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Entries in Taxes (142)

Tuesday
Nov272012

Small Business Owners Stand with President Obama on Taxes

Official White House Photo by Pete Souza(WASHINGTON) -- Small business owners emerged from the White House Tuesday confident that President Obama is committed to ending tax cuts for the wealthy and preserving tax breaks for the middle class as he works toward a deal to avert the “fiscal cliff.”
 
“What grows jobs in America are consumers spending money.  And the average person needs that two or three thousand dollars in his pocket to help drive the economy,” Lewis Prince, co-founder of the Vintage Vinyl record store in St. Louis, Mo., told reporters after his meeting with the president. “Saying that tax breaks for the rich drive consumers lower down to spend is like saying… you can start your car by pouring gasoline on the hood. There is nothing – this is no proof, there is no factual data to support it and it’s completely a sham to say that.”
 
The president met Tuesday with over a dozen entrepreneurs, the first in a series of outreach meetings he is holding this week as he makes the case for a “balanced” deal to reduce the deficit before the looming “fiscal cliff” of mandatory spending cuts and tax increases kicks in on Jan 1.  
 
“I was very encouraged by the meeting,” said Chris Yura, founder of SustainU, a sustainable clothing company in Morgantown, W. Va. “[The president] really delivered a message of confidence in moving forward with what I feel is the right direction to extend the [middle-class] tax cuts.”
 
“There was a lot of talk in the room about certainty,” reported Texas crop duster manufacturer David Ickert. “Small business wants certainty so they can plan, strategically look at how we move forward.”

Copyright 2012 ABC News Radio

Thursday
Nov082012

California Approves Higher Taxes to Save the State and Schools

iStockphoto/Thinkstock(SACRAMENTO, Calif.) -- With the state billions in the red, California voters on Tuesday passed Proposition 30 by about eight percentage points that both boosts the sales tax and puts heavier income taxes on the rich.

Gov. Jerry Brown hopes to generate at least $6 billion for the state, end college tuition hikes and halt the cuts to schools that include teacher lay-offs.

The governor, who will also have the benefit of a Democratic super majority in each legislative house, told reporters on Wednesday, "The real lesson here is that voters have trusted the elective representative...maybe even trusted me to some extent...and now we've got to meet that trust."

The income tax hikes will last seven years while the sale tax boost expires in four years.

Copyright 2012 ABC News Radio

Thursday
Oct252012

Economist Who Advises Romney: ‘Rich Are Taxed Enough’

David Paul Morris/Bloomberg via Getty Images(NEW YORK) -- “The rich are taxed enough,” argued Columbia Business School Dean Glenn Hubbard.

The man who The New York Times called Mitt Romney’s “go-to economist” and who is considered a leading candidate to be treasury secretary in a Republican administration made his case at a debate in New York Wednesday.

“Raising tax rates on the rich is both counter-productive and unnecessary to fund the government we want,” said Hubbard.

While steering clear of specifics, Hubbard told the audience at the Intelligence Squared Debate that “higher tax rates won’t necessarily produce enhancements in revenue.”

“We can and should achieve fairness and growth without taxing the rich more than they are today,” he said.

Hubbard’s somewhat dry tone was balanced by the passion of one of his debate opponents, former Labor Secretary Robert Reich.  Speaking against the notion “the rich are taxed enough,” Reich called the idea “absurd.”

“The rich have done extraordinarily well but the rest haven’t,” said Reich to audience applause.  “The percentage of total U.S. income of the top 1 percent has doubled in the past 30 years.  Given where we are now, we shouldn’t even have this debate.”

Hubbard opposed raising tax rates for the rich but added, “We need a progressive tax system.”

“The wealthy should pay a disproportionate share of taxes,” he said.

Hubbard and his debate team colleague, Arthur Laffer, spoke out for tax reform that would lower rates but also broaden the tax base.

“We need to think about growth and fairness.  Tax rates should not rise,” said Hubbard.

The United States already has one of the most progressive tax systems in the world, he argued.  Comparing the U.S. economy to a tall building, Hubbard said the “lower floors are flooded” while the people in the penthouse are doing well but “the elevator is broken.”

If the tax base were broadened with lower rates and tax reform, opportunity would be expanded and “we would get more revenues” to pay for the government, he said.

