Okay, it’s not quite Tax Day yet but if I don’t post this now then I’m likely to forget.
John Scalzi in 2010, Tax Frenzies and How to Hose Them Down:
A question in e-mail based on all the recent “rich people feeling not rich” nonsense, and the associated commentary online:
Why is it that the people freaking out the most about taxes on the rich are the ones who don’t seem to know how the tax code works?
The answer is in the question: Because they don’t know how the tax code works. The major failing seems to be an incomprehension regarding marginal tax rates, but people also seem to fall down on the matter of taxable income vs. gross income (i.e. how deductions can work for you!), how to apply tax credits, and other various and fairly basic aspects of the tax code here in the US.
If you don’t know that stuff — if you basically wander through your life thinking the government taxes all of your income based on the highest possible percentage — then I suppose it’s no wonder you freak out. But it also kind of makes you the financial equivalent of the people who think that Darwin said we are all descended from monkeys, or that the Bible says “God helps those who help themselves.” In short, it means you’re a bit ignorant. You should stop being that. It’s easily correctable. In any event, at some point in time, real live grown-ups should understand the concept of marginal rates. It’s not that difficult to grasp.
His whole post is worth reading but I particularly enjoyed this paragraph. John Scalzi (via Brad DeLong):
I really don’t know what you do about the “taxes are theft” crowd, except possibly enter a gambling pool regarding just how long after their no-tax utopia comes true that their generally white, generally entitled, generally soft and pudgy asses are turned into thin strips of Objectivist Jerky by the sort of pitiless sociopath who is actually prepped and ready to live in the world that logically follows these people’s fondest desires. Sorry, guys. I know you all thought you were going to be one of those paying a nickel for your cigarettes in Galt Gulch. That’ll be a fine last thought for you as the starving remnants of the society of takers closes in with their flensing tools.
(The rest of the post is much more sedate. The bottom line is that he recommends you hire an accountant to do your taxes.)
Chye-Ching Huang, Starbucks’ UK Tax Dodge Highlights Flaws of Territorial Taxation:
U.S.-based multinational corporations that are lobbying Congress to adopt a “territorial” tax system, which would cut their taxes on foreign profits to zero or a very low rate, often note that many other developed countries have such systems. But those countries are a warning, not a model, as a great new analysis by former Joint Tax Committee Chief of Staff (and now University of Southern California Law School Professor) Edward Kleinbard shows.
The United Kingdom has a territorial system, so it generally only taxes profits that a corporation earns in the UK. UK policymakers and citizens have been outraged to learn that Starbucks UK, despite capturing nearly a third of the UK coffee market in 2011, paid no corporate tax in 2011 (or in 12 of the 13 years before that).
How did Starbucks UK do it? By claiming big losses instead of big (taxable) profits.
Read the her full post for additional detail.
Fiscal Cliff Deal
I Do Not Understand the Obama Administration, Brad DeLong.
The big reason to make a deal before January 1, 2013 was that detonating the “austerity bomb” would impose 3.5% of fiscal contraction on the U.S. economy in 2013, and send the U.S. into renewed recession. It was worth making a good-enough deal–sensible long-run revenue increases and tax cuts to close the long-run fiscal gap plus enough short-term fiscal stimulus to make the net fiscal impetus +1.0% of GDP–in order to avoid renewed recession.
Conservative Republican Bruce Barlett argues that zero taxation is not the ideal state of nature. (Barlett is old school in that he is both
deeply a committed conservative and also reality-based. Don’t see too much of that nowadays.)