Archive for October 3rd, 2012

One hundred thousand views in a little over a year. That’s not too shabby. Though a closer inspection of this site’s hits reveals that many of our guests have stopped by unintentionally, and by the looks of it, left considerably disappointed. Below is a list of the Top 6 search terms that have led internet users to Double Taxation since its inception:

Canyonero: 886 (The fact that nearly 1,000 people came here because they were searching for the fictional SUV endorsed by The Simpsons’ Krusty the Clown warms my heart and renews my faith in humanity.)

Power Rangers Porn: 620 (For obvious reasons, this instantly renews my disgust for humanity)

Double Taxation: 606 (Picking a good blog title is key. Search engine optimization!)

Power Ranger Porn: 391 (You should all be ashamed of yourselves. Perverts.)

Tax Law Changes for 2013: 270 (I’m not sure what it says about the content of this site that it took until our fifth search term to yield a result that I actually wrote about.)

Things get slightly more comforting when we look at the most-read posts in our 16-month history:

Tax Planning for the 2013 Law Changes 3,038
IRS Clarifies Interplay Between Luxury Auto Depreciation   Limits and 100% Bonus Depreciation, Long National Nightmare Finally Over   2,403
IRS Issues Luxury Audit Limits, Fails To Acknowledge   Potential Problem 1,873
Power Ranger Porn, Google Rip-Offs, and Homicidal   Accountants: Just Another Day in the Tax Court 1,591
Presidental Candidate Tax Comparison: Update 1,345

Two things can be gleaned from this data:

1. People really seem to care about luxury audit for some reason, and

2. If you want to get page hits, here’s a simple yet full-proof business plan for any blog:

Phase 1: Put “porn” in title

Phase 2: ?????

Phase 3: PROFIT!

On the tax front, in advance of tonight’s presidential debate, Mitt Romney has finally started to cave to continuing pressure to share some details regarding his tax proposals; particularly, how he plans to keep his 20% acr0ss-the-board rate cuts revenue-neutral while not shifting the tax burden away from the rich and towards the middle class. In a speech given this week, Romney indicated that he might cap deductible itemized deductions at $17,000 per individual.

There are still a number of details missing — particularly whether the $17,000 would be doubled for MFJ and how the cap would handle credits — but according to Bloomberg, this cap is just the first in a three-part plan to achieve Romney’s tax goal of a cutting tax rates by 20% while remaining revenue neutral and progressive. From Bloomberg:

A second cap would apply to personal exemptions and a third cap would apply to the health care exclusion. The amount and details of the caps could be changed to meet Romney’s targets for revenue and distribution of the tax burden. The aide emphasized that the three-cap idea is only one option being considered.

While devoid of the details necessary to formulate any meaningful conclusion, it’s hard to see how this is a step in the right direction in achieving progressive, revenue-neutrual tax reform while also cutting rates. A study conducted by the Tax Policy Center earlier this year concluded that Romney would have to eliminate all deductions for those taxpayers earning in excess of $200,000 before limiting those deductions to a lesser extent to those earning below the threshold in order to pay for his tax cuts in a progressive manner. Clearly this proposal does not accomplish those goals, as it allows those earning over $200,000 to retain some of their deductions, while providing the same limitation to those earning below the threshold.

The key, in my mind, is how the third cap would treat excludable health care benefits, as this preference largely benefits the middle class. Do away with the Section 105 exclusion, and you will likely be right back to shifting the burden of tax increases to those taxpayers earning less than $200,000.

What I do like about Romney’s proposal, however, is that he could avoid the morass of trying to eliminate deductions and preferences from the Code, as any attempt to do so would leave special interest groups fighting to the death for their particular provision. By instituting a cap,  you leave the mortgage interest deduction untouched, leave the state and local tax deduction, and leave the charitable contribution deduction in the Code, but cap their benefit. While this doesn’t neceessarily achieve the simplicity one seeks when base broadening, as it leaves those provisions in the Code, as we’ve discussed here before, sweeping Code reform isn’t particularly likely anyway.

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So last night, as I was trolling the Drudge Report for the latest in election news and teacher-student sex scandals, I noticed an article tilted “These are the Top 5 Worst Taxes ‘Obamacare’ Will Impose in 2013.”

Apparently, the list was first authored by the Grover Norquist-founded Americans for Tax Reform, a Section 501(c)(4) lobbying group that opposes “all tax increases as a matter of principle.”

In running through the list, I came upon #2: The ‘Obamacare’ ‘Haircut’ for Medical Itemized Deductions, which read as follows:

Currently, those Americans facing high medical expenses are allowed a deduction to the extent that those expenses exceed 7.5 percent of adjusted gross income (AGI). This tax increase imposes a threshold of 10 percent of AGI. By limiting this deduction, Obamacare widens the net of taxable income for the sickest Americans. This tax provision will most harm near retirees and those with modest incomes but high medical bills.

This, as you might expect, led to a spate of misspelled, grammatically incorrect reader comments about how Obamacare unfairly punished the elderly. There’s just one problem with this sentiment: it’s not accurate.

Yes, Section 213(a) of the Code was amended to increase the AGI threshold from 7.5% to 10% starting in 2013, meaning taxpayers will now have to generate medical deductions in excess of an extra 2.5% of their adjusted gross income before they begin reaping tax benefits. This much is true. But when the Americans for Tax Reform write — This tax provision will most harm near retirees  — and readers pile on by decrying President Obama’s willingness to screw over the elderly —  it tells me that these people didn’t actually read the new law.

Had they bothered to continue reading a few lines further into Section 213, they would have discovered that Section 213(f) was also amended, and it now provides:

(f) Special rule for 2013, 2014, 2015, and 2016.
In the case of any taxable year beginning after December 31, 2012, and ending before January 1, 2017, subsection (a) shall be applied with respect to a taxpayer by substituting “7.5 percent” for “10 percent” if such taxpayer or such taxpayer’s spouse has attained age 65 before the close of such taxable year.

In other words, the increase to the AGI threshold will not, as the AFTR’s report states, harm near retirees or the elderly, because for the next four years, the AGI threshold is not increased if either the taxpayer or the spouse is over 65. For all of those 65 and over in 2013, their medical expenses will be treated the exact same way in they were in 2012. And let’s be honest, in today’s economy, if you’re retiring before 65, you’ve got enough money that your medical expenses probably aren’t going to exceed 7.5, 10, or even 30% of your adjusted gross income.

Now that I’ve addressed that tiny bit of legislative minutiae and done my part to stem the spread of tax misinformation among people who are so rational they are still calling for the President’s birth certificate four years after his election, I can rest knowing that I’ve left the world a slightly better place.

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