Summary of “The IRS Tried to Take on the Ultrawealthy. It Didn’t Go Well.”

In 2009, the IRS had formed a crack team of specialists to unravel the tax dodges of the ultrawealthy.
The IRS commissioner aimed to stanch the country’s losses with what he proclaimed would be “a game-changing strategy.” In short order, Charles Rettig, then a high-powered tax lawyer and today President Donald Trump’s IRS commissioner, warned that the squad was conducting “The audits from hell.” If Trump were being audited, Rettig wrote during the presidential campaign, this is the elite team that would do it.
How did a case that consumed so many years of effort, with a team of its finest experts working on a signature mission, produce such a piddling result for the IRS? The Schaeffler case offers a rare window into just how challenging it is to take on the ultrawealthy.
Because the audits are private – IRS officials can go to prison if they divulge taxpayer information – details of the often epic paper battles between the rich and the tax collectors are sparse, with little in the public record.
The billionaire’s lawyers and accountants first crafted a transaction of unusual complexity, one so novel that they acknowledged, even as they planned it, that it was likely to be challenged by the IRS. Then Schaeffler deployed teams of professionals to battle the IRS on multiple fronts.
The IRS came to realize it was not properly auditing the ultrawealthy.
“The IRS felt a transaction was suspect but couldn’t figure out why, so it would raise an issue and we’d whack it and they would raise another and we’d whack it. The IRS was ill-equipped.”
Today, the IRS often refers to its work as “Customer service.” One result of constant congressional scrutiny is that senior IRS officials are willing to meet with top tax lawyers and address their concerns.

The orginal article.

Summary of “Where in the U.S. Are You Most Likely to Be Audited by the IRS?”

As we reported last year, the IRS audits EITC recipients at higher rates than all but the richest Americans, a response to pressure from congressional Republicans to root out incorrect payments of the credit.
Because more than a third of all audits are of EITC recipients, the number of audits in each county is largely a reflection of how many taxpayers there claimed the credit, he found.
In counties with the highest audit rates, there were about 11 audits per 1,000 tax returns filed each year, he found, which is more than 40 percent above the national average.
The five counties with the highest audit rates are all predominantly African American, rural counties in the Deep South.
Generally, the IRS audits taxpayers with household income between $50,000 and $100,000 the least.
In an email, an IRS spokesperson said that tax returns are selected for audit without regard to race or where the taxpayer lives.
The IRS does sponsor a program to provide free legal help to low-income taxpayers, but in Mississippi, the state with the highest audit rate in the country, there is only one attorney for the program.
Congress, she said, “Must ensure that the IRS initiates and executes audits in a fair and impartial manner.”

The orginal article.

Summary of “Amazon federal taxes: how the company’s corporate tax bill was $0”

Amazon’s founder is America’s richest person, but the company paid no corporate income tax last year.
For starters, Jeff Bezos is rich because of the value of Amazon stock, but for years, Wall Street loved the company even though it was a curiously unprofitable retail and technology giant.
The company paid $0 in corporate income tax last year, according to an analysis from the Institute on Taxation and Economic Policy, an astonishing figure that generated dozens of news stories last week.
A big part of the story here is the tax treatment of stock-based compensation, which has the slightly odd feature that the more successful your company becomes, the lower your tax bill becomes.
Amazon’s three tricks for reducing its taxes An interesting thing to note here is that Amazon isn’t lowering its tax bill through classic technology company shenanigans like stashing profits in offshore subsidiaries or declaring itself to be a foreign company.
Some of that is because Amazon is able to avail itself of the research and development tax credit, a not-very-controversial policy that encourages profitable companies to plow earnings into R&D. Congress routinely extends this on a bipartisan basis, with the thinking that research into innovation is good, and Amazon is obviously a company that does a fair amount of R&D. The second reason is that the Trump tax bill included a temporary provision allowing companies to take a 100 percent tax deduction for investment in equipment.
More broadly, when Democrats complain that companies are plowing too much of their profits into share buybacks rather than investing, they are in effect saying they wished more companies acted like Amazon – which does not do any share buybacks and does invest a lot – and this provision of the Trump tax bill encourages companies to do this.
Normally, while companies pay sales taxes to state and local governments, the federal government taxes them on their profits.

The orginal article.

Summary of “Don’t Worry About a Recession. Yet.”

