Your typical leveraged buyout kingpin lives in a swanky Park Avenue apartment, or maybe a hollowed-out volcano in the South Pacific. But that doesn't mean you can't get some good old-fashioned tax dodging and company buying-out, right in the middle of Utah. Husband and wife team Lester and Jeanette Mower liked the idea of trading companies for fun. The weird thing is that the confusing part is the legal part: they would create new businesses, merge them with existing public companies, and sell the stock. That meant a blizzard of paperwork, lots of legal fees, and transactions with dozens of banks and brokers. That's the complicated part. Next comes the simple part: once they sold their shares — they never paid taxes. Oops. The strangest part? their take from the scheme was $30 million. They were dodging the capital gains tax. Which means that, had they not cheated the IRS, they would be forced to make do with a mere... $24 million. So why did they do it? It's exactly hard to have a nice life with $24 million, especially in a low-cost state like Utah. So what's really going on? Two possibilities: They had a legitimate business and a serious gambling problem. Some of the ...

South Carolina governor Mark Sanford got into the headlines (and some hot water) for trying to turn down Federal stimulus payments earlier this month. Now, he's famous for a different reason: in a rambling press statement, he admitted to having an affair with a woman in Argentina. Could this be a serious blow to stimulus opponents? One commentator, Jeff Seemann, thinks so. Seemann claims that Sanford used stimulus money to pay for the affair: The state of South Carolina is granted 2.8 billion dollars in federal stimulus money. After originally rejecting the money, the SC Supremes smack Sanford down and force the state to accept the money. Sanford later announces that he will use several hundred million dollars of the stimulus to pay down the state's budget deficit. Sanford's salary is paid for from the South Carolina budget. Sanford went to Argentina to see his mistress on the dime of the South Carolina taxpayer. Which, if true, means that all money spent by anyone paid by the government counts as stimulus money. In other words, Jeff Seemann is also claiming that President Obama spent the stimulus on cigarettes. This, by the way, is not the first time Seemann has had any run-ins ...

You know what's sane and normal? Having trouble letting go when a loved one dies. You know what's not so sane or normal? Dressing up as a deceased parent for years in order to collect social security benefits and rent subsidies. Irene Prusik passed away in 2003. But Thomas Prusik-Parkin kept on collecting her benefits for years. This had to take some planning: he started by fudging the numbers on her death certificate so she wouldn't be listed as dead. After that, it was just a simple matter of, um: donning a wig, nail polish and dresses to impersonate his dead mom and collect $115,000 in Social Security and rent subsidies. Prusik-Parkin really exemplifies the idea of giving people a "hand up, rather than a handout." He had to work hard to earn the government benefits of two people. In addition to the creepy cross-dressing disguises, he sued himself for selling his house to himself, and filed a fake affadavit from a fake relative to support the claim. All that, and he still got evicted! The New York Daily News has the whole bizarre story. Oh, and one other thing: today, it came out that he kept the casket in his living room. Which you'd ...

Californians pay the highest sales tax in the nation. Their top-bracket earners have the second-highest income tax rate in the country. The middle class to upper class — those making $48,000 to $1 million — are right up there among the most highly taxed, too. California's gas tax, at 35.3 cents per gallon, is third-highest in the nation. Corporations face the highest tax rates in the West. California is famous for having high taxes, but they're still a subject of perennial debate. Outside of California, the facts are pretty stark: state residents take home less of their paychecks than almost anyone else, and more gets taken out of the after-tax money they spend. Add that to the generally high cost of living, and the situation looks pretty awful. But one of the reasons Californians can stand it is that their state is not too shabby in the spending department. Great schools like Caltech, Berkeley, and Stanford mean that the state has a well-educated population with an emphasis on technology. Add that to the state's formerly red-hot property market, and you can see why they were spending so much: they were making lots of money, too! As with all high-tax situations, the real question ...

Think back to the summer of 2000. The NASDAQ had, well, NASDAQ'd, all of Silicon Valley was nursing a collective hangover, and the rest of the country was getting back to normal. Imagine if, in the midst of all that, someone had gotten a clever policy idea: now that nobody is starting new startups, we could just gather together smart 22-year-olds, give them thousand-dollar office chairs, five thousand-dollar computers, and million-dollar stock options packages, and we could pay for it all with taxpayer money! Okay, that's crazy & but it's less crazy than using tax credits as down payments on a new house (first mentioned on Taxrascal in this real estate crisis, redux, post). At least during the dot-com bubble, people were excited about starting new companies. The real estate bubble involved people excited about other people paying too much for dirt. What's worse is that this has some support, from people who should know better: "It is a very attractive offering, and basically it addresses one of the hurdles that keeps more people from buying a home - getting help with the down payment or paying closing costs," says Bob Meighan, a vice ...

