In the previous blog entry, I wrote about the people who want high earners to pay higher taxes. I alluded to that kind of thought as tax envy - that the low earners want the high earners to pay up more.
Here are some things that will never fly: total confiscation of income above a certain level (communist!); national income taxes (regressive!), flat taxes (super regressive!) and value added taxes (double secret super regressive!) Income redistribution raises a lot of hackles, and sometimes ends up being entirely circular, defeating the purpose (i.e. the money taken from the high earners goes to the low earners as some form of "social justice" payment, and the government charges sin taxes, paid by the poor earners, and spirits it back to the government).
Rob Sama has a fantastic outline of what he'd do with the current tax code, but I have some ideas to eliminate (or at least reduce) tax envy is as follows.
1. Keep the progressive tax structure, but adjust the tax rates and broaden the income levels they fall under. The rates would be as follows:
- 5% absolute minimum tax (deducted from any refunds; explained below)
- 10% (income $15,600 and under)
- 20% ($15,601 to $78,000)
- 30% ($78,001 to $390,000)
- 40% ($390,001 to $1,560,000)
- 50% ($1,560,001 and above).
For head of the household, multiply by 1.25; for married filing jointly, multiply by 1.5.
Also, $15,600 is the minimum wage per year if you work 40 hours a week and 52 weeks a year, not including holidays. If the minimum wage increases or decreases, the structure also increases.
2. Everyone who works pays something - no ducking the IRS. I would propose an absolute minimum tax of 5% for people who have $100 or less in taxable income - and it's deducted from your refund. If you earned $20,000 in a year and had no tax liability, yet you had $3,000 withheld, the IRS will take $150 from your refund, leaving you with $2,850. If you earned $100,000 in a year and had a tax liabillity of $50, and had $15,000 withheld for the year, your absolute minimum tax would be $5,000 and would be deducted from your refund of $15,000, leaving you with $10,000.
The people who claim zero tax liability at both ends of the earning spectrum is part of the reason for tax envy, and curing that is as simple making sure no one escapes the IRS.
3. Change the Alternative Minimum Tax into the Alternative Income Tax, with a flat rate of 55%. However, unlike the current alternative minimum tax, which has rates of 26% and 28%, filers can choose to this higher tax, but there would be no exceptions, deductions or deferments allowed. The AIT would be applied to gross income, including income, stocks, bonds, investments, and other items. This would give those who truly want to give more a chance, but at a steeper rate.
Example: You've earned $1 million in a year. You decide to file the AIT instead of paying at 35%. You pay the government $550,000.
These ideas might not satisfy everyone, but it's a start.
Showing posts with label taxes. Show all posts
Showing posts with label taxes. Show all posts
4/25/2011
Getting rid of tax envy
I write this blog for free. Gratis. I get no income from it, and the only value I put on it is that people can read it.
Whenever I hear grumblings and sniffs that the higher earners* should be taxed more, and supporting propaganda such as "X% of higher earners pay Y% of all tax while Z% of low earners pay nothing," "The zillionaires should have their earnings (taxed heavily, confiscated above a certain level)," and "the fair tax/flat tax/Richard Simmons Shake Your Left Leg and Rub Your Tummy tax is regressive to the poor, the blind, and David Letterman", there is one word that sticks out like a sore thumb: Envy.
Envy is a powerful thing. Little wonder why the lower classes cast a huge green eye at the upper classes, and wish they were taxed to the stratosphere.
But there's a problem with punishing the high earners with punitive taxes, even though in the past, it was acceptable to have an income tax rate of 90% during WWII and a 70% rate in the 1960s and people were just as prosperous. The problem is that when there's a disincentive in place to earn money, the ambition to avoid that tax will go up exponentially. Whether it's plowing it into investments, putting it into an overseas tax shelter, or giving it away to charity, the high earners will find every which way but loose to avoid having that money snared by the IRS. And, when the high income earner gets fired, laid off or their business heads overseas, that narcotic tax income that the IRS has enjoyed evaporates - usually because the business itself cannot sustain handing over a high corporate tax rate plus salaries, so the jobs are either eliminated to save money or are sent overseas to countries where the tax rates are far lower and the employment rules aren't as strict.
The lower earners lose also, because to paraphrase John Scarne, Old Man Tax Collector will find a way to get their money, and it's as high or higher than the upper tax bracket of 35%. The lower earners think they pay no income tax, but they pay high taxes on cigarettes (45-70% effective), gasoline (10%), cell phone bills (12-20%), excise taxes, sin taxes, and many others. So while it's great to get all that money IRS withheld in your paycheck due to tax credits, all it takes is a sick kid or a major car repair (or a missed rent payment) to wipe that refund out in a jiffy. Meanwhile, even though the high earner is paying 75% to the government in income tax, they have the ability to save good chunks of their income and can live comfortably, whereas the low income earners are forced to live paycheck to paycheck while paying a ton in hidden taxes.
Ironically, when the lower income earners move up and make comfortable salaries, the revenge fantasies go away. They don't care if the guy across the street has four BMWs and just returned from a 60 day cruise around the world; so long as the mortgage is paid and the credit cards are current, that's all that matters. Even the former higher earners, when they lose their job and find a new one that pays less, get the ever-vigilant eye of the IRS off their backs because they've gone down two or three brackets. Sure, you're not earning as much as you did, but so long as the mortgage is paid and the credit cards are current, that's all that matters.
In my next entry, some ideas to reduce tax envy.
* Rather than using "the rich" as a pejorative term, "high earner" is a little more accurate to me because I'm not putting a random dollar amount on how "rich" a person can be.
Whenever I hear grumblings and sniffs that the higher earners* should be taxed more, and supporting propaganda such as "X% of higher earners pay Y% of all tax while Z% of low earners pay nothing," "The zillionaires should have their earnings (taxed heavily, confiscated above a certain level)," and "the fair tax/flat tax/Richard Simmons Shake Your Left Leg and Rub Your Tummy tax is regressive to the poor, the blind, and David Letterman", there is one word that sticks out like a sore thumb: Envy.
Envy is a powerful thing. Little wonder why the lower classes cast a huge green eye at the upper classes, and wish they were taxed to the stratosphere.
But there's a problem with punishing the high earners with punitive taxes, even though in the past, it was acceptable to have an income tax rate of 90% during WWII and a 70% rate in the 1960s and people were just as prosperous. The problem is that when there's a disincentive in place to earn money, the ambition to avoid that tax will go up exponentially. Whether it's plowing it into investments, putting it into an overseas tax shelter, or giving it away to charity, the high earners will find every which way but loose to avoid having that money snared by the IRS. And, when the high income earner gets fired, laid off or their business heads overseas, that narcotic tax income that the IRS has enjoyed evaporates - usually because the business itself cannot sustain handing over a high corporate tax rate plus salaries, so the jobs are either eliminated to save money or are sent overseas to countries where the tax rates are far lower and the employment rules aren't as strict.
The lower earners lose also, because to paraphrase John Scarne, Old Man Tax Collector will find a way to get their money, and it's as high or higher than the upper tax bracket of 35%. The lower earners think they pay no income tax, but they pay high taxes on cigarettes (45-70% effective), gasoline (10%), cell phone bills (12-20%), excise taxes, sin taxes, and many others. So while it's great to get all that money IRS withheld in your paycheck due to tax credits, all it takes is a sick kid or a major car repair (or a missed rent payment) to wipe that refund out in a jiffy. Meanwhile, even though the high earner is paying 75% to the government in income tax, they have the ability to save good chunks of their income and can live comfortably, whereas the low income earners are forced to live paycheck to paycheck while paying a ton in hidden taxes.
