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