income taxes.

The ad features images of Republican and Democratic presidential prospects with their mouths zippered shut.  The narrator says they “don’t talk much about the tax implications” of Obama’s action granting eligibility for temporary legal status and work permits to nearly 5 million persons who have been living in the U.S. without permission.

The narrator goes on to say that “amnesty gives illegal aliens the right to take American jobs and apply for $1.7 billion in tax refunds, even though many illegal aliens never paid taxes, and struggling American workers will be stuck with the tax bill.”  And it further says “your tax bill may depend” on rescinding the president’s order.

In its news release, the sponsor cites “Congressional Budget Office projections” as its authority for the claim about tax refunds.  But the CBO’s analysis actually shows that the overall “tax implications” of Obama’s order would cut the federal deficit rather than creating any new “bill” for American taxpayers.

It’s true that the CBO estimated in a Jan. 29 letter that one of the budgetary effects of Obama’s action (and an earlier order granting temporary legal status to immigrants who were brought to the U.S. as children) would be to increase federal payments for Earned Income Tax Credits and per-child tax credits by a total of more than $10 billion spread over 10 years.

So where does the ad get the $1.7 billion figure?  Some newly legal workers may be able to claim EITC refunds for prior years, provided they had worked and file tax returns.  Some Republicans have called this an “amnesty bonus,” and we covered that in detail in a Feb. 20 item.  According to a March 4 report by the McClatchy Washington bureau, the nonpartisan tax experts at the congressional Joint Committee on Taxation found that these retroactive refunds would amount to $1.7 billion over 10 years (nearly all in the first five years).  It’s this so-called “amnesty bonus” that the CAP’s ad refers to, a CAP spokesman told us.

But that “bonus” and all the other tax refunds are only part of the overall budget effects.

The CBO’s Jan. 29 letter also estimated that the president’s order would bring in more than $22 billion in new tax revenue.  Most of that would come from increased payments of Social Security taxes levied on newly reported earnings.

And the net result — even figuring in added federal payments for Affordable Care Act subsidies, Medicaid and other federal programs for which the newly legal residents could qualify — would be a decrease in federal deficits, totaling just under $7.5 billion over 10 years.

Where would the increased revenue come from?  CBO, citing an analysis by the Joint Committee on Taxation, said the biggest effect comes from newly legal immigrants openly declaring their income and paying taxes rather than hiding it for fear of discovery and deportation.  Also, the JCT experts figure, wages for legal workers tend to be higher than for those in the underground economy.  Any increase in reported wages results in higher payroll tax collections.

In short, CBO says the budgetary pluses of the president’s action will outweigh the minuses.  But this ad tries to give viewers the opposite impression.

TAXES - President Obama's Middle Class Tax Plan

"Inside Obama’s middle class tax plan" PBS NewsHour 1/18/2015

Excerpt

SUMMARY:  President Obama will reportedly unveil a plan to offer tax relief for the middle class during his State of the Union address on Tuesday night.  The plan would be paid for by increasing taxes the rich pay on investments and inherited property.  For more, Carol Lee of the Wall Street Journal joins Hari Sreenivasan from Washington.

HARI SREENIVASAN (NewsHour):  President Obama reportedly will unveil a plan to offer tax relief for the middle class during his State of the Union address Tuesday night.  The plan would be paid for by increasing taxes the rich pay on investments and inherited property.

For more about the president’s proposal, its chances of success, and its political impact, we’re joined now from Washington by Carol Lee. She is White House correspondent for The Wall Street Journal.

So, Carol, who does the administration say that this will help, and how?

CAROL LEE, The Wall Street Journal:  Their main target is the middle class.

And they — their argument is that it will help the middle class by taking — closing certain tax loopholes that they say benefit the top 1 percent of Americans and making different changes to the tax code, including raising the capital gains tax from 23.8 percent to 28 percent by, as you mentioned, taxing some of these investments and assets that people transfer to their children that currently are not taxed and a number of other things.

And what they do with that money, which is roughly several hundred billion dollars, is put it towards proposals such as tripling the child tax credit.  So, that would go from $1,000 to $3,000.  They’re proposing to create a new tax credit for households where both spouses work.

And they would — the president has unveiled a proposal to offer free community college for folks.  And that’s another thing that — that this would pay for.  And so it’s kind of — it’s basically the president’s opening bid on a number of tax issues that have been vexing Washington for a long time.

And, so far, it has not gotten a very warm reception from Republicans.  But the White House’s argument is that this would help the middle class, the Republicans say that they are now focused on the middle class, the economy is doing better, and so now is the time to do things — things — take steps like this.

And while conceding that they probably won’t get everything that they want, which is a very optimistic view of this package, given the response we have seen from Republicans, the hope is that this is an opening bid to what the White House hopes are broader negotiations on some of these individual tax code issues.

