Sorting through candidate's tax plans

Specifics are hard to come by, but Senator Obama's speech last night reminded me that tax policy will be a big issue in the next couple of months. Both candidates are promising tax cuts for the middle class. Sounds appealling and wonderful, almost as nice as free hot fudge sundaes every week.

Tax Prof Blog has an interesting comparison of the tax "breaks" here. It includes a link to the remarkable Obama Tax Cut Calculator.

I plugged in a single married wage earner with no children earning $100,000 per year and got this:

"Your Obama Tax Cut is: $920.73
John McCain would tax you $289.59 MORE than Barack Obama."

So John McCain has a tax cut too, just not as big.

The key, according to the methodolgy section, is that Obama is mostly going to tax the upper 1% more heavily. But here is the interesting word play:

"Obama will only increase taxes for the top 1% of incomes; and this isn't really an increase: he's simply going to let the Bush tax cuts expire."

There's a lot of missing context and history as to why the Bush tax cuts are set to expire, but it is fairly plain that allowing them to expire is in fact an increase.

One major problem with either plan is that they both look to run up the government debt even more. From the executive summary provided by the Tax Policy Center:

"Both candidates prefer to compare their plans to the “current policy” baseline, which would extend the 2001 and 2003 tax cuts and indefinitely extend an indexed
AMT “patch”—and collect nearly $3.6 trillion less than under current law over the coming decade. Against that baseline, Obama would raise revenues by about $600 billion over the decade, while McCain would lose $600 billion. But choice of baseline doesn’t change how the proposals would affect the budget picture; without substantial cuts in government spending, both plans would sharply increase the national debt. Including interest costs, Obama’s tax plan would boost the debt by $3.5 trillion by 2018. McCain’s plan would increase the debt by $5 trillion."

I'm starting to hear echos of "read my lips. . . ."

Decoding Party Platforms

Michael Kinsley, in an August 9, 2008, N.Y. Times column on the Democratic Party Platform, noted this in passing:

Translating the document is no simple task. First, an alarmist note. Democrats favor “tough, practical and humane immigration reform.” And, “We will provide immediate relief to working people who have lost their jobs, families who have lost their homes and people who have lost their way.” It’s not clear what that third item refers to. Tax credits for G.P.S. devices? Presumably,“people who have lost their way” doesn’t mean illegal immigrants trying to find the border.

I like the idea. If we stick only to G.P.S. devices, we might be able to afford this plan.

Update on US v. Stein et al.

The 2nd Circuit Court of Appeals affirmed the dismissal of the charges against the KPMG defendants:

We affirm the district court’s ruling that the government deprived Defendants-Appellees of their right to counsel under the Sixth Amendment by causing KPMG to place conditions on the advancement of legal fees to Defendants-Appellees, and to cap the fees and ultimately end them. Because the government failed to cure the Sixth Amendment violation, and because no other remedy will return Defendants-Appellees to the status quo ante, we affirm the dismissal of the indictment.

Opinion.


In the big KPMG tax shelter case, back in June 2006, Federal District Judge Kaplan ruled that the prosecutors violated the Fifth and Sixth Amendment rights of KPMG Defendants because it was demonstrated that the government had interfered with KPMG's practice of paying legal expenses for cases involving their work with the firm. The government's activity stemmed from the Thompson memorandum, which essentially said that if KPMG paid defense fees of its employees, that would be used as evidence against KPMG itself.

Note that the Thompson memorandum has since been supplanted by the McNulty memorandum as this short Wall Street Journal article points out. Under the new memo, paying your employees attorney's fees is still a factor in deciding whether to prosecute a company.

It looks like, under this opinion, paying your employee's attorney's fees cannot be used as a factor to decide to prosecute so long as your company has had an established policy of doing so and does not implement such a policy for the purpose of impeding an investigation.

Some tax lawyer out there is likely heading for trouble

From today's page of the U.S. Tax Court:

NOTICE: The United States Tax Court has received many telephone calls regarding an e-mail which purports to originate from the Court being sent by a member of the Tax Court's practitioner bar. This message is an example of "Spear Phishing", which is an e-mail spoofing attempt that targets a specific organization. The Tax Court is not disseminating any e-mail notice to anyone who currently has a case before this Court. If you receive an e-mail with a subject line that includes the text, "Notice of Deficiency #" followed by a series of numbers or "US Tax Petition", along with a malformed docket number following the format #000-000, and a sender address of noreply@ustaxcourt.org, complaints@ustaxcourt.org, or notice@ustaxcourt.org, please ignore/delete the e-mail and do not click any link within the e-mail message.

I don't know how the Court knows it is a member of the Tax Court bar, but if it knows, no doubt so does the Justice Department.

Nonprofits and charitable orgs take note

They IRS has just issued a new form 990 to be used for 2008. Instructions and form at the IRS website:

http://www.irs.gov/charities/article/0,,id=185561,00.html: