Biden wants a 43.4% Capital Gains Tax

It will be over 55% if you live in NY, Calif. Inflation makes it worse, and can easily result in negative investment returns. Say inflation is 100% over 20 yrs & your house increases in price from $200K to $500K. At 55%, the capital gains tax is $165K. After tax return $135K, but you need at least a $200K return to cover inflation. So you are actually going to lose money on this investment. Even a 33% capital gains tax will mean that you make no return on your investment. From the WSJ:

The midday leak to the Biden-sympathetic Bloomberg News managed to tank stocks, with the S&P 500 falling the most in more than a month. Treasury yields also fell on the news, as investors discounted the prospects for growth. Nothing like higher taxes to take some of the bloom off the “Biden boom,” as Democrats are now calling the post-Covid economic recovery.

The leakers told Bloomberg that Mr. Biden will tax capital gains for taxpayers who earn more than $1 million at the personal income tax rate, which he also wants to raise to 39.6% from 37%. Add the 3.8% ObamaCare tax on investment, and you get to 43.4%. And that’s merely the federal rate. Add 13.3% in California and 11.85% in New York (plus 3.88% in New York City), which also tax capital gains as regular income, and you are heading toward the 60% rate range.

Who does the New York Times claims will benefit the most from the tax reform bill?

This is from an email that the New York Times sent out to people who had subscribed to its list.

Do you want to see what the House and Senate tax plans will mean for your tax bill? Try this neat calculator

If you would like to see what the House and Senate tax plans will mean for your tax bill, try a neat easy to use Tax Plan Calculator.  Click here.

Senator Chuck Schumer's views on corporate tax cuts, what a difference a year makes

From The Hill newspaper in April 2016:

Sen. Charles Schumer (D-N.Y.) on Tuesday said he is interested in working with other lawmakers to see if an agreement on international tax reform can be reached as soon as this year. 

“I’m game to do it because I think it’s really important for American competitiveness,” he said at a Senate Finance Committee hearing on business tax reform. . . .

Now he says: 

“The cut in the corporate rate would hardly help the everyday American worker. This is trickle-down. Our Republican colleagues don’t really talk about trickle-down, because they know most of America doesn’t believe in it. Our corporations are flush with cash already. They’re flush with cash. Giving them more cash? ”

On Fox Business to talk about tax cuts and the impact that they will have on investment in the US

Appearing on Fox Business.  Dr. John Lott says optimism over tax reform is boosting the markets.  He explains how money will US flood markets if we get tax cuts.

The problem with US corporate income taxes isn't just that we have the highest rates in the world, but that we make American companies pay that high rate on money that they earn in other countries

From Megan McArdle at Bloomberg View:

If you're writing about inversions, and you don't prominently mention global taxation in the first few paragraphs, then your article is not serious and anyone with even a smidgen of actual interest in the issue should stop reading. . . . 

The purpose of an inversion has never been, and never could be, and never will be, "ooh, Canada has a 15 percent tax rate, and the U.S. has a 35 percent tax rate, so we can save 20 points of taxes on all our income by moving." Instead the main purpose is always: "If we're incorporated in the U.S., we'll pay 35 percent taxes on our income in the U.S. and Canada and Mexico and Ireland and Bermuda and the Cayman Islands, but if we're incorporated in Canada, we'll pay 35 percent on our income in the U.S. but 15 percent in Canada and 30 percent in Mexico and 12.5 percent in Ireland and zero percent in Bermuda and zero percent in the Cayman Islands." . . .

People in low tax burden states like their states much better.

Gallup has an interesting survey asking residents of each state the "Best Possible state to live in" (column 2 on page 2).  Residents of Texas, Alaska, Hawaii and Montana are much more likely to believe that their states are the best places to live, while Connecticut, Illinois, and Rhode Island don't have many of their residents who like the state.  The differences are huge: 28% of Texans say that their state is the best to live in while only 3% of those living in Connecticut, Illinois, and Rhode Island say the same thing.  