OPINION - Shields and Brooks 2/28/2014

"Shields and Brooks on Putin perceptions and a tax reform proposal" PBS Newshour 2/28/2014

Excerpt

SUMMARY:  Syndicated columnist Mark Shields and New York Times columnist David Brooks join Judy Woodruff to discuss the week’s news, including the latest developments in Ukraine and the ways Russian President Vladimir Putin wields power, the veto of a controversial bill in Arizona, Rep. Dave Camp’s new tax reform plan and the launch of a program encouraging private foundations to support young men of color.

CHARITIES - How to Choose One That Really Works

Note that I'm a believer that if you are truly charitable you do NOT take a tax deduction.  Charity means giving without expecting a return.

"How to choose a charity that really delivers" PBS Newshour 12/22/2013

Excerpt

JOHN LARSON:  And now to a topic on the minds of many this time of year: charitable giving.  Studies show that Americans are among the most generous in the world, but donations are partially fueled by tax deductions.  And for some time now, there’s been talk about capping those deductions.  For more about all of this, we are joined now by Ken Berger.  He’s the CEO of Charity Navigator, which rates how effective charities are at actually getting donations to those in need.  Ken, thanks so much for joining us.

KEN BERGER:  Thank you for having me.

JOHN LARSON:  First of all, that cap on deductions, it’s not the law of the land yet, but if it should become law, what do you anticipate the effect would be?

KEN BERGER:  Well, there’s some debate on that, but essentially, billions of dollars less will be given to charity, most likely.  The percent of the overall is in question, but certainly billions of dollars less would be given to charity.

CONGRESS - Apple Takes Bite Out of Taxpayers

"Congressional Hearing on Apple Tax Practices Puts Spotlight on Legal Loopholes" PBS Newshour 5/21/2013

Excerpt

SUMMARY:  Tech giant Apple has avoided paying billions of dollars in taxes to the U.S. or any country by using a complex web of Irish subsidiaries.  But Apple is not alone, and none of the practices are illegal.  Margaret Warner talks to Charles Duhigg of The New York Times for more on corporate tax loopholes.

TAXES - Federal Law Allowing States to Collect Sales Tax?

IMHO, even though I do much online shopping, it about time this got done.

NOTE:  In California Amazon has already agreed to collect state sales tax since they are opening a distribution center in California.

"Congress Seeks to Eliminate Perk of Online Shopping by Requiring Sales Tax" PBS Newshour 4/29/2013

Excerpt

GWEN IFILL (Newshour):  Since the earliest days of the Web, buying goods online has often come with one often-not-quite-legal perk, no sales tax.  But that may be about to change.

The Senate has cleared the way for a new law that would allow states to collect taxes on transactions conducted across state lines.  The bill exempts businesses earning less than a million dollars a year.  As it stands now, states can only collect taxes from businesses that have a physical presence in their state.

We look at what's at stake in Congress and the debate surrounding the change with Brian Bieron, senior director of global public policy for eBay, which has actively opposed the legislation, and Rachelle Bernstein, a vice president at the National Retail Federation, which supports the bill.

ADOLESCENTS - Private Investors vs Teen Recidivism Rate (Report 1 of 2)

"Private Investors Put Money on Decreasing Teen Recidivism Rate" PBS Newshour 4/9/2013

Excerpt

JUDY WOODRUFF (Newshour):  One would be hard-pressed to think of any connection linking Rikers Island, Goldman Sachs, and a private charitable foundation.  But they're all part of a new way to finance government social services through private investment.

The NewsHour's economics correspondent, Paul Solman, looked into the project as part of his ongoing reporting Making Sense of financial news.

PAUL SOLMAN (Newshour):  New York City's infamous Rikers Island jail, responsible for the bulk of the city's billion-dollar corrections budget, it's home to 88,000 inmates a year, many of them regular repeat offenders.

JUDITH RODIN, Rockefeller Foundation:  A complete turnstile.

PAUL SOLMAN:  Rockefeller Foundation president Judith Rodin has been as despairing as most social reformers about so-called turnstile recidivism and its costs, both to the taxpayer and to society.

JUDITH RODIN:  These people don't get put back in prison for doing nothing, so there's all the social costs of what next crime they commit during this period and throughout the remaining periods that make them go back, and back, and back numerous times.

PAUL SOLMAN:  But, in 2010, Rodin heard about a new financial approach to recidivism:  social impact bonds.

EDUCATION - Public Money to Private Schools?

"Should Public Money Be Used for Private Schools?" PBS Newshour 4/1/2013

Excerpt

MARGARET WARNER (Newshour):  Now the debate over vouchers and school choice is heating up anew in some states -- the latest, last week, the Indiana Supreme Court upheld a 2011 state law allowing tax funds to be used for private schools through tuition vouchers.