Doug Holtz-Eakin, the president of the conservative American Action Forum and a former top economic adviser to George W. Bush and John McCain, told me he hasn’t yet come up with a story to reconcile the contradictory data because it’s early yet.
Thanks to a variety of tax credits and a significant tax break available on pay handed out in the form of company stock, Amazon actually received a federal tax rebate of $129 million last year, giving it an effective federal tax rate of roughly -1 percent.
For Amazon, the most lucrative of those was a tax break for pay given out in the form of stock options, which allowed the company to shave roughly $1 billion off its 2018 tax bill, said.
Previous ITEP analysis has shown that between 2008 and 2015, profitable Fortune 500 companies paid an average effective federal tax rate of 21.2 percent, well under the statutory 35 percent rate in effect in that period.
One hundred of the companies had paid zero or negative tax in at least one profitable year, and 58 of them had multiple zero-tax years while being profitable.
Gov. Phil Murphy and state legislative leaders have reached a deal in principle on how to tax and regulate marijuana in New Jersey after months of negotiations, paving the way to bringing legal weed to the Garden State.
Multiple legislative and industry sources confirmed an agreement was in place on a bill that would tax marijuana by the ounce, rather than the contentious sales tax that had divided Murphy and state Senate President Stephen Sweeney.
The defendant stands convicted of the serious crimes of tax fraud, bank fraud, and failing to file a foreign bank account report.

The orginal article.

Summary of “Soak the rich? Americans say go for it”

Surveys are showing overwhelming support for raising taxes on top earners, including a new POLITICO/Morning Consult poll released Monday that found 76 percent of registered voters believe the wealthiest Americans should pay more in taxes.
A recent Fox News survey showed that 70 percent of Americans favor raising taxes on those earning over $10 million – including 54 percent of Republicans.
A plan from first-term Rep. Alexandria Ocasio-Cortez to slap a 70 percent marginal rate on income earned over $10 million clocked in at 59 percent support in a recent Hill/HarrisX poll.
The new POLITICO/Morning Consult poll, conducted Feb. 1-2, found that 61 percent favor a proposal like the “Wealth tax” recently laid out by Sen. Elizabeth Warren that would levy a 2 percent tax on those with a net worth over $50 million and 3 percent on those worth over $1 billion.
Historical trend data from Gallup show that the percentage of people describing their taxes as too high peaked around 1970 at 69 percent when the top marginal rate was around 70 percent, though the effective rate after deductions and other tax-avoidance strategies was much lower.
Last year, 48 percent described their own taxes as “About right” compared with 45 percent who said they were “Too high,” helping lay the groundwork for Democratic proposals to raise top marginal rates and institute things like a wealth tax to help pay for big, expensive proposals like a “Green New Deal” or “Medicare for All.”.
The latest POLITICO/Morning Consult poll found that 33 percent said the bill helped the economy, 41 percent said it hurt or made no difference and 25 percent said they didn’t know or had no opinion.
Using “Effective tax rates” calculated by the CBO, he said the percentage of income paid by the top 1 percent of earners right now is not much different than it was in the 1970s.

The orginal article.

Summary of “Trump tax bill and refunds: why fewer people are getting them”

The new tax law does result in some people paying higher taxes, but the specific issue here is tax refunds rather than total taxes paid.
That’s because it’s a lot easier for the government to pay out refunds to people who overwithheld than to run around trying to collect cash from people who underwithheld.
How the tax law changed withholding The 2017 Tax Cuts and Jobs Act was largely focused on reducing taxes for rich business owners.
People who are stand to inherit multi-million dollar estates got an enormous tax cut, as did people who own “Small” businesses that generate millions of dollars in annual profits.
Then to compensate for these lost tax deductions, the Child Tax Credit got more generous and was also given to richer people and the standard deduction got much bigger.
The change is that fewer taxpayers should be overwithholding and more should be under withholding – in other words, fewer people will get a refund and more people will be asked to pay up.
By switching to a new system in which fewer people get refunds and more people owe extra money, they will be achieving a more balanced result.
They are now facing a backlash from an angry public that includes millions of people who were expecting tax refunds that they are now not going to get.

The orginal article.