Ironically, when the lower income earners move up and make comfortable salaries, the revenge fantasies go away. They don't care if the guy across the street has four BMWs and just returned from a 60 day cruise around the world; so long as the mortgage is paid and the credit cards are current, that's all that matters. Even the former higher earners, when they lose their job and find a new one that pays less, get the ever-vigilant eye of the IRS off their backs because they've gone down two or three brackets. Sure, you're not earning as much as you did, but so long as the mortgage is paid and the credit cards are current, that's all that matters.
In my next entry, some ideas to reduce tax envy.
* Rather than using "the rich" as a pejorative term, "high earner" is a little more accurate to me because I'm not putting a random dollar amount on how "rich" a person can be.
3/15/2011
Watching the Ten Percenters
I'm responding to this excellent Herald article by Hillary Chabot as a long-time lottery player.
I've cashed tickets at the Lottery offices for years. Until 2004, I got the full amount of my winnings, and since then I've paid my 5% cut to the state. (Quit laughing back there if you're thinking I'm financing Deval Patrick's junkets. OK, maybe a nice lunch at a London restaurant.) If you have nothing to hide and you won a substantial amount of money, you would go and cash in the ticket...
...unless you owed child support, back taxes, parking tickets, and the like. Not only do you get the 5% haircut from the state (or, if you're over $5,000, an additional 25% to the IRS), whatever you owe to the Department of Revenue gets taken. For instance, if you owe $100,000 to the state for child support and you win $250,000, all you get left is $87,500, as $75,000 is sent to the DOR and IRS for taxes and the $100,000 is sent to the ex who has been demanding payment. Even if you win as little as $600, whatever you're in arrears gets reduced by your winnings. If you owe $100,000 and you win $600 - sorry, no check for you, but you get your bill reduced to $99,400.
Enter the professional ticket casher, or the "ten percenter." What a ten percenter will do is cash the ticket for you in his own name, take 10% for themselves, and then give the rest to the winner. The result: the tax/child support cheat still owes money, but keeps his winnings out of the radar of the DOR and the IRS
If you're not in trouble and you still want to remain anonymous (or have relatives or collectors dial you night and day because they discovered your suddenly fattened bank account) a blind trust established by a lawyer would be better than giving it to a ten percenter. That way, the lawyer can come forward and claim the prize in the interest of the trust; the members of that trust remain anonymous (well, except for those under 18).
So what to do about this loophole that's costing the DOR millions in back taxes and child support?
Appeal to the ten percenters to turn against the ninety percenters. A back stabbing move? Sure, but if the ten percenter knows that the cheat won't give them their 10%, nothing lubricates the skids more than a ten percenter entrapping his boss.
Here's how it would go: a tax cheat owes $50,000 in child support and $25,000 in back taxes. The tax cheat wins $100,000 in Mass Cash. His $70,000 net will be seized if he turns in the ticket, so he gives it to the ten percenter with a promise of giving him $10,000. The ten percenter knows the tax cheat has screwed him in the past, so he works with the DOR and cashes in the ticket for the cheat.
The catch: the $70,000 check the ten percenter receives gets deposited into a traceable DOR account, who is also monitoring the amount of money given to the tax cheat. When the tax cheat discovers DOR and IRS agents at his door and arrests him for child support and tax evasion, he also will find out all of his assets are seized too, thanks to the help of the ten percenter. The $60,000 that the tax cheat tried to evade gets applied to his outstanding liens, and the ten percenter still gets his 10% of the original winnings - plus 10% interest on what the cheat originally owed, which is $7,500. A fairly nice bonus.
The program, which I would call "Operation Dime Time," would help the DOR get lost cash from their evaders through the work of the ten percenters, who would also get rewarded for their assistance. The ten percenters themselves would shed their image as mules for tax and child support cheats. Even better - children who have been suffering due to the selfishness of their parents would get the money they deserve.
I've cashed tickets at the Lottery offices for years. Until 2004, I got the full amount of my winnings, and since then I've paid my 5% cut to the state. (Quit laughing back there if you're thinking I'm financing Deval Patrick's junkets. OK, maybe a nice lunch at a London restaurant.) If you have nothing to hide and you won a substantial amount of money, you would go and cash in the ticket...
...unless you owed child support, back taxes, parking tickets, and the like. Not only do you get the 5% haircut from the state (or, if you're over $5,000, an additional 25% to the IRS), whatever you owe to the Department of Revenue gets taken. For instance, if you owe $100,000 to the state for child support and you win $250,000, all you get left is $87,500, as $75,000 is sent to the DOR and IRS for taxes and the $100,000 is sent to the ex who has been demanding payment. Even if you win as little as $600, whatever you're in arrears gets reduced by your winnings. If you owe $100,000 and you win $600 - sorry, no check for you, but you get your bill reduced to $99,400.
Enter the professional ticket casher, or the "ten percenter." What a ten percenter will do is cash the ticket for you in his own name, take 10% for themselves, and then give the rest to the winner. The result: the tax/child support cheat still owes money, but keeps his winnings out of the radar of the DOR and the IRS
If you're not in trouble and you still want to remain anonymous (or have relatives or collectors dial you night and day because they discovered your suddenly fattened bank account) a blind trust established by a lawyer would be better than giving it to a ten percenter. That way, the lawyer can come forward and claim the prize in the interest of the trust; the members of that trust remain anonymous (well, except for those under 18).
So what to do about this loophole that's costing the DOR millions in back taxes and child support?
Appeal to the ten percenters to turn against the ninety percenters. A back stabbing move? Sure, but if the ten percenter knows that the cheat won't give them their 10%, nothing lubricates the skids more than a ten percenter entrapping his boss.
Here's how it would go: a tax cheat owes $50,000 in child support and $25,000 in back taxes. The tax cheat wins $100,000 in Mass Cash. His $70,000 net will be seized if he turns in the ticket, so he gives it to the ten percenter with a promise of giving him $10,000. The ten percenter knows the tax cheat has screwed him in the past, so he works with the DOR and cashes in the ticket for the cheat.
The catch: the $70,000 check the ten percenter receives gets deposited into a traceable DOR account, who is also monitoring the amount of money given to the tax cheat. When the tax cheat discovers DOR and IRS agents at his door and arrests him for child support and tax evasion, he also will find out all of his assets are seized too, thanks to the help of the ten percenter. The $60,000 that the tax cheat tried to evade gets applied to his outstanding liens, and the ten percenter still gets his 10% of the original winnings - plus 10% interest on what the cheat originally owed, which is $7,500. A fairly nice bonus.
The program, which I would call "Operation Dime Time," would help the DOR get lost cash from their evaders through the work of the ten percenters, who would also get rewarded for their assistance. The ten percenters themselves would shed their image as mules for tax and child support cheats. Even better - children who have been suffering due to the selfishness of their parents would get the money they deserve.
12/08/2010
The Pleasure Killers
I read the piece about the Bush Tax Cuts in the New York Times (link: and you're saying to yourself, 'hmm, he usually quotes the New York Post or Fox News' - there's not everything in the New York Times I disagree with, and this one's pretty good) and how Obama's deal with the Republicans on keeping the current tax brackets and plus an added bonus of cutting the payroll tax by 200 basis points, or 2%. President Obama could well have left everything as it is, or even hiked taxes to the levels he feels people should pay (not what people are willing to or afford to pay). I'm not sure what the result would have been, but if there were no extra revenue (or a sharp decline in revenue), then the government would have hiked them even further, engaging in a vicious cycle of tax hikes and revenue drops.
I'm not going to pretend that I don't like what happened. I'm middle class and I'm not going to complain. The Republicans tried every way to Sunday to get something moving, and it took the near shutdown of the government (well, that and Election 2010) to get Obama to at least concede that raising taxes is not the way to return to prosperity.
The comments, on the other hand? Save for one or two good comments, either Obama is the second coming of Bush, Obama should have had more cojones, the Republicans are the Party of No, the rich get away scot free with this, and so on. Oh, and a smattering of how he's a one term president. Childish, insecure, ignorant, arrogant, get-the-venom out stuff.
