Professor Elam

FICA Top Level Soars

Tuesday jan 17 2023

Social Security Administration announces the increases for 2023 

• The maximum earnings subject to the FICA tax will increase from $147,000 to $160,200 which means for 2023, the maximum Social Security tax that employers and employees each will pay is $9,932.40 ($160,200 x 6.2%).  The Medicare component will remain the same at 1.45% of all earnings.  Plus, individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly, and $125,000 for married filing separately) will pay an additional .09% in Medicare taxes.
• The cost-of-living increase of $8.7% will be seen for recipients of Social Security Benefits and Supplemental Security Income (SSI).

 

Reality of the inflation Reduction Act

Monday Aug 8 2022

 

Here is a run down on the Democrats new tax plan. It raises taxes for everyone.

 

 

Why Do We Have to File Tax Returns

Wed Feb 16 2022

The IRS already has your W2, 1099s, and now stock trades, so why do we have to do that again?

Who Does AOC think Supports the MET?

Tuesday Sept  14, 2021

Here is an excerpt from  the news on AOC's debut at a MET Opera Gala

Democratic congresswoman Alexandria Ocasio-Cortez is well-known for making powerful statements with her political speeches but she's just got everyone talking through the medium of fashion, at her first ever Met Gala appearance.

At an event attended by the likes of Kim Kardashian, Jennifer Lopez and a load of generally extremely financially wealthy people, AOC seized her moment to make totally clear where she still stands on closing the gap between the ultra-rich and the working class people of America.

AOC's interpretation of the theme "America: A Lexicon of Fashion" was a stunning floor-length white gown by Brother Vellies, which was simple and classic from the front, and from the back was emblazoned with "TAX THE RICH" in huge red writing. In case people missed her not-subtle-at-all message, AOC's bag also read “Tax The Rich”.

 

Anyone who follows AOC's political career will likely have been aware of her stance on this issue before the Met Gala. She's previously been vocal about increasing tax for the highest earners, suggesting those who make above $10m may need to be taxed up to 70% because "As you climb up this ladder, you should be contributing more."

So, her dress was true to form and it's fair to say the people of Twitter were living for the look.

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The tickets to any arts event, the opera, ballet, art museum, symphony, do not support the endeavor. It requires serious external fund raising. And  folks on food stamps do not provide that support. Taking money away from the well to do for her latest vote buying schemes only makes it more difficult for the arts to exists. And clearly she  and Joe Biden do not grasp that this means more money (the money she wants) will be spent on attorneys and cpas to prevent the tax grab.

Biden's Corp Tax Increase will Hit Middle Class

Thursday April 1 2021

Corporations do not pay income  taxes, their customers do. Corporations pass tax increases on via higher prices or less product for the same price.

Progressives think the corporations they want to punish for their success will just wince and pay up, no way.  What do progressives learn in economics class I wonder.

 

https://www.wsj.com/articles/here-come-the-biden-taxes-11617231225

 

Steve Forbes Case For a Flat Tax

Thursday Dec 22, 2016

Steve Forbes has been advocating a Flat Tax for many years.

Here he lays out the case for a 17% Flat Tax.  His best point is that the tax system lets politicians dispense tax favors.

And then there is the incredible amount of time spent preparing tax returns, and auditing them!

A big problem in getting such an idea done, is of course, the massive ignorance about the current tax system.

The Apple Empire Strikeds Back

Labor Day Sept 5 , 2016

Apple's Tim Cook responded to EU's $14.5 B retroactive tax as he put it.

This is from the WSJ site and I do not know if the link will work but the EU minister tells Tim Cook that Apple does not understand the obligatino of big firms to pya European taxes.

Here is an excerpt of the EU comments

“The Apple response shows that they don’t grasp what’s going on in society and they do not grasp what’s going on in the public debate,” Mr. Dijsselbloem, president of the Eurogroup of finance ministers, said on the sidelines of the Ambrosetti forum of business leaders in Italy. “This is a very strong moral issue and large companies, even if they’re this large, can’t say ‘this is not about us, there’s no problem here.’”

Actually Cook understands this perfectly. Big firms with cash are being targeted by left wing governments as cash cows. The governments want the firms to make up for tax shortages due to their own failed programs which have left 10-20% unemployed and paying no taxes. Cook's first obligation is to his shareholders not to the increasingly failing EU.

This is a good time to have this debate. As the article notes, even heavily indebted Ireland would rather have the jobs and research and development expenditures than the tax. Ireland understand what it takes to attract business.Ireland has the welcome mat out for business.

Italy and France do not. This is why their countries have double digit unemployement among young people graduating from collgee.

 

 

Apple Hit with $14.5 EU Extortion Tax Bill

Wed August 30 2016

The European Union has told Ireland to collect a $14.5 Billion tax from Apple. Apple located a unit in Cork, Ireland to manage international sales. And of course to escape the highest corporate tax in the world the US rate of 35%. Read the front page story here.

