Good Thinking by Congressional Republicans?

Govexec reports on the resignation of a Treasury tax expert, who apparently struggled with the job of writing regs to implement Trump's tax cut law.

But some parts of the law as drafted “were not well thought out,” Trier, a Treasury veteran from the 1980s and later a New York lawyer who consulted to congressional committees, was quoted as saying. Trier revealed that people looking at pieces of the new law sometimes asked him whether lawmakers could have reasonably meant to write it the way they did. “We’re going to have trouble with about half the legislation if we apply that standard,” he said, according to the Journal. 

Implementing a big bill is always difficult, but it sounds as if the GOP gave the bureaucrats a more difficult job than usual, a job likely to be complicated if Congress can't agree on passing a technical corrections bill to fix some of the problems. 

I wonder whether Treasury will be able to live with the 2 for 1 regulation mandate of the administration when implementing this?

Are High Tax Cities Doomed?

Conservatives and libertarians like to point to migration away from high tax locations like California and the Northeast to lower tax locations like Texas and the Sunbelt.  The implication is that high taxes in the long run doom a location/city to decline and doom.   In light of that I found this excerpt from an interesting  Jstor daily piece on the invention of street lighting by a Dutch painter to be interesting:

By 1670 Amsterdam boasted 1,800 street lamps, and by 1681 2,400 lamps. Adding all these lights was a colossal and expensive undertaking, and taxes in Amsterdam rose to pay for it. But seventeenth-century Amsterdam was already famous for its high municipal taxes. This new lighting system was so popular that cities across Holland, Europe, and eventually Japan, began to implement the same.

Republicans Favor Drunks?

Vox notes that the Senate tax bill cuts taxes on alcohol by 16 percent.

IMHO that's the wrong way to go.  Taxes should be raised, simply because alcohol is dangerous to society.  That's one principle the founding fathers believed in, witness the whiskey tax.

More on the IRS and Policing Nonprofit Groups

A long piece on the IRS and enforcing the legal provision that to be qualified for to receive contributions which are deductible the group must be mostly a social good group, not a  political action group.  It includes a chart, which I've copied (and thereby changed the formating) below:

Approved

Denied

2005

63,402

765

2006

66,262

1,283

2007

68,278

1,607

2008

65,761

1,221

2009

56,943

472

2010

48,934

500

2011

49,677

205

2012

45,029

123

2013

37,946

79

2014

94,365

67

2015

86,915

57

2016

79,545

37

Note the Obama administration rejected fewer groups than did the Bush administration.

Drum and the IRS Oversight Issue

Kevin Drum posts on the IRS oversight of nonprofits I visited earlier.

IRS Bureaucrats Did Some Things Right

According to a Politico report the IG, IRS bureaucrats applied heightened scrutiny to some liberal nonprofits on much the same basis as they did to conservative ones: looking at clues from their titles and connections.  The conventional wisdom, as I understand it, is this is wrong, wrong, wrong.  Every nonprofit should get the same amount of scrutiny, and using clues is akin to racial profiling.

This is the issue the Republicans made hay out of in the Obama administration, doing several Congressional investigations,  forcing Lois Lerner to retire, and calling for criminal prosecutions.  I didn't spend much time delving into the details, but I still want now to state two positions:

• if you don't have unlimited resources, it's good bureaucratic strategy to focus your efforts.  That's the theory Obama used in establishing DACA, and it applies for more than just prosecutorial  work. So to me it was perfectly rational for the IRS bureaucrats to devote more attention to groups linked to the Tea Party and to Acorn, than a nonprofit set up to fund local recreational facilities, for example.   I agree it would be bad if the bureaucrats showed a partisan bias, but based on the Politico report it seems they didn't.
• the problem, as it so often is, is Congress in writing a bad law, made worse by bad decisions in the past.  As I understand it, nonprofits can receive tax-exempt donations only if they're not "political ."  What does "political" mean--Congress didn't give a definition and IRS has in the past permitted "some" activity which would seem to a layman to be political, expanding more recently to be less than 50 percent.   That means IRS has to examine the nonprofit in depth, which requires resources, which gets back to the need to focus their attention.