My thought is that there are still a ton of people who hate George W Bush and what he stood for. I'm also not going to pretend I didn't like him. Unlike Obama, who I feel surrounds himself with czars, bureaucrats, nanny-staters and the-bus-doesn't-stop-there radicals, Dubya was a steadfast and principled man. Often he was wrong as he was right. He too let himself be led by the nose by his advisors, but when he was correct, damn, you had to respect his tenacity, even though you were marching through the streets demanding he be dragged to the Hague in front of the World Court.
It leads me to a good question: some people can't stand others being happy, prosperous, and self-sufficient AND self-reliant. There's a streak of Puritanism that permeates through certain social circles that happiness and wealth is a sin, one that must be atoned for with brutal acts of contrition. But within that streak is a rank hypocrisy: it's OK for you to be happy, but not for someone else, and even if you die trying, you're going to prevent someone from their dreams.
It's a toxic stew of jealousy, resentment, and selfishness that rots the soul. It's the basis of moral panics that end up hurting people more than they help because the person trying to control the panic ends up overcompensating and snowballing unintended consequences.
Take for example the "obesity crisis." If a person is slightly overweight, the most simple way of doing so is to eat less and exercise more, not to tax items sky-high because someone (Michelle Obama? Mayor Mike Bloomberg? Deval Patrick?) is afraid that it might lead to being obesity. If you're exercising and eating right, the occasional donut won't kill you, nor will the daily cruller resign you to the pits of a fat camp. And, those extra tax revenues because you're slapping a dollar on a soda may be a smokescreen for trying to fatten (pun intended) the state coffers. True, morbid and gross obesity exists, but trying to eradicate it by controlling food, and in turn trying to control people, is the ultimate fools' errand.
The same thing goes for taxes. If you're a successful employee and make your company the best it is, why in heaven should you be penalized for it through high taxes? That's the whole gist about keeping the Bush Tax Cuts - if there are people so resentful and jealous of others success that short of running them over with your car or hiring a hit man to liquidate them your feeling is that the money must be taken away from them "for the greater good" (a healthy, steaming pile of total, absolute, pious, self-serving bullshit), those people should be given something to do that will keep them away from the editorial pages.
How about helping the people who should get a lift up from the depths of trash TV and shady lawyers? No one's going to be Oprah right away, and there will be weeks of your bank account being very lean, but it's better than handouts and bailouts. And happiness and success does come, so long as you work hard and you're patient - and anyone who tries to get in your way should be avoided at all costs.
There are people who still take their anger, guilt, bitterness, and disappointment on others because they cannot control things. It is a religion all its own, and it makes Puritanism look downright hedonistic. The ones who try to kill happiness have never been successful anyway - because happiness and success always seem to win, don't they?
UPDATE: Despite the House not deigning to vote on it and Bernie Sanders (S-VT) deciding it would be a great idea to read from the telephone book as a way to filibuster (maybe he did, maybe he didn't), this tax deal will go through with a lot of noses held, because if it doesn't, the Party of No will have a D next to it.
UPDATE #2: China is in a hefty snit because the Nobel Prize committee awarded Liu Xiabao the Peace Prize in absentia. The three signs I take out of this are (a) even farthest of the far left are demanding his release from Chinese prison, (b) it takes away the spotlight and attention from a like-minded Canberra Julian of W_______s, and (c) China must be really shit-scared of losing its power to ramp up the manipulation to sub-light speed, all because a dissident had a manifesto that wasn't one endorsed by a German aristocrat with money guilt.
I'm not going to pretend that I don't like what happened. I'm middle class and I'm not going to complain. The Republicans tried every way to Sunday to get something moving, and it took the near shutdown of the government (well, that and Election 2010) to get Obama to at least concede that raising taxes is not the way to return to prosperity.
The comments, on the other hand? Save for one or two good comments, either Obama is the second coming of Bush, Obama should have had more cojones, the Republicans are the Party of No, the rich get away scot free with this, and so on. Oh, and a smattering of how he's a one term president. Childish, insecure, ignorant, arrogant, get-the-venom out stuff.
My thought is that there are still a ton of people who hate George W Bush and what he stood for. I'm also not going to pretend I didn't like him. Unlike Obama, who I feel surrounds himself with czars, bureaucrats, nanny-staters and the-bus-doesn't-stop-there radicals, Dubya was a steadfast and principled man. Often he was wrong as he was right. He too let himself be led by the nose by his advisors, but when he was correct, damn, you had to respect his tenacity, even though you were marching through the streets demanding he be dragged to the Hague in front of the World Court.
It leads me to a good question: some people can't stand others being happy, prosperous, and self-sufficient AND self-reliant. There's a streak of Puritanism that permeates through certain social circles that happiness and wealth is a sin, one that must be atoned for with brutal acts of contrition. But within that streak is a rank hypocrisy: it's OK for you to be happy, but not for someone else, and even if you die trying, you're going to prevent someone from their dreams.
It's a toxic stew of jealousy, resentment, and selfishness that rots the soul. It's the basis of moral panics that end up hurting people more than they help because the person trying to control the panic ends up overcompensating and snowballing unintended consequences.
Take for example the "obesity crisis." If a person is slightly overweight, the most simple way of doing so is to eat less and exercise more, not to tax items sky-high because someone (Michelle Obama? Mayor Mike Bloomberg? Deval Patrick?) is afraid that it might lead to being obesity. If you're exercising and eating right, the occasional donut won't kill you, nor will the daily cruller resign you to the pits of a fat camp. And, those extra tax revenues because you're slapping a dollar on a soda may be a smokescreen for trying to fatten (pun intended) the state coffers. True, morbid and gross obesity exists, but trying to eradicate it by controlling food, and in turn trying to control people, is the ultimate fools' errand.
The same thing goes for taxes. If you're a successful employee and make your company the best it is, why in heaven should you be penalized for it through high taxes? That's the whole gist about keeping the Bush Tax Cuts - if there are people so resentful and jealous of others success that short of running them over with your car or hiring a hit man to liquidate them your feeling is that the money must be taken away from them "for the greater good" (a healthy, steaming pile of total, absolute, pious, self-serving bullshit), those people should be given something to do that will keep them away from the editorial pages.
How about helping the people who should get a lift up from the depths of trash TV and shady lawyers? No one's going to be Oprah right away, and there will be weeks of your bank account being very lean, but it's better than handouts and bailouts. And happiness and success does come, so long as you work hard and you're patient - and anyone who tries to get in your way should be avoided at all costs.
There are people who still take their anger, guilt, bitterness, and disappointment on others because they cannot control things. It is a religion all its own, and it makes Puritanism look downright hedonistic. The ones who try to kill happiness have never been successful anyway - because happiness and success always seem to win, don't they?
UPDATE: Despite the House not deigning to vote on it and Bernie Sanders (S-VT) deciding it would be a great idea to read from the telephone book as a way to filibuster (maybe he did, maybe he didn't), this tax deal will go through with a lot of noses held, because if it doesn't, the Party of No will have a D next to it.
UPDATE #2: China is in a hefty snit because the Nobel Prize committee awarded Liu Xiabao the Peace Prize in absentia. The three signs I take out of this are (a) even farthest of the far left are demanding his release from Chinese prison, (b) it takes away the spotlight and attention from a like-minded Canberra Julian of W_______s, and (c) China must be really shit-scared of losing its power to ramp up the manipulation to sub-light speed, all because a dissident had a manifesto that wasn't one endorsed by a German aristocrat with money guilt.
5/21/2010
896 million reasons why cigarette smoking will never be banned in Massachusetts
With cigarette excise taxes $2.51 per pack and $562 million taken in as tax revenue, plus $315 million from the tobacco settlement, you would figure that half of that money goes to smoking cessation programs, right?