Summary of “Hollywood Stars Didn’t Pay 90 Percent Tax; They Created Loopholes”

SHARE THIS ARTICLE. After Representative Alexandria Ocasio-Cortez raised the idea of a marginal tax rate of 70 percent on income over $10 million, the progressive wing of the Twittersphere began pointing out that in the 1950s and early 1960s , the top marginal tax rate was over 90 percent.
According to records compiled by the Tax Foundation, a single person making $16,000 in 1955 – that’s $150,000 in today’s dollars – had a marginal tax rate of 50 percent; compensation of $50,000 moved you into the 75 percent tax bracket; and an income of $200,000 put you in the 91 percent tax bracket.
They found – or created – enough loopholes that, according to the Congressional Research Service, the top 0.01 percent in the 1950s paid not 90 percent but closer to 45 percent of their income in taxes.
Prior to the Tax Reform Act of 1986, the tax code was full of loopholes that individuals could take advantage of.
As one oil expert put it at the time, “If you are in the 90 percent tax bracket, you are risking only 10 cents on the dollar spent on unsuccessful ventures.” In effect, Hollywood was providing the capital oilmen needed to drill wells.
The collapsible corporation was the other tax loophole Hollywood stars relied on.
Why? Because the corporate tax rate was around 50 percent rather than 90 percent.
Some stars would sell stock in their corporation to the movie company, so they could take their fee in the form of capital gains, which had a maximum tax rate of only 25 percent.

The orginal article.

Summary of “This Cartoon Explains How the Rich Got Rich and the Poor Got Poor”

Since the 1970s, we’ve significantly reduced how much we tax investment income.
The most we’ve taxed investment income is about 40 percent.
Until 2013, the most investment income could be taxed was 15 percent.
Keep in mind that, if you’re filing as a single person, your salary and wages starting at $38,000 are taxed at 25 percent – and from there the rates only go up.
Since it’s the rich who made more and more money on investments, taxing investments less helped them a lot.
The below chart shows how effective tax rates have changed.
Even though we have a relatively progressive tax system, we now have some of the lowest tax rates in decades.
Low tax rates mean the US collects less revenue – and can transfer fewer resources back to taxpayers.

The orginal article.

Summary of “Three Things I Learned From My Estate Planning Lawyer Everyone Should Do”

My estate planning lawyer said something interesting before I decided to hire her.
Based on history, you can see from the chart that currently, we are at the highest estate tax exemption with the lowest death tax rate since 1997.
It may be logical to assume a continued increase in the estate tax exemption and a continued decrease in the estate tax rate given the 22-year trend.
It is also reasonable to anticipate an estate tax exemption decline and/or estate tax rate increase after the Tax Cut And Jobs Act expires in 2025.
Would you rather pay a $4,000,000 tax bill or spend more money on yourself and loved ones? If there is a high likelihood your estate will be worth more than the lifetime tax exemption amount, it seems obviously better to utilize your wealth while living, rather than after death.
If the estate tax exemption amount decreases or the death tax rate increases or both, then there’s even more reason to spend your money now while living.
My estate planning lawyer really opened my eyes to how overly frugal I am.
For those of you who’ve gone through the estate planning process, what else did you learn about yourself and about estate planning laws? Why do people hoard so much more than the estate tax exemption amounts? Wouldn’t it be better to spend and give while alive than after death?

The orginal article.

Summary of “How the IRS Was Gutted”

The IRS Budget Has Declined 20102017$14B$12B. Had the billions in budget reductions occurred all at once, with tens of thousands of auditors, collectors and customer service representatives streaming out of government buildings in a single day, the collapse of the IRS might have gotten more attention.
Under continued pressure from Republicans, the IRS has long made a priority of auditing people who receive that money, and as the IRS has shrunk, those audits have consumed even more resources, accounting for 36 percent of audits last year.
The first bill introduced by House Republicans in 2011 was a budget that slashed funding across the government and took special aim at the IRS. In addition to calling for a cut to its budget of $600 million, the bill prohibited the IRS from using any of its funding to carry out key parts of the Affordable Care Act.
Inspector general reports later pointed out that the IRS division that oversaw tax-exempt organizations had also targeted progressive groups and concluded that the IRS had taken prompt action to address the previously identified problems in the nonprofit unit.
“We deliberately lowered the IRS funding to a level that would make the IRS think twice about what you are doing and why you are doing it,” Crenshaw told Koskinen in a hearing, “Because you don’t have a single dime to spare on anything frivolous or foolhardy or even mediocre.”
It’s a decision that everyone who works at the IRS has to make: How will you respond when someone asks, “So what do you do?” Answer forthrightly, and you’re bound to be met with either iciness or open hostility.
Over her 30-year career, Pam Reicks, the former IRS manager, adopted a solution that’s common for IRS lifers.
Reicks’ new job, as a senior manager in the offshore program, was to help the IRS figure out how many of those people it could audit.

The orginal article.