Copyright 2012 ABC News Radio

Tuesday
Oct092012

New Jersey No Longer Worst for Businesses

iStockphoto/Thinkstock(NEW YORK) -- The Tax Foundation, a non-profit conservative-leaning tax research group, is out Tuesday with its ranking of states most and least friendly to business. Gov. Chris Christie will be pleased to learn that New Jersey is no longer the most unfriendly for business -- neighboring New York has stolen that honor.

“The lesson is simple: a state that raises sufficient revenue without one of the major taxes will, all things being equal, have an advantage over those states that levy every tax in the state tax collector’s arsenal,” the foundation said on its website.

Topping the list of the 10 best states for business friendliness include:

  • Wyoming
  • South Dakota
  • Nevada
  • Alaska
  • Florida
  • Washington
  • New Hampshire
  • Montana
  • Texas
  • Utah

Generally these states did best, by the foundation’s reckoning, because they “do without one or more of the major taxes: the corporate tax, the individual income tax, or the sales tax.”

“Wyoming, Nevada, and South Dakota have no corporate or individual income tax; Alaska has no individual income or state-level sales tax; Florida has no individual income tax; and New Hampshire and Montana have no sales tax,” the group notes.

The 10 lowest-ranked, or worst, states in terms of business friendliness are:

  • Maryland
  • Iowa
  • Wisconsin
  • North Carolina
  • Minnesota
  • Rhode Island
  • Vermont
  • California
  • New Jersey
  • New York

New York landed at the bottom this year because of its higher individual income tax and near-worst unemployment insurance and property taxes.

Maine moved up the rankings because it repealed an alternative minimum tax. Michigan swapped out some business taxes and put in a flat six percent corporate income tax “that is largely free of special tax preferences,” the group said, moving the state up in the rankings.

The 2013 index is a picture of each state’s tax climate as of July 1, 2012.

Copyright 2012 ABC News Radio

Tuesday
Oct022012

Tax Policy Center Spells Out Repercussions of 'Fiscal Cliff'

Comstock/Thinkstock(NEW YORK) -- Watch out for the 'fiscal cliff.'  A new study forecasts that unless Congress acts, soaring taxes at the beginning of next year could blow a hole in your wallet.

The nonpartisan Tax Policy Center said on Monday that taxes would rise an average of $3,500 per household, thus slicing after-tax income by over 6 percent.

In other words, there'll be less money to spend, businesses will have to lay off staff and the country will likely experience another recession although not quite as bad as the previous one.

Still, no one wants that to happen but any action on Capitol Hill, which is deserted now because of the election season, won't happen until the proverbial lame duck session, if at all.

According to the Tax Policy Center, those at the top 1 percent of the pay scale will see taxes increase by a whopping $120,000 while those at the bottom will see an average of $412 in additional taxes.

Americans earning between $40,000 and $65,000 a year will pay an average of $2,000 more in taxes annually.

Overall, collective taxes will go up $536 billion in 2013.  Most of it has to do with the expiration of tax breaks passed in 2001 and 2003 as well as the payroll tax holiday that began in 2009 also ending.

The White House and Republicans have been at loggerheads over what to about the expiring tax cuts, with the GOP wanting to extend them for all Americans while President Obama and Democrats say that anyone earning $250,000 or more should pay more to help bring down the deficit.

Copyright 2012 ABC News Radio

Thursday
Aug162012

Taxpayers Subsidize CEO Pay, Report Says

Justin Sullivan/Getty Images(WASHINGTON) -- The Institute for Policy Studies, a self-described “progressive multi-issue think tank,” analyzed the link between tax loopholes and excessive executive compensation and concluded that the loopholes created an “uneven playing field” between large companies and small businesses and led to lost tax revenue.

The latest edition of the institute’s annual Executive Excess compensation study found that in 2011, 26 CEOs received more in compensation than their companies paid in taxes, and that the four major tax loopholes contributing to excessive executive pay cost taxpayers about $14.4 billion a year.

“The report is timely at a time when the tax debate is so intense in this country,” Sarah Anderson, the institute’s global economy project director and the report’s co-author, told ABC News.  "Some leaders are saying we need to reduce the corporate tax burden even more while major companies are taking advantage of loopholes to lower their tax bill."

The report critiqued the major tax loopholes, including the preferential treatment of “carried interest” income for hedge fund managers.  "Carried interest" income can be taxed as capital gains -- at 15 percent tops -- instead of at 35 percent, the top income tax rate. The Congressional Budget Office's projected estimate for “carried interest” income -- revenue from investment income or dividends -- for 2012 to 2021 was $21.4 billion.