Wrongo. According to WBZ's David Wade, out of nearly $900 million, only one half of one percent - $4.5 million - is earmarked for programs that help people quit smoking.
The other $895.5 million heads right to the General Fund. You buy a $7.50 pack of cigs in a poor section of Boston, you buy a firehouse for a well-to-do tony village in the Berkshires. Your dirt-cheap $5.75 pack of below-generic cigs purchased in Springfield may show up as a perdiem for a representative in North Andover, a dedication for a library of a state senator in Taunton, or even a re-election campaign push for the governor. Redistribution and super-easy cash at its best.
Put another way - if the state ever banned cigarettes, the tax revenues from cigarettes at both the state and federal level (which was raised to $1.01 in 2009) would mean billions of dollars lost per year. Now we know why the state will never ban cigarettes, at least until the federal government determines that all cigarettes are a health hazard and must be pulled off the shelves immediately. Once the Federal government is willing to give up their money habit, the state will be forced to follow suit.
Russet Morrow Breslau, head of Tobacco Free Mass, makes this astute judgement: ""You can't balance the budget on the backs of smokers[.]"
Who are those smokers, who are shelling out an effective tax rate of 45-60% to the general fund? The poor and middle class.
Wrongo. According to WBZ's David Wade, out of nearly $900 million, only one half of one percent - $4.5 million - is earmarked for programs that help people quit smoking.
The other $895.5 million heads right to the General Fund. You buy a $7.50 pack of cigs in a poor section of Boston, you buy a firehouse for a well-to-do tony village in the Berkshires. Your dirt-cheap $5.75 pack of below-generic cigs purchased in Springfield may show up as a perdiem for a representative in North Andover, a dedication for a library of a state senator in Taunton, or even a re-election campaign push for the governor. Redistribution and super-easy cash at its best.
Put another way - if the state ever banned cigarettes, the tax revenues from cigarettes at both the state and federal level (which was raised to $1.01 in 2009) would mean billions of dollars lost per year. Now we know why the state will never ban cigarettes, at least until the federal government determines that all cigarettes are a health hazard and must be pulled off the shelves immediately. Once the Federal government is willing to give up their money habit, the state will be forced to follow suit.
Russet Morrow Breslau, head of Tobacco Free Mass, makes this astute judgement: ""You can't balance the budget on the backs of smokers[.]"
Who are those smokers, who are shelling out an effective tax rate of 45-60% to the general fund? The poor and middle class.
11/06/2009
The lump sum option in the Lottery's instant tickets...not a great idea
The Lottery, beginning with this summer's games, are now offering the choice between taking your winnings in installments or being paid out in a lump sum.
For example, if you win $1 million, you can take either 20 payments per year of $50,000 each, or one payment of $650,000.
First, the installments:
Now, with the lump-sum:
The higher the prize, the more you stand to lose. If you won $10 million, the amounts I mentioned above go up by a factor of 10 - meaning you lose $3.5 million if you take the lump sum and receiving a check for $4,550,000. On the other hand, taking the 20 checks at $350,000 each means you get $7,000,000.
So your best bet? Having a steady, albeit, lower winnings check for 20 years is much better than instant gratification and losing a lot more money.
It's partially correct that the Lottery is a math tax on the stupid - because it takes a stupid person to utter that phrase.
For example, if you win $1 million, you can take either 20 payments per year of $50,000 each, or one payment of $650,000.
First, the installments:
- With taxes, at 25% federal and 5% state, you will receive a check for $35,000 per year.
- Over 20 years, you will receive a total of $700,000.
- Depending on your tax bracket, you will likely stay within or go up perhaps one or two tax brackets. For instance, if you're in the 15% tax bracket, you will stay there or increase to either the 25% or 28% tax bracket.
Now, with the lump-sum:
- With taxes, at 25% federal and 5% state, you will receive a one-time check for $455,000.
- The $650,000 represents 13 annuity checks at $50,000 apiece, meaning you will lose 7 annuity checks at $350,000 for this convenience.
- Compared with the annuity of 20 checks, the loss will be $245,000 over the period of 20 years ($700,000 - $455,000), or about $12,250 a year.
- Accepting the $650,000 will also put you into the 35% tax bracket for that year, meaning you will likely pay much more in taxes. For instance, if you're in the 15% tax bracket, you will be in the 35% tax bracket that year - and all taxes are progressive.
The higher the prize, the more you stand to lose. If you won $10 million, the amounts I mentioned above go up by a factor of 10 - meaning you lose $3.5 million if you take the lump sum and receiving a check for $4,550,000. On the other hand, taking the 20 checks at $350,000 each means you get $7,000,000.
So your best bet? Having a steady, albeit, lower winnings check for 20 years is much better than instant gratification and losing a lot more money.
It's partially correct that the Lottery is a math tax on the stupid - because it takes a stupid person to utter that phrase.
4/24/2009
The tax of least resistance, Part II
Now the House is batting about a 7% state sales tax, according to the Globe.
In my last entry, I stated that the sales tax is a tax of least resistance. Here is a more in depth reason why it is, and why I prefer it over all other taxes.
You can avoid paying gas taxes by taking public transportation. Having ridden the T for over 25 years, I can tell you that taking the T can be pretty convenient. If you work in Downtown Boston, the trip from Hyde Park to South Station is about 14 minutes. The travel time via car is 35 minutes. If I-95 had been built through Hyde Park, the trip to Downtown Boston would take about 7 minutes total - a 50% reduction in time.
I commute to Watertown, which from Hyde Park is a 15 mile journey. I now have to factor in a commuter rail ride, a Red Line ride, and a trackless trolley ride. The best time I have commuted from Hyde Park to Watertown is 42 minutes. With MBTA delays, crowded buses, traffic and the like, my commute ranges from 1 hour to 1-1/2 hours, all for that 15 miles.
By car, the distance is about 10 miles, and the travel time is about 25-30 minutes. On a 20 mile per gallon gas tank and gas at $2.00 per gallon, my one-way cost is $1.00. If the gas tax is hiked 20 cents, my cost goes up to $1.10. If I paid everything with cash - no CharlieCard discount - my cost would be $7.75 one way, based on a $4.25 commuter rail fare, $2.00 subway fare, and a $1.50 bus ride. So to avoid a 19-25 cent per gallon gas tax, instead of paying $2-2.20 a day, I would now be forking over at least $10 a day just to make that 15 mile journey, up to $15.50.
The per-day costs do go down considerably if you do buy a monthly pass. For example, a $59 LinkPass would cost you $2.95 for each of the 20 days you use it, or $2 a day if you use it all 30 days - a savings of $3 a day. A $135 Zone 1 pass would cost $6.75 a day per 20 days or $4.50 for 30 days. For the most expensive pass - Zone 8 at $250 - 20 days would be $12.50 a day and 30 days would be $8.33 a day.
The basic point is this: for all that effort to "get cars off the road" due to a hike in the gas tax, people will now pay much more to ride the T to avoid the gas tax if they pay cash and don't have a monthly pass. That means people who can't afford a monthly pass - read: the poor - will end up paying more to ride the T - sending them to their cars for a cheaper, quicker ride. For all that effort to get cars off the road due to a higher gas tax, more people will avoid taking the T because it is prohibitively expensive because they can't afford the passes, and end up driving anyway. Pretty much a zero sum game.
The sales tax, however, cannot be avoided. Everyone - rich, poor, middle class - cannot wriggle out of paying a sales tax at the cash register, and only under certain circumstances, such as food and clothing. A person paying $200 for an iPod pays $10 in sales tax now. If the 7% sales tax goes through, they will now pay $14 in tax - an extra $4 or 40%. If you buy a laptop for $1,000, you would pay $50 now, but $70 if the tax passes. You can still head to New Hampshire and buy your goodies tax-free, but if you're planning to eat at the food court, New Hampshire has an 8% "prepared meals" tax, which carries a 60% premium over our current meals tax of 5%.
