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Posts Tagged ‘taxes’

The Texas Tax Holiday: A Business Subsidy Even a Kid Can See Through

The 13-year-old grandson and his 11-year-old sister are discussing the Texas tax holiday—for one weekend in August there will be no sales tax on school-related items. The grandson says stores will cut prices to compete for customers. The granddaughter, already an inveterate shopper, says no: With the tax holiday there will be so many customers that the stores will be able raise prices.
While prices won’t rise compared to the previous weekend, the granddaughter seems to understand that an inelastic demand means the incidence of (gain from) the tax cut will be on the sellers—the customers are unlikely to get much of a bargain. A subtle, Texas-style subsidy to business; but one that even an 11-year-old can see through!

IRS Math: $600 Million = $4 Billion

A few years back, we argued that Americans should want more IRS audits, not fewer. “Still, unless you are personally cheating by one-fifth or more, you should be mad at the I.R.S. — not because it’s too vigilant, but because it’s not nearly vigilant enough,” we wrote. “Why should you pay your fair share when the agency lets a few hundred billion dollars of other people’s money go uncollected every year?”

Quotes Uncovered: Death and Taxes

I’m back to inviting readers to submit quotations whose origins they want me to try to trace, using my book, The Yale Book of Quotations, and my more recent research.

The Annals of Taxation

I’m lecturing at the University of Essex and going from office to office chatting with people about their research. This is hard physical labor — I repeatedly go down one or two flights of stairs in this rabbit warren, walk down a hall, up the stairs in the adjoining building, then back down another hall. What a waste — why?

Economics Can Be Bewitching!

An article on the BBC and elsewhere notes that witches and astrologers are now recognized occupations in Romania and no longer part of the underground economy. Practitioners’ incomes are now taxable-and practitioners are now covered by the country’s pension and health insurance schemes. Some witches have cast spells to overturn the new regulations, while others like the new benefits more than they dislike paying the new taxes.

Giving Back the Tax Cuts: A Guest Post

My colleagues Jacob Hacker and Daniel Markovits have created a cool website called that not only includes a useful tool to let you calculate the size of your tax cut, but suggests that “Americans who have the means should collectively give back our Bush tax cuts, by making donations to organizations that promote fairness, economic growth, and a vibrant middle class.” Here’s a post from the creators themselves that gives more details.

Another Lottery Idea Worth Considering?

We recently released a two-part podcast about Prize-Linked Savings, which are typically bank accounts or government bonds that shave a bit of interest off the top and pool together that interest to award regular big cash prizes to random account holders. The idea is to offer the thrill of the lottery with the principal-retaining properties of a savings or bond account.

Your Tax Questions, Asked and Answered (by a U.S. Treasury Official)

Given the massive uncertainty about the near (and long-term) future of the U.S. tax code, we recently invited Michael Mundaca, the Assistant Secretary of the Treasury for Tax Policy, to field questions from Freakonomics readers. You asked about everything from offshore tax shelters to the messy estate/death tax situation; here are his answers. A big thanks to all.

Baffled By Potential Tax Changes? Us Too. So Bring Your Questions for a Tax Expert

It’s shaping up to be a most interesting year on the tax front. A recent Freakonomics quorum focused on potential tax-policy mistakes that might be made this year, with so many issues up in the air. It brought up concerns about everything from expiring tax cuts to the federal deficit to the lack of clarity surrounding even this year’s tax code.

When the Rolling Stones Hit the Laffer Curve

A recent interview with the Rolling Stones reveals some of their business and wealth-protection strategies. “The whole business thing is predicated a lot on the tax laws,” said Keith Richards. “It’s why we rehearse in Canada and not in the U.S. A lot of our astute moves have been basically keeping up with tax laws, where to go, where not to put it. Whether to sit on it or not. We left England because we’d be paying 98 cents on the dollar. [This may sound like an exaggeration, but likely isn’t.] We left, and they lost out. No taxes at all. I don’t want to screw anybody out of anything, least of all the governments that I work with. We put 30% in holding until we sort it out.”

At Microsoft, Two Views on a New Tax

In Washington State, high-income residents and corporations are coming together to battle I-1098, a ballot initiative that would levy a 5 percent tax on “income above $400,000 per couple and a 9% levy on income above $1 million per couple.”

What's the Biggest Tax Mistake That Might Be Made This Year? A Freakonomics Quorum

Consider the ingredients: a frail economy, a toxic political environment, looming hard deadlines and massive uncertainty in the business community – the perfect circumstances under which to write some great federal tax policy!
But tax-code writing will be done – on the expiring Bush-era tax cuts, the estate tax, the Alternative Minimum Tax, capital-gains taxes and more.