Companies can deduct executive pay as a business expense, just as they do inventory and appreciation. Because of a tax rule enacted in the early 1990s that limited the amount of cash that could be deducted to $1 million, corporations have increasingly paid executives in stock options. Corporations can exempt stock option compensation, and other performance-based pay, from taxation.

William McBride, chief economist with the Tax Foundation, a conservative-leaning nonpartisan think tank, said this makes sense, because stock options are speculative compensation.

“They’re worth nothing unless they’re in the money,” McBride told ABC News. “It wouldn’t be fair to tax someone for getting paid an option that doesn’t have any real value until it has been exercised.”

Steven Balsam, an accounting professor at the Fox School of Business at Temple University, said from a business viewpoint, “it’s an expense, just like any other person’s salary.”

Others defend performance-based compensation for high-performing executives who have overseen companies with increasing earnings and stock prices.

Balsam said it was unlikely that boards would limit executive pay even if their pay was not tax deductible.

Anderson, who co-wrote the report, said that company boards that might choose to forfeit the deduction and continue paying high compensation packages “are stacked with executives from other firms that have a vested interest in maintaining the status quo.  

“However, we need to keep chipping away at the myth that massive payouts are necessary to attract talented managers,” she said. "Having a meaningful deductibility cap would send the right message, and at least taxpayers wouldn’t have to continue to subsidize excessive pay.”

The report points to the largest beneficiaries of the tax loopholes, saying they benefit the most from the unlimited tax deductibility of executive pay because their compensation has the largest proportion of deductible, performanced-based pay.

Oracle’s Larry Ellison, the sixth richest person in the world with a net worth of $36 billion, according to Forbes, tops the list, and is followed by Discovery Communications’ David Zaslav; Viacom’s Philippe Dauman; Motorola Mobility Holdings’ Sanjay Jha; and CBS Corp.’s  Leslie Moonves.

Neither Oracle, Discovery Communications, Viacom and Motorola Mobility Holdings returned calls requesting comment. A spokeswoman for CBS Corp. and a spokeswoman for Discovery declined to comment.

Copyright 2012 ABC News Radio

Tuesday
Aug142012

Paul Ryan's Budget Plan Could Raise Middle Class Taxes, Says Panel

Creatas/Thinkstock(NEW YORK) -- While Mitt Romney would reportedly pay less than 1 percent of his income in taxes under Paul Ryan's previous tax plan, most Americans making less than $200,000 would see a tax hike under the budget Ryan proposed before he was selected to be Romney's running mate.

Most of Romney's income is comprised of interest income, capital gains and dividends, which are not taxed under the plan Ryan first introduced in 2010.

Ryan proposed two tax rates, 10 and 25 percent, instead of the current 6 percent.

The House Republican budget for the 2013 fiscal year, passed by the House in June, would raise taxes by $1,358 for jointly-filing households earning between $50,000 and $100,000, assuming the additional income is taxed at a 10 percent rate, according to a report published earlier this summer by the Joint Economic Committee of Congress.

Households with incomes between $100,000 and $200,000 would see their taxes increase by $2,681, the Joint Economic Committee said.

Rep. Ryan's office did not return a request for comment.

The committee reported Ryan's budget plan would give the richest Americans -- those who make over $1 million -- a tax break of about $300,000.

According to the Center for Budget and Policy Priorities, Ryan's budget plan would make the Bush tax breaks permanent, including the extra tax cuts on taxable household income above $250,000, and would cut the top tax rate paid by the wealthiest Americans and the corporate income tax rate by nearly 30 percent.

Americans for Tax Fairness Action, a left-leaning political group, criticized Ryan for giving tax breaks to millionaires and ending the Medicare guarantee.

"The bottom line is that our tax system is rigged in favor of the wealthy and big corporations who play by their own set of rules," said Sean Crowley, communications director for Americans for Tax Fairness Action.  "The tax system is not working for most Americans.  The richest already get the biggest tax breaks.  It's not fair and we need to radically overhaul our tax system."

