The disconnection between public treasuries and local domestic needs drawing upon them does not exist within taxpayers’ pockets or bank accounts. The same taxpayers supply money for all layers of government. Rather, the disconnection is purely administrative and governmental. It is a political artifact with the strength of bureaucratic tradition. That being so, the dumbed-down result should be simple to mend but, if experience in Canada is a guide, it can’t be mended.

–Jane Jacobs, Dark Age Ahead (New York: Random House, 2004), pp. 105-106

In Hawaii, state employees are bracing for furloughs of three days a month over the next two years, the equivalent of a 14 percent pay cut. In Idaho, lawmakers reduced aid to public schools for the first time in recent memory, forcing pay cuts for teachers.

And in California, where a $24 billion deficit for the coming fiscal year is the nation’s worst, Gov. Arnold Schwarzenegger has proposed releasing thousands of prisoners early and closing more than 200 state parks.

Meanwhile, Maine is adding taxes on candy and ski tickets, Wisconsin on oil companies, and Kentucky on alcohol and cellphone ring tones.

Read it all.

The White House is caught in a battle within its own party over how to finance a comprehensive overhaul of America’s health-care system, as key Democrats advocate a tax plan that could require President Obama to break his campaign pledge not to raise taxes on the middle class.

Sensitive to voter anxiety about a soaring federal deficit, Obama and congressional leaders have vowed to pay for a sweeping expansion of the health-care system — expected to cost more than $1 trillion over the next decade — without additional borrowing.

Much of the money is likely to come from reining in spending on federal health programs for the elderly and the poor. Obama has proposed trimming more than $600 billion from Medicare and Medicaid by 2019 — including more than $300 billion in cuts unveiled in his Saturday radio and Internet address — which could fulfill the promise to curb the growth of federal health spending.

The rest of the cash will probably come from new taxes.

Read it all.

Members of Congress are seriously considering proposals to rein in the growth of health spending by taking tens of billions of dollars of Medicare money away from doctors and hospitals in high-cost areas and using it to help cover the uninsured or treat patients in lower-cost regions.

Those proposals have alarmed lawmakers from higher-cost states like Florida, Massachusetts, New Jersey and New York. But they have won tentative support among some lawmakers from Iowa, Minnesota, Montana, North Dakota, Oregon and Washington, who say their states have long been shortchanged by Medicare.

Nationally, according to the Dartmouth Atlas of Health Care, Medicare spent an average of $8,304 per beneficiary in 2006. Among states, New York was tops, at $9,564, and Hawaii was lowest, at $5,311.

Researchers at Dartmouth Medical School have also found wide variations within states and among cities. Medicare spent $16,351 per beneficiary in Miami in 2006, almost twice the average of $8,331 in San Francisco, they said.

Read it all from the front page of yesterday’s New York Times.

The carnage in state budgets is getting worse, a report said Thursday, with places like Arizona being hurt by falling revenue on multiple fronts, like personal income and sales taxes. Other states are having mixed experiences, with some tax categories stable, or even rising, even as others fall off the map.

The report, by the National Conference of State Legislatures, also provided a scorecard for how well drafters of state budgets read the recession’s economic tea-leaves ”” and the short answer is, not very well.

Thirty-one states said estimates about personal income taxes had been overly optimistic, and 25 said that all three major tax categories ”” sales taxes, personal income taxes and corporate taxes ”” were not keeping up with projections.

Read it all.

….our aging population and unconstrained entitlement programs mean that a dramatic expansion in the size of government will occur automatically in coming decades unless Medicare, Medicaid and Social Security are reformed. Simply stated, there’s no way to finance all this new spending without an additional, broad-based tax. That’s exactly why a VAT — which is like a national sales tax collected at each stage of the production process, rather than at the final point of sale — should be resisted.

The classical argument in favor of a VAT says that it’s desirable because it has a single rate and is based on consumption. It is true that single-rate systems (assuming a reasonable rate) are less harmful than discriminatory regimes with “progressive” rates. It’s also true that a consumption-based tax would not inflict as much damage as our internal revenue code, with its multiple layers of tax on income that is saved and invested. But these arguments only apply if a VAT replaces the current tax system — which is not the case here. And the evidence from Europe suggests it’s not a good idea to add a somewhat-bad tax like the VAT on top of a really bad tax system.

Read it all.

Taxpayers are on the hook for an extra $55,000 a household to cover rising federal commitments made just in the past year for retirement benefits, the national debt and other government promises, a USA TODAY analysis shows.

The 12% rise in red ink in 2008 stems from an explosion of federal borrowing during the recession, plus an aging population driving up the costs of Medicare and Social Security.

That’s the biggest leap in the long-term burden on taxpayers since a Medicare prescription drug benefit was added in 2003.

Read it all.

