Imagine, for a second, that you’re a smoker, which, if you’re a smoker, should be easy. You’ve triumphed over brownish teeth and the lingering stench of stale smoke. You’ve bravely ignored the highly increased risk of lung cancer in the noble pursuit of having something to do with hands while you drink.

What’s your reward? Finding out that people are overwhelmingly in favor of making your addictive and potentially deadly habit MORE expensive.

67% of voters favor a $1 tax per pack of cigarettes, according to a report from the Robert Wood Johnson foundation. Voters far prefer this tax to budget cuts or other tax increases. The report indicates that states could raise up $9 billion to help counter the large deficits many are facing.

Additionally, the report, Tobacco Taxes: A Win-Win-Win for Cash-Strapped States, found that the tax would prevent children from picking up smoking. “Win-win-win” refers to the three benefits of the proposed new tax: more money (52.8 billion saved in health care costs), fewer young smokers (2.3 million kids prevented from starting smoking) and widespread political support (voters support a pro-tax candidate 59-35).

The measure fared particularly well when compared with other health conscious methods for fund-raising, including charging a large one-time fee for Russian Roulette, and making parachute-less skydiving punishable by large fine.

Are you a lobbyist for a large soda company that long ago traded your chance for any sort of spiritual salvation for piles of stress and increasingly redundant money?

Are you perhaps a lawmaker who long ago became jaded and no longer harbors any delusion about helping people?

If you answered “yes” or “huh?” to any or all of these questions, there’s good news for you out of Washington: The soft-drink industry has doused plans to tax their sugary concoctions. Mere months ago, it looked bleak for pop-makers: public health advocates thought the plan would be an easy fit with Congressional Democrats looking to raise money, and figured lowering heart disease and obesity would be the cherry on top of this low-fat fro-yo sundae.

The Congressional Budget indicated that a tax of less then one cent per ounce could raise $50 billion dollars over 10 years. While it is hard to accurately measure the health benefits of the decreased consumptions, it is virtually certain that drinking less soda is healthy per se; such drinks are stuffed with calories but devoid of nutritional value.

The soda-slurping set didn’t take this news slumped in a diabetic coma. Operating under the name Americans Against Food Taxes, a coalition of interested parties sought to prove that such taxes unfairly targeted poor people. They enlisted the help of a bevy of Hispanic advocacy groups, including the National Hispanic Medical Association, which represents 36,000 Latino doctors and focuses on health issues, including obesity.

The coalition was able to convincingly argue that taxing soda set a bad precedent for food taxation, and was thus able to elicit support from a wider range of advocacy groups. Furthermore, they rejected evidence linking soda consumption and obesity, noting that a lack of exercise was for more to blame for the heavy situation the country finds itself in.

So next time you’re training for a 5K, skip the water: bring along a big bottle of Pepsi. A study commissioned by its manufacturers found its negative effects inconclusive. What more assurance could you want?

Who says money can’t grow on trees?

While this plan doesn’t involve special heatlamps and a closet full of contraband, it would seek to profit from the growing and distribution of marijuana. Growers, retailers and distributors in California (where the drug is legal) would have to register with the state and pay a licensing fee. The drug itself would be subject to a tax of up to 41%.

State Senator Ron Calderon is to introduce the bill, which is being pushed by Board of Equalization member Jerome Horton, who sponsored similar legislation aimed at quashing illegal cigarette sales. Calderon was careful to note that the proposal would not legalize the sale of marijuana (that proposal was introduced by Tom Ammiano, and died a legislation timeline death but should be reintroduced in the next several days).

The Senator says the plan would not only help control legal dispution (and crack down on illegal sales), it could also bring nearly 2 billion dollars in yearly revenue to the beleagured state.

Lets just hope that money goes to something more than Natural Light and a really sweet bong.

According to Reuters.com, the US is pissed at the Philippine government. Why? Well, Obama’s tax lieutenants have a problem with the Philippine’s distaste of Jack Daniels. The miniature nation of islands has an excise tax on America’s Whiskey and gin. No big deal, except the tax on American spirits is anywhere between 10-40 percent more than those from within its own borders.

