Category: Taxes

Would You Like a Nice Cup of Shut the F%$# Up with Your Outrage?

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After months of outrage the Obama administration has finally taking action againat the tax dobbed known as “Corporate Inversion”, and accoording to FT, this is provoking a, “foreign fury.”

Cry me a f%$#ing river:

A White House tax crackdown designed to put a halt to Pfizer’s planned $160bn takeover of Allergan has provoked fury from foreign multinationals with operations in the US.

Barack Obama stepped up the offensive on Tuesday championing new proposals to deter “inversion” deals — such as Pfizer-Allergan — that companies use to move to low-tax jurisdictions, accusing them of exploiting “one of the most insidious tax loopholes out there”.

Multinationals responded by saying they were being unfairly caught in the crossfire of Mr Obama’s campaign as their operations in the US could also be affected by the new rules.

The angry rhetoric came a day after the Treasury department released new proposals which threatened the biggest planned inversion to date — Pfizer’s takeover of Irish-domiciled Allergan — and triggered big losses for some hedge funds, such as Paulson & Co and Third Point.

“It came as a total surprise. Everyone thought the Treasury had used all their firepower,” said one hedge fund manager.

………

The Treasury’s latest moves would make inversions less lucrative by eliminating a tax benefit for “abusive” inverters. But its plan would also deny the benefit to foreign companies with US operations.

“Rather than using a scalpel to deal with this issue they are using a machete,” said Nancy McLernon, president of the Organisation for International Investment, a trade group for foreign companies in the US.

“It’s a misguided approach. They’re trying to go after those companies that are doing something they think is problematic and carelessly hitting a whole class of employers.”

The tax benefit stems from companies’ use of internal loans to cut their tax bills. By loading up US subsidiaries with debt from head office, foreign companies can deduct the interest payments from their US tax bills — a practice called earnings stripping.

Here is my response to the aggrieved tax dodgers:

The fact that you have been able to skate on corporate taxes for the past few decades do not give you the right to continue stealing from the rest of us.

Pass the Popcorn

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It appears that someone has hacked into the files of Panamanian law firm Mossack Fonseca, and found a treasure trove of evidence of international corruption:

A massive leak of documents has blown open a window on the vast, murky world of shell companies, providing an extraordinary look at how the wealthy and powerful conceal their money.

Twelve current and former world leaders maintain offshore shell companies. Close friends of Russian leader Vladimir Putin have funneled as much as $2 billion through banks and offshore companies.

Those exposed in the leak include the prime ministers of Iceland and Pakistan, an alleged bagman for Syrian President Bashar Assad, a close pal of Mexican President Enrique Peña Nieto and companies linked to the family of Chinese President Xi Jinping.

Add to those the monarchs of Saudi Arabia and Morocco, enough Middle Eastern royalty to fill a palace, honchos in the troubled body known as FIFA that controls international soccer and 29 billionaires featured in Forbes Magazine’s list of the world’s 500 richest people.

Also mentioned are 61 relatives and associates of current country leaders, and another 128 current or former politicians and public officials.

The documents within the leak also expose how secretive offshore companies at times subvert U.S. foreign policy and mock U.S. regulators. When drug traffickers, money launderers or other crooks control companies, they undermine national security, and the trail of dark money flowing through them strips national treasuries everywhere of tax revenues.

………


The firm is one of the world’s top five creators of shell companies, which can have legitimate business uses, but can also be used to dodge taxes and launder money.

More than 11.5 million emails, financial spreadsheets, client records, passports and corporate registries were obtained in the leak, which was delivered to the Süddeutsche Zeitung newspaper in Munich, Germany. In turn, the newspaper shared the data with the Washington-based International Consortium of Investigative Journalists (ICIJ).

It would be nice if we actually saw some action by they criminal and tax authorities in response to the leaks, but I doubt it.

A Tory With a Conscience, and Other Myths

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Iain Duncan Smith, the British Work and Pensions Secretary,  has resigned over cuts to disability payments to the UK’s most vulnerable:

Iain Duncan Smith has resigned as work and pensions secretary, denouncing £4bn of planned cuts to disability benefits as “indefensible”.

He complains of pressure to “salami slice” welfare, saying the latest cuts were a “compromise too far” in a Budget that benefits higher earning taxpayers.

David Cameron said he was “puzzled and disappointed” at the resignation.

Earlier, the government had indicated it would look again at some of the proposed disability benefits changes.

‘Enormous regret’

BBC political editor Laura Kuenssberg said: “There had been bad blood off and on between Chancellor George Osborne and Iain Duncan Smith over some of the more controversial welfare reforms, but nobody expected this move only 48 hours since the Budget.”