As long as we’re talking about getting people to pay for what they value online, Edward Gottesman suggests in the British magazine Prospect, what about taxing everyone a few cents per e-mail to cut down on the estimated 90 percent of it that is unwanted spam choking the Web?

Yuck. Read it all.

Federal tax revenue plunged $138 billion, or 34%, in April vs. a year ago ”” the biggest April drop since 1981, a study released Tuesday by the American Institute for Economic Research says.

When the economy slumps, so does tax revenue, and this recession has been no different, says Kerry Lynch, senior fellow at the AIER and author of the study. “It illustrates how severe the recession has been.”

Read it all.

With budget deficits soaring and President Obama pushing a trillion-dollar-plus expansion of health coverage, some Washington policymakers are taking a fresh look at a money-making idea long considered politically taboo: a national sales tax.

Common around the world, including in Europe, such a tax — called a value-added tax, or VAT — has not been seriously considered in the United States. But advocates say few other options can generate the kind of money the nation will need to avert fiscal calamity.

At a White House conference earlier this year on the government’s budget problems, a roomful of tax experts pleaded with Treasury Secretary Timothy F. Geithner to consider a VAT. A recent flurry of books and papers on the subject is attracting genuine, if furtive, interest in Congress. And last month, after wrestling with the White House over the massive deficits projected under Obama’s policies, the chairman of the Senate Budget Committee declared that a VAT should be part of the debate.

“There is a growing awareness of the need for fundamental tax reform,” Sen. Kent Conrad (D-N.D.) said in an interview. “I think a VAT and a high-end income tax have got to be on the table.”

Read it all.

The decision, which would make it hard for Americans in London to open bank accounts and trade shares, is being discussed by executives at Britain’s banks and brokers who say it could become too expensive to service American clients. The proposals, which were unveiled as part of the president’s first budget, are designed to clamp-down on American tax evaders abroad. However bank bosses say they are being asked to take on the task of collecting American taxes at a cost and legal liability that are inexpedient.

Andy Thompson of Association of Private Client Investment Managers and Stockbrokers (APCIMS) said: “The cost and administration of the US tax regime is causing UK investment firms to consider disinvesting in US shares on behalf of their clients. This is not right and emphasises that the administration of a tax regime on a global scale without any flexibility damages the very economy it is trying to protect.”

One executive at a top UK bank who didn’t want to be named for fear of angering the IRS said: “It’s just about manageable under the current system – and that’s because we’re big. The danger to us is suddenly being hauled over the coals by the IRS for a client that hasn’t paid proper taxes. The audit costs will soar. We’ll have to pay it but I know plenty of smaller players won’t.”

Read it all.

The mayor of Providence wants to slap a $150-per-semester tax on the 25,000 full-time students at Brown University and three other private colleges in the city, saying they use resources and should help ease the burden on struggling taxpayers.

Mayor David Cicilline (sis-ah-LEEN-ee) said the fee would raise between $6 million and $8 million a year for the city, which is facing a $17 million deficit.

If enacted, it would apparently be the first time a U.S. city has directly taxed students just for being enrolled.

Read it all.

The barrage of tax increases proposed in President Barack Obama’s budget could, if enacted by Congress, kill any chance of an early and sustained recovery.

Historians and economists who’ve studied the 1930s conclude that the tax increases passed during that decade derailed the recovery and slowed the decline in unemployment. That was true of the 1935 tax on corporate earnings and of the 1937 introduction of the payroll tax. Japan did the same destructive thing by raising its value-added tax rate in 1997.

Read it all.

But the higher deficit figures and additional proposed taxes, along with details of corporate tax breaks the Obama administration wants to ax, led to sharp criticism of the White House from some Republican lawmakers and business groups. It was a taste of the battle to come on Capitol Hill, where lawmakers and lobbyists have prevented some of the proposed changes in the past.

“The administration’s displayed an insatiable appetite for spending and they need to get money wherever they can. So they use the tax code the way Willie Sutton used a gun,” said Martin A. Regalia, vice president for economic and tax policy at the U.S. Chamber of Commerce, referring to the famous bank robber.

Read it all.

Senate leaders are considering new federal taxes on soda and other sugary drinks to help pay for an overhaul of the nation’s health-care system.

The taxes would pay for only a fraction of the cost to expand health-insurance coverage to all Americans and would face strong opposition from the beverage industry. They also could spark a backlash from consumers who would have to pay several cents more for a soft drink.

On Tuesday, the Senate Finance Committee is set to hear proposals from about a dozen experts about how to pay for the comprehensive health-care overhaul that President Barack Obama wants to enact this year. Early estimates put the cost of the plan at around $1.2 trillion. The administration has so far only earmarked funds for about half of that amount.

Read it all.