The following graphs show that states with low tax burdens and high incomes have the happiest people. 

I also tried average temperature and whether there is a large body of water (ocean, great lake), but those don't add too much explanatory power.  More rainfall in a state seems related to lower levels of happiness.  Even when you run regressions you get similar results.  

Estate tax rate in New York State is as high as 164 percent

I suspect that there are a few more people who will be leaving New York.  From CNBC:

Certain estates could even wind up with a tax rate of 164 percent on portions of their estates, according to one tax expert. . . .  

On its face, the new law seems like tax relief. Under the previous law, New Yorkers paid estate taxes of 3.06 percent to 16 percent on the value of estates over $1 million. The new law raises that exclusion to $2.062 million this year and gradually increases it to more than $5 million by 2017. 

But because the law also phases out certain credits related to federal taxes, people who have estates valued just above the $2 million threshold could get massive estate tax bills. An analysis by U.S. Trust found that a New York resident who dies today with a taxable estate of $2,165,625 could have to pay an estate tax of over $112,050. That represents a tax of over 100 percent on the value of the estate over $2,062,000. 

It gets worse in a few years. Matz said that assuming that the exclusion rises to $5,250,000, a New Yorker with a taxable estate of $5,512,500 would have to pay an estate tax of $430,050. That's a marginal tax rate of 164 percent on the value of the estate above the exclusion. . . . .  

Matz, however, said the issue is not just a problem for the so-called rich. When you add up the value of property, pension plans, 401(k) plans and other assets, a New Yorker with just over $2 million in New York "is not exactly super rich. In a state with a high cost of living, that's not that unusual."

Who said that taxes don't affect behavior?: "ABBA wore outrageous outfits to avoid taxes"

The video from Fox News is available here.

Total gasoline taxes by state

ExxonMobile earned about 5.5 cents for every gallon of gasoline the company sold in the US in 2013.  The federal gasoline tax is 18.4 cents a gallon.  

"IRS refunded $4B to identity thieves," 655 tax refunds to a single Lithuania address

Don't red flags go off when 655 tax refunds are sent to a single address in Lithuania?  This gives one lots of confidence that government can run health insurance well.  From the Associated Press:

The Internal Revenue Service issued $4 billion in fraudulent tax refunds last year to people using stolen identities, with some of the money going to addresses in Bulgaria, Lithuania and Ireland, according to an inspector general's report released Thursday. 

The IRS sent a total of 655 tax refunds to a single address in Lithuania, and 343 refunds went to a lone address in Shanghai. 

In the U.S., more fraudulent returns went to Miami than any other city. Other top destinations were Chicago, Detroit, Atlanta and Houston. 

The IRS has stepped up efforts to fight identity theft, but thieves are getting more aggressive, said the report by J. Russell George, Treasury's inspector general for tax administration. Last year, the IRS stopped more than $12 billion in fraudulent refunds from going to identity thieves, compared with $8 billion the year before. 

"Identity theft continues to be a serious problem with devastating consequences for taxpayers and an enormous impact on tax administration," George said in a statement. The fraud "erodes taxpayer confidence in the federal tax system. . . .

How high US tax rates are causing companies to flee the country

There is a growing trend of US companies buying foreign companies and reincorporating overseas so a to reduce their tax burden.

The recent merger of California chip maker Applied Materials and Japanese company Tokyo Electron saved a lot of money by reincorporating in the Netherlands. From the New York Times:

. . . The merged company will save millions of dollars a year by moving — not to one side of the Pacific or the other, but by reincorporating in the Netherlands.  

When Applied Materials announced its deal for Tokyo Electron, it said that its effective tax rate would drop to 17 percent from 22 percent as a result. For a company that had nearly $2 billion in profit in 2011, that amounts to savings of about $100 million a year. 