Copyright 2012 ABC News Radio

Thursday
Aug092012

‘The Price Is Right’ – but the Taxes Are Wrong

Frederick M. Brown/Getty Images(LOS ANGELES) -- Oh, happy day! You’re a contestant on a popular game show – The Price Is Right, let’s say. You spin the wheel, you make the winning bid, and suddenly – ka-ching! – you’ve won the Lexus or the dishwasher or the lifetime supply of nail clippers. Pretty swell, right?

From a tax standpoint, maybe not.

Consumerist.com gives the example of a Price is Right winner (name withheld) whose haul included a new truck, a washer and dryer, an Apple computer, a poker table and a trip to Washington, D.C.

On the social news site, Reddit, the man fielded questions from people wanting to know if there was any downside to winning.

There sure was: “I won $57,000-worth of items. I had to pay around $17,000 or $20,000 in taxes.”

Some winners, he said, decline to take their prizes because they don’t want to pay the taxes.

If winners had the option of taking cash, rather than the fridge or car, it would simplify paying Uncle Sam. But that’s possible only under certain circumstances, the Price Is Right winner said.

“We won an Apple computer, and Apple doesn’t ship their items, so we got the money,” he said.

He used the cash to pay taxes on his other items.

Melissa Labant of the American Institute of Certified Public Accounts told SmartMoney that winners have to pay state and federal taxes on their prizes, just as they would on any other income.

They file a return in the state in which they won – meaning, she says, usually New York or California. Then, they claim those taxes as a credit in their home state.

But there’s a catch, she said:  If your home state has a lower tax rate, you won’t get back the difference.

Another catch: You’re paying taxes on the item’s full retail value – in the case of a car, say, on the manufacturer’s suggested retail price, rather than on the discounted price a buyer on the open market might pay. Win a really big prize, and the income might be enough to lift you into a higher tax bracket, further increasing the cost of your good fortune.

The Price is Right guy cited another reason winners sometimes say, “No thanks.”

“One guy won a $10,000 cash prize and didn’t take it because he didn’t want to pay half to his ex-wife,” he said.

Copyright 2012 ABC News Radio

Wednesday
Aug012012

Sen. Rubio Introduces Bill to Eliminate Tax on Olympic Prizes

Chris Maddaloni/CQ Roll Cal(WASHINGTON) -- Sen. Marco Rubio, R-Fla., introduced a bill today in the Senate that would exempt U.S. Olympic medal winners from paying federal taxes on their medals and prize money earned in the Olympics.

“Our tax code is a complicated and burdensome mess that too often punishes success, and the tax imposed on Olympic medal winners is a classic example of this madness,” Rubio said in a paper statement today announcing his legislation.  “Athletes representing our nation overseas in the Olympics shouldn’t have to worry about an extra tax bill waiting for them back home.”

Under U.S. tax law, the athletes must add the value of their Olympic medals and prizes to their taxable income, and are taxed at a rate of 35 percent by the IRS.

Americans for Tax Reform found that the value of a gold medal is about $675, meaning that athlete could be on the hook for $236 extra tax burden.

Olympians who win medals also receive cash payments -- $25,000 for gold, $15,000 for silver and $10,000 for bronze. This taxable income could mean that Gold Medal winner could face a tax on the cash prize, in addition to the amount from the tax on their medal, at $8,750, according to the Americans for Tax Reform.

Rubio said athletes should not be punished in this way by their athletic achievement.

“We need a fundamental overhaul of our tax code, but we shouldn’t wait any time we have a chance to aggressively fix ridiculous tax laws like this tax on Olympians’ medals and prize money,” Rubio said.  “We can all agree that these Olympians who dedicate their lives to athletic excellence should not be punished when they achieve it.”

Rubio’s bill, if taken up and passed in Congress, would apply to awards won after Dec. 31, 2011.

The bill would amend the Internal Revenue Code of 1986 to eliminate the tax on Olympic medals and prize money won by United States athletes.  If enacted into law, the gross income of Olympic athletes “shall not include the value of any prize or award won by the taxpayer in athletic competition in the Olympic Games.”  

A copy of Rubio’s bill can be found here.

Copyright 2012 ABC News Radio

Sunday
Jul292012

US Consumers Refrain from Further Spending

Brand X Pictures/Thinkstock(NEW YORK) -- Because of limited job growth in America, consumers have cut back in spending reports Bloomberg.

In the second quarter, state and local governments have also slashed budgets. With looming U.S. tax changes and the European debt crisis in effect, the American economy is in a weary state.

Copyright 2012 ABC News Radio







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