Still, the tea parties are not based on the cold wonkery of budget data. They are based on an “ethical populism.” The protesters are homeowners who didn’t walk away from their mortgages, small business owners who don’t want corporate welfare and bankers who kept their heads during the frenzy and don’t need bailouts. They were the people who were doing the important things right — and who are now watching elected politicians reward those who did the important things wrong.

Voices in the media, academia, and the government will dismiss this ethical populism as a fringe movement — maybe even dangerous extremism. In truth, free markets, limited government, and entrepreneurship are still a majoritarian taste. In March 2009, the Pew Research Center asked people if we are better off “in a free market economy even though there may be severe ups and downs from time to time.” Fully 70% agreed, versus 20% who disagreed.

Read it all.

Yet the idea of non-traditional protesters using bottom-up organizing to foment a national movement in the span of 60 days may have marked a turning point for the tea partiers ”“ especially since the high attendance estimates rivaled the estimated 500,000 or so protesters who converged on New York City and several other major cities to oppose the Iraq War on Feb. 15, 2003.

“I think it’s not dissimilar from what we had in 2003 with the anti-war protests, where a lot of people were uncomfortable with the war, but also uncomfortable with the anti-war position, recognizing there are terrorists out there,” says Jeremi Suri, a history professor who specializes in social movements at the University of Wisconsin in Madison. “Here we have a similar thing: There are serious economic issues, and it’s unclear to many people whether the stimulus is going to deal with these.”

Read it all.

. Asked about the tea parties, President Barack Obama responded that he was not aware of them. As Marie Antoinette said, “Let them drink Lapsang Souchong.” His Imperial Majesty at Barackingham Palace having declined to acknowledge the tea parties, his courtiers at the Globe and elsewhere fell into line. Talk-show host Michael Graham spoke to one attendee at the 2009 Boston Tea Party who remarked of the press embargo: “If Obama had been the king of England, the Globe wouldn’t have covered the American Revolution.”

The American media, having run their own business into the ground, are certainly qualified to run everybody else’s into the same abyss. Which is why they’ve decided that hundreds of thousands of citizens protesting taxes and out-of-control spending and government vaporization of Americans’ wealth and their children’s future is no story. Nothing to see here. As Nancy Pelosi says, it’s AstroTurf ”“ fake grass-roots, not the real thing.

Besides, what are these whiners so uptight about? CNN’s Susan Roesgen interviewed a guy in the crowd and asked why he was here:

“Because,” said the Tea Partier, “I hear a president say that he believed in what Lincoln stood for. Lincoln’s primary thing was he believed that people had the right to liberty, and had the right ”¦”

Read it all.

The president failed to point out, though, that the tax cuts he promoted are part of the problem Volcker was asked to solve. Taxpayers face a thicket of potential deductions, credits and exclusions because Congress and the White House use the tax code instead of direct subsidies to promote certain types of behavior. For example, to boost sales of cars and homes, this year Congress added a temporary deduction for automobile sales taxes and expanded the credit for first-time home buyers. Over the years, lawmakers piled on layer after layer of benefits for social aims, along with a dizzying array of incentives for businesses and investors. Meanwhile, they played a cat-and-mouse game with tax accountants, tweaking the code to deter the gimmicks that shifted income into less-taxed categories.

Read it all.

[KAI] RYSSDAL: If ever there was topic that rolled behavioral and economics all into one, it is taxes. Because really you don’t want to pay them. What is the temptation here, to maybe not pay taxes and cheat a little bit.

[DAN] ARIELY: Taxes, especially with the American system, is a kinda good test case for cheating. Where we have to pay taxes, and we realize it. We also realize it’s good to pay taxes on some level because the government does all kinds of things for us. At the same time, we have our selfish desires to pay as least as possible. And the tax code lets us play tricks with ourselves. So imagine you went out for dinner with your aunt, and she asked you how work was going, and you said, “Oh, it was going well,” and she gave you some suggestions about work. Can you not charge it as a business expense?

I caught this last night on the way home from the dentist, it is really a good discussion. Read or listen to it all.

Take a look.

As a deep recession strips Americans of their jobs, homes and investments, the 2009 U.S. tax season promises to see a large uptick in first-time delinquent income taxpayers.

“Our calls are up 280 percent,” said Richard Boggs, founder and chief executive of Los Angeles-based Nationwide Tax Relief, a firm that helps delinquent taxpayers resolve tax issues.

“We’ve seen a huge rise in what we call the rookie delinquent taxpayer,” he said. “They are incredibly scared, and they have no idea what’s going to happen to them because, God bless them, they’ve never owed before.”

Read it all.

The government likely recorded $953 billion in red ink from October through March including $290 billion for the Troubled Asset Relief Program, or TARP, which was to provide much-needed cash to struggling financial institutions, the CBO said.

