Individual Income Tax Loopholes

Tesla Buyers Tax Loophole 

Tesla along with being the world's first hybrid sports car has created an even greater incentive for car buyers to choose Tesla. Now purchasers of the Tesla Model X for a whopping $100,000.00 can purchase the Model X and receive a $25,000.00 federal tax deduction. Model X buyers will also be eligible for the $7,500.00 hybrid car purchaser tax credit and any additional state tax credits or deductions that may exist. These significant tax brakes have received significant criticism as the average income earner in the US would not be able to afford such a car to receive such a large tax break. Tesla states that the Model X will not qualify for the "hummer tax loophole" which provides credits and deductions for hybrid cars. The tax code section was intended to apply to small business owner purchases that would help infuse small business by providing tax credits for heavy equipment that the business might need. The tax was intended to be progressive in nature but if applied to expensive hybrid cars the effect could in fact be regressive. Tesla its subsidiaries have faced major scrutiny lately for the significant tax benefits received by the company from the government. Tesla has received over $4.9 billion dollars in federal government support with additional millions of dollars from the state of California. These numbers do not include the tax deduction that purchasers of Tesla's will take. Lawmakers fear that applying this tax deduction to essentially a luxury car is not consistent with the purpose of the law. Read more about the tax incentives of buying a Tesla at http://www.latimes.com/business/autos/la-fi-hy-tesla-tax-break-20151013-story.html

Multinational Corporation Taxes

Facebook's Minimal UK Corporate Tax 

Facebook paid less than $7,000.00 in corporate taxes on its $2.9 billion in revenues in 2014 to the UK government. While Facebook's 362 UK employees each paid almost $6,000.00 in income and national insurance benefit tax. The European Union (EU) is investigating Facebook along with other multinational corporations tax arrangements in the UK. Starbucks was the first US corporation under investigation for minimal UK tax paid over a span of 14 years on billions of dollars made in the UK by the company. The investigation has uncovered that Luxembourg has issued many tax rulings which have allowed various multinational corporations to lower their tax bill by "funneling money through the country". Facebook has stated in response that it is in compliance with UK tax laws. The EU investigation will continue but the problems may stem from the UK's complex and extensive tax code which is very similar in complexity to the US Tax code. A simplification of the UK tax code could help to better identify the various tax loopholes used by US based multinational corporations operating in the UK.  If the UK tax code is not amended it may lead to more US corporations moving to the UK or other countries to take advantage of the lenient code system that results in corporate taxes which are less than the average income tax paid by employees of these companies. Further, this code will create greater inefficiencies in the allocation of taxes in the UK. with billion dollar companies paying minimal taxes countries will be unable to afford the toll on resources that results from operation of business in the country. An eventual deterioration of infrastructure, educational systems and government subsidiaries such as housing and employment. Hopefully, the EU investigation will be able to reevaluate the current tax code to avoid these inefficiencies. Read more about Facebook's corporate tax in the UK here: http://www.bbc.com/news/business-34504474

US Percentage of Tax Expenditures 

Currently, most US tax dollars go to defense and international security assistance, social security and medicare, medicaid subsidies. While other developed countries have evenly distributed the majority of their tax expenditures towards various areas that require tax dollars. For instance in, in the UK more of the tax dollars are allocated for a government sponsored retirement plan. Further, in the Netherlands almost half of the countries tax expenditures are allocated towards business incentives to drive the countries accompany. Inversely, in Germany more than half of the countries taxes are utilized for government sponsored housing initiatives. A balance must struck with tax policy in a country to determine the expenditures that are necessary and those that are creating a greater detriment to the country. There are substantial benefits to a government funded health care initiative and tax dollars should be allocated to this. However, other interests such as business incentives, housing or retirement should also be considered in developing tax policy. Please see the following OECD Publishing article comparing international tax expenditures: http://dx.doi.org/10.1787/746827562747

Source: http://www.cbpp.org/research/policy-basics-where-do-our-federal-tax-dollars-go