Listen, Philippines. America will look the other way if you kick around your second-class citizens or engage in some illegal arms dealing. The government could even deal with your tiny country having the temerity to provide its citizens with nationalized health care. But if you screw with US expatriates’ right to get drunk on old fashioned Maker’s Mark – at a reasonable price! – well then, you’re gonna be looking at the wrong side of a sternly-worded letter to the WTO.

Incidentally, it turns out America’s not the only country suffering from unreasonable excise taxes from the draconian Philippine policy of petty taxation schemes. The EU filed their own grievance against the taxes to the WTO a while back, to no avail. In a turn of events that should surprise no one, it’s been discovered that the WTO has no actual power to enforce its policies, such as the one that says “countries should not discriminate between imported and domestic products in their tax regimes.”

Sounds a bit like the UN. All sizzle, no imported steak.

Because of this, it makes sense to sell at the end of the year. (The IRS will let you buy the stocks back after 30 days and still give you the tax penalty.) And if people are selling stocks they still like, they’re going to buy them back later. All this trading gets other traders excited; it’s fun to try to guess which hammered stocks will be sold for the tax loss—and then to chase them back up when their owners buy them back.

This year, the S&P 500 was up 3% during December. But if you’re expecting Santa to swing by again in January, you might be in for some disappointment.

Compared to previous years, this stock market is a lot less interesting. In the late 90’s, you could pick tech stocks or huge momentum plays that paid off. In 2000-2003, tech stocks deflated, but value stocks roared back. Later on, asset plays and natural resource stocks dominated the market, while other companies lagged.

But in 2008, nearly everything went down—the only question was how “financial” the company was, and thus how far it fell. In 2009, everything went up—and this time, the game was Six Degrees of Ben Bernanke: big banks did great, companies that could borrow from them did well, and the rest of the market tagged along.

But that’s not all. Trading has also gotten choppier: algorithmic trading companies have started shuffling shares back and forth at a faster and faster rate, increasing volume and decreasing holding times.

All this means that there are far fewer stocks available for tax-loss sales this year. The last month’s rally might, in retrospect, look a little over-eager: if nobody is around to sell for tax losses, everyone who buys is buying in order to sell to a buyer who won’t show up. It’s a smaller version of the Greater Fool theory, but this weird tax quirk could cost investors money.

A Santa Clause Rally this year? What do you think?

But that’s a superficial way to look at it. There are some important questions that tax shelters bring up, and not all of them can be answered by soaking the rich:

1. Should people be penalized for following the rules? The tax code is designed to make good behavior more rewarding, and bad behavior less rewarding. But laws can’t just argue about “good” and “bad”—they have to allow specific things. If tax rules are designed to encourage companies to invest in new equipment, they can’t just ask nicely—they have to give companies a tax break based on the depreciating assets they own. And if companies use that depreciation to reduce their tax burden, is it really their moral problem? They just exist to make as much money as possible; if the rules encourage them to do that in useless ways, the rules are the issue.
2. How much should corporations pay in taxes, anyway? Look at IKEA. They dodge a multi-billion dollar tax bill every year. But the company invests most of its profits in expansion, and currently has over a hundred thousand employees—all of whom spend most of their time selling incredibly cheap furniture. Add up the payroll taxes alone and it looks like they’ll end up paying more taxes if they don’t have to pay any taxes.There’s an easy way to sum it up: companies save money. They reinvest it. And if they don’t, they distribute the profits to people or to charities. So there’s no specific reason to tax companies, since the money they make gets handed to taxable individuals in the end. But there’s one good reason not to tax them. They save like crazy.
3. The next round of rules will get written by the bad guys. If you know much about tax loopholes, you probably find them appalling. If you know a lot about tax loopholes, you probably exploit them for a living. The only people who know enough to permanently fix existing problems are the ones who are exploiting them in the first place.

So it’s true. Tax shelters are a huge problem. But the problem isn’t that companies are getting out of paying their fair share: it’s that they do extra work to evade poorly-conceived, poorly-implemented rules.