She added that she understood Mr Cameron had personally tried to persuade Mr Duncan Smith to stay on and called the resignation “a bombshell at a very sensitive time”
………
Mr Duncan Smith, who was the Conservative Party leader and Leader of the Opposition from 2001 to 2003, wrote in his resignation letter that the changes to disability benefits were “defensible in narrow terms, given the continuing deficit”.

But he said they should have formed part of “a wider process” of finding the best way to focus resources on those most in need.

“I am unable to watch passively whilst certain policies are enacted in order to meet the fiscal self-imposed restraints that I believe are more and more perceived as distinctly political rather than in the national economic interest,” Mr Duncan Smith said.

“Too often my team and I have been pressured in the immediate run up to a Budget or fiscal event to deliver yet more reductions to the working-age benefit bill.

“There has been too much emphasis on money-saving exercises and not enough awareness from the Treasury, in particular, that the government’s vision of a new welfare-to-work system could not be repeatedly salami-sliced.

“It is therefore with enormous regret that I have decided to resign.”

………

Over the weekend Iain Duncan Smith discovered the Chancellor planned to offer cuts in Capital Gains Tax and was very unhappy that those tax cuts were to be offered to the better off, while he had been forced to make more welfare cuts prematurely, in his view. When Number 10 and the Treasury then backtracked on the reforms to PIP today, he concluded that he could no longer remain in government.

Sources close to him are absolutely adamant that his decision was in no way related to his views on Europe.

Smith supports a Brexit from the EU, so there is some speculation that his exit was influenced by this difference.

Personally, I am inclined to think that there are crass political motivations, but I’m a cynic that way.

This is Brilliant Politics

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Rather unsurprisingly, Bobby Jindal has left the finances of the state of Louisiana in a mess.

His successor, Democrat John Bel Edwards realized that the state needs to raise taxes to fix the mess that he inherited.

He has come up with a new way to sell revenue measures, he’s holding the LSU Football program hostage:

Louisiana’s new Democratic Governor John Bel Edwards is pushing for new tax increases to help address the severe budget deficit left behind by former Governor Bobby Jindal. The problem: Voters in Louisiana are allergic to the very word tax.

Edwards took his case to the public in a televised address on Thursday night, warning that inaction on his proposed increases could jeopardize the holiest of all institutions: LSU football.

The state’s higher education commissioner warned this week that unless the legislature acts to provide funding for the public university system, it will have to suspend some classes for the spring semester and give students grades of “incomplete.” Because of NCAA rules, no athlete may compete for his or her team with an “incomplete” on their transcript, meaning that LSU’s football players will be ineligible come the fall semester.

 Nice to know someone who understands his electorate, and is willing to use this effectively.

The Overton Window has Shifted

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The editorial board of the New York Times has come out in favor of a financial transaction tax.

It does not get any more establishment than that:

A financial transaction tax — a per-trade charge on the buying and selling of stocks, bonds and derivatives — is an idea whose time has finally come. It has begun percolating in the Democratic presidential campaign, with all three candidates offering proposals.

 Hillary Clinton and Martin O’Malley have proposed a worthy but narrow tax on certain high-frequency trades, which generate windfall profits on small and fleeting differences in prices at the expense of ordinary investors and market stability. Bernie Sanders supports a hefty tax on a broader range of transactions to raise revenue from Wall Street, also a worthy goal, but his proposal would be likely to squeeze investors too hard. Republicans have not engaged the debate, except to say no to taxes no matter what.

 A well-designed financial transaction tax — one that applies a tiny tax rate to an array of transactions and is split between buyers and sellers — would be a progressive way to raise substantial revenue without damaging the markets. A new study by researchers at the nonpartisan Tax Policy Center has found that a 0.1 percent tax rate could bring in $66 billion a year, with 40 percent coming from the top 1 percent of income earners and 75 percent from the top 20 percent. As the rate rises, however, traders would most likely curtail their activity. The tax could bring in $76 billion a year if it was set at 0.3 percent, but above that rate, trading would probably decrease and the total revenue raised would start to fall.

 The burden of this tax would be concentrated at the top, because that’s where the ownership of financial assets is concentrated. However, individuals who buy and hold investments, including those who invest in index funds that trade infrequently, would be largely unaffected. Pension funds that devote a portion of their portfolios to speculative trading, often through hedge funds, would be hit, but some pension funds have already stopped using hedge funds because the returns do not justify the costs. A financial transaction tax that encouraged other pension funds to follow suit could actually benefit pension participants in the long run.