We turn again to Hari for that story.

HARI SREENIVASAN (Newshour):  Ahead of last week's ruling, Republican Gov. Mike Pence rallied students and parents at the state legislature in Indianapolis in support of the voucher program.

In 2011, education correspondent John Tulenko visited Indiana soon after the law passed and found passions still strong on both sides.  Then-state Superintendent Tony Bennett was the driving force behind the Republican-led choice movement.

TONY BENNETT, Former Indiana State Superintendent:  What this has done, it has allowed -- and the statistics are bearing it -- it is allowing families the opportunity to pursue prosperity for their children.

HARI SREENIVASAN:  Democratic State Representative Ed DeLaney said he preferred high-quality public schools over choice.

TAXES - New York State and Higher Rates on Top Earners

"Deal in Albany Would Extend Higher Taxes on Top Earners" by THOMAS KAPLAN, New York Times 3/19/2013

Excerpt

Congress dodged the so-called fiscal cliff in part by raising taxes on high incomes.  California voters addressed their state’s school budget troubles with a surcharge on big incomes.  And now Albany has decided to raise revenue with a high income tax rate for people with seven-figure incomes.

Gov. Andrew M. Cuomo and legislative leaders are finalizing a surprise deal to extend a high-tax bracket for the state’s top incomes.  The bracket, first approved by lawmakers in late 2011 as a temporary response to disappointing revenues, does not expire until the end of 2014.  But that year is an election year, and by deciding to renew the bracket now, Mr. Cuomo and lawmakers can avoid debating high tax rates while running for re-election.

Mr. Cuomo, who in 2011 described a new high tax bracket as a “short-term solution” to help the state weather a financial emergency, did not mention his desire to extend the new tax bracket when he publicly announced his budget proposal in January, or in the weeks since as he and his cabinet members have crisscrossed the state, promoting his spending plan to residents.

The Legislature has not held any hearings or debate about the tax proposal, and Mr. Cuomo’s office has declined to provide details while it is being negotiated.  The State Democratic Party has even broadcast television advertisements praising the lack of any tax increases in the spending plan that Mr. Cuomo proposed.

But the emerging deal follows similar actions in Washington and in other states to improve shaky balance sheets by generating more revenue from those with top incomes.  In its deal to resolve the so-called fiscal cliff, Congress agreed in January to raise taxes on individuals with incomes higher than $400,000 and couples with more than $450,000.  And in November, at the urging of Gov. Jerry Brown, California voters approved a temporary income tax surcharge on the state’s highest incomes.

While some states are moving in the opposite direction — seeking to eliminate income taxes in an effort to spur growth — others like New York are embracing the idea of generating more revenue from those who make the most.  Maryland raised income taxes on high incomes last year, and Minnesota is considering an increase this year.

CYPRUS - Banking Crisis Effect

"In Cyprus, Banking Crisis Prompts Government to Tax Citizen Savings" (Part-1) PBS Newshour 3/18/2013

JUDY WOODRUFF (Newshour):  The day's biggest economic story came from Europe, where old worries about debt, bailouts, and public anger found new life again.  European markets were rattled today by events that occurred on the tiny Mediterranean island nation of Cyprus.  The island is part of the European Union, and plans for the government to seize individual bank deposits set off outrage there.

It also prompted worries about whether other nations could follow suit in time.  As the day wore on, concerns about the region's debt crisis dragged on U.S. markets as well.  The Dow Jones industrial average fell 62 points to finish the day at 14,452.  The NASDAQ lost more than 11 points to close above 3,237.

We begin our coverage with this report from Emma Murphy of Independent Television News in Nicosia.

EMMA MURPHY, Independent Television News:  They held their hands in protest and not inconsiderable despair.  These of Cyprus say they are furious with their government and other Eurozone leaders.  They are the people who are having to carry the weight of the E.U. bailout.

The banks will get 10 billion Euros to keep them afloat, but Cyprus has to find 5.8 billion more.  It would come through a levy, meaning these people will lose between six percent and nine percent of their savings.

MAN:  It's like people putting your hands in your pockets and receiving something.  It's outright theft.  And this is something that should not have happened in Cyprus.

EMMA MURPHY:  These are the people who are really suffering.  They saved their money.  They put it in the bank.  And they believed that it would be safe.  Then they woke up to find that their balances had gone down considerably and they couldn't even get access to cash, little wonder after promises from their president that their money would be protected, they're now so angry.

SUE HALL, Business Owner:  We do probably about 50 weddings a year.

EMMA MURPHY:  Sue Hall moved to Cyprus to run a wedding company.

