Opinion

David Cay Johnston

You’re not paying the tax rate you think you are

David Cay Johnston
Feb 21, 2012 21:42 UTC

If you make more than about $33,500 a year, your federal income tax burden is probably lighter than you think.

The portion of your income that you pay in taxes is your “effective tax rate.” But when politicians and pundits talk about effective tax rates, the data they typically use relies on an incomplete measure for income. Use an incomplete measure for income and your tax rate calculation comes out high.

In a new analysis the Tax Policy Center, a nonpartisan Washington research organization, used a wider measure of income to calculate effective tax rates. The rates are much lower using this broader measure of income.

The Tax Policy Center computer model of the tax system, which estimates how changes in the law would affect tax burdens, has repeatedly made projections that subsequent events showed were accurate. The center is a joint project of two Washington research organizations, the Urban Institute and the Brookings Institution. The George W. Bush administration went out of its way to praise the reliability of the center findings even when they were not helpful to administration policy.

The incomplete measure is called “adjusted gross income,” or AGI. This is the number on the last line of the front page of the standard tax return.

How to avoid a securities class action

David Cay Johnston
Feb 11, 2012 00:01 UTC

For years, the U.S. Chamber of Commerce has pressed Congress to restrict securities class action lawsuits, saying they put a damper on economic activity.  Securities lawyers argue that such suits act as a crucial protection for investors, who deserve their day in court when deceitful actions by executives cost them money.

Now, some new research sheds light on this question.

Jonathan Rogers, an associate professor of accounting at the University of Chicago’s Booth School of Business, led an investigation into why some companies get sued while others do not.

Rogers, his Booth colleague Sarah Zechman and Andrew Van Buskirk of Ohio State University identified 165 companies that were sued because their share price fell after an earnings statement had pointed to strong future performance.

How Romney would tax us

David Cay Johnston
Feb 7, 2012 19:41 UTC

With so much attention placed on Mitt Romney’s verbal blunders, much less has been given to his written plans for the economy and taxes.

The Republican frontrunner’s 160-page “plan for jobs and economic growth,” which he released in September, contains some sound ideas. He would encourage more Americans to save and invest. And one of his proposals would strengthen America’s status as a technological powerhouse. See the plan here.

But there’s a side to the plan that would raise taxes on the poorest 125 million Americans while tilting tax cuts further toward the rich.

Newt and the NEWT Act

David Cay Johnston
Feb 3, 2012 21:41 UTC

Newt Gingrich’s 2010 income tax return inspired a quick response from U.S. congressman Pete Stark.

Twelve days after Gingrich, a Republican presidential hopeful, made his return public, Stark proposed the Narrowing Exceptions for Withholding Taxes (NEWT) Act.

This proposal has an uncertain future in Congress, but it would be a good addition to our tax laws, closing a significant loophole that Gingrich took advantage of.

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