 Such a tax would also bring the United States more in line with other countries. There are already financial transaction taxes in Britain, Switzerland and South Korea as well as in Hong Kong and other developed markets and emerging nations, generally at rates of 0.1 percent to 0.5 percent on stock transfers. In addition, 10 countries in the European Union, including Germany and France, have agreed to apply a common financial transaction tax starting in 2017, though relentless lobbying by investment banks and hedge funds threatens to delay and even derail the effort.

There are a number of arguments against this.

The strongest one is that it will collect less revenue than expected, because it would disincentivize speculation.

As if that were a bad thing.

If So, I Approve this Camel’s Nose………

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Matt Bruenig has a very interesting perspective on Bernie Sanders’ single payer program, specifically, he believes that it provide the fiscal basis for a massive expansion of social welfare programs:

Currently, total health expenditures in the US make up around 17% of GDP. The average for the OECD is 9.3%. Around half of our healthcare spending is public while the other half is private. Thus, very roughly speaking, to shift all of the current healthcare expenditures onto the public health insurance, you’d need initially to raise the tax level by 8.5 points of GDP (half of 17%).

 If you believe, as I do, that switching to a single-payer healthcare system would allow us to better curb healthcare inflation and thus to control costs much more effectively than we currently do, then that means that the 17% of GDP we currently pay towards healthcare could be pushed down over time. Let’s assume that, by keeping healthcare inflation in check through single-payer, we could eventually bring health expenditures down to around 10% of GDP (slightly above the OECD average).

 Under this scenario, we would initially raise the tax level by 8.5 points in order to cover the half of health expenditures that are currently paid out privately. Then, over time, we would cut healthcare expenditures by 7 points (from 17% to 10% of GDP). Assuming we didn’t lower the tax level over the expenditure-slimming period, we would be able to use those 7 points of savings towards other welfare programs (child care, child allowance, paid leave, etc.). And there is a lot of stuff you can get with 7 points of GDP.

He’s an optimist.

My guess is that these savings, will go to bombs and bullets, because  ……… America!!!!

We have still not accepted the wisdom of Eisenhower’s Chance for Peace speech, while we bankrupt ourselves through military procurement and military adventurism.

Well, It’s a Start

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In order to fund health benefits for 911 first responders, the fees for H1B visas have been doubled, and the software houses in India who abuse the program are unamused:

The United States is set to pass a bill named the “9/11 Health and Compensation Act” and Indian IT companies are mad as hell about it.

The bill delivers funding to compensate those whose lives were impacted by the 9/11 attack on the World Trade Centre in New York. To keep those dollars flowing, the Bill has changed the amount businesses must pay to secure an H1-B or L1 visa to bring workers into the USA.

Indian IT companies use those visas a lot, to bring people from India to work in the USA. Use of such visas has become an issue in the US presidential election, as some candidates seek to curb use of the permit in order to promote employment of local workers. Critics of H1-B visas also argue that they are used to keep wages low, as by bringing in foreign workers it becomes possible to give them a modest pay bump to cope with the cost of living in the US without paying them the same wage as permanent residents or citizens.

Whatever the rights and wrongs of the H1-B, Congress will on Friday double the cost of using one to US$4,000, with the increase funnelled into funds for the victims of 9/11.

India’s large IT concerns, which are among the heaviest users of H1-Bs, are livid because the fee increase will push up their costs. So livid that when Barack Obama called Indian Prime Minister Narendra Modi to thank him for help negotiating the Paris climate change agreement, Modi pointedly “shared with President the concerns of the Indian IT industry and professionals on the proposed legislation in the U.S. Congress relating to H1B and L1 visas.”

The H1B program is about letting people in who cannot be found in the US.

The Indian IT firms, as well as large IT firms in the US, use it to cut their labor costs, both by hiring cheap slave labor, and by pushing down wages for domestic workers.

I think that this fee should be closer to $40,000 than it is to $4,000.

Companies should never save money by bringing in H1B and L1 visas.

As to Tata and Infosys and the rest of the Indian software firms, they can take the implicit subsidy to their business model that comes from the H1B program and shove it up their ass.

Germany Finally Does Something Useful for Greece

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It appears that Germany had combed through the data that it has managed to obtain from various tax havens, and has turned over to Greece the names of over 10,000 tax cheats:

Germany has handed Athens the names of more than 10,000 of its citizens suspected of dodging taxes with holdings in Swiss banks.

The inventory, which details bank accounts worth €3.6bn – almost twice the last instalment of aid Athens secured from creditors earlier this week – was given to the Greek finance ministry in an effort to help the country raise tax revenues.

They could have done this at the beginning of the whole crisis, and done a lot more to help both the Greek people and the Euro Zone.

The Germans wanted their pound of flesh, though, so it’s taken 3 years for them to turn over this data.

Stupid IP Tricks

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European tax authorities going after Starbucks for “Recipe” payments in order to artificially lower its tax payments in Europe:

If there are two edicts I try to follow whenever I’m writing, they are, first, write what is true and, second, avoid cliche at all costs. I bring that up only as a preface before saying the following: the UK is walking down an Orwellian path. It’s nearly the cliche of cliches to say something like this, and yet it happens that the cliche is true. While there is most certainly a real thing known as a threat from Islamic terrorism, there is also such a thing as overreaction. What started as the British government’s attempt to ban extremist thought from social media and television (under the notion that some thoughts are too dangerous to enjoy the freedom that other thoughts deserve) then devolved into the conscripting of teachers that were to be on the lookout for children that might become radicalized. To assist them with this, the government helpfully provided spy-software to use against students. Spy-software which itself was found to be exploitable in the most laughably easy of ways. This employed two of the most horrifying aspects of Orwell’s Oceania: the concept of thought-crime and the employ of citizens to fearfully surveil one another.

 And now it seems the UK is going even further, adopting Oceania’s reputation for the swallowing up of citizens should they be found suspect of thought-crime by those watchful citizens. Specifically, the Family Division of the Judiciary has put out a memo declaring exactly how it will remove children from the homes of anyone it suspects might radicalize those children. Here’s a snippet.

 Recent months have seen increasing numbers of children cases coming before the Family Division and the Family Court where there are allegations or suspicions: that children, with their parents or on their own, are planning or attempting or being groomed with a view to travel to parts of Syria controlled by the so-called Islamic State; that children have been or are at risk of being radicalised; or that children have been or at are at risk of being involved in terrorist activities either in this country or abroad.

 Only a local authority can start care proceedings (see section 31(1) of the Children Act 1989 – the police powers are set out in section 46). However, any person with a proper interest in the welfare of a child can start proceedings under the inherent jurisdiction or apply to make a child a ward of court.2 Usually, in cases falling within the description in paragraph 1 above, it will be the local authority which starts proceedings under the inherent jurisdiction or applies to make a child a ward of court, and the court would not expect the police (who have other priorities and responsibilities) to do so. There is, however, no reason why in a case where it seems to the police to be necessary to do so, the police should not start such proceedings for the purposes, for example, of making a child a ward of court, obtaining an injunction to prevent the child travelling abroad, obtaining a passport order, or obtaining a Tipstaff location or collection order. Given the complexities of these cases, I have decided that, for the time being at least, all cases falling within the description in paragraph 1 above are to be heard by High Court Judges of the Family Division.

In other words, the High Court Judges within the Family Division are now tasked with determining whether children will be made wards of the state based solely on suspicions of possible radicalization. Children torn from mothers and fathers in Muslim homes will be subject to the whims and inherently flawed watch of the larger citizenry. A citizenry, mind you, that has had its vigilance unduly ramped up by the government’s past actions and requests. It’s hard to imagine a better recipe for the unfair targeting of Muslim families than this. Unfortunately for all concerned, this same memo imagined just such a recipe, making things even worse.

………

 Tax avoidance [Note: Tax avoidance uses legal, though frequently unethical, techniques to lower the tax burden. Tax evasion is a crime.] is a sore point in the United States, where the largest companies, including Apple, Amazon and many others, routinely try to minimize their bills. In Europe, the cases have hit a raw nerve in countries where citizens have been squeezed by years of austerity, and stoked friction among member states that are jockeying with one another for jobs and investment.

 ………

 After asking Dutch tax authorities and Starbucks to provide details of their tax deals last year, the commission determined the company’s tax setup with the Netherlands had no realistic economic justification. The case zeroed in on Alki, the British-based entity at the center of Starbucks’ efforts to reduce its Dutch and European tax bills.

 In 2001, Starbucks installed its European corporate headquarters and a massive new coffee roasting plant in Amsterdam after conferring with Dutch tax authorities. The setup proved beneficial: Starbucks created several Dutch partnerships that were not subject to the country’s corporate tax, including one named Emerald City, a nickname for Seattle.

 Emerald City owned Alki, which was set up in London to house Starbucks’ intellectual property. The intellectual property included logos and the recipe for roasting coffee beans, which Starbucks subsidiaries pay Alki a royalty to license. Because of its structure, Alki was not subject to corporate tax in the Netherlands or Britain.

 ………

 The recipe was basically the temperature for roasting beans, and appeared to be more like instructions than intellectual property. Yet counting it as such allowed Starbucks’ roasting unit to reallocate most of its profit to Alki in the form of royalties, the commission said, nearly wiping out the Dutch tax bill. No other Starbucks companies or roasters paid royalties for the same information, the commission said.