A higher sales tax also takes money from people who pay very little in income taxes - either those who don't earn enough and get tax credits, or those who participate in dubious activities and have their monies set up to avoid a huge tax bite - like offshore bank accounts, money paid "under the table" and the like. If you can buy a $60,000 Corvette on your gains - illicit or not - you can fork over $4,200 in sales tax to the state. If you can buy a $3 million home in a gated community, there's no reason to shell out $21,000 to the Commonwealth.
There are a lot of people who think they are entitled to everything without paying a single penny, or that the state can vacuum all the money out of our pockets through nuisance taxes. If the state is absolutely serious about getting money into our coffers to remain solvent and to avoid cuts in service, it has to take that risk of angering the public. The public must participate one way or another - either by begrudgingly paying more in sales tax, or flipping the switch for the opponent of those who voted for the sales tax, gas tax, or any type of tax.
The passive-aggressive approach hasn't and won't work.
In my last entry, I stated that the sales tax is a tax of least resistance. Here is a more in depth reason why it is, and why I prefer it over all other taxes.
You can avoid paying gas taxes by taking public transportation. Having ridden the T for over 25 years, I can tell you that taking the T can be pretty convenient. If you work in Downtown Boston, the trip from Hyde Park to South Station is about 14 minutes. The travel time via car is 35 minutes. If I-95 had been built through Hyde Park, the trip to Downtown Boston would take about 7 minutes total - a 50% reduction in time.
I commute to Watertown, which from Hyde Park is a 15 mile journey. I now have to factor in a commuter rail ride, a Red Line ride, and a trackless trolley ride. The best time I have commuted from Hyde Park to Watertown is 42 minutes. With MBTA delays, crowded buses, traffic and the like, my commute ranges from 1 hour to 1-1/2 hours, all for that 15 miles.
By car, the distance is about 10 miles, and the travel time is about 25-30 minutes. On a 20 mile per gallon gas tank and gas at $2.00 per gallon, my one-way cost is $1.00. If the gas tax is hiked 20 cents, my cost goes up to $1.10. If I paid everything with cash - no CharlieCard discount - my cost would be $7.75 one way, based on a $4.25 commuter rail fare, $2.00 subway fare, and a $1.50 bus ride. So to avoid a 19-25 cent per gallon gas tax, instead of paying $2-2.20 a day, I would now be forking over at least $10 a day just to make that 15 mile journey, up to $15.50.
The per-day costs do go down considerably if you do buy a monthly pass. For example, a $59 LinkPass would cost you $2.95 for each of the 20 days you use it, or $2 a day if you use it all 30 days - a savings of $3 a day. A $135 Zone 1 pass would cost $6.75 a day per 20 days or $4.50 for 30 days. For the most expensive pass - Zone 8 at $250 - 20 days would be $12.50 a day and 30 days would be $8.33 a day.
The basic point is this: for all that effort to "get cars off the road" due to a hike in the gas tax, people will now pay much more to ride the T to avoid the gas tax if they pay cash and don't have a monthly pass. That means people who can't afford a monthly pass - read: the poor - will end up paying more to ride the T - sending them to their cars for a cheaper, quicker ride. For all that effort to get cars off the road due to a higher gas tax, more people will avoid taking the T because it is prohibitively expensive because they can't afford the passes, and end up driving anyway. Pretty much a zero sum game.
The sales tax, however, cannot be avoided. Everyone - rich, poor, middle class - cannot wriggle out of paying a sales tax at the cash register, and only under certain circumstances, such as food and clothing. A person paying $200 for an iPod pays $10 in sales tax now. If the 7% sales tax goes through, they will now pay $14 in tax - an extra $4 or 40%. If you buy a laptop for $1,000, you would pay $50 now, but $70 if the tax passes. You can still head to New Hampshire and buy your goodies tax-free, but if you're planning to eat at the food court, New Hampshire has an 8% "prepared meals" tax, which carries a 60% premium over our current meals tax of 5%.
A higher sales tax also takes money from people who pay very little in income taxes - either those who don't earn enough and get tax credits, or those who participate in dubious activities and have their monies set up to avoid a huge tax bite - like offshore bank accounts, money paid "under the table" and the like. If you can buy a $60,000 Corvette on your gains - illicit or not - you can fork over $4,200 in sales tax to the state. If you can buy a $3 million home in a gated community, there's no reason to shell out $21,000 to the Commonwealth.
There are a lot of people who think they are entitled to everything without paying a single penny, or that the state can vacuum all the money out of our pockets through nuisance taxes. If the state is absolutely serious about getting money into our coffers to remain solvent and to avoid cuts in service, it has to take that risk of angering the public. The public must participate one way or another - either by begrudgingly paying more in sales tax, or flipping the switch for the opponent of those who voted for the sales tax, gas tax, or any type of tax.
The passive-aggressive approach hasn't and won't work.
4/18/2009
The tax of least resistance
The Boston Herald proffers the 1 cent hike in the sales tax, which is gaining a much closer by look by the Legislature than all the seizure and social engineering taxes that are being bandied about, will kill the economy, "hit the poor where they can least afford it" (when people say that, it reminds me of those noisemakers little kids wing around their heads, and it sounds just as obnoxious), and send our Commonwealth into a death spiral.
This is one instance where I strongly disagree with the Herald from its editorial point of view.
Of all the taxes we pay, a sales tax is the tax of least resistance. You don't need to fill out forms and send them in by April 15. It shows up on your receipt when you pay for things. With the exception of New Hampshire, our sales tax at 5% is lower than Rhode Island's 7%, Connecticut and Vermont's 6%, and is at par with Maine's at 5%.
I believe, though, that a 6% tax the Commonwealth is proposing is not enough. If you really want to bring in the big money - even at hue and cry of critics - the sales tax and the income tax should be combined into a state sales tax of 12.5% - our current 5% sales tax, plus current income tax of 5.3%, plus an extra 2.2%. We will succeed California in having the have the highest sales tax in the nation, but we will also join the ranks of states with no income tax - like New Hampshire. The state income tax would then be eliminated - so in effect, it'll be a victory - if late and backdoor - for Question 1 if the 12.5% sales tax ever came to effect.
Critics, like the Boston Herald and community groups, will complain that the state sales tax hike will hurt the poor the most, as it's a regressive tax, and that this sales tax hike will kill business, introduce layoffs, and accelerate middle class flight. It will also prove a goldmine to New Hampshire, who has no state sales tax or income tax.
With the new sales tax of 12.5% and the subsequent elimination of the income tax, the monies taken out on every paycheck in MA income tax weekly or biweekly will actually give people extra money to spend or invest. People can take that money and put it into their 401(k)'s if they like, but the tradeoff is that when they buy something, they will pay those taxes at the cash register, daily and automatically. Massachusetts will become more attractive to business and production and attract more workers as there is no income tax to consider. There will still be exemptions for food and clothing - including snacks and beverages.
The amount of money brought in If a 6% sales tax brings in an extra $750 million a year, a 12.5% sales tax will bring in $5.625 billion - a healthy amount of money. The 12.5% tax can help retire the MBTA's long-standing debt and breathe new life into the system, bringing it out of its urban decay and into the 21st century.
Everyone praises New Hampshire for having no sales and income tax, but they are not completely tax-free. New Hampshire has an 8% prepared foods and meals tax. Consider that when you save $10 on a $200 iPod, buying a $10 meal at the food court will cost you 80 cents in tax in New Hampshire versus 50 cents here - a 60% difference! Property taxes in New Hampshire are also high, second only to New Jersey as the highest in the nation. So while people would high-tail it to get their sales tax free goods, eating and living there is just as cost-prohibitive.
