How the Rich Are Saving State Governments |
| How the Rich Are Saving State Governments Posted: 17 May 2011 08:23 AM PDT California, New York and New Jersey suddenly have more money than they thought. The reason: rich people. California Governor Jerry Brown announced on Monday that the state had $6 billion more than they expected in revenues. New Jersey's legislature projects it will rake in $913 million more than expected. And New York recently projected $2 billion in unexpected revenue.
Politicians and economists are surprised by the windfalls, which are upending the austerity debates and budget cuts in the states. But this shouldn't be surprising. The reason the states got into this mess is the same reason they are getting out so quickly: a dependence on the wealthy. California, New York and New Jersey get more than 40% of their personal income-tax revenue from the top 1% of taxpayers. When the incomes of those taxpayers crashed in the financial crisis, their tax payments also plunged. A substantial part of the budget shortfall in New York, California, New Jersey and others states owed to the decline in incomes of the rich–and more specifically, the decline in stock markets and capital gains. Now, stock markets have recovered and so have the rich. It follows, therefore, that as the incomes of the rich are soaring again (all those Facebook billionaires and hedge-funders), so are their tax payments. As go the rich, so go the states. (That is simply fact: This is not to argue for lower or higher rates on the rich). Add to this the fears last year of higher capital-gains tax rates–which induced the rich to sell extra stock so they don't have to pay more later–as well as Roth IRA rules and you get a new bulge in tax revenue. The good news is that the revenue boom will continue–as long as stock markets hold. The bad news is that just as governments failed to recognize their dependence on the rich in good times, and failed to prepare for a bust, they have been too slow to realize the rebound of the rich in good times. Now they find themselves drastically missing their budget projections. And rest assured, this boom in tax revenue from the rich will end just like the last one. And government's won't be ready.
     |
| Is the IRS’s ‘Wealth Squad’ Working? Posted: 16 May 2011 12:27 PM PDT
The IRS has garnered a lot of headlines with its crackdown on the wealthy. The Global High Wealth Industry Group, formed in 2009 and also known as “The Wealth Squad,” has a team of agents specially trained in the dark arts of tax evasion by the rich.
They have helped the IRS ramp up audits of the rich. According to the agency, audit rates among taxpayers who reported $10 million or more in income in 2010 jumped to 18% from 10% in 2009. Among taxpayers who reported $5 million to $10 million in income, nearly 12% were audited, compared with 6% in 2008. The audits have been especially resented by the wealthy and their accountants (big surprise), who say the audits are bureaucratic make-work that involve reams of unnecessary paperwork and trivial documentation. But at least it is working right? We don't know. The IRS has refused to report how much money the “wealth squad” has brought in. This isn't so difficult. Britain, which set up a similar "rich squad" around the same time, has announced that its squad netted £162 million ($ 263 million) in 2010-11, up from £82 million the year before. Those amounts are on top of the taxes already paid by the rich who are being targeted. The IRS has declined comment on their amounts or to explain why it won’t release the numbers. The IRS already has come under fire for a study that found that the 78 agents in the “global high wealth” group only audited two returns in 2010 and 11 in the first six months of fiscal 2011. That was far below its targets. The IRS disputed the numbers, produced by the Transactional Records Access Clearinghouse at Syracuse University. The agency said the analysis was “incorrect,” but the agency didn't give any alternative numbers. I understand the IRS need to keep some facts and figures secret. But without a little more information on the high-net-worth proceeds, opponents can continue to label it a jobs program with little revenue benefit. Do you think the IRS should release the numbers?
   |
| You are subscribed to email updates from The Wealth Report To stop receiving these emails, you may unsubscribe now. | Email delivery powered by Google |
| Google Inc., 20 West Kinzie, Chicago IL USA 60610 | |
No comments:
Post a Comment