Last year, the Eaton Corporation, a power management company from Cleveland, acquired Cooper Industries, based in Ireland, for $13 billion, and reincorporated there. The company expects to save $160 million a year as a result of the move. 

In July, Omnicom, the large New York advertising group, agreed to merge with Publicis Groupe, its French rival, in a $35 billion deal. The new company will be based in the Netherlands, resulting in savings of about $80 million a year. 

Also in July, Perrigo, a pharmaceutical company from Allegan, Mich., said it would acquire Elan, an Irish drug company, for $6.7 billion. Perrigo will also reincorporate in Ireland, bringing its effective tax rate to 17 percent from 30 percent, and saving the company an estimated $150 million a year, much of it in taxes. 

Ireland’s 12.5 percent corporate tax rate is a big draw for some companies. Earlier in the year, Actavis, based in Parsippany, N.J., bought Warner Chilcott, a drug maker with headquarters in Dublin, and said it would reincorporate in Ireland, leading to an estimated $150 million in savings over two years. 

“These companies are doing the math and seeing they can save a couple hundred million dollars by doing this,” said Martin A. Sullivan, chief economist at Tax Analysts, a nonprofit group that publishes analysis about global taxes. 

But the small fortunes saved by inverted companies amounts to billions in revenue not collected by Washington. . . .

The article has other examples:

Tyco went to Bermuda in 1997 to lower its tax bill. A year later, Fruit of the Loom moved to the Cayman Islands. And in 2001, Ingersoll-Rand reincorporated in Bermuda. . . . 

France: Trying to figure out a way of exempting soccer clubs from having to pay the 75% income tax for their best players

The UK telegraph has the back-and-forth on how to get around the tax for the soccer teams available here.  The funny thing is that everyone in France understands how the high tax will drive out the best soccer players, but they seem unwilling to accept that it will drive away the best businessmen.  

Pierre Moscovici spoke after warnings from the head of France'sprofessional football league, Frédéric Thiriez that the "crazy tax" would see France "lose its best players" and cost first division teams 182 million euros (£154 million).
"We are looking at different views on this issue, but it's true that we have football clubs which are in a fragile financial state," he said.
The 75 per cent tax – a key electoral promise of President François Hollande – has already sent several Gallic public figures, including star actor Gérard Depardieu, running for fiscal cover. . . .

Very liberal, pro-Democrat Google charged by Whistleblower with massive tax avoidance scheme

Google execs are among the biggest supporters of Obama and other Democrats who are constantly pushing for higher tax rates, but they have no problem break the law to avoid paying taxes themselves.  Google execs have also benefited greatly from Obama's stimulus dollars.  From the London Sunday Times:

A FORMER Google executive has blown the whistle on a massive and “immoral” tax avoidance scheme that has “cheated” British taxpayers out of hundreds of millions of pounds over the past decade. 

Barney Jones, 34, who worked for the internet search giant between 2002 and 2006, has lifted the lid on an elaborate structure which diverts British profits through Ireland to the Bermuda tax haven. 

Although Google’s London sales staff would negotiate and sign contracts with British customers, and cash was paid into a UK bank account, deals were technically booked through its Dublin office to minimise its liabilities here. Jones, a devout Christian and father of four, is ready to hand over a cache of more than 100,000 emails and documents to HM Revenue & Customs (HMRC), detailing the “concocted scheme”. . . .

More than 8,000 French households income tax rates topped 100%

And people are surprised that some of the wealthy are leaving France?  From Reuters:

More than 8,000 French households' tax bills topped 100 percent of their income last year, the business newspaper Les Echos reported on Saturday, citing Finance Ministry data. . . .
Les Echos reported that nearly 12,000 households paid taxes last year worth more than 75 percent of their 2011 revenues due to the exceptional levy. . . .

More evidence that taxes matter: Boxer takes Fight in Macau, U.S. Federal Income Tax Rate Proves Too High

Taxes forcing a fight to be outside the US.

