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Offshore Tax Havens Cost Average Taxpayer $1,259 a Year, Small Businesses $3,923

April 18, 2014 Comments off

Offshore Tax Havens Cost Average Taxpayer $1,259 a Year, Small Businesses $3,923
Source: U.S. Public Interest Research Group

As hardworking Americans file their taxes today, it’s a good time to be reminded that ordinary taxpayers pick up the tab for special interest loopholes in our tax laws. A new U.S. PIRG report released today revealed that the average American taxpayer in 2013 would have to shoulder an extra $1,259 in state and federal taxes to make up for the revenue lost due to the use of offshore tax havens by corporations and wealthy individuals.

Every year, corporations and wealthy individuals avoid paying an estimated $184 billion in state and federal income taxes by using complicated accounting tricks to shift their profits to offshore tax havens. Of that $184 billion, $110 billion is avoided specifically by corporations.

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New From the GAO

April 18, 2014 Comments off

New GAO Reports
Source: Government Accountability Office

1. Nuclear Weapons: Technology Development Efforts for the Uranium Processing Facility. GAO-14-295, April 18.
http://www.gao.gov/products/GAO-14-295
Highlights – http://www.gao.gov/assets/670/662665.pdf

2. Maritime Infrastructure: Key Issues Related to Commercial Activity in the U.S. Arctic over the Next Decade. GAO-14-299, March 19.
http://www.gao.gov/products/GAO-14-299
Highlights – http://www.gao.gov/assets/670/661762.pdf

3. Medicare Imaging Accreditation: Effect on Access to Advanced Diagnostic Imaging Is Unclear amid Other Policy Changes. GAO-14-378, April 18.
http://www.gao.gov/products/GAO-14-378
Highlights – http://www.gao.gov/assets/670/662659.pdf

4. Large Partnerships: Characteristics of Population and IRS Audits. GAO-14-379R, March 19.
http://www.gao.gov/products/GAO-14-379R

Standard Deductions: U.S. Corporate Tax Policy

April 18, 2014 Comments off

Standard Deductions: U.S. Corporate Tax Policy
Source: Council on Foreign Relations

The U.S. system for taxing corporate profits is outdated, ineffective at raising revenue, and creates perverse incentives for companies to shelter profits overseas. It is also, for most U.S. companies most of the time, a pretty good deal, which is one of the big reasons why any serious overhaul will be so difficult to achieve.

This is the fourth progress report and scorecard from CFR’s Renewing America initiative. Previous progress reports and scorecards have evaluated transportation infrastructure, federal education policy, and trade.

CRS — Bonus Depreciation: Economic and Budgetary Issues

April 17, 2014 Comments off

Bonus Depreciation: Economic and Budgetary Issues (PDF)
Source: Congressional Research Service (via National Agricultural Law Center)

The Tax Extenders Act of 2013 (S. 1859), which would extend expiring tax provisions for a year, includes bonus depreciation. The temporary provisions enacted in the past for only a year or two and extended multiple times are generally referred to collectively as the “extenders.” One reason advanced for these temporary provisions is that time is needed to evaluate them. Most of these provisions, however, have been extended multiple times, and some suggest that these provisions are actually permanent but are extended a year or two at a time because permanent provisions would significantly increase the costs in the budget horizon. Historically, bonus depreciation has not been a traditional “extender.”

Bonus depreciation allows half of equipment investment to be deducted immediately rather than depreciated over a period of time. Bonus depreciation was enacted for a specific, short-term purpose: to provide an economic stimulus during the recession. Most stimulus provisions have expired. Bonus depreciation has been in place six years (2008-2013), contrasted with an earlier use of bonus depreciation in place for three years. Is bonus depreciation temporary or permanent? The analysis of bonus depreciation differs for a temporary stimulus provision, compared to a permanent provision that can affect the size and allocation of the capital stock.

Who Pays Taxes in America in 2014?

April 16, 2014 Comments off

Who Pays Taxes in America in 2014?
Source: Citizens for Tax Justice

All Americans pay taxes. Everyone who works pays federal payroll taxes. Everyone who buys gasoline pays federal and state gas taxes. Everyone who owns or rents a home directly or indirectly pays property taxes. Anyone who shops pays sales taxes in most states.