Massachusetts has proven itself to be an innovator in many things, so why not put this consumption tax to the test? Like same-sex marriage and mandatory health care, Massachusetts has become a place where "what ifs" that were never thought about came true, even though they are imperfect. Again, the 12.5% sales tax will be high and there will be a lot of complaints from many people. This new, all-inclusive sales tax can be an experiment for other states to see if a consumption tax really works, and if it does, set aside their income taxes. If it doesn't bring in the money it's intended to bring in, then the income tax can return at its old rate.
I admit I hate paying taxes, especially high ones. Personally, I can deal with a 6% sales tax. It is a hike of 100 basis points (a basis point is 1 hundredth of one percent), or (as the Herald correctly puts it) 20% more than the 5% sales tax we pay now, doing so at the cash register will be much easier than shoving down severe cuts in MBTA service and the 19 cent gas tax down people's throats.
A side note: Since the Lottery is a voluntary tax, what should also happen is that the Commonwealth should drop Lottery payouts from 69-85% - the most generous return to players in the nation - to a uniform 50-55% payout on all tickets. (This can easily be done by reducing the money pool to pay high-tier winning tickets without changing the money pool of low tier tickets. A better explanation of what I'm taking about is that is here.) Lottery players will cry, "they took out all the big winners!" but it will save the state a lot of money that can be used for other programs. Also, cutting down the grand prizes will also help - it's nice to pay $10 for the privilege of winning $2.5-$5 million, but many other states have prizes for $100,000-$250,000 for the same privilege - and it's paid out all at once.
This is one instance where I strongly disagree with the Herald from its editorial point of view.
Of all the taxes we pay, a sales tax is the tax of least resistance. You don't need to fill out forms and send them in by April 15. It shows up on your receipt when you pay for things. With the exception of New Hampshire, our sales tax at 5% is lower than Rhode Island's 7%, Connecticut and Vermont's 6%, and is at par with Maine's at 5%.
I believe, though, that a 6% tax the Commonwealth is proposing is not enough. If you really want to bring in the big money - even at hue and cry of critics - the sales tax and the income tax should be combined into a state sales tax of 12.5% - our current 5% sales tax, plus current income tax of 5.3%, plus an extra 2.2%. We will succeed California in having the have the highest sales tax in the nation, but we will also join the ranks of states with no income tax - like New Hampshire. The state income tax would then be eliminated - so in effect, it'll be a victory - if late and backdoor - for Question 1 if the 12.5% sales tax ever came to effect.
Critics, like the Boston Herald and community groups, will complain that the state sales tax hike will hurt the poor the most, as it's a regressive tax, and that this sales tax hike will kill business, introduce layoffs, and accelerate middle class flight. It will also prove a goldmine to New Hampshire, who has no state sales tax or income tax.
With the new sales tax of 12.5% and the subsequent elimination of the income tax, the monies taken out on every paycheck in MA income tax weekly or biweekly will actually give people extra money to spend or invest. People can take that money and put it into their 401(k)'s if they like, but the tradeoff is that when they buy something, they will pay those taxes at the cash register, daily and automatically. Massachusetts will become more attractive to business and production and attract more workers as there is no income tax to consider. There will still be exemptions for food and clothing - including snacks and beverages.
The amount of money brought in If a 6% sales tax brings in an extra $750 million a year, a 12.5% sales tax will bring in $5.625 billion - a healthy amount of money. The 12.5% tax can help retire the MBTA's long-standing debt and breathe new life into the system, bringing it out of its urban decay and into the 21st century.
Everyone praises New Hampshire for having no sales and income tax, but they are not completely tax-free. New Hampshire has an 8% prepared foods and meals tax. Consider that when you save $10 on a $200 iPod, buying a $10 meal at the food court will cost you 80 cents in tax in New Hampshire versus 50 cents here - a 60% difference! Property taxes in New Hampshire are also high, second only to New Jersey as the highest in the nation. So while people would high-tail it to get their sales tax free goods, eating and living there is just as cost-prohibitive.
Massachusetts has proven itself to be an innovator in many things, so why not put this consumption tax to the test? Like same-sex marriage and mandatory health care, Massachusetts has become a place where "what ifs" that were never thought about came true, even though they are imperfect. Again, the 12.5% sales tax will be high and there will be a lot of complaints from many people. This new, all-inclusive sales tax can be an experiment for other states to see if a consumption tax really works, and if it does, set aside their income taxes. If it doesn't bring in the money it's intended to bring in, then the income tax can return at its old rate.
I admit I hate paying taxes, especially high ones. Personally, I can deal with a 6% sales tax. It is a hike of 100 basis points (a basis point is 1 hundredth of one percent), or (as the Herald correctly puts it) 20% more than the 5% sales tax we pay now, doing so at the cash register will be much easier than shoving down severe cuts in MBTA service and the 19 cent gas tax down people's throats.
A side note: Since the Lottery is a voluntary tax, what should also happen is that the Commonwealth should drop Lottery payouts from 69-85% - the most generous return to players in the nation - to a uniform 50-55% payout on all tickets. (This can easily be done by reducing the money pool to pay high-tier winning tickets without changing the money pool of low tier tickets. A better explanation of what I'm taking about is that is here.) Lottery players will cry, "they took out all the big winners!" but it will save the state a lot of money that can be used for other programs. Also, cutting down the grand prizes will also help - it's nice to pay $10 for the privilege of winning $2.5-$5 million, but many other states have prizes for $100,000-$250,000 for the same privilege - and it's paid out all at once.
4/13/2009
Why snack taxes don't work, Exhibit #2,384
Going into the L'il Peach (now Tedeschi's) to buy a newspaper for the train/bus rides into Watertown, I literally have to go around groups of kids waiting to go into the Rogers. If I'm lucky, I'm able to purchase my paper (and a lottery ticket or two) before they can slam all of their sugar-laden junk onto the counter.
Here is my bit of friendly advice to Ray Considine, who is the head of the Medical Foundation in Boston. A lot of those kids come to Hyde Park from other parts of the city - mainly the inner city, like Roxbury and Dorchester. Their families likely cannot afford organic/vegan/super healthy things to begin with, so the kids don't get a healthy, nourishing breakfast. So they either (a) wait until they get into school, where the breakfast they serve is so bad even the rats refuse to eat it, or (b) they purchase quick cheap energy, like L'il Hugs, Doritos, and Little Debbies. Not many of them would be patient enough to buy a banana or buy a little cup of Milk and Cinnamon Toast Crunch.
Unless you want a full-bore black market on junk food - to which many kids will gladly profit from and mark up the price to willing demand - forget the snack tax. It's a tax that will not fund health programs or anything remotely resembling health. (Notice I'm using the word "health" and not the diaphanously ambiguous and Orwellian "wellness.") They will be boomerang taxes, going from the poor to the government to fill their rainy day fund.
"But it will only add up to pennies!" you proclaim.
Horse hockey. For every dollar these kids spend, it's 5 pennies to the state. Five percent sales tax. Add that to a $1.50 bottle of soda, plus a five cent deposit, and it's a sneaky/stealth/backdoor 8% sales tax. A kid with two bottles of soda at $1.50 each, plus two hostess at a dollar, and a bag of Doritos at $0.75, is looking at a 7% tax. (The good thing is that they're not buying cigarettes at a national/state take of 50-60%, which I learned isn't going anywhere near smoking prevention programs, but to...wait for it...the rainy day fund.)
What are the efforts to control our smoking and eating habits anyway? I call these efforts health eugenics - the efforts of a government to conform the citizens into a perfect, docile, asexual, compliant group of Stepford people. Utopia ain't here and never will be. Trying to manipulate life and people for the promotion of utopia has violent, even deadly, results.