Manny Pacquiao will look to break a two-fight losing streak when he returns to the ring on Nov. 24 (Nov. 23 in the U.S.) at The Venetian in Macau, China, to fight Brandon Rios in a 12-round welterweight bout, Pacquiao adviser Michael Koncz exclusively told Yahoo! Sports on Monday. . . . .

Here are some of the comments about their views on taxes.

Michael Koncz told Yahoo! Sports that the 39.6 percent tax rate Pacquiao would face if he were to fight again in the U.S. makes a fall bout in Las Vegas "a no go." . . . 

"Manny can go back to Las Vegas and make $25 million, but how much of it will he end up with – $15 million?" Arum said. "If he goes to Macau, perhaps his purse will only be $20 million, but he will get to keep it all, so he will be better off." . . .

Two figures from my book "At the Brink"

California retroactively increases taxes all the way back to 2008

I can understand why these businessmen thought that their accounts had misread the tax law.  This is just too unbelievable.  What do you think that this will do to people's willingness to invest in California in the future?  From The Hill newspaper:

The state’s tax officials have announced that they are retroactively canceling a tax incentive for startup companies in the state, and now presenting those companies with tax bills that date back to 2008 – plus interest. 

If that sounds like a declaration of war on entrepreneurs in the Golden State, you wouldn’t be far off as far as Brian Overstreet is concerned. 

Overstreet is the tech entrepreneur widely credited with having broken the story on a holiday season decision by the California Franchise Tax Board (FTB) to retroactively rescind a tax program that had incentivized companies to stay and grow in the state. The FTB about face was driven by a court decision that said the tax incentive was inappropriately granted only to companies with 80% of their assets in California. . . .  

“If you followed the law, did nothing wrong, and created jobs in California, you received a legal reduction in the state tax on capital gains you paid when you sold your company.” Overstreet explained to me. “Now, five years later, you get a bill for new taxes plus interest for up to five years.” . . .

Apple might have $145 Billion in cash, but tax laws are forcing it to borrow money

Apple has huge amounts of cash, but they can't get at the money without paying a large tax penalty.  So the tax law is forcing Apple to borrow a large amount of money that it shouldn't have to borrow.  From Buzzfeed:

The most interesting part of Apple's earnings report wasn't its $43.6 billion in revenue or $9.5 billion in net profit. Nor was it the 37.4 million iPhones and 19.5 million iPads sold over the last three months. It was the fact that, despite having just under $145 billion in cash and short-term marketable securities on its balance sheet, the company plans to borrow money by issuing debt for the first time in its history. 

Apple did not specify how much it planned to borrow, saying only that it "expects to announce more details about this in the near future." Sure, the company needs to find money to fund the extra $50 billion it plans to spend on share buybacks by 2015, which at a total of $60 billion makes it the largest single share repurchase program in corporate history. It also needs more money for its 15% dividend increase to $3.05 per share. . . . 

"Seventy percent of Apple's cash is overseas and would be taxed if they brought it home to buyback stock," said BTIG analyst Walter Piecyk. . . .

Politico: "Using sales taxes as a gun control tool"

I recently made the same argument in an op-ed for Fox News.  These taxes are just a way to reduce gun ownership.

State and local officials are pushing a new way to expand gun control: taxes. 

Gun owners in and around Chicago last week started paying a new $25 tax on every firearm they purchase. In California, a statehouse panel on April 15 will hear testimony on a nickel-per-bullet tax measure, and in New Jersey, lawmakers want to slap an additional 5 percent sales tax on guns and ammo. 

The effort to impose new taxes on guns and bullets faces serious opposition from pro-gun groups, but it shows how far some states and localities are willing to go in this new frontier on gun control — especially as Washington struggles to find consensus even on the most scaled-back gun proposals being debated in Congress. . . .  

Gun Owners of America legislative counsel Michael Hammond called gun taxes “an effort to say the poor can’t own firearms because we’re going to impose a tax which they can’t afford to pay.” . . .