Do Some People Really Face an 83% Income Tax?

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Do Some People Really Face an 83% Income Tax?

Via TaxProf, I found essay by economist Greg Mankiw, claiming that his actual income tax will be 83% under McCain and 93% under Obama.

It’s a surprising claim, but Mankiw has at least done the math. He argues that for any new income, he’d invest it, and let his kids inherit it. Thus:

Let’s suppose Greg Mankiw takes on an incremental job today and earns a dollar. How much, as a result, will he leave his kids in T years?

The answer depends on four tax rates. First, I pay the combined income and payroll tax on the dollar earned. Second, I pay the corporate tax rate while the money is invested in a firm. Third, I pay

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Check’s in the Mail: The IRS is Trying to Pay Taxpayers $266 million

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Check’s in the Mail: The IRS is Trying to Pay Taxpayers $266 million

The IRS has recently announced that hundreds of thousands of stimulus and rebate checks haven’t made it to their intended recipients. You can blame out-of-date mailing addresses and social security number snafus.

Fortunately, the IRS is bending over backwards to make sure these get delivered. They’ve publicized the issue (though 383,000 wrong addresses out of over 100 million tax filers doesn’t call for much of a mea culpa), and they’ve whipped up some useful tools for curious taxpayers:

It’s almost inevitable that this will lead to a new a new generation of advance-feeRead more…

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Do the Fat Cats Always Cheat?

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Do the Fat Cats Always Cheat?

According to a new study, yes: people earning $500,000 to $1 million understate their income by about 21%, compared to 8% for those earning $50,000 to $100,000. The first obvious response is outrage — how dare they lie, when they’re already so much better off? But a more practical question is to ask what we can do about this — and whether we should do anything at all.

To deal with tax evasion, you have to think like a tax evader. The first thing to do is to restate your term: the marginal tax rate isn’t a tax rate — it’s the return on dishonesty. Someone taxed at 15% gets fifteen cents for every dollar worth of lies; someone… Read more…

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Suffering From ‘Non-Filer Syndrome’? Better Have Rich Friends

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Suffering From ‘Non-Filer Syndrome’? Better Have Rich Friends

Charles O’Byrne, a top aide to New York Governor David Patterson, refused to file income taxes for years. He now owes the state $300,000 and an apology — he’s been able to tender one of these on his own.

What’s surprising is that for someone earning so much — his last salary was $178,000 per year — and working directly for the state government, O’Byrne didn’t get much attention from the tax authorities. From 2001 to 2005, he accumulated a six-figure debt without ever being asked to pay up.

According to his lawyer, Richard Kestenbaum, he suffered from ‘Non-Filer Syndrome’, which made him too depressed to do his taxes, even though, “Most times, with professionals, these are very high-functioning people… Read more…

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Optimists, Pessimists, and Con of All Kinds

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Optimists, Pessimists, and Con of All Kinds

With the market in the doldrums and the election turning nastier every day, most people are feeling increasingly negative about everything, their finances included. But the markets have (for now) stopped crashing, and some people are taking stock and seeing reasons to be optimistic. Meanwhile, others point out that there are still some financial follies to avoid. And, of course, there’s a new crop of entertaining tax evaders since the last edition of Today in the Taxosphere.

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Joe the Plumber: Taxes and Swing Votes

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Joe the Plumber: Taxes and Swing Votes

Joe Wurzelbacher might think twice about getting involved in politics again. A week ago, Joe the Plumber was just another plumber. Now he is the Joe the Plumber, a more important political topic than the War in Iraq, and a more sensitive debate subject than abortion or gay marriage.

How did Joe the Plumber find his way into the spotlight? First, he happened to be named ‘Joe’: every candidate wants a less insulting, more family-friendly replacement for “Joe Sixpack,” and Joe the Plumber is definitely it. But more importantly, he touched on a crucial issue: what are the long-term effects of the Obama and McCain tax plans?

In the video that made him famous, Joe sounds like his mind… Read more…

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Tax Q&A: Who Pays for the Bailout, and How?

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Tax Q&A: Who Pays for the Bailout, and How?

$700 billion. It’s an incredible number. The Troubled Asset Relief program (abbreviated TARP, often just called “The Bailout”) is an unprecedented spending spree. The closest comparison, the Marshall Plan, cost about $110 billion in present dollars, so the scope of the TARP is beyond that of any new government program.

When people hear about $700 billion in new spending, their first reaction after scraping their jaw off the floor is to ask: “Who will pay for this?” with the sneaking suspicion that the answer is, as usual, “The taxpayers.”

But it’s not that simple. The first important thing to realize about paying for the bailout is that it’s not necessarily going to mean a higher tax rate or an end… Read more…

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The Heating Bill Hedge

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The Heating Bill Hedge

It’s hard to miss the headlines about hedge fund collapses. It seems like every day there’s a story of another hedge fund that blew up thanks to esoteric bets on mortgages, metals, or currencies. One easy lesson to draw from this is that the hedge fund concept has been thoroughly debunked. But a better lesson is to ask how you can behave more like a smart hedge fund owner.

I don’t mean to suggest that any small investor should play with the financial high-wire act that some funds use. Nor should typical investors play around with complex securities like stock options — if a team of MIT-educated PhDs could lose billions of dollars on ‘risk-free’ options trading, it might… Read more…

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Tax Q&A: I heard there isn’t actually a law that says we have to pay taxes. Is this true?

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Tax Q&A: I heard there isn’t actually a law that says we have to pay taxes. Is this true?

Is it true that there’s no law saying I have to pay income taxes? This is a common question on tax forums and discussion boards. Many websites and publications argue that paying taxes is illegal, immoral, unconstitutional, dishonest — basically every synonym for evil except “fattening”. The famous tax protestor Irwin Schiff calls income taxes “The Biggest Con.” The rise of popular libertarian candidates like Ron Paul has caused many people to scrutinize the Constitution and reconsider current tax rates.

So what’s the big deal? Is it true that we don’t owe taxes? Can we do anything about it?

There are several common conversational gambits among tax protestors, but the most common is: “What law, specifically, requires us to pay income

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Fake Tax Cuts, Terrifying Foreclosure Videos, Dog Taxes, and More

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Fake Tax Cuts, Terrifying Foreclosure Videos, Dog Taxes, and More

We’re all bracing for the next debate, but the taxosphere is rolling right along. Today brought in still more outraged comments about the bailout/stabilization plan/boondoggle-upon-a-boondoggle-upon-a-boondoggle. There’s a lot to catch up on in today’s tax blog posts:

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