The Treasury Inspector General for Tax Administration (TIGTA) today publicly released its review of the IRS’s processing of applications for Individual Taxpayer Identification Numbers (ITINs).
TIGTA reviewed a sample of ITIN applications and found that almost 70% contained significant errors and/or raised concerns that should have prevented the issuance of an ITIN. The IRS estimates that it has issued more than 14 million ITINs as of December 2008.
ITINs are intended to provide tax identification numbers to resident and nonresident alien individuals who may have U.S. tax reporting or filing obligations but do not qualify for Social Security Numbers, which generally are only issued to U.S. citizens and individuals legally admitted to the U.S. …
“The number of individual income tax returns filed using ITINs and reporting wage income has increased by 247 percent from 2001 to 2008,” commented J. Russell George, the Treasury Inspector General for Tax Administration. “If the IRS continues to issue ITINs without proper verification, the risk of fraudulently filed returns – along with fraudulently claimed refunds – will continue to rise,” added Inspector General George.
Mark Perry has created a great chart showing the net movement of income to right-to-work states:
From the National Right to Work Committee:
Counting just the income lost by forced-unionism states in the first year after each tax filer moved to a Right to Work state, forced-unionism states lost a net total of $124.3 billion (in constant 2008 dollars) due to domestic outmigration over this eight-year period.
Martin A. Sullivan at tax.com makes an interesting observation: the rich pay higher taxes than the “super rich.”
The chart above illustrates the latest data from the IRS. It shows that as income rises, effective tax rates also rise, but only up to a point.
The effective income tax rates levels off at around 24.1 percent for incomes between $1 million and $1.5 million. For higher incomes, however, the rate declines: for incomes above $10 million, the rate is 19.4 percent.
So what accounts for this?
Sullivan attributes the tax decline to capital gains. Most of the “super rich” receive their income through capital gains and qualified dividends which are taxed at a 15 percent rate, rather than the 35 percent rate that applies to other forms of income.
Here is a sad report from the Associated Press:
The Internal Revenue Service on Thursday auctioned off a large swath of land owned by an impoverished Indian tribe to help pay off more than $3 million in back taxes, penalties and interest — a sale the tribe says is illegal under federal laws protecting Indian land.
The 7,100 acres, or 11 square miles, of Crow Creek Sioux tribal land in central South Dakota ranch sold for almost $2.6 million, less than the $4.6 million it was appraised at, said IRS spokeswoman Carrie Resch. She did not say who bought the land.
The Heritage Foundation has published a fact sheet on the death tax.
Current Policy: Congressional policy on the death tax has been to phase it out and then abolish it for close to a decade now.The 2001 tax cut began an eight-year phase out of the death tax. It lowered the rate from 55% in 2000 to 45% this year and increased the untaxed portion of estates from $1 million to $3.5 million. In 2010, it completely abolishes the death tax.
Back to Life: The death tax only expires for one year, however. It comes back to life in 2011 at a 55% rate and $1 million exemption.
Policy Change: Some in Congress do not want to see the death tax go away. They are offering bills that would extend the death tax at its current rate and exemption level either for next year or permanently. Other approaches extend the tax permanently at 35% with a $5 million exemption.
Tax Increase: Extending the death tax for one year or permanently at either 35% or 45% is a steep tax increase, since current policy is to abolish it completely.
Punishes Hard Work : The death tax discourages saving and investing, undermines job creation, suppresses productivity and wage growth, contradicts the central promise of American life–wealth creation–and hurts those who have their savings tied up in land and other hard-to-sell assets.
Jobs Destroyer: The death tax is a drag to the economy because it is a tax on capital, the fuel of economic growth. Recent estimates show that full repeal of the tax would create 1.5 million jobs.
Slams Family-owned Businesses: Family-owned businesses are often asset-rich but cash-poor. They have equipment, real estate, and inventory that makes them appear valuable on paper. But they have comparatively little cash on hand. When a family member dies, the death tax is an enormous burden on them. Many have to sell their assets, or in some cases the entire business, to pay the tax. Or they must divert the precious cash flow they need to grow the business over many years to pay the tab.
Little Protection: Often the only protection family-owned businesses have from the death tax are expensive life insurance policies. The premiums they pay for them are a boon to insurance companies but siphon off the cash these businesses need to grow and create jobs.
Time to Kill the Death Tax
High Cost: The death tax is a drag on the economy and raises only 1% of all federal revenue. Estimates show it costs the economy more in lost growth than it raises in revenue.
Permanent Repeal: Congress should stick with current policy and permanently repeal the death tax once and for all. Abolition of this harmful tax will help spur economic recovery, put unemployed Americans back to work, and increase the long-term growth potential of the economy.
Restore the American Dream: Most importantly, repeal of the death tax would restore the American Dream that if you work hard and live a virtuous life, you can pass the fruits of your labor to succeeding generations of your family without fear that the government will take it away from them.
With its damaging effects on economic growth and its gross abrogations of individual rights, the death tax is probably one of the more insidious elements of the tax code – which is saying quite a lot.
Today, October 22nd, is the 23rd anniversary of the enacting of the Tax Reform Act of 1986 (signed into law by President Reagan). This act gave us the Internal Revenue Code (IRC) of 1986 – which is still used today. Though The Act was meant to simplify the tax code, today taxpayers are still beleaguered by a reprehensible system that disregards basic tenets of individual liberty and creates massive inefficiencies. Gerald Prante, senior economist of the Tax Foundation, had this to say on The Act’s 20th anniversary:
Why have politicians taken the stance that they would rather have tax deductions whose benefits are narrow rather than a broad-base, low-rate tax system that would benefit everyone and promote economic efficiency?
The simple answer is that special interests benefit heavily from narrow tax deductions and exemptions, even though the average taxpayer only benefits marginally. Therefore, while the overall benefits to society from overhauling the tax code would be significantly greater than the benefits of maintaining the status quo-the special deductions and complexity that permeate our tax system-special interests have a much greater incentive than the average American to lobby Congress on this issue.
Tax Foundation economist Gerald Prante gives a simple, yet informative, explanation of the full tax burden borne by taxpayers (it goes far beyond the last line of your Form 1040).
The principle of deadweight loss also applies to other transaction costs imposed by governments (such as tariffs).
Newly released data from the IRS clearly debunks the conventional Beltway rhetoric that the “rich” are not paying their fair share of taxes.
Indeed, the IRS data shows that in 2007—the most recent data available—the top 1 percent of taxpayers paid 40.4 percent of the total income taxes collected by the federal government. This is the highest percentage in modern history. By contrast, the top 1 percent paid 24.8 percent of the income tax burden in 1987, the year following the 1986 tax reform act.
Again, I’ll ask the question: by what right? Our society should reward ability and virtue – such a tax system does little more than punish those who create the wealth we all enjoy. The above percentages are the result of a society that regards ability as a vice and need as a virtue. The greater your success, the more you are forced to sacrifice. The greater your failure, the more you are entitled to. This is not the type of moral code that made our country what it is, and it is not the type of moral code necessary to maintain our greatness.