Seems to me it would be better to  worry about interlocking directorates and size of the effort.  Go after the big boys.

McArdle on the Trump Tax Plan

Megan McArdle has a good post on the Trump tax plan outline. We would be hit by the loss of state tax deductibility, but that's okay with me, if only they'd reduce the cap on mortgage interest deductions.

Tax Reform Easier Than Obamacare Repeal?

Secretary of the Treasury Mnuchin is optimistic about getting tax reform done by August--he says:

""We're able to take the tax code and redesign things, and I think there is very, very strong support," he said. "I think in healthcare, it's [a] much, much more complicated issue, where you start out with ObamaCare, which had all these issues, and you're trying to kind of get rid of it and make changes simultaneously.""

Minority Leader Pelosi was talking "rookie day" yesterday, mocking the difficulties the Republicans were having with healthcare.  I'd call Mnuchin another "rookie", given his optimism.  I remember the problems Reagan had in the 1980's with his tax reform, back in the days when he had Sen. Bill Bradley and Rep. Danny Rostenkowski in Congress to get the necessary Democratic votes.  Even with those advantages there was a lot of cliff hanging and logrolling and the final package came up short of the initial promises.

Remember, while healthcare affects 1/6 of the economy, taxes affect the whole thing.
 

The Agency of Subjects of Regulation

"Agency" is a big buzz-word, has been for a number of years.  Typically in liberal and academic circles it means that people have minds and wills of their own, particularly the enslaved, the poor, the marginalized.  But it's also true when bureaucrats try to regulate behavior.  Often the picture in the bureaucrat's mind does not match the reality, or at least the picture in the mind of the person being regulated.  That's a truth often ignored in discussions.

It's particularly nice for a liberal to find this mistake occurring when conservatives/libertarians are the ones designing the regulations.  That's the case in Kansas, where governor Brownback has pushed tax reforms and cuts, intended to prove the old supply-side theory that less regulation and lower taxes will encourage growth and fill the government's coffers.  Jared Bernstein has this quote from a Wall Street Journal article (behind pay wall):

The WSJ piece points out that the number of entities taking advantage of this new loophole [not taxing small business income "passed through" to an individual] turned out to be 70 percent above the state’s projections.
Steve Moore, a key trickler that pushed the plan in Kansas, didn’t see that coming:
“Sometimes it was legitimate, and sometimes it was a gaming of the tax system to pay the zero rate, so that loophole has to be closed,” he said.  “Unless you have some rules about this, people really will shift income and they’ll find ways to legally avoid paying tax, and that was never the intention.”

Trump's Taxes

Kevin Drum as usual has a good post on the issue of how Trump handled his tax returns in the 90's, specifically how he avoided declaring forgiveness of debts as income.  I think I'm wrong in my comment on the post--this Trump issue occurred before the Republicans started hammering the IRS (in Congressional hearings during Clinton's second term).  So if the IRS accepted a dubious interpretation of law in the first term, it may reflect something other than badgering from Congress.

U.S. Being Subsidized by Asia

Two posts caught my eye:

• James Fallows at Atlantic on a follow-up post on Chinese education--an excerpt from a reader's comments:

First, the US college system is now deeply dependent on the sky-high tuition that international students pay; here at Purdue, it's often said that the international students are essentially subsidizing the in-state tuition for Indiana students. Many schools are massively dependent on international student dollars, and Chinese student dollars particularly -- which means we're massively exposed to fluctuations in the Chinese economy.

• The NYTimes reports that because of cuts in the National Parks Service budget, they're doing an appeal for contributions to the Korean War Memorial on the Mall, an appeal so far answered only by Korean businesses. 

Folks, this is pitiful.  I blame our politicians and ourselves: we need higher taxes to fund education and parks.