SUE HALL:  My big concern is the business, because most of the money in my business account actually belongs to brides that have paid for weddings here.  So, you know, what do I do?  Do I ask them for more money or do I have to carry the loss?

EMMA MURPHY:  Banks are closed until Thursday.  And there's a limited amount of money left in the cash points.  The Cypriot government has to get parliament to agree the deal or the bailout fails.  They're not confident.

HARRIS GEORGIADES, Cyprus Ministry of Labor and Social Insurance:  We shall face a total collapse of the banking system and of the whole Cyprus economy.

EMMA MURPHY:  Such talk may well be brinksmanship.  If not, these people and many more across Europe face futures which will be forever changed by the events of the past three days.

"Will the Banking Crisis in Cyprus Rock Other Markets?" (Part-2) PBS Newshour 3/18/2013

Excerpt

SUMMARY:  Off the coast of Greece, the small nation of Cyprus is facing big economic problems.  Judy Woodruff interviews Jacob Kirkegaard of the Peterson Institute for International Economics on the magnitude of the banking crisis in Cyprus and how it may be causing aftershock effects in others markets.

CALIFORNIA - Millionaires' Tax Hike

"Two-Tax Rise Tests Wealthy in California" by ADAM NAGOURNEY, New York Times 2/6/2013

Excerpt

It is getting awfully expensive to be a millionaire in California.

With the new year, big earners are confronting a 51.9 percent federal-state income tax hit on earnings over $1 million, the result of a confluence of new tax-the-rich levies imposed by California and Congress in the closing days of 2012.  That is officially the highest in the nation. And at 13.3 percent, the top-tier California income tax is, in addition to being higher than any other state, the steepest it has been since World War II.

Though no one expects traffic jams at 30,000 feet as panicked millionaires make for the state line, the wealthy are once again grumbling about abandoning California for less punishing tax climates.  Phil Mickelson, the golfer who collects purses in excess of $1 million, suggested that he might become the latest in a line of athletes and entertainment figures, among them Tiger Woods, who left California for states like Florida, which has no personal income tax.

The Republican governor of Texas, Rick Perry, firing a new shot in an old interstate war, began putting radio advertisements on the air in California this week summoning burdened businesses his way.  “I have a message for California business: Come check out Texas,” Mr. Perry said.

Blood, it seems, is in the water.

“Are you looking to leave California because of the recent tax increase?” a CNN Money correspondent posted online in an inquiry this week.  “You could be profiled in an upcoming story.”

For all its many attributes, California has long been a state defined by high taxes and the people who hate them; conservatives here were successfully organizing against taxes before anyone heard of the Tea Party.  Yet this milestone — or perhaps millstone — has sneaked up as an unpleasant surprise for the rich, a cloud in the sky at a time when the state budget has come back into balance (in no small part because of the aforementioned tax increase) and the state economy seems to be snapping back to life.

Mr. Mickelson later apologized for discussing the topic, though that did not prevent Mr. Perry from sending him a message on Twitter: “Hey Phil ... Texas is home to liberty and low taxes ... we would love to have you as well!!”  Conservatives and antitax activists have cited Mr. Mickelson’s remarks as evidence of what they have long argued are the costs California pays for having such a high tax burden.

“It’s definitely the highest in the United States,” said David Kline, a vice president of the California Taxpayers Association, a taxpayers’ advocacy organization.  “What we like to point out to people is that there are states with absolutely no personal income tax — so if you moved from California to Florida, and you are in a high-income bracket, you are automatically giving yourself a 13.3 percent raise.”

For what it is worth, California’s big earners can deduct their state taxes from their federal returns, or at least for the time being: were Congress to repeal that deduction, which is now under discussion, the actual tax burden would be 52.9 percent.  The top rate in California has been as high as 15 percent and as low as 6 percent, and the combined rate has been higher at times, like when federal income taxes spiked to pay for wars.

Gov.Jerry Brown, a Democrat who urged voters to approve the latest state income tax surcharge, dismissed Mr. Perry’s poaching as political trickery, suggesting that high earners consider other factors in deciding where to locate.  “People invest their money where these big things have occurred,” he told reporters.  “The ideas, the structures, the climate, the opportunity is right here on the Pacific Rim.”

Some of those earners seem at least resigned to the tax burden as a cost of being able to live in California rather than, say, Texas.

“I am happy to pay my taxes, whatever they are: no problem with me,” said David Geffen, the entertainment mogul, who owns estates on the oceanfront in Malibu and on the hedge-lined streets of Beverly Hills.  He said he thought it could hurt the business climate, but added, “I don’t think anybody of means is really going to move because of it.”

OPINION - Contrasting Words vs Deeds in GOP Tax Policy

Rachel Maddow Show
MSNBC 1/28/2013

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