Opinion

David Cay Johnston

Time to junk income taxes?

David Cay Johnston
Jan 6, 2012 20:27 UTC

This is America’s 100th year for individual income tax, a system as out of touch with our era as digital music is with the hand-cranked Victrola music players of 1912. It is also the 26th year of the Reagan-era reform for both personal and corporate tax, a grand design now buried under special-interest favors.

With U.S. elections in November, and the George W. Bush tax cuts due to expire at the end of 2012, it’s time for a debate that goes beyond ginning up anger over taxes and the superficial issue of tax rates.

It’s time to consider whether to get rid of income taxes, personal and corporate. What are the strengths and weaknesses of our current system? Should we tax individual and corporate income — or something else?

We need to think about it. Whatever systems we consider, we should weigh up what it takes to raise the necessary revenue along with such other attributes as minimal compliance cost, leakage and economic distortion.

Times change. Tax systems must change with them or else their lubricating effect turns to sand, wearing down the gears of commerce.

GOP inaction means higher taxes

David Cay Johnston
Nov 22, 2011 19:03 UTC

The author is a Reuters columnist. The opinions expressed are his own.

Thanks to Republicans who signed Grover Norquist’s pledge never to raise taxes, your taxes are automatically scheduled to go up in January — unless you are a plutocrat.

The law that created the congressional super committee set a target of this week for reducing budget deficits. The committee failed to meet the target.

Republican members were willing to cut programs that benefit millions, but they would not raise taxes on the hundreds of thousands of families whose annual income is in the millions and, in a few cases, billions of dollars.

You’re paying taxes, so why aren’t energy companies?

David Cay Johnston
Nov 8, 2011 17:42 UTC

By David Cay Johnston

The views expressed are his own.

In a competitive market, economists argue endlessly about who bears the burden of corporate income tax. Is it owners, who get a smaller net return? Or workers, who make less? Or suppliers, who get lower prices? Or customers, who pay higher prices?

In one sector of the U.S. economy, however, the answer is clear-cut. Corporate-owned utilities (mostly electric and natural gas) and pipeline partnerships, all of them legal monopolies, pass their income tax burdens on to customers.

Now a study, released last week, provides powerful new evidence that these two industries convert corporate income taxes from a burden to a benefit.

A gift, from NY to Abu Dhabi

David Cay Johnston
Nov 1, 2011 16:37 UTC

The author is a Reuters columnist. The opinions expressed are his own.

How does being taxed to give money to the oil-rich kingdom of Abu Dhabi and its hereditary ruler strike you?

The cost, if you live in New York State, comes to about $1.4 billion, or roughly $190 per household, for an economic development deal with a privately held company called GlobalFoundries to build a microchip plant near Albany.

As you ponder this forced transfer from you to the chip-making giant, which is controlled by Abu Dhabi‘s ruler Sheikh Khalifa bin Zayed Al Nahyan, keep in mind that Abu Dhabi says its citizens enjoy the world’s third-highest per capita income, a third higher than Americans’.

Beyond the 1 percent

David Cay Johnston
Oct 25, 2011 15:42 UTC

By David Cay Johnston
The author is a Reuters columnist. The opinions expressed are his own.

The U.S. tax debate tends to focus on the top 1 percent — their share of income taxes and their tax rates. Anti-tax groups encourage this focus, now embraced by the Occupy demonstrators on Wall Street and across America.

Problem is, the top 1 percent is a very misleading measure of who pays federal income taxes. It mixes doctors and billionaires, masking the taxes paid by the middle class and the affluent.

Orwellian tax talk

David Cay Johnston
Oct 11, 2011 12:33 UTC

By David Cay Johnston
The author is a Reuters columnist. The opinions expressed are his own.

Political tax talk is becoming Orwellian: Secrecy is Democracy. Auditors Reduce Collections.  Tax Cheats Will Be Caught With Fewer Auditors.

Let’s start in Kansas, where the Lawrence Journal-World broke the news on Sunday that economist Arthur Laffer, father of curve-on-a-napkin tax policy, is advising the state on a new tax structure. The news is not so much that Laffer is getting $75,000 of taxpayer money, but that Governor Samuel Brownback wants advice only from business leaders; no wage earners allowed behind these officially closed doors.

Ignoring tax cheats

David Cay Johnston
Sep 27, 2011 14:05 UTC

By David Cay Johnston
The writer is a Reuters columnist. The opinions expressed are his own.

Each year New York State lets real estate investors evade at least $200 million of taxes. In peak years the figure likely rises to $700 million, if known tax cheating in another state is any indication. Some of the investors who cheat New York State also cheat New York City out of at least $40 million annually.

Back in the 1990s Jerry Curnutt figured out how to finger such cheats when he was the top partnership specialist at the Internal Revenue Service. Curnutt’s computer sifted through tax returns until he learned how to separate thieves from honest taxpayers. The tax-evasion estimates of $200 million and $40 million are his.

More for the rich

David Cay Johnston
Sep 20, 2011 13:42 UTC

By David Cay Johnston
The views expressed are his own.

President Barack Obama this week started pitching his plan to cut U. S. taxes for everyone in 2012 and then in 2013 raise income tax rates for high earners, primarily those making more than $1 million, many of whom bear a lighter burden than a cop married to a nurse.

Two responses are certain.

There will be claims that economic ruin will follow once taxes go up. Never mind the proposed 2012 tax cuts are for virtually everyone. Never mind that the modest rate hikes would apply only to those who make more than 97 percent of their fellow Americans with most of the burden on those making more than $1 million. Never mind IRS data showing that tens of thousands of those whose increased taxes would increase their income tax rate by just 1.2 percentage points make more in a year than the median family earns in a lifetime.

Obama has also set a clever trap for anti-tax Republicans. Obama’s American Jobs Act would lower Social Security taxes for all workers and for all businesses in 2012. Republicans who vote against the bill would be voting against a tax cut. They would also be voting against a huge business tax break, letting business immediately write off all capital investments made in 2012.

Budget cuts that raise costs

David Cay Johnston
Aug 30, 2011 13:43 UTC

By David Cay Johnston
The opinions expressed are his own.

The Obama administration’s support for killing off the U.S. Statistical Abstract underscores what’s wrong with Washington’s approach to cutting the budget. This nearly thousand-page compendium of official data is in its 130th and evidently last edition since 1878. It is published online and in print.

Taxpayers will save the $2.9 million it costs in a year to compile the data from a multitude of government, academic, nonprofit and industry websites.

But how much time will be wasted hunting for data without this ready reference? How much will state and local taxpayers pay for the extra time reference desk librarians need to answer questions? How many questions will go unanswered? And what of the Statistical Abstract’s value in quickly and efficiently pointing to other sources for a deeper look that spares researchers having to hunt through the vast array of government and private websites?

Wiping out Wisconsin taxes

David Cay Johnston
Aug 26, 2011 21:45 UTC

By David Cay Johnston
The author is a Reuters columnist. The opinions expressed are his own.

The heirs of the SC Johnson fortune, the richest family in Wisconsin with four multi-billionaires according to Forbes, paid not a penny of Wisconsin corporate income tax on profits from their global household products business and two smaller companies from 2000 through 2008, public records show.

The smaller companies made more than $400 million in Wisconsin profit. Indications are the much larger household products firm, which is privately held and does not disclose its profits, netted more than a billion dollars, and possibly many billions.

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