Here is my bit of friendly advice to Ray Considine, who is the head of the Medical Foundation in Boston. A lot of those kids come to Hyde Park from other parts of the city - mainly the inner city, like Roxbury and Dorchester. Their families likely cannot afford organic/vegan/super healthy things to begin with, so the kids don't get a healthy, nourishing breakfast. So they either (a) wait until they get into school, where the breakfast they serve is so bad even the rats refuse to eat it, or (b) they purchase quick cheap energy, like L'il Hugs, Doritos, and Little Debbies. Not many of them would be patient enough to buy a banana or buy a little cup of Milk and Cinnamon Toast Crunch.
Unless you want a full-bore black market on junk food - to which many kids will gladly profit from and mark up the price to willing demand - forget the snack tax. It's a tax that will not fund health programs or anything remotely resembling health. (Notice I'm using the word "health" and not the diaphanously ambiguous and Orwellian "wellness.") They will be boomerang taxes, going from the poor to the government to fill their rainy day fund.
"But it will only add up to pennies!" you proclaim.
Horse hockey. For every dollar these kids spend, it's 5 pennies to the state. Five percent sales tax. Add that to a $1.50 bottle of soda, plus a five cent deposit, and it's a sneaky/stealth/backdoor 8% sales tax. A kid with two bottles of soda at $1.50 each, plus two hostess at a dollar, and a bag of Doritos at $0.75, is looking at a 7% tax. (The good thing is that they're not buying cigarettes at a national/state take of 50-60%, which I learned isn't going anywhere near smoking prevention programs, but to...wait for it...the rainy day fund.)
What are the efforts to control our smoking and eating habits anyway? I call these efforts health eugenics - the efforts of a government to conform the citizens into a perfect, docile, asexual, compliant group of Stepford people. Utopia ain't here and never will be. Trying to manipulate life and people for the promotion of utopia has violent, even deadly, results.
3/27/2009
Grandma got run over by the DOR
I don't condone smoking, but I just noticed that cancer sticks, over the past decade or so, have more than doubled in price. You could get a generic brand of smokes for $2, and a name brand for $3. Today, a generic pack costs $5.50 and a name brand pack is $7.50. This is due to our $2.51 state tobacco tax and the new $1 or so tax to fund children's health care. Cross the border into New Hampshire, and the prices are slightly less.
One industrious lady went the route of getting generic cigarettes from an Native American Smoke shop. One carton of their brand goes for the rock-bottom price of $14.89 - which comes out to 79 cents a pack. Pretty good deal, right? And the Native Americans, since they operate from a sovereign nation (aka the reservation), don't charge taxes on what they sell. You can get name brand cigarettes for $35 a carton - a huge savings over Massachusetts' $150 per carton.
But the Native Americans, making sure they keep kosher with the states, report whoever buys their cigarettes to the tax rolls of each state. As a result of buying 5 cartons of Seneca unfiltered cigarettes, this woman now must pay an additional $91.58 to the state. And, she's refusing to pay, even if they levy penalties and interest.
Let's calculate what's going on here. $14.89 times five cartons is $74.45. In order to tack on $91.58 to her bill, the tax on each additional carton must be $18.316, making her actual purchase (in the eyes of the Commonwealth) $166.03 - or $33.21 a carton. Why would the state chase this woman over cheap generic cigarettes at $33.21 a carton when there are bigger fish to fry - the people who fork over $150 for name brand cigarettes? Maybe it's because the Native Americans have a much better handle on freedoms and what it means, versus the health neurotics who can't seem to keep their germophobic mitts out of other people's business - and if they had a chance, not only would they not hand over names, they'd tell the states what rabbit hole to go down to?
When cigarettes and tobacco are banned from the state, I can tell exactly who's going to need the bigger nicotine patch - the Mass DOR, as billions of tax dollars generated from cigarette and tobacco sales fund everything the desire, and you bet they'll have a jones worse than a heroin withdrawal once that tax money goes away.
One industrious lady went the route of getting generic cigarettes from an Native American Smoke shop. One carton of their brand goes for the rock-bottom price of $14.89 - which comes out to 79 cents a pack. Pretty good deal, right? And the Native Americans, since they operate from a sovereign nation (aka the reservation), don't charge taxes on what they sell. You can get name brand cigarettes for $35 a carton - a huge savings over Massachusetts' $150 per carton.
But the Native Americans, making sure they keep kosher with the states, report whoever buys their cigarettes to the tax rolls of each state. As a result of buying 5 cartons of Seneca unfiltered cigarettes, this woman now must pay an additional $91.58 to the state. And, she's refusing to pay, even if they levy penalties and interest.
Let's calculate what's going on here. $14.89 times five cartons is $74.45. In order to tack on $91.58 to her bill, the tax on each additional carton must be $18.316, making her actual purchase (in the eyes of the Commonwealth) $166.03 - or $33.21 a carton. Why would the state chase this woman over cheap generic cigarettes at $33.21 a carton when there are bigger fish to fry - the people who fork over $150 for name brand cigarettes? Maybe it's because the Native Americans have a much better handle on freedoms and what it means, versus the health neurotics who can't seem to keep their germophobic mitts out of other people's business - and if they had a chance, not only would they not hand over names, they'd tell the states what rabbit hole to go down to?
When cigarettes and tobacco are banned from the state, I can tell exactly who's going to need the bigger nicotine patch - the Mass DOR, as billions of tax dollars generated from cigarette and tobacco sales fund everything the desire, and you bet they'll have a jones worse than a heroin withdrawal once that tax money goes away.
2/20/2008
The Northeast: where economic growth sputters
Jon Keller has the goods on a report from ALEC, a non-partisan forum highlighting where the economic pulse is good and bad.
According to the report, Massachusetts ranks 26th in economic outlook, which is one rung below the 50th percentile. Our saving graces: low sales taxes (5%), low income taxes (5.3%-5.95%) and "solid tort liability" (not sure what that means). Yet, we lose 330K residents thanks to a "high minimum wage" (national minimum is $5.85; ours is $7.50), high property taxes, high corporate taxes, and "forced unionism" (meaning that great "living wage" they tell you about also includes 20% or so in union dues, which promptly get spent on campaigns, strike funds, protests, and goodies for the union bosses).
A great example between Massachusetts and New Hampshire, for example? New Hampshire has an outrageously high property tax, about $50 per $1,000 per home value, meaning your $250,000 home in Nashua yields $12,500 in property taxes. They also have a meals tax of 8%. On the other hand, New Hampshire has 0% income tax and 0% sales tax. Massachusetts also has the largest concentration of colleges (including 10+ Ivy League schools), universities, and hospitals, and many are world class (is there a New York Latin School? A Kentucky General Hospital? What if Harvard were in Chicago?), whereas New Hampshire has one Ivy League school (Dartmouth), one quasi-ivy league school (University of New Hampshire) and many smaller state schools. In New Hampshire, apartment rents are at least 50% lower than those of Boston, if you can find an apartment not occupied by medical students and college students AND pay the $1000+/month rent.
It all balances out in the end - the strengths of one state may outnumber the weaknesses of the other, but it's how we pay the bills that makes all the difference. If you live in Utah, no worries - except in Salt Lake City, where word has it that the mayor is a little bit weird.
In case you're wondering who ranks dead last...when the report mentioned one Bernie Sanders as an "avowed socialist...enough said," I never thought Vermont would come in dead last. No wonder some Vermonters want to secede from America - they want to make it a new Cuba!
According to the report, Massachusetts ranks 26th in economic outlook, which is one rung below the 50th percentile. Our saving graces: low sales taxes (5%), low income taxes (5.3%-5.95%) and "solid tort liability" (not sure what that means). Yet, we lose 330K residents thanks to a "high minimum wage" (national minimum is $5.85; ours is $7.50), high property taxes, high corporate taxes, and "forced unionism" (meaning that great "living wage" they tell you about also includes 20% or so in union dues, which promptly get spent on campaigns, strike funds, protests, and goodies for the union bosses).