Here is a comment on why Britain voted to leave the dictatorial EU.

And here is the WSJ editorial take on the matter.

There is entirely too much of this progressive, you have more money than you need, we the government know better how to spend it even though we did not and could not earn it ourselves.

If Apple pays no doubt every dubious government will find a reason to impose additional taxes until Apple's cash hoard disappears. The better idea would be for the US to allow a  one time 10% tax on money brought back to the US.  No stock buy backs should be allowed, the money needs to go for R & D. But don't expect this Administration to be that practical.

 

Minimum Wage Increase, Careful What you Wish For!

Monday June 6, 2016

I got those low down mind messin' workin' at the car wash blues.

Jim Croce, Composer

Multiple states want to raise the minimum wage to $15.

The linked article reports that car wash owners are considering more and more automation to replace workers.

I heard a presentation a couple of years ago suggesting that a zero interest and highly regulated environment would result in more automation.

Well here we are!  Progressives advocating forced wages with no regard to productivity or pricing or higher taxes, always assume behavior will be constant, it will not. Here is the proof. France is slowly sinking under the weight of such rules.  In fact such rules will cause the very workers they claim to help to likely lose those jobs.

And robotic car washers don't have health care or take the day off or have children or go on strike.

Blow up the Tax Code

Weekend June 20, 2015

Blow Up the Tax Code

The time consumption is further burdensome to individual tax filers. Considering 8 hours each for 169 million returns, Americans spent over 1.35 billion hours filing individual taxes.

All said, Americans spent over 3.24 billion hours, which is about 369,858 years, preparing and filing tax returns in 2012. Considering individual, business and employment taxes, this costs $37 billion annually in compliance cost for federal taxes alone.

Tax Foundation, se details at

 http://taxfoundation.org/blog/cost-tax-compliance

 

Rand Paul is probably in the second tier of Republican Presidential candidates. But his idea to blow up the tax code is strictly first tier. Given their penchant for income re-distribution, I doubt we will see this from Democrats. And the other Republicans have not come around either.

Your business columnist is also Texas a Certified Public Accountant.   I would really enjoy seeing those opposed to blowing up the tax code defend what we have now.

Commerce Clearing House sells various tax publications. Their largest series, the Federal Tax Reporter, now runs over 70,000 pages. The reason of course is that it allows Congress to dispense various ‘tax favors’ to well heeled lobbyists, in exchange for campaign money. Steve Forbes was the last to run with this idea of a flat tax, and was speared by the same lobbyists still patrolling K Street in DC seeking favors. Let’s take a look at the proposal.

Rand Paul’s plan, fashioned with the Heritage Foundation, Steve Forbes, and Arthur Laffer, would repeal the entire Code, as it exists. In its place he would have a flat tax of 14.5%. Mortgage deductions for interest and charitable giving deductions would remain.

The plan would eliminate the payroll tax on workers (an immediate 6%+ pay raise), and several federal taxes including gift and estate, telephone taxes, and all duties and tariffs.

The 40% highest tax for small business and the 35% highest rate on corporations would be replaced with a 14.5% rate. Income less normal expenses would be taxes. All capital expenditures would be immediately expensed, eliminating the MACRS depreciation schedules.

So what would the effect be? The non-partisan Tax Foundation, quoted in our opening, suggests that in ten years domestic GDP would increase 10%. At least 1.4 million new jobs would be created. (I find that statistic elusive but it would certainly create rather than destroy jobs.)

 

I don’t know that the graphic of pages of tax law over time will run with this column, but I put the link in the opening. Please go there and behold the horror of a massive privacy invasion. The number of tax code pages has doubled just since 1990. This is an unsustainable parabolic trend!

Ah you say, but as a CPA how can I advocate for such a thing?  Frankly I would much rather have CPAs working with managerial accounting tools to help clients make more money, and pay more 14.5% in tax!  I doubt individuals or corporations would object to that rate. The point here is that when rates raise to such levels the individuals and corporations feel they are robbed the tax avoidance game goes into high gear. Lower rates generate a sense of fairness resulting in less tax avoidance and more work towards actually generating income.

Just this past week, General Electric announced a move out of high tax Connecticut, its corporate headquarters.  Thursday’s Wall Street Journal reports Texas’ Engine Keeps Revving’ on page A3. Toyota is moving here from California. Fed Ex and Liberty Mutual are building in the same area. Low taxes drive economic growth.

The challenge as Paul admits will be to overcome the special interest groups that feed on the corporate welfare of special tax dispensations.   I suspect the bigger challenge would be getting Congress to abandon this vote-buying scheme of the tax code and then to abide by the new rules, i.e., no changing the game again.

This is a bold idea, whose time has come. Let those opposed to such change defend all 70,000 pages of the existing tax swamp of regulation.

Are there 60 Senators and 218 representatives, not to mention a new President with the courage to do this?

Dennis Elam PhD CPA teaches accounting at Texas A & M University San Antonio.