Receipts during the six-month period dropped about $160 billion, or 14 percent, over the same period in fiscal 2008. Nearly half of the drop, $73 billion, came from a fall in corporate income tax receipts.

The CBO, the nonpartisan budget analyst for Congress, said the drop in corporate receipts was the largest in more than three decades.

Read it all.

Gordon Brown’s carefully laid plans for a G20 deal on worldwide tax cuts have been scuppered by an eve-of-summit ambush by European leaders.

Angela Merkel, the German chancellor, last night led the assault on the prime minister’s “global new deal” for a $2 trillion-plus fiscal stimulus to end the recession.

“I will not let anyone tell me that we must spend more money,” she said.

Read it all.

But asked twice whether he would accept a budget that did not include provisions for additional tax cuts for the middle class, or that did not launch a cap-and-trade program to reduce greenhouse gas emissions, Mr. Obama demurred. Instead, he called for “a serious energy policy that frees ourselves from dependence on foreign oil and makes clean energy the profitable kind of energy” — implicitly suggesting that cap-and-trade, though he supports it, might have to wait. As for the middle-class tax cut that Mr. Obama would pay for with revenue from a cap-and-trade program, the president said, “we already had that” in the stimulus package. “We know that that’s going to be in place for at least the next two years. We had identified a specific way to pay for it. If Congress has better ideas in terms of how to pay for it, then we’re happy to listen.”

Read it all.

President Obama’s proposal to limit the tax deductibility of charitable contributions would effectively transfer more than $7 billion a year from the nation’s charitable institutions to the federal government. But the high-income taxpayers affected by the rule change are likely to cut their charitable giving by as much as the increase in their tax bills, which would, ironically, leave their remaining income and personal consumption unchanged.

In effect, the change would be a tax on the charities, reducing their receipts by a dollar for every dollar of extra revenue the government collects. It is hard to imagine a rationale for taxing schools, hospitals, medical research budgets and arts organizations in this way. I suspect that the administration officials who drafted this proposal did not understand that it would have this perverse effect.

Read it all.

President Obama’s proposed 2010 federal budget contains a 7% cut in charitable tax deductions for the nation’s wealthiest taxpayers. Some religious groups are asking how that will affect their bottom line.

The answer: it depends who you ask.

Here’s what it means in real terms for the 5% of Americans whose household income exceeds $250,000 a year. Those families can currently save $350 in taxes for every $1,000 donated to charity; under Obama’s plan, that amount would drop to $280 per $1,000 donation.

“By doing this, you raise the cost of giving” said Roberton Williams, a senior fellow at The Tax Policy Center, a liberal Washington think tank.

Read it all.

The statewide property tax reforms of 2006, which exempted homeowners from most school taxes, were supposed to be paid for with a penny increase in the statewide sales tax. The result: A shortfall of more than $143 million over the past two years, which made the state’s budget problems worse.

Locally, the optional sales taxes that voters approved by referendum in two-thirds of South Carolina counties are used to offset town, city and county taxes.

The difficulty for local governments comes in projecting sales tax revenues up to a year ahead of time, and crediting those amounts to property tax bills. If they guess wrong, they come up short.

“That was our problem,” said Keith Bustraan, Charleston County deputy administrator and chief financial officer. “We set our revenue estimate and then began the long slide.”

Read it all from the local paper.

Bankers on Wall Street and in Europe have struck back against moves by US lawmakers to slap punitive taxes on bonuses paid to high earners at bailed-out institutions.

Senior executives on both sides of the Atlantic on Friday warned of an exodus of talent from some of the biggest names in US finance, saying the “anti-American” measures smacked of “a McCarthy witch-hunt” that would send the country “back to the stone age”.

There were fears that the backlash triggered by AIG’s payment of $165m in bonuses to executives responsible for losses that forced a $170bn taxpayer-funded rescue would have devastating consequences for the largest banks.

“Finance is one of America’s great industries, and they’re destroying it,” said one banker at a firm that has accepted public money. “This happened out of haste and anger over AIG, but we’re not like AIG.”

Read it all.

Polish the pitchfork, fire up the torches, and join the revolt preparing to storm the Bastille.

That’s the impression from several corners of the state about the public’s mood. Voters already steamed about the recession, rising unemployment and corporate bailouts are growing angry about taxes, too.

News that one in 10 Georgia lawmakers is a repeat violator of tax laws has fueled a call for a rewrite of the state’s tax code. And it’s not just conservatives who feel that way.

When a series of President Barack Obama’s appointees to senior posts revealed they hadn’t paid their taxes, the anger grew. When the Georgia Department of Revenue distributed a list of outstanding taxes owed by 19 unnamed legislators, frustration boiled further.

This underlines once again the need for massive tax simplification. Read it all.