The nation’s tax system is barely progressive. Those who argue that the wealthy are overtaxed focus solely on the federal personal income tax, while ignoring the other taxes that Americans pay. But, as the table to the right illustrates, the total share of taxes (federal, state, and local) that will be paid by Americans across the economic spectrum in 2014 is roughly equal to their total share of income.

Many taxes are regressive, meaning they take a larger share of income from poor and middle-income families than they do from the rich. To offset the regressive impact of payroll taxes, sales taxes and even some state and local income taxes, we need federal income tax policies that are more progressive.

SOI Tax Stats – Corporation Source Book: U.S. Total and Sectors Listing

April 16, 2014 Comments off

SOI Tax Stats – Corporation Source Book: U.S. Total and Sectors Listing
Source: Internal Revenue Service

The 2011 Corporation Source Book is now available on the IRS Tax Stats Webpages. This publication presents balance sheet, income statement, tax, and other selected items, by size of total assets for all returns with and without net income, and returns with net income only. Data tables are available by industrial groupings based upon the North American Industry Classification System (NAICS). Separate data tables are available for S corporations at the highest level of industry groupings. The Source Book contains over 700 Excel tables in separately grouped zip files.

Encouraging Low- and Moderate-Income Tax Filers to Save

April 16, 2014 Comments off

Encouraging Low- and Moderate-Income Tax Filers to Save
Source: MDRC

SaveUSA, a voluntary program launched in 2011 in four cities (New York City, Tulsa, San Antonio, and Newark), encourages low- and moderate-income individuals to set aside money from their tax refund for savings. Tax filers at participating Volunteer Income Tax Assistance (VITA) sites can directly deposit all or a portion of their tax refund into a special savings account, set up by a bank or credit union, and pledge to save between $200 and $1,000 of their deposit for about a year. Money can be withdrawn from SaveUSA accounts at any time and for any purpose, but only those who maintain their initially pledged savings amount throughout a full year receive a 50 percent match on that amount. Account holders, irrespective of match receipt, can deposit tax refund dollars in subsequent years and become eligible to receive additional savings matches on their new tax refund deposits.

This report presents findings on SaveUSA’s implementation in all four cities and its early effects on savings and other financial outcomes in two cities: New York City and Tulsa. In these latter cities, a randomly selected half of the tax filers who were interested in SaveUSA in 2011 could open accounts (the “SaveUSA group”), but the other half could not (the control group). The report compares the savings and other financial behaviors of the two groups over time to estimate SaveUSA’s effects. The findings thus suggest the effects that savings policies structured similarly to SaveUSA might have.

Taxation — Facts & Figures 2014: How Does Your State Compare?

April 16, 2014 Comments off

Facts & Figures 2014: How Does Your State Compare?
Source: Tax Foundation

This morning, the Tax Foundation released the 2014 edition of Facts & Figures: How Does Your State Compare? Just in time for tax season, the latest edition of this popular pocket-sized handbook contains the rates and rankings of all 50 states on 39 different measures of tax and fiscal policy.

Topics include information on tax measures (such as revenue per capita, federal aid to states, and State Business Tax Climate Index rankings), individual income taxes, corporate income taxes, general sales taxes, excise taxes, property taxes, state debt, and population data. For a full list of all measures included in this year’s edition, click here.

Taking the Long Way Home: U.S. Tax Evasion and Offshore Investments in U.S. Equity and Debt Markets

April 15, 2014 Comments off

Taking the Long Way Home: U.S. Tax Evasion and Offshore Investments in U.S. Equity and Debt Markets
Source: Journal of Finance, forthcoming (via SSRN)

We empirically investigate one form of illegal investor-level tax evasion and its effect on foreign portfolio investment. In particular, we examine a form of round-tripping tax evasion in which U.S. individuals hide funds in entities located in offshore tax havens and then invest those funds in U.S. securities markets. Employing Becker’s (1968) economic theory of crime, we identify the tax evasion component in foreign portfolio investment data by examining how foreign portfolio investment varies with changes in the incentives to evade and the risks of detection. To our knowledge, this is the first empirical evidence of investor-level tax evasion affecting cross-border investment in equity and debt markets.

Maps: Tax Indicators in Your County

April 11, 2014 Comments off

Maps: Tax Indicators in Your County
Source: Brookings Institution

Tax season is winding down, and many of us are scrambling to submit our returns to the IRS this week. But do you know how your tax return compares to others from around the country?

Earlier this year, Brookings released a series of interactive tax maps that break down major taxes and credits by individual U.S. county.