It's happened to everyone: one day, your property taxes drop from $1400 a year to $50, and you, well, you figure it's not a problem. Or if it is a problem, it's somebody else's problem. Detroit City Council member JoAnn Watson has landed in hot water thanks to revalations that she saved a sweet $12,000 over the last nine years. A flurry of media attention forced her to explain exactly what was going on, and a thorough investigation (it lasted about a week). She didn't exactly get a positive reception when she explained herself: If anyone here in this circle received a bill and you've argued to pay more, just raise your hand. That's fine, but if I lived in a notoriously corrupt city, and happened to have a job in politics, I might at least think it looked bad. And it's not like Detroit is doing especially well, financially. Did Watson have any idea how many steamy text messages from Mayor Kwame Kilpatrick to his chief of staff that money could have paid for? Or how many jobs for the mayor's friends and family that money could have saved (answer: not many -- his associates got raises averaging 36% over two years, while ...

New York taxpayers are getting a nasty surprise in the next months, as retroactive tax increases require them to set aside much more money in their quarterly tax payments. The Wall Street Journal reports that this change is hitting taxpayers who have high deductions especially hard. Those tax hikes were tempting, but this kind of story showcases one of the big problems with raising taxes during a recession: that unstable tax code gives everyone an incentive to earn less and lie more, since they don't know what they'll actually get to keep. Instead of spending big during good times and squeezing taxpayers during bad times, states should plan ahead for this kind of crisis. A better plan is to set aside savings for bad times -- New York could have kept spending low during the boom years, paid down debt, and had a large expense cushion when times got more difficult. That might have slowed the boom down a bit (with less hiring going on at city hall, wages citywide would be a tad lower), but that's not such a big problem: a crash from a Dow at 13,000 or 12,000 is less painful than a crash from 14,000, and if the ...

New York has a new plan to collect back taxes: publicly shame delinquent taxpayers. It's pretty cheap, as far as collection strategies go. And it doesn't sound as bad as you'd think, because they plan on notifying taxpayers first. But there are a few big problems with this plan. First, it's a huge violation of privacy, that's prone to error. If there's a mistake in the records that keeps the state from contacting a taxpayer in time, it might be a mistake on the state's end -- so they could end up naming and shaming someone who doesn't owe money after all. And even if the state is able to collect back taxes from taxpayers who are grateful for the amnesty, what if the naming-and-shaming gets the attention of the IRS? According to some reports, owing lots of back taxes could become a felony. If that happens, this plan would essentially give the IRS a list of targets who could be hit with serious penalties. New York State would end up using the Feds as muscle to enforce their own tax claims. So if they can't name and shame, what can they do? They can negotiate with taxpayers, and find out how much they ...

The fat tax proposal is back, and it hasn't exactly slimmed down. Now, instead of a statewide tax hike, we might get a nationwide effort to raise taxes on soda, alcohol, sodium, and trans fats. Inside sources tell the Tax Rascal that this proposal is just a preliminary one, and that the full plan also includes a cost-saving cap-and-trade system, reducing the total number of flavors available to an easily managable group including stalwarts like "Bitter," and "Bland," as well as new introductions like "Asphalty," and "Shame." Okay, maybe not. But it's still a bad plan. The jury's still out on whether or not taxing this kind of stuff would actually lead to better health (or would just lead to people trying unhealthier alternatives). And even if it is the right thing to do, there's always the question of why that's the right way to cover the extra health costs of people with unhealthy habits. A rule like this basically says that the way to charge for health care is to figure out how much people are likely to cost the system, and then charge them in advance based on that. But that doesn't make much sense: it's like a restaurant charging people ...

Coming soon: you can use your $8,000 new-home tax credit to make a down payment on your new home. We're now several years into a credit crisis caused by people buying homes they couldn't really afford. And the response? Creating a new incentive to buy more homes — and to borrow money to do it. There is no way this will end up moving prices to an appropriate level, and no way it's going to make the finance and housing industries change their behavior. In fact, the main result is to make things even worse: in the past, the government just made borrowing cheaper (through the income tax deduction, which made interest cheaper than other kinds of interest, and through Fannie and Freddie, which made mortgage loans easier loans to make). With this new law, they've gone from making promises to just plain writing checks. You can't really take this much farther without making it even more absurd. In the future, we're going to have to raise taxes (on everything except real estate, apparently). Or huge deficits will lead to rampant inflation (making dollar bills worth less than wallpaper — also a boon to the housing industry, incidentally).