The IRS decided it doesn’t need to tax airlines for the $1.76 billion made in baggage fees, this year. I mean, when you have the chance to add to the airlines’ astounding amount of tax breaks and subsidies, you’ve got to take it, right? And why not give airlines incentive to institute more “fees” that, like entertainment, food, drink, and alcohol, generate tax-free revenue? Look, TaxRascal is no fan of unfair taxes. We’ve pretty much affirmed that by now, yes? But the airlines are already enjoying all kinds of gentle caresses from the IRS (as well as basically every other government agency ever created, ever), so giving them a pass on another somewhat despicable revenue stream is silly, if not unconscionable. Facts on the ground are changing, and the tax code should follow suit. Airlines are participating in a cashgrab orgy, and given the loose reins, there’s not an end in sight. Just a couple weeks ago, Delta & Continental both increased their baggage fees, tempting other carriers to follow. Delta’s increase moved their fees to $25 for the first and $35 for the second, up from $15 & $25. Delta’s been the pioneer in the baggage fee frontier, with ...

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 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 ...

California's unusually high sales tax may get even higher thanks to a new tax plan. The weird part isn't that California will be raising sales taxes from 7.25% to 8.75% -- it's what the planned tax increase will pay for. The core of Arnold Schwarzenneger's new budget plan is an increase in taxes to pay for the state's current budget shortfall: in addition to raising the sales tax, he wants it to apply to some services. He's also raising taxes on alcohol, cigarettes and energy. But one industry gets a tax break: TV and movie companies could get millions from other initiatives. It's not surprising that the state would want to tax some industries and subsidize others, but it's disturbing that they'd need to help that particular industry: there is no state with as much access to the talent, capital, and expertise necessary to make movies. There is almost no reason for an ambitious person who wants to enter that industry to go anywhere but California. Schwarzenneger could easily get away with taxing them more, instead: ask yourself how high taxes would have to be for Universal Studios to relocate to, say, Milwaukee. One of the most common problems with tax policy is that ...