Crap like this happens, because we as a society have made a conscious decision to encourage rent of this sort behavior.

IP protections are there to incentivize creativity, and when we extend those incentives far beyond what is necessary for this, we create a cesspool of corruption and self-dealing.

It also one of the things that contributes to a less equal society, because the unearned proceeds create resources to lobby for even more rentier behavior.

One of the Facts of Running a Local Government Is That Making Your Government “Business Friendly” Never Pays

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Of course, what I mean by “Business Friendly” is using tax abatements, creating dedicated infrastructure, or building stadiums.

When you pay companies to locate in your town, you always lose, and the latest case is the oil boom towns in North Dakota, which have discovered that by not making drillers pay their way, they raise costs for everyone else:

While the massive Bakken oil boom drew hordes of job seekers and international attention to the remote prairies of North Dakota and Montana in recent years, it’s turned into a money loser for most cities and counties in the region.

 Crime in Dunn County, N.D., in the heart of the nation’s oil boom, skyrocketed 60 percent in just three years, and the road maintenance budget soared from $1.5 million to $25 million.

 The local government couldn’t keep up, with demand for services outpacing the growth in tax revenue by as much as 40 percent. The problem continues as the drop in oil prices in the past year means increasingly less money for the county to spend on projects – while drilling, the truck traffic that eats up the roads, and demand for community services haven’t stopped.

 “The gap between revenues and needs is still fairly large,” Daryl Dukart, a Dunn County commissioner, said in an interview. “It will take many years to balance out.”

 Dunn County is far from alone. Analysis from researchers at Duke University found that “most local governments in North Dakota and Montana’s Bakken region have experienced net negative fiscal effects” from the shale drilling boom.

The answer here is fairly simple: Make the newcomers pay their own way.

When thousands of very trucks tear up your local roads, charge tolls on them.

When their water demands require the construction of new sewer and water infrastructure, charge them for that too.

The oil is where the oil is. If drilling drops by 10% because the energy companies have to pay their own way, it’s a net plus.

The idea that in the long term it will sort itself out, a sentiment expressed by a Dickinson, North Dakota City Manager Shawn Kessel, is a pipe dream.

In the long term, the oil boom goes bust, and you still have to pay for the infrastructure that is now sitting unused, as well as the mountains of toxic waste that will start showing up.

I learned a little bit by being raised by a city planner, and one of the lessons that stuck is that if you subsidize industries to locate in your town, it will be a net tax loser.

The 2nd lesson is that most of the money in real estate is made through explicit and implicit subsidies that come from the local government in the form of tax abatements, zoning changes, and unpaid for infrastructure upgrades.

For Once, the Law Applies to the Little Guy

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The Illinois Supreme Court has ruled that the pension gutting law past last year is unconstitutional. I am further amused because it looks like Rahm Emanuel’s equivalent law in Chicago is also covered by the ruling:

The Illinois Supreme Court on Friday unanimously ruled unconstitutional a landmark state pension law that aimed to scale back government worker benefits to erase a massive $105 billion retirement system debt, sending lawmakers and the new governor back to the negotiating table to try to solve the pressing financial issue.

The ruling also reverberated at City Hall, imperiling a similar law Mayor Rahm Emanuel pushed through to shore up two of the four city worker retirement funds and making it more difficult for him to find fixes for police, fire and teacher pension funds that are short billions of dollars.

At issue was a December 2013 state law signed by then-Democratic Gov. Pat Quinn that stopped automatic, compounded yearly cost-of-living increases for retirees, extended retirement ages for current state workers and limited the amount of salary used to calculate pension benefits.

Employee unions sued, arguing that the state constitution holds that pension benefits amount to a contractual agreement and once they’re bestowed, they cannot be “diminished or impaired.” A circuit court judge in Springfield agreed with that assessment in November. State government appealed that decision to the Illinois Supreme Court, arguing that economic necessity forced curbing retirement benefits.

On Friday the justices rejected that argument, saying the law clearly violated what’s known as the pension protection clause in the 1970 Illinois Constitution.

“Our economy is and has always been subject to fluctuations, sometimes very extreme fluctuations,” Republican Justice Lloyd Karmeier wrote on behalf of all seven justices. “The law was clear that the promised benefits would therefore have to be paid and that the responsibility for providing the state’s share of the necessary funding fell squarely on the legislature’s shoulders.

During the financial crisis, Wall Street made arguments that their obscene pay was contractually guaranteed, and as such, could not be regulated.

At the very same time, they were cutting wages and benefits of auto workers at GM and Chrysler.

I am amused.