Tax Freedom Day® Arrives on April 21, 2014

April 10, 2014 Comments off

Tax Freedom Day® Arrives on April 21, 2014
Source: Tax Foundation

Tax Freedom Day, the day on which American’s have collectively earned enough income to pay off the total federal, state, and local tax bill, will arrive 111 days into the year on April 21, according to the annual report released this morning by the nonpartisan Tax Foundation.

While the national date arrives 6 days after the deadline for filing taxes, each state’s total federal, state, and local tax burden varies greatly. Louisiana’s Tax Freedom Day is the earliest and arrives on March 30, and is followed by Mississippi (Apr 2) and South Dakota (Apr 4). New Jersey and Connecticut are tied with the latest date on May 9 and they are preceded by New York (May 4).

The study’s key findings include:

  • Tax Freedom Day is three days later than last year due mainly to the continuing economic recovery, which will boost federal tax revenue collected through the corporate, payroll, and individual income tax.
  • Americans will spend more on taxes in 2014 than they will on food, clothing, and housing combined.
  • Americans will spend 42 days working to pay off income taxes, 15 days for excise taxes, and 11 days for property taxes. Click here for a full breakdown.
  • Americans will pay $3 trillion in federal taxes and $1.5 trillion in state and local taxes, for a total bill of more than $4.5 trillion, or 30.2 percent of the nation’s income.
  • If you include annual federal borrowing, which represents future taxes owed, Tax Freedom Day would occur on May 6, 15 days later.

See also: Tax Foundation Figures Do Not Represent Typical Households’ Tax Burdens (Center on Budget and Policy Priorities)

Millions of Dollars in Potentially Improper Claims for the Qualified Retirement Savings Contributions Credit Are Not Pursued

April 10, 2014 Comments off

Millions of Dollars in Potentially Improper Claims for the Qualified Retirement Savings Contributions Credit Are Not Pursued (PDF)
Source: Treasury Inspector General for Tax Administration

For Tax Year 2011, TIGTA determined that taxpayers potentially made approximately $53 million in improper claims for contributions made to a qualifying retirement account. Based on a comparison with third party data, these claims appear to be potentially either false or overstated. In the future, if the IRS identifies and addresses taxpayers who are potentially ineligible to receive the saver’s credit, it could recover approximately $264 million over five years.

CBO — Presentation on Raising the Excise Tax on Cigarettes: Effects on Health and the Federal Budget

April 9, 2014 Comments off

Presentation on Raising the Excise Tax on Cigarettes: Effects on Health and the Federal Budget
Source: Congressional Budget Office

Presentation by James Baumgardner, CBO’s Deputy Assistant Director for Health, Retirement, and Long-Term Analysis, to the 30th International Congress of Actuaries

State Government Tax Revenue Rises for Third Year in a Row, Census Bureau Reports

April 9, 2014 Comments off

State Government Tax Revenue Rises for Third Year in a Row, Census Bureau Reports
Source: U.S. Census Bureau

State government tax revenue increased by 6.1 percent from fiscal year 2012 to a record $846.2 billion in 2013, the U.S. Census Bureau reported today. The increase shows an upward trend in state government tax revenue for the third year in a row. From fiscal year 2010 to 2011, state government tax revenue increased by 7.3 percent; from fiscal year 2011 to 2012, the increase was 4.7 percent.

The 2013 Annual Survey of State Government Tax Collections, which has been collected annually since 1951, contains statistics on the tax collections of all 50 state governments, including receipts from compulsory fees.

New From the GAO

April 8, 2014 Comments off

New GAO Reports and Testimonies
Source: Government Accountability Office

Reports

1. Medicare: Second Year Update for CMS’s Durable Medical Equipment Competitive Bidding Program Round 1 Rebid. GAO-14-156, March 7.
http://www.gao.gov/products/GAO-14-156
Highlights - http://www.gao.gov/assets/670/661475.pdf

2. 2014 Annual Report: Additional Opportunities to Reduce Fragmentation, Overlap, and Duplication and Achieve Other Financial Benefits. GAO-14-343SP, April 8.
http://www.gao.gov/products/GAO-14-343SP
Podcast - http://www.gao.gov/multimedia/podcasts/662283

3. Aviation Safety: FAA Should Improve Usability of its Online Application System and Clarity of the Pilot’s Medical Form. GAO-14-330, April 8.
http://www.gao.gov/products/GAO-14-330
Highlights - http://www.gao.gov/assets/670/662388.pdf