"The Donors Are Taking the Place of the State"

A group of 40 American billionaires, led by Bill Gates and Warren Buffett, has publicly vowed to donate at least half of their wealth to philanthropic causes. Gates and Buffett, through their project The Giving Pledge, hope to persuade the 400 richest Americans to join them. If successful, the duo could generate an unprecedented $600 billion for charity (Americans as a whole donate about $300 billion a year). A laudable example of pure altruism, right? German shipping tycoon Peter Krämer thinks not

Do Tax Cuts for the Rich Help the Poor?

The altruism of yacht-buyers towards shipyard workers has now been surpassed by those arguing for an extension of the Bush tax cuts of 2001 for the very well-to-do (family income above $250,000, probably the top 2 percent of taxpayers), scheduled to expire on December 31. A recent objection is that, by reducing net incomes of the rich, failing to extend this tax cut would reduce job creation, placing a burden on working-class families.

IRS Combat

My colleagues laughed at me today when I mentioned I was doing my taxes. They argued that, given the price of my time – my wage rate – I should hire a professional.

The Rights to a View

Who owns the rights to an air space and to a view? What are property rights in such cases? An article in our local paper discusses complaints of residents in a luxury condo complex who are insisting that the City Council help pay the $75,000 it would cost an outdoor advertiser to move a billboard that blocks their view and lowers their property values.

Death and Taxes, Slightly Less Certain

The second chapter of SuperFreakonomics, which is primarily about catching terrorists and running an emergency room, includes a few passages about the timing quirks of births and deaths.

More Tax Breaks for the Rich?

I was talking with some folks at LSU who were working on a proposal to exempt textbooks from sales taxes in Baton Rouge, currently a whopping 9%. I’m all in favor of cutting sales taxes, which are generally not progressive; but textbooks are a luxury good—college education is disproportionately undertaken by the offspring of higher-income families. Why subsidize higher-income college students still further?

A Defense of Irrational Taxation?

Here’s a behavioral puzzler: Why might it be more efficient for Connecticut to change its sales tax rate from 6 percent to e^2 percent ?
Or more generally, why might using irrational numbers as tax rates be less distortionary than rational tax rates?
A hint comes from a great article of Amy Finkelstein, “E-ZTax: Tax Salience and Tax Rates.” Her simple and powerful idea is that as the salience of tax rates declines, taxes will produce fewer distortions because taxpayers will not pay as much attention to the taxes.

Who's Ready for a Fat Tax?

From a Wall Street Journal article by Betsy McKay come these tantalizing facts (emphasis added):

The medical costs of treating obesity-related diseases may have soared as high as $147 billion in 2008, the Centers for Disease Control and Prevention said Monday, as its new director set a fresh tone in favor of more aggressively attacking obesity.

Taxes I Can't Complain About

Texas has a very high sales tax at 6.25 percent, and Austin adds on 2 percentage points. I’ve always thought we were high in this category.
Before our current vacation in Colorado, I was pleased to notice that its sales tax rate is only 2.9 percent. On my first purchase in Steamboat Springs, though, the tax rate was 8.4 percent — the town adds 5.5 percentage points to the state rate.

Your Tax Dollars at Work (Seriously)

A long-standing pet peeve of mine is that so much academic research is funded by public tax dollars and yet the public is rarely given access to the findings of that research.
In a short Times piece today, I found a hero: Michael Tuts, a particle physicist at Columbia who, among other things, is doing work at CERN, the European Organization for Nuclear Research:

Track Your Taxes

Concerned citizens can now track government spending at Users can view current and historical spending on contracts, grants, and loans, broken down by characteristics like congressional district and contractor. The website, mandated by the Federal Funding and Accountability and Transparency Act of 2006, is a revamped version of Warning: if you’re a pacifist, steer clear, or at least keep your blood-pressure pills at hand.

Look Who's Paying for Low Tuition

Texas raises most of its tax revenue from the sales tax. We are one of only seven states without a personal income tax. Even with the exclusion of groceries from the sales tax, it is likely that the tax is regressive. Our legislators (who fortunately only convene for four months every two years) are now proposing that state-supported universities be . . .

Greening the Brain

In the Times Magazine, Jon Gertner takes a look at the Center for Research on Environmental Decisions (CRED), which is dedicated to analyzing how people make environmental decisions. CRED has discovered, for instance, that if a carbon tax is framed as an “offset” instead of a “tax,” it makes a substantial difference in how people, particularly Republicans, feel about it. . . .