Additionally, I am amused because this means that teabagger governor Bruce Rauner is going to be forced to raise taxes.

Heh.

Our F%$#ed Up Drug Policy, Colorado Edition

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Though sales of recreational marijuana are increasing swiftly, medical marijuana sales in Colorado fell during 2014, GreenWave Advisors calculated, along with the number of new medical cardholders, CNBC reported. Many medical users in the state have begun to purchase on the recreational side despite a lower tax rate.

………

“As long as Medpot is illegal on the federal level no one wants to register for a pot card for fear the feds now know who and where they are, knowing fully the feds could and would come bust them on a federal charge,” wrote Jeffrey Moab in a comment attached to the CNBC story. “People are willing to pay extra bucks to remain invisible to the feds.”

We need to take pot off the schedule 1 registry.

Not Just Ferguson

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In Wittier, California, police officers have sued over retaliation for reporting illegal quotas:

Six Whittier police officers are suing the city, saying they faced retaliation when they complained and refused to meet alleged ticket and arrest quotas.

Officers Jim Azpilicueta, Anthony Gonzalez, Mike Rosario, Nancy Ogle, Steve Johnson and Cpl. Joseph Rivera say they spoke out against the quotas, which they claim were imposed by the Whittier Police Department in 2008, according to a suit filed Tuesday in Los Angeles County Superior Court.

The officers said their “careers have been materially and adversely affected, and irreparably harmed” by the city.

City Manager Jim Collier and Whittier police spokesman Officer John Scoggins declined to comment and said they had not seen the lawsuit.

“The lawsuit is unfortunate and the city will determine the best course of action once an analysis of the lawsuit is completed,” Collier said.

The officers say the alleged ticket and arrest quotas continue to this day.

The alleged retaliation started after the officers said they complained to their supervisors and the police department’s Internal Affairs Division, the suit claims.

After complaining about quotas, the officers faced a series of disciplinary actions including counseling sessions, unwarranted transfers, increased scrutiny and disparaging comments, the lawsuit said.

………

Imposing arrest and ticket quotas on police officers violates California Vehicle Codes section 41600. The codes makes it illegal for any state or local agency to force officers to meet a certain number of citations or arrests for promotion or disciplinary purposes.

Here’s a thought for initiative petition crazy California:  Someone start collecting signatures for a ballot measure that takes all the proceeds from these sort of offenses, and transfers it to a scholarship program for state schools.

Once municipalities no longer from pulling this sh%$, they will stop pulling this sh%$.

Why do I Think that Obama is Playing to Lose on this Issue?

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Barack Obama is now proposing a tax on foreign profits that are not repatriated:

President Barack Obama will propose that U.S.-based companies pay a minimum 19 percent tax on their future foreign earnings, capturing profits that are now often beyond the government’s reach.

Obama will also seek a 14 percent mandatory tax on about $2 trillion in stockpiled offshore profits, said two people familiar with his budget proposals, declining to be named because the document won’t be made public until Feb. 2. Companies would pay that tax regardless of whether they bring the money back to the U.S., the two said, creating a revenue stream the president would use to pay for roads, bridges and other infrastructure projects.

Obama’s latest proposals add new details to the administration’s efforts to revamp the U.S. business tax system. The issue has been stalled in Congress, though lawmakers of both parties say they see potential room for agreement on business taxes.

In one sense, Obama is offering U.S. companies the kind of system they have sought — one with lower corporate marginal tax rates and with future foreign profits subject to little or no extra U.S. tax when brought home.

However, he’s offering to do so on terms that are less favorable than companies would want, with rates that could mean significant tax increases for companies that have been shifting profits to jurisdictions such as Bermuda and Ireland and paying less than 10 percent on their foreign profits.

Do you want me to map out the road map here?

  1. Obama proposes corporate tax reform which includes tax cuts juxtaposed with progressive changes to the tax code.
  2. As would be expected by anyone who can fog a mirror, the Republicans categorically reject the progressive changes to the tax code, and propose elimination of ordinary folks’ tax decuctions along with the tax cuts on businesses.
  3. Obama caves, and the rest of us get f%$#ed.

The trick here is that if you have been listening to Obama over the past few years, this is something that he supported.  He has long been making noises about tax ciode “reforms” that consist largely of eliminating middle class tax cuts (mortgage deduction in particular),

This is not a meaningful tax proposal, this is political atmospherics.

This is Number 1 on my Schadenfreude hit Parade Today

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You know the story, libertarian boy makes good, doesn’t want to pay taxes, renounces his US citizenship, and is shocked when he is denied an entry visa into the United States:

Roger Ver, a high-profile member of the Bitcoin community who is commonly known as “Bitcoin Jesus,” has been denied a US visa — despite having been born in the country.