4. Military Capabilities: Navy Should Reevaluate Its Plan to Decommission the USS Port Royal. GAO-14-336, April 8.
http://www.gao.gov/products/GAO-14-336
Highlights - http://www.gao.gov/assets/670/662377.pdf

5. Information Security: IRS Needs to Address Control Weaknesses That Place Financial and Taxpayer Data at Risk. GAO-14-405, April 8
http://www.gao.gov/products/GAO-14-405
Highlights - http://www.gao.gov/assets/670/662372.pdf
Podcast - http://www.gao.gov/multimedia/podcasts/662350

Testimonies

1. Paid Tax Return Preparers: In a Limited Study, Preparers Made Significant Errors, by James R. McTigue Jr., director, strategic issues, before the Senate Committee on Finance. GAO-14-467T, April 8.
http://www.gao.gov/products/GAO-14-467T
Highlights - http://www.gao.gov/assets/670/662357.pdf

2. Tobacco Products: FDA Spending and New Product Review Time Frames, by Marcia Crosse, director, health care, before the Subcommittee on Health, House Committee on Energy and Commerce. GAO-14-508T, April 8.
http://www.gao.gov/products/GAO-14-508T
Highlights - http://www.gao.gov/assets/670/662361.pdf

3. Government Efficiency and Effectiveness: Opportunities to Reduce Fragmentation, Overlap, and Duplication and Achieve Other Financial Benefits, by Gene L. Dodaro, Comptroller General of the United States, before the House Committee on Oversight and Government Reform. GAO-14-478T, April 8.
http://www.gao.gov/products/GAO-14-478T
Highlights - http://www.gao.gov/assets/670/662367.pdf

Can US Coordination Failure Explain Why Americans Work So Much More than Europeans?

April 4, 2014 Comments off

Can US Coordination Failure Explain Why Americans Work So Much More than Europeans? (PDF)
Source: Institute for the Study of Labor

Prescott (2004) argues that Europeans work much less than Americans because of higher taxes and that they would gain significantly by charging US taxes and working as much as Americans. I argue that the opposite may be true and that Americans work more than Europeans due to a coordination failure. Studies show that utility falls with other people’s income, a negative externality that is internalized in Europe through laws on the minimum amount of vacation time (and maximum hours of work), something unthinkable in the US. Thus, Americans may be stuck in an “overworking trap” and would gain by working less. A simple model and data on work time are used to obtain an estimate of the US welfare gain from reducing its work time to Europe’s level. On the other hand, if neither EU nor US work time is optimal, then the sign of the EU-to-US welfare difference is positive (ambiguous) if EU work time is greater (smaller) than the optimum, while simulations show that even in the latter case, EU welfare is greater than US welfare if, relative to the optimum, the EU work ‘shortage’ is smaller than the US work ‘surplus’.

New From the GAO

April 2, 2014 Comments off

New GAO Report and Testimonies
Source: Government Accountability Office

Report

1. Information Technology: IRS Needs to Improve the Reliability and Transparency of Reported Investment Information. GAO-14-298, April 2.
http://www.gao.gov/products/GAO-14-298
Highlights - http://www.gao.gov/assets/670/662231.pdf

Testimonies

1. Information Security: Federal Agencies Need to Enhance Responses to Data Breaches, by Gregory C. Wilshusen, director, information security issues, before the Senate Committee on Homeland Security and Governmental Affairs. GAO-14-487T, April 2.
http://www.gao.gov/products/GAO-14-487T
Highlights - http://www.gao.gov/assets/670/662228.pdf

2. Veterans’ Health Care: Oversight of Tissue Product Safety, by Marcia Crosse, director, health care, before the Subcommittee on Oversight and Investigations, House Committee on Veterans’ Affairs. GAO-14-463T, April 2.
http://www.gao.gov/products/GAO-14-463T
Highlights - http://www.gao.gov/assets/670/662225.pdf

3. Missile Defense: Mixed Progress in Achieving Acquisition Goals and Improving Accountability, by Cristina T. Chaplain, director, acquisition and sourcing management, before the Subcommittee on Strategic Forces, Senate Committee on Armed Services. GAO-14-481T, April 2.
http://www.gao.gov/products/GAO-14-481T
Highlights - http://www.gao.gov/assets/670/662252.pdf

Subcommittee exposes Caterpillar offshore profit shifting

April 2, 2014 Comments off

Subcommittee exposes Caterpillar offshore profit shifting
Source: U.S. Senate Permanent Subcommittee on Investigations

Caterpillar Inc., an American manufacturing icon, used a wholly owned Swiss affiliate to shift $8 billion in profits from the United States to Switzerland to take advantage of a special 4 to 6 percent corporate tax rate it negotiated with the Swiss government and defer or avoid paying $2.4 billion in U.S. taxes to date, a new report from Sen. Carl Levin, the chairman of the U.S. Senate Permanent Subcommittee on Investigations shows.

