By Chris Joseph
By Terrence McCoy
By Kyle Swenson
By Chris Joseph
By Chris Joseph
By Kyle Swenson
By Chris Joseph
By Chris Joseph
It doesn't really work, since most people will buy homes whether they receive a break or not. Countries like Australia and Canada have similar ownership rates to ours without offering the deduction. But at least congressmen back in 1913 occasionally tried to do something beneficial for the country. Today's Washington is more interested in exploiting such beneficence. Take the yacht deduction.
The luxury sailing industry was able to buy its way into the mortgage break when Congress officially declared boats to be homes. But not just any boats. The rules require that they have sleeping quarters, a kitchen, and a toilet, leaving just 3 percent of U.S. boat owners to qualify.
"The mortgage deduction was never targeted for that," says Congressman Tim Walz (D-Minnesota). "It was meant to make homeownership more affordable for the middle class."
So Walz wrote the Ending Taxpayer Subsidies for Yachts Act, hoping to bar the über-wealthy from sponging off the mortgage deduction. Once again, Congressman Dave Camp refuses to let it come up for a vote.
That leaves everyday taxpayers to subsidize toys like Microsoft CEO Paul Allen's $200 million yacht, which comes equipped with an indoor pool, basketball court, and its own submarine.
"It's a loophole in the tax code that benefits a few people at the very top," says Walz, a sergeant major in the National Guard and former teacher. "I certainly feel if they want to grab their luxury liners, I'm glad they do. And I'm glad we have people making them. I'm just not certain we subsidize that."
5. Big Oil's Cadillac welfare.
Last month, Mitt Romney traveled to Iowa, where wind energy has become an economic force, responsible for 7,000 jobs and 20 percent of the state's electricity. He announced that, as president, he would kill the $3.3 billion in tax incentives that now go to this nascent form of electricity. In Romney's eyes, the industry has had more than enough time to stand on its own two feet.
"He will allow the wind credit to expire, end the stimulus boondoggles, and create a level playing field on which all sources of energy can compete on their merits," Romney spokesman Shawn McCoy told the Des Moines Register.
It's a laughable position. After all, Romney has announced no similar crackdown on a much older and larger welfare queen: Big Oil.
The five largest U.S. oil companies collect a spectacular $20 billion a year in tax breaks. And they'd prefer that wind farms not compete for that lucrative welfare dollar. During this year's presidential race, the industry has paid Romney $3.4 million via campaign contributions to ensure that wind goes away.
Technically, the oil giveaway is supposed to defray the cost of searching for new sources. But even George W. Bush realized the industry didn't need subsidies back in 2005, when the price of a barrel was at $55. "We don't need incentives to oil and gas companies to explore," he said at the time. "There are plenty of incentives."
These days, the price of a barrel routinely hovers around $100. But the five biggest companies — BP, Chevron, ConocoPhillips, ExxonMobil, and Shell — still get their breaks, despite collective record profits of $137 billion last year.
"The oil industry is doing fine," says Johnson, the University of Texas tax expert. "They don't need or deserve a dime of subsidy. It's all money thrown away to make shareholders richer. The private market will provide any subsidies by increasing the price. It's time to get the government out of the business of special subsidies. It's like Cadillac welfare."
4. A break for shipping your job to China.
Steelworkers in Stevens Point, Wisconsin, suffered the same fate. Their mill's owner, Joerns Heathcare, took away 150 jobs last month by moving operations to Mexico.
In each case, American taxpayers will subsidize the evacuation.
It's not just cheap labor that pushes work overseas. The U.S. tax code allows companies to expense every last cost of sending your job abroad.
At a time of 8 percent unemployment, one would think Congress would rush to kill a loophole that actually encourages economic misery. One would be wrong.
This summer, Senate Democrats introduced the Bring Jobs Home Act, which would kill the loophole and offer a tax credit to companies that bring work back to America. The credit would cover 20 percent of their costs from bringing those jobs back.
Republicans filibustered the bill to death. Sen. Orrin Hatch (R-Utah) went so far as to call the measure "a joke," ensuring another nervous Christmas for the country's blue-collar workers.
3. The behaving-like-an-asshole deduction.
The vessel crashed, spilling upward of 25 million gallons of oil into Prince William Sound. The disaster could have been avoided if the ship's collision avoidance radar was working. It had broken a year before, but Exxon chose not to fix it due to the cost of repair and operation.
"Loophole" is a misnomer, and should not be used, as it creates the impression that the resultant deduction was not intended. So the press does the public a disservice when it uses a word that allows people to infer that some tax advisers have arcane, specialized esoteric knowledge, that allows their ultra rich client to get around the substance and intent of the IRS Tax Code definition of income.
Socially engineered tax deductions (social engineering) are deductions to elicit certain types of behavior - to encourage investment in specific areas like multifamily housing in the 80s which caused havoc to real estate; and other tax incentives for former colleagues and friends who give to political campaigns, have riddled our tax laws with a maze of favoritism at the expense of tax fairness and revenue for government that has led to our current depression and vast chasm of income inequality.
Only a few decades ago the substance and intent of the code controlled, and form versus substance was pierced by the IRS in going against the most abusive forms contrives to get around substance.
The "step transactions" described herein should be easy for the IRS to attack and prevail, however, today there is no resolve on the part of the IRS to seriously go after some members of the ultra rich who have overly aggressive tax "experts" designing forms to avoid which in fact are - evasion. And evasion is a felony.
Of course people like Romney, and his tax preparers at Price Water House...confidently affirm there is nothing illegal. What else would you expect when the substance is contrived form to avoid/evade the intent and substance of the code. These people who claim "nothing is illegal" base their claim on the fact that their avoidance/evasion has not be overturned by the IRS and then by US Tax Court. But the controlling issue has not been addressed or how could so many blatant step transactions remain in existence when the existence has been revealed on 1040s, including Romney's 1040s that have been released?
To learn more: www.the5thestate.net
this is why it's silly to talk tax rates as if corporations were paying their fair share anyhow - maurice greenberg of starr insurance (he previously ran A I G) estimates $2,5oo,ooo,ooo,ooo in off-shore profits yet to be repatriated and taxes paid on that amount - so even a small change in the current rate say 10% would automatically yield a $25,ooo,ooo,ooo SAVINGS - no wonder lobbyists seem over-compensated when compared to current issues - the big picture is profits previously earned YET TO BE taxed
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