Privatizing Taxation

Microsoft's Carbon Emission Tax 

Microsoft along with other companies has implemented an internal tax structure to tax itself in an effort to address the environmental concerns that result from carbon emissions. Microsoft along with various other companies has begun self regulating in an effort to address various environmental concerns. Regulation of carbon emissions is a global concern that is addressed by many governments most recently in the United Nations Sustainable Development Summit. Global leaders met to discuss the growing environmental concerns in their countries.While countries are attempting to address these issues on a global level.  Microsoft and 437 other companies are imposing taxes upon themselves and allocating the tax to internal sustainable energy initiatives. The company has saved over $10 million dollars in energy expenses through it's internal taxation campaign. Microsoft expects to save over $20 million through its reduced use of carbon emissions. Companies such as General Motors and Exxon Mobil have began internal taxation of carbon emissions also reducing their energy costs. Some of the companies imposing taxes are not reinvesting the internal taxes for sustainability initiatives but have imposed the internal tax in anticipation of governmental regulations that may be imposed in the coming years. The concept of internal private taxation has emerged among large and smaller scale companies to further the functionality of the business and to address social and political concerns. Microsoft's actions are consistent with the global stance on carbon emission which is the importance of its limitation. http://ec.europa.eu/taxation_customs/resources/documents/company_tax_study_en.pdf Read about Microsoft's internal taxation structure and the movement that exists among larger corporations to create sustainable alternatives within their corporations. http://nyti.ms/1Fpv6JF

Raising Taxes

Increased Taxes for Hedge Fund Managers

Both Jeb Bush and Donald Trump propose a tax increase for Hedge Fund Managers. The proposed tax would require the classification of income earned as income rather than gains on investment as the tax is currently classified. Bush proposes a reform of the carried interest policy which allows profits from managing funds to be taxed as as investment gains rather than earned income. This along with other reformations of the tax code are proposed by both Bush and Trump. These reforms come as a surprise to many as Bush and Trump are no strangers to wall street and are aware of the various loopholes used by hedge fund managers to avoid paying taxes. Increasing taxes on income earned by hedge fund managers will result in greater taxes earned which could be reinfused into the economy. As many politicians have mentioned throughout the course of their campaigning a reform of the tax code is necessary to properly allocate resources. The codes expensive policies allow for individuals with access to tax specialists to take advantage of various loopholes within the code which take away from the benefits that should exist under the code. An increase in taxes for those who can afford to pay inversely effects lower income individuals that pay regressive taxes that they cannot afford. An increase in the taxes of income of individuals who can afford to pay would result in great benefit for individuals that are unable to afford to pay regressive taxes. http://www.cnn.com/2015/09/08/politics/jeb-bush-tax-proposals/

The Earned Income Tax Credit

Agreeing with Trump on the EITC?

I never thought I would see the day that I agreed with Donald Trump on anything, but that day has come. The Earned Income Tax Credit (EITC), is a refundable tax credit provided to qualifying lower income individuals. It is utilized by many lower income people as a way to supplement their low incomes. The credit is primarily available to individuals that work but often still make below the poverty line. The credit often allows these people remain above the poverty line. The credit is anticipated by many lower income people through out the year and these individuals are often taken advantage of in attempts they make to access these funds. Institutions such as H & R Block and Jackson Hewitt provide these individuals with a local vendor that can assist them with completing their returns properly in order to receive the funds. Unfortunately, H & R Block and others charge exorbitant fees for these services which often take away from the large refunds these individuals would receive. A system is necessary to regulate these preparers however their services or similar services are necessary as these people often do not have the resources or ability to complete these returns on their own. H & R Block and other tax preparers are generally located in lower income neighborhoods. They are often the only access that a lower income individual will have to an accountant or individual who might have the knowledge necessary to ensure they receive their complete refund. These preparers are not regulated by any institution. They are not required to have a college degree or take any form of examination. Changes such as a degree, or exam requirement would be helpful to ensure that they are providing these individuals with the best services possible. These preparers should also be required to reduce their fees and provide a flat rate for lower income individuals so that they are not taken advantage of. Additionally, in certain circumstances these preparers should be required to provide pro bono hours for those who cannot afford to pay. There are government preparation services but they are often not located in areas where lower income individuals can access them. So yes Trump may be right about H & R Block unless they take some affirmative steps to change the way they handle individuals that receive the EITC. The following article http://www.forbes.com/sites/kellyphillipserb/2015/09/04/fix-the-tax-code-friday-tightening-up-the-eitc/print/ describes Trump's reasoning for why H & R Block should go out of business.