Here’s a sampling of what people are saying about this tax issue:

Obamacare: all in favor say…

@Acaseofzombism : #obamacarefacts Under ObamaCare garfield will no longer hate mondays

@CyberWasteland : Under ObamaCare E.T. would’ve died. #obamacarefacts

@southworth : Under ObamaCare, Obama will bring about the Biblical Apocalypse, and it will be labeled a pre-existing condition. #obamacarefacts

@jephjacques Under ObamaCare, the CIA will replace the prozac in your tap water with its generic #obamacarefacts

Obamacare: opponents say…

@Mike_McC : Under ObamaCare, dolphin therapy is replaced with rabid wolverine therapy. #obamacarefacts

@NatalieAntonia : Under ObamaCare, we’re all going to need the damn insurance because we’ll be worried SICK trying to pay for it, and need constant care!!

@EastCoastSteff : Under ObamaCare, bloodmobiles will be replaced with government-subsidized Chevy Volts (which actually run on blood) #obamacarefacts

@Beppy: Under ObamaCare, you get Dr. House but he doesn’t get his vicodin #obamacarefacts

@jephjacques: Under ObamaCare activites that damage your health will also be socialized. Other people will drink all your beers. #obamacarefacts

So that’s that. Everyone’s busy trying to outdo the other side, which is good news for anyone who is worried about this kind of program: exaggerate enough, and you might get close to what’s eventually going to happen!

According to one source, Claybrooks made $20,000 on the scheme — at least, that’s how much they caught him for. But the scheme lasted for several years, and those numbers are for just two people who got taken in.

The way it worked was simple: Claybrooks would contact people who owed the IRS money, and would kindly suggest that they refinance their mortgages to get better treatment. He also suggested that they use a company called Faith Mortgage, which — in a show of good faith, perhaps? — was giving Claybrooks a referral fee on every new customer he got them. Prior to joining the IRS, he happened to work for Faith Mortgage directly.

This story comes via Kay Bell’s excellent “Don’t Mess With Taxes.

Oh, and in case you were wondering, he still works at the IRS.

The bet works like this: if most minimum wage workers are underpaid, they win! They all get raises, and the money they make is closer to what they’re worth. They spend more money, the economy gets a boost, and everyone gets to thank Congress for making sure they’re paid the right amount.

And if they aren’t worth it — or they are worth the money, but it’s money their employers don’t have? In that case, they get laid off. But, of course, it’s harder to measure when that happens, or what really caused it. In the end, the easiest person to blame is the employer.

It’s a simple case of heads, Congress wins, tails, employers and employees both lose. But what makes it worse is who is affected: minimum wage workers are generally young, and generally women. In other words, they’re often economically vulnerable (and, in the case of young people, often getting “paid” mostly in experience).

With math like that, it’s an easy bet for some folks to make. Unfortunately, it ignores the economic realities of work and experience. Many people work for less than minimum wage — as interns, as volunteers, or under the table. Few of them expect to keep working for that much money forever, but all of them are clearly more willing to work for low wages than to spend their time some other way.

There are plenty of reasons to think that minimum wage is too low — but the most compelling reason to think so is when inexperienced people get hired for more than minimum wage, not that people complain that the wages they willingly work for are too low.

• The New York Times charts who is affected by the new minimum wage law.

• Kay Bell at Don’t Mess With Taxes also discusses the news.

• The AFL-CIO has a different view. They mention workers “Affected by an increase,” without pointing out how often the effect of an increase is a layoff. Oh well!

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 is how much people pay, not the “sticker price” on their tax returns. California has a reputation for being pretty trigger-happy with deductions:

“California has relatively high tax rates, but it’s because we have a loophole-ridden tax system,” said Jean Ross, director of the California Budget Project. “If we had fewer loopholes for the rich, we could have lower tax rates. (Resisting tax increases) is really a smoke screen for saying we believe government ought to do less for education, children and health care.”

That’s certainly not a fair accusation (the state’s freethinking reputation aside, there aren’t many anti-education, anti-children people in California). But it does make a good point: California’s property taxes, for example, have been kept artificially low for some time. This fueled the real estate boom, but it also meant that the state had to find other ways to get the revenue most states get from taxing homes.

California’s tax muddle makes it increasingly clear that the numbers we talk about aren’t always the ones that matter. High tax rates don’t mean much if loopholes soften the blow, and high spending is not such a problem if it’s spending that boosts the economy.