What Ticks Me Off--Taxes

What really gets me is all the politicians, particularly Republicans but Democrats too, who pontificate about the need for a simpler tax system.  When they're given a good idea which would ease the paperwork burden, be optional for the taxpayer, and save money, they allow the lobbying of special interests (i.e., Intuit) to kill the proposal.  See today's NYTimes--Mr. Manjoo picks up an idea Propublica.org has pushed for some time now (having IRS set up taxpayer accounts with the 1099/W2 data preloaded).


And don't get me started on the idea of cutting the appropriations for IRS. Don't go there.

The Return of the Schizophrenic Congress

The "Cromnibus" bill funding the government for FY15 is being worked on today.  As usual with big pieces of appropriations, there's some policy riders included, often riders which reverse or bar the agencies from doing what legislation says they should.  And there's cuts for the IRS, making it harder to enforce tax laws.  I'd call those Republicans who vote for the bill hypocrites if they also criticized Obama for failing to enforce immigration laws, but once we start identifying hypocrisy among Washington politicians we embark on a never-ending task. 

Latest Euphemism: "Sidestepped"

From a NYTimes article on Al Sharpton:

"Mr. Sharpton has regularly sidestepped the sorts of obligations most people see as inevitable, like taxes, rent and other bills. Records reviewed by The New York Times show more than $4.5 million in current state and federal tax liens against him and his for-profit businesses. And though he said in recent interviews that he was paying both down, his balance with the state, at least, has actually grown in recent years. His National Action Network appears to have been sustained for years by not paying federal payroll taxes on its employees.

I can't stand tax cheats--one of my first posts was on the subject (Richard Hatch).

What Low-Tax Advocates Gave Us

I like John Oliver.  Here he is on lotteries.  A factoid--the first (modern) public lottery was in New Hampshire in 1964, sold as a way to support education.  Now back in the day, NH was a low tax state, ruled by the editor of the Manchester newspaper, who was far right.  NH still doesn't have an income tax, although it's elected some Democrats recently.

Taxpayer Receipt

At the Whitehouse website you can put in the income tax and FICA taxes you pay and see where the money went.  I tried to embed it here, but the code didn't work for me.  I wrote the White House--will be interested to see what the result, if any, is. 

Anyhow, it's a useful idea--people when polled have little idea of how much money goes for each function in government.

Taxing CRP Payments

The title of this post at Sustainable Ag,  U.S. Tax Court: Federal Self-Employment Tax Applies to Non-Farmer’s CRP Payment,pretty well describes the content.

 It interests me because it involves determining that the owner of land in CRP is not automatically in the business of farming (assuming I understand it correctly).  The theory seems to be that while the owner is being compensated for activities required by the CRP contract, that's not farming but a business.

"Actively Engaged" Versus "Primary Activity"

Who has it worse--IRS or FSA employees?

Kevin Drum blogs about the problems IRS employees have in determining what "primary activity" means in regards to organizations who try to claim § 501(c)(4) status.  I sympathize, but I believe the controversy and unclarity over what is "actively engaged in farming" for payment limitation purposes trumps the IRS problem.  Come back to me in 28 years and we'll see whether IRS is still grappling with unclear rules.

(BTW, I've not blogged on the new farm bill versions, but it does seem that the Senate version revives last year's clarifications of what counts as actively engaged.  Now if I could only remember what they are, I could save some research.)

Richer Is Worser

From today's Farm Policy,an article discussing Rep. Noem of SD

The Register article explained that, “Noem, now 41, said people today planning to pass a farm operation on to a family member are in ‘a much worse position than we were back then’ because of the increase in land values.
“When Noem’s dad died in 1994, an acre of land in Hamlin County in the eastern part of the state sold for $650 to $800 an acre.
“Today, some of the same land is fetching $7,000 an acre.”

Estate Tax/Death Tax

I note a couple of items on the estate tax problem, as part of the fiscal cliff negotiations.  I'm struck by the fact it's now "estate tax", no longer the "death tax".  I don't know if that's just my limited sample, or the juice has gone out of the effort to stigmatize estate taxes.