A great example between Massachusetts and New Hampshire, for example? New Hampshire has an outrageously high property tax, about $50 per $1,000 per home value, meaning your $250,000 home in Nashua yields $12,500 in property taxes. They also have a meals tax of 8%. On the other hand, New Hampshire has 0% income tax and 0% sales tax. Massachusetts also has the largest concentration of colleges (including 10+ Ivy League schools), universities, and hospitals, and many are world class (is there a New York Latin School? A Kentucky General Hospital? What if Harvard were in Chicago?), whereas New Hampshire has one Ivy League school (Dartmouth), one quasi-ivy league school (University of New Hampshire) and many smaller state schools. In New Hampshire, apartment rents are at least 50% lower than those of Boston, if you can find an apartment not occupied by medical students and college students AND pay the $1000+/month rent.
It all balances out in the end - the strengths of one state may outnumber the weaknesses of the other, but it's how we pay the bills that makes all the difference. If you live in Utah, no worries - except in Salt Lake City, where word has it that the mayor is a little bit weird.
In case you're wondering who ranks dead last...when the report mentioned one Bernie Sanders as an "avowed socialist...enough said," I never thought Vermont would come in dead last. No wonder some Vermonters want to secede from America - they want to make it a new Cuba!
1/28/2008
Smoking - an addiction for people and politicians
My mother quit smoking on New Years Day 1991, and she does not miss the habit. Back in 1991, there weren't as many finger-waggers telling her all of those lovely chemicals she's putting into her body, and a pack of cigarettes cost about $2 a pack. Today, thanks to an excise tax of $1.51 per pack of cigs, the cheapest you can get a pack of cigs is $3.50, with the name brands clocking in at least $5.00. In New York State, a pack of cigarettes goes for at least $6 - and in New York City, you can't even get an ultra-cheap (as in no-name, you've got to be desperate) pack of cancer stix for less than $8.
When I went to Mohegan Sun for my birthday last year, I would have expected cigarettes to be much cheaper. Boy, was I wrong: a pack of Marlboros went for the princely sum of $9.65 per pack. (I have no clue how much the cheapos were, but a sawbuck? They were also selling bars of soap with real money for $13.95 - and of course, stupid me bought one. I did, however, use that dollar inside the bar of soap to play the daily numbers and ended up winning $721.)
In some of the New York State Indian reservations, however, you can still get name-brands for more than half the price. Why? The Indians kinda sorta don't put tax stamps on the packages.
This means the bridge & tunnel folks from Queens and Brooklyn (and their Manhattanite friends) who don't want to venture into their corner bodega can take a quick trip to the Hamptons for a family "visit" and stop by the Shinnecock Indian rez for a carton of Newports at $50. If their corner bodega is selling them for $8.50 a pack, that's $170 a carton there versus $50 (and $2.50 a pack) at the rez, meaning a savings of $120 per carton. No wonder the Indians in New York State like business the way it is, and the wholesalers are a bit miffed.
And believe the wholesalers with a fisheye when they say the cheap cigs are funding terrorism. Wholesalers who deliver to stores get a commission on all the sales they make, no matter what the price. So, when they go into the convenience store and set up their displays, it's not to make sure the lady in a bikini is not showing too much bodacious ta-ta; it's because that bodacious ta-ta is the difference between a stale pack that doesn't get sold and several hundred orders, perhaps with the bodacious ta-ta exposed. The wholesalers are blowing as much smoke to deceive the public; if the black market were as thriving as the wholesalers would have you believe, then New York City would have returned to the glorious cesspool of iniquity it once was. It hasn't, and it looks like the wholesalers are ticked that Indian tobacco sellers are cutting into their commissions and profits.
It doesn't mean I approve of smoking. I don't smoke myself, and I personally don't care if you light up, and I will not stop you if you're puffing away (if you ask nicely, all the fuss you'll get is a friendly hand wave and a "g'right ahead.").
Imagine, though, if cigarettes were ultimately banned. Everyone stopped smoking, no one got dirty looks when you lit up, and you didn't smell like an ashtray.
The politicians would have a hell of a time getting over their addiction - to smoker's money.
Here in Massachusetts, the excise tax for a carton is $1.51 x 20 = $30.20. $30.20 is not chump change, and a million cartons not being lit up means $30.2 million denied to the Commonwealth's coffers. Hence, you will see increasing and more constrictive rules on smoking, but you will never, ever see a complete ban, because once the commonwealth or any other state bans smoking completely, they lose hundreds of millions of dollars in easy, regressive tax revenue. The nanny state is not bold or ballsy enough to do a total ban, so they must do their deeds in passive-aggressive steps.
If there's anyone who really must get an intervention, it's the governments who use their insecurities and moralities to control people. Smoking is that perfect example: if smoking were banned, the states would require cases of Nicorette Tax patches.
When I went to Mohegan Sun for my birthday last year, I would have expected cigarettes to be much cheaper. Boy, was I wrong: a pack of Marlboros went for the princely sum of $9.65 per pack. (I have no clue how much the cheapos were, but a sawbuck? They were also selling bars of soap with real money for $13.95 - and of course, stupid me bought one. I did, however, use that dollar inside the bar of soap to play the daily numbers and ended up winning $721.)
In some of the New York State Indian reservations, however, you can still get name-brands for more than half the price. Why? The Indians kinda sorta don't put tax stamps on the packages.
This means the bridge & tunnel folks from Queens and Brooklyn (and their Manhattanite friends) who don't want to venture into their corner bodega can take a quick trip to the Hamptons for a family "visit" and stop by the Shinnecock Indian rez for a carton of Newports at $50. If their corner bodega is selling them for $8.50 a pack, that's $170 a carton there versus $50 (and $2.50 a pack) at the rez, meaning a savings of $120 per carton. No wonder the Indians in New York State like business the way it is, and the wholesalers are a bit miffed.
And believe the wholesalers with a fisheye when they say the cheap cigs are funding terrorism. Wholesalers who deliver to stores get a commission on all the sales they make, no matter what the price. So, when they go into the convenience store and set up their displays, it's not to make sure the lady in a bikini is not showing too much bodacious ta-ta; it's because that bodacious ta-ta is the difference between a stale pack that doesn't get sold and several hundred orders, perhaps with the bodacious ta-ta exposed. The wholesalers are blowing as much smoke to deceive the public; if the black market were as thriving as the wholesalers would have you believe, then New York City would have returned to the glorious cesspool of iniquity it once was. It hasn't, and it looks like the wholesalers are ticked that Indian tobacco sellers are cutting into their commissions and profits.
It doesn't mean I approve of smoking. I don't smoke myself, and I personally don't care if you light up, and I will not stop you if you're puffing away (if you ask nicely, all the fuss you'll get is a friendly hand wave and a "g'right ahead.").
Imagine, though, if cigarettes were ultimately banned. Everyone stopped smoking, no one got dirty looks when you lit up, and you didn't smell like an ashtray.
The politicians would have a hell of a time getting over their addiction - to smoker's money.
Here in Massachusetts, the excise tax for a carton is $1.51 x 20 = $30.20. $30.20 is not chump change, and a million cartons not being lit up means $30.2 million denied to the Commonwealth's coffers. Hence, you will see increasing and more constrictive rules on smoking, but you will never, ever see a complete ban, because once the commonwealth or any other state bans smoking completely, they lose hundreds of millions of dollars in easy, regressive tax revenue. The nanny state is not bold or ballsy enough to do a total ban, so they must do their deeds in passive-aggressive steps.
If there's anyone who really must get an intervention, it's the governments who use their insecurities and moralities to control people. Smoking is that perfect example: if smoking were banned, the states would require cases of Nicorette Tax patches.
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