“Caterpillar is an American success story that produces phenomenal industrial machines, but it is also a member of the corporate profit-shifting club that has shifted billions of dollars in profits offshore to avoid paying U.S. taxes,” Levin said. “Caterpillar paid over $55 million for a Swiss tax strategy that has so far enabled it to avoid paying $2.4 billion in U.S. taxes. That tax strategy depends on the company making the case that its parts business is run out of Switzerland instead of the U.S. so it can justify sending 85 percent or more of the parts profits to Geneva. Well, I’m not buying that story.”

TIGTA — Millions of Dollars in Potentially Improper Self-Employed Retirement Plan Deductions Are Allowed

March 31, 2014 Comments off

Millions of Dollars in Potentially Improper Self-Employed Retirement Plan Deductions Are Allowed (PDF)
Source: Treasury Inspector General for Tax Administration

IMPACT ON TAXPAYERS
Self-employed taxpayers may deduct contributions that are made to their own Simplified Employee Pension (SEP) or other qualified retirement plan account on line 28 of their individual tax return under certain circumstances.

WHY TIGTA DID THE AUDIT
The overall objective was to determine whether the IRS’s controls and third‑party data are adequate to identify improper deductions for contributions made by self‑employed taxpayers to their own SEP plan retirement account.

WHAT TIGTA FOUND
This could be verified using information provided by taxpayers when individual tax returns are filed. If the IRS improves controls, it could prevent improper deductions and potentially protect $71 million in revenue over five years. In addition, TIGTA found that the IRS could better use third‑party data to detect potentially improper SEP deductions. For example, to be able to claim a SEP deduction on line 28 of Form 1040, self‑employed taxpayers must show net earnings on a self-employed business. If the IRS improves controls, it could detect improper deductions and potentially realize $29 million in revenue over five years.

WHAT TIGTA RECOMMENDED
TIGTA recommended that the IRS enhance controls to prevent and detect improper claims on line 28 and assess the need for additional third‑party data to verify line 28 deductions. In their response, IRS management disagreed with TIGTA’s conclusion…but they agreed that certain actions can be taken to improve existing processes. TIGTA does not believe that the IRS’s corrective actions are sufficient. This audit identified millions of dollars in potentially improper or fraudulent claims… TIGTA continues to believe that the IRS should consider additional controls to prevent or detect potentially improper retirement plan deductions.

CRS — The Mortgage Interest and Property Tax Deductions: Analysis and Options

March 31, 2014 Comments off

The Mortgage Interest and Property Tax Deductions: Analysis and Options (PDF)
Source: Congressional Research Service (via National Agricultural Law Center)

Concern has increased over the size and sustainability of the United States’ recent budget deficits and the country’s long-run budget outlook. This concern has brought the issues of the government’s revenue needs and fundamental tax reform to the forefront of congressional debates. Congress may choose to address these issues by reforming the set of tax benefits for homeowners. According to the Joint Committee on Taxation, federally provided tax benefits for homeowners will cost approximately $136.3 billion annually between 2014 and 2017. Reducing, modifying, or eliminating all or some of the current tax benefits for homeowners could raise a substantial amount of revenue, while simultaneously simplifying the tax code, increasing equity among taxpayers, and promoting economic efficiency.

This report focuses on the two largest federal tax benefits available to homeowners—the mortgage interest deduction and the deduction for state and local property taxes. While other tax benefits for homeowners exist, these two particular benefits are the most expensive in terms of forgone revenue to the federal government. Between 2014 and 2017 the mortgage interest deduction and property tax deduction are estimated to cost around $77.3 billion and $31.5 billion annually. Congress may therefore consider modifying these two tax benefits to raise revenue. The mortgage interest deduction and property tax deduction are also the two tax benefits proponents most often argue promote homeownership. Economists, however, have questioned this claim.

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