Category: taxes

It is difficult to tax only the rich…

…because to a large extent they can pass the taxes on. After all, they are rich because they have some sort of market power, something somebody needs. If we increase the cost of providing whatever it is that rich people provide, they will just charge more for it.

Today’s example involves overpaid corporate executives. They get various perks, such as country club memberships or free use of company airplanes by their spouses. They also get extra-generous severance agreements. Congress has passed special taxes on these things. Do corporate executives pay them? No, most companies make additional payments to cover the taxes, and further additional payments to cover the taxes on the additional payments.

Note these executives and corporations aren’t taking advantage of any special loopholes here.

Source: “Rules shine light on ‘gross-up’ gravy train” Chicago Tribune, May 2 2007. If the Tribune puts this AP article behind a paid archive screen in a few days, versions might still be here or here . Earlier, a similar article appeared here , and some time ago here.

Of course there is a tax that mainly hits the rich, and cannot be passed on.

Public ignorant about taxes

That’s my personal conclusion from the Tax Foundations latest opinion survey results.  Not entirely ignorant, to be sure, but people think that the most unfair tax most of us pay are gas taxes.  The only taxes considered less fair are  real estate taxes and the estate tax, which few ever pay.  And what’s most fair? taxes on beer, wine, and cigarettes, followed by payroll taxes and the corporate income tax.

Not only did the survey fail to distinguish between land taxes and improvement taxes, but it didn’t even consider taxes on gross receipts.

A little good news from New Orleans

Never know what you’ll find searching for news about “single tax.”  USA Today tells us that last November the voters of New Orleans approved consolidation of their seven(!) assessors into a single office.   Prior to the election, locals seemed to think it a good move for higher assessment quality and less corruption, though I can’t find any local post-election comment.  In fact, USA Today seems to have been the only source to cover this.

Real estate tax worse than any except the others

is the way the Manchester Union Leader puts it.

[P]roperty taxes.. are for the most part locally raised and locally spent. They are painful to raise, which is why politicians loathe them. They cannot raise them easily, because they are raising them from their neighbors. And those neighbors also see what is being doing with the money.

How much easier it would be for the politicians to have a broadbased sales or income tax! The tax would be raised from afar (Concord) and the monies it would bring in would be stupendously large. Think of what a savvy politician could do with such a huge new income source.

Remember, too, that the property tax, that “worst funding mechanism,” wouldn’t go away. As has happened in every state where income and/or sales taxes have been enacted, the property taxes continue to increase.

Of course, New Hampshire doesn’t tax retail sales or income,yet.  But the warning applies to us also.

Thanks to Mark Monson for the link.

Another sweet deal for farmland owners…

…and somehow the Tribune can’t see it. Today’s edition carries Jason George’s article Cashing in on the Hunt, noting that a lot of farmland is valuable for hunting. OK, it’s tough to make a living as a farmer, so farmers are getting from $25 to $50 per acre (in Pike County) for allowing hunters to use their land. So far, so good, this probably isn’t the best farmland anyhow. (George doesn’t clearly explain whether the same land can be farmed during the summer, then used for hunting in the late fall, but I believe that it can.)

A local farmer, who’s also a real estate agent, says that the revenue “really helps pay those real estate taxes.” It would make you think that real estate taxes are more than the hunting revenue. Not so. Correlating 2003 data from the Illinois Department of Revenue and the 2002 U S Census of Agriculture, Pike County farms pay less than $12/acre in real estate taxes, an effective rate of about 2/3 of 1% on value ($1840/acre). I bet Chicago-area homeowners, who pay two to three times this percentage of value (see this report), would love to have such a deal.

The Tribune, who in the past have done a good job of explaining how farmland owners profit from political favors, missed a chance to point it out.

Unfortunately, it is the custom of the Tribune to hide most of their articles behind a paid-subscriber screen after a week or so. I can’t find any other publications who carried this article, but it contains the phrase “whirring wings of pheasants” which might be useful in a future search.

Update on December 6: The Tribune link (above) still works!

What state spends the most public money on K-12 "education?"

According to the Census Bureau’s 2003-4 data, it’s Illinois. $2334 per capita, compared to a national average of $1623. Average salary of secondary school teachers, $61,800, is also the highest, but elementary school teachers struggle along on just $50,900. This is from table A-21 of the Bureau’s newly-released State and Metropolitan Area Data Book (very big pdf).

I’m expecting to spend way too much time browsing around this document, maybe I’ll have some other interesting things to post.

The surprise is that they're not 99%

The Tax Foundation says:

In 1996 the Congressional Budget Office reviewed a number of studies examining the efficiency losses associated with the corporate income tax and found that they probably exceed half of corporate receipts

If any profit-seeking corporation that I owned stock in missed an opportunity to save $1 in taxes by wasting 99c, I’d be a bit upset.

Come on, guys, this corporate income tax makes no sense, nor does any other kind of tax on productive labor.