Ver is well known in the Bitcoin community as an entrepreneur and angel investor, having funded products including Blockchain, Ripple, and Blockpay. He became known as “Bitcoin Jesus” after giving thousands of coins of the virtual currency away for free. Ver was born in the US, making him a citizen there, but he renounced his citizenship in March — and now he says the government isn’t letting him back in.

As Coindesk is reporting, Ver posted on Twitter that the US government had refused his recent request for a non-immigrant visa, leaving him “effectively locked out of his native USA.”

Ver complains that the decision has forced him to miss speaking appointments at conferences and that the US embassy in Barbados refused to even consider the evidence for his application.

The official reasoning behind Ver’s rejection is that he doesn’t have sufficient “ties” to his country of residency in the Caribbean and has not demonstrated he has “the ties that will compel [him] to return to your home country after your travel to the United States,” according to a picture he tweeted of a letter that appears to be from the embassy.

In short, US officials are worried that Ver might choose to stay in his native country illegally.

I’m sure that he sees himself as a modern lieutenant Philip Nolan, but I think that the rest of us just see him as a self entitled, solipsistic, schmuck.€

It really could not have happened to a more deserving person.

H/t Cthulhu* at the Stellar Parthenon BBS.

*No, not the unspeakably malevolent super-being, the contributor to the Stellar Parthenon.†
†OK, I’ve never seen the two of them together, so Cthulhu might actually be the Cthulhu, but the mere fact that he is on a BBS, interacting with humans‡ would seem to mitigate against this.
‡Yes, I know, this is the internet, where no one knows if you are a dog.
€Not really. As anyone with an even passing knowledge, a schmuck has a head, and a turtleneck.

The Battle over Tax Avoidance in the EU Begins

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The EU is instituting major changes in the taxation of digital items in EU.

It makes changes in the Value Added Tax (VAT), both in rates and how it is assessed:

Europe’s tax showdown could be headed straight to people’s wallets.

With the new year, a change in fiscal rules in the European Union is increasing the tax on many purchases of digital content like e-books and smartphone applications.

Under the new rules, first approved in 2008, the tax rate on digital services like cloud storage and movie streaming will be determined by where consumers live, and not where the company selling the product has its European headquarters. Tax experts say Europe’s revamped rules could add up to an extra $1 billion in annual tax revenue for European governments.

The bit about having the VAT assessed based on the location of the purchaser (technically it works this way in the US, but this rule is rarely followed).

This this is all about the predatory tax policies of places like Luxemburg and Ireland:

The changes to Europe’s so-called value-added tax — a tax on goods and services similar to sales taxes in the United States — are part of a continuing push by lawmakers to tax the region’s digital economy more heavily. Companies like Apple and Amazon have been roundly criticized for housing their European operations in low-tax countries like Ireland and Luxembourg. The companies say they operate there legally.

Many of the world’s largest tech companies selling digital products, like Amazon and Microsoft, now house their European digital businesses in Luxembourg, where the V.A.T. rate is as low as 3 percent for e-book purchases. In contrast, countries like Britain charge companies a 20 percent sales tax for selling e-books. Analysts say the current rules provide an advantage to global companies that have the financial muscle to shop around for the lowest tax rate.

………

One of the European countries most affected by the tax change will be Luxembourg. The small country’s low value-added tax rates have enticed Apple to set up its international iTunes business there, and Microsoft’s digital download operation is also based there.

Luxembourg’s corporate tax system is being challenged by several European investigations into whether politicians gave preferential treatment to the likes of Amazon and a financing unit of Fiat, the Italian carmaker. And Jean-Claude Juncker, Luxembourg’s former prime minister, who now runs the executive arm of the European Union responsible for the continuing investigations, has been criticized for his role in promoting the country’s low-tax policies.

For the longest time, the EU thought that the status of tax haven EU members was considered a feature, and not a bug, but with the current fetish for austerity, this attitude appears to changed.

In any case, it is about to really suck for Luxemburg and Ireland, whose economies are largely built on being tax evasion.

I’ll Go With the Under on Net Neutrality

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The cable companies pet FCC commissioner has estimated the cost of net neutrality regulations to consumers at $17 billion, while an open internet advocacy group has pegged the cost at $0:

After a dramatic shift in the debate over net neutrality last month, many expect the FCC will reclassify internet providers so as to bar them from giving special treatment to some websites over others. The question now becomes how much (if at all) the agency’s decision, which turns on an arcane process called Title II, will cost consumers.
Depending on who you ask, the answer is that Title II, which would treat internet providers akin to public utilities, will be ruinously expensive — or will have little financial impact at all. Among the Cassandras, you can count Republican FCC Commissioner Ajit Pai:

 “It will cost $17 billion in new fees,” Pai told an audience of telecom lawyers in Washington on Friday, warning that consumers’ monthly internet bills are set to soar.

Pai’s number, which has also popped up on the Wall Street Journal‘s editorial page and in other right-leaning outlets, is lifted from a purported study by the Progressive Policy Institute, a think tank that has reportedly taken funding from AT&T.

………

Like so much else in the pitched debate over net neutrality, however, the $17 billion number may have been ginned up for political purposes. According to Free Press, a nonpartisan advocacy group for open internet, the figure represents a misleading worst-case scenario that will never come to pass.

As the group points out, reclassification does not appear to require any new consumer fees. Such fees, it they do appear, will instead be the result of a separate set of decisions by the FCC and various governments.

I have no doubt that the PPI has taken funding from AT&T.  After all, their parent organization, the now defunct Democratic Leadership Council (DLC) was funded by the Koch brothers.

Also note that most of the $17 billion involved is on a separate regulatory ruling, and that the FCC has made it very clear that they will engage in regulatory forbearance, and not impose the charges that Mr. Pai is mentioning, but these charges have nothing to do with reclassification of Title II.

Even if there are a few buck additional charges, it would well worth it to prevent “Cable Company F%$#ery.”

Japan Once Again Proves that Contractionary Economics is ……… Contractionary

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It is no surprise that the Japanese, in their haste to go back to austerity when the first glimmers of light has driven their economy back into recession:

Japan’s economy unexpectedly fell into recession in the third quarter, a painful slump that called into question efforts by Prime Minister Shinzo Abe to pull the country out of nearly two decades of deflation.

The second consecutive quarterly decline in gross domestic product could upend Japan’s political landscape. Mr. Abe is considering dissolving Parliament and calling fresh elections, people close to him say, and Monday’s economic report is seen as critical to his decision, which is widely expected to come this week.

………

Rising sales taxes have been blamed for triggering the downturn by deterring consumer spending, and with Japan having now slipped into a technical recession, the chances that Mr. Abe will seek a new mandate from voters to alter the government’s tax program appear to have increased significantly.

The preliminary economic report, issued by the Cabinet Office, showed that gross domestic product fell at an annualized pace of 1.6 percent in the quarter through September. That added to the previous quarter’s much larger decline, which the government now puts at 7.3 percent, a slightly worse figure than in its last estimate of 7.1 percent.

………

Although the second part of the tax increase would not be carried out until October, Mr. Abe needs to decide what to do about it soon, to give Parliament time to change legislation if he opts to cancel or postpone it. If fully enacted, the plan would increase the tax on all goods and services sold in the country to 10 percent over 18 months. It now stands at 8 percent after the first increase in April.

Yeah, imposing crushing sales tax increases, taxes were taken from 5% to 8%, with an as yet not implemented increase to 10%, will discourage consumer spending, and have a deflationary effect. (See also Krugman saying, “I told you so,” here and here and about a gazillion other places.)

If you are concerned about the deficit, tax financial and currency speculation,  which, in addition to reigning in destabilizing speculation, would encourage that money to go into investments in plant, equipment, training, etc.

As Nome, Alaska Goes, So Goes the Country

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Well, not usually, though the good people of Nome have been at the forefront of dealing urban polar bear infestations.

In this case, however, if Nome decides to charge sales taxes to churches and other non-profits, it will be a very big deal:

Nome, Alaska, is a tiny town of less than 4000 people. Despite its size, its name is well-known, showing up in popular culture venues from “The Lucy-Desi Comedy Hour” of the 1950’s, to “The X-Files,” to “The Simpsons Movie.” And Nome is the finish line of the 1049 mile-long Iditarod Trail Sled Dog Race.

 Nome, Alaska, may one day soon be known for another reason: as the first American town to tax its churches.

 Strapped for cash, the town’s Finance Director, Julie Liew believes taxing churches and other non-profits could raise $300,000 annually. The city council has already met to debate the idea, and it looks like they may move forward.

“You get rid of the sales tax exemption, most of the time these other exemptions aren’t given — we’re a very nice city [to do] it,” City Council member Matt Culley said, according to KNOM. “When we sit down at budget time, [with] the numbers to look at, if we want to donate that [money back to nonprofits], the money can go all back in … but we have control over it now, as opposed to it going whatever direction that we have it going now.”

This is a very good idea.

More money is being spent on various tax exemptions in the United States than is spent on food stamps. (source of the table above)

Subsidizing religion and religiosity is not a good thing