Posts tagged with: Taxation in the United States

parsonage (1)A federal court of appeals has rejected an atheist group’s lawsuit seeking to strike down a 60-year-old tax provision protecting ministers, notes the Becket Fund. The ruling allows ministers of all faiths to continue receiving housing allowances. “This is a great victory for separation of church and state,” said Luke Goodrich, Deputy General Counsel of the Becket Fund of Religious Liberty. “When a group of atheists tries to cajole the IRS into raising taxes on churches, it’s bound to raise some eyebrows. The court was right to send them packing.”

Aside from the question of constitutionality, the clergy exemption raises a question that many people — whether religious or not — are likely to be wondering: Why exactly do ministers receive a tax exemption for their housing allowance?

To answer the question we must first consider how taxation of church property, including clergy housing, has historically been considered.
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29taxes.2-500In an attempt to trap Jesus, some Pharisees and Herodians asked him, “Is it lawful to pay taxes to Caesar, or not? Should we pay them, or should we not?” In response, Jesus said,

“Why put me to the test? Bring me a denarius and let me look at it.” And they brought one. And he said to them, “Whose likeness and inscription is this?” They said to him, “Caesar’s.” Jesus said to them, “Render to Caesar the things that are Caesar’s, and to God the things that are God’s.”

The Pharisees and Herodians “marveled” at Jesus answer, but had they asked an agent of the Roman IRS they likely would have been given a similar answer.

Governments have always had to contend with citizens who make what are considered “frivolous tax arguments” to avoid complying with tax laws. Such arguments rarely work (it’s usually not effective to try to present a creative interpretation of tax law to the people who interpret tax laws) but people keep trying.

The IRS has an entire list of responses to the most common frivolous tax arguments. Here are four of my favorites:
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ben carsonIn 2012, Dr. Ben Carson, former head of pediatric surgery at John Hopkins Hospital, rose to media attention at the National Prayer Breakfast in Washington, D.C. During that speech, he told the audience, including President and Mrs. Obama, that he didn’t mean to offend anyone, but he wasn’t going to be “politically correct,” either. Since then, Dr. Carson has been a regular contributor to The Daily Caller. He recently spoke in Sikeston, Missouri, and gave his prescription for what ails America.

Of all that’s ailing America, including the decline of education, Obamacare, politicians run amok, and government spending, the doctor offered various prescriptions. The Founders, [Carson] said, knew that the country relied on an informed populace. We must not be misled by “slick politicians and a dishonest media.” If we will “spend a half hour learning something new every single day … [we] become a formidable friend of truth and a formidable enemy of deception.” (more…)

IRS-300x300Adopting a child can be a laborious, time-consuming, and expensive process. So why is the IRS trying to make it even more laborious, time-consuming, and expensive? As David French notes, in 2012, the IRS requested additional information from 90 percent of returns claiming the adoption tax credit and went on to actually audit 69 percent:

So Congress implemented a tax credit to facilitate adoption – a process that is so extraordinarily expensive that it is out of reach for many middle-class families — and the IRS responded by implementing an audit campaign that delayed much-needed tax refunds to the very families that needed them the most. Oh, and the return on its investment in this harassment? Slightly more than 1 percent.

This audit wave got almost no media coverage, but what was the experience like for individual families? In a word, grueling. Huge document requests with short turnaround times were followed by lengthy IRS delays in processing, all with no understanding for the unique documentation challenges of international adoption.

Read more . . .

(Via: HotAir)

Blog author: jballor
Tuesday, February 19, 2013
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My friend John Teevan of Grace College sends out a monthly newsletter, “Economic Prospect.” He passes along this in the current edition:

I found this note from a newly retired accountant (age 66) who has not gone on social security yet. His income as a part-time accountant in his town was $60,000.

“My income is $60,000 and my IRS taxes are 10,000, my FICA deduction is $8,000, my state income tax is $2500, and my property tax is $6000. So I pay a total of $26,500 in taxes leaving me $33,500.

However, I have additional costs that I would like to (but can’t) deduct from my income. As I watch ‘government accounting’ I realize that these should be considered real costs.

I have saved $200,000 and invested the money in bonds earning 1% ($2000).

I could have invested that money in CDs earning 5% (10,000), but as the Fed has lowered the interest rate the cost to me is the difference: $8000.

In addition I am now entitled to social security and at my level of income over the years I would have received $28,000 this year, but I have chosen not to take Social Security saving Uncle Sam that money.

So I have contributed a total of $36,000 to Uncle Sam in foregone interest and foregone Social Security payments. Who got the benefit of that $36,000?

Uncle Sam; not me.

So if I add up my total contributions to the government this past year I paid $26,500 in taxes and paid $36,000 in lost income. These two come to $62,500…more than the $60,000 I earned.

While I enjoy my new job, when I think about this, I start to feel like one of Pharaoh’s slaves toiling to roll immense stones up from the Nile to his pyramid.”

Send John a message if you’d like to be added to his “Economic Prospect” list. It’s always a great read.

Blog author: jcarter
Wednesday, December 5, 2012
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What is the “fiscal cliff”?

The term “fiscal cliff”, which is believed to have originated in Congressional testimony by Federal Reserve Chairman Ben Bernanke, refers to the substantial changes to tax and spending policies that are scheduled to automatically take effect in January 2013. The changes are intended to significantly reduce the federal budget deficit.

What are the tax and spending policies that will change?

Several major tax provisions are set to expire at year’s end:
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After every electoral defeat—whether suffered by Republicans or Democrats—a period of hand-wringing and soul-searching inevitably develops in the days and weeks after the election. Journalists and politicians take to print to explain “What went wrong” and “Here’s what should be done differently.” Although the solutions are almost always what the pundits were saying before the election, the exercise in self-reflection is, on the whole, a much needed corrective. But too often the advice tends to be of the always terrible, “We should be more like the party that won.”

A prime example is an article today by Wick Allison, publisher of The American Conservative. Allison voted for Obama in 2008 and hinted that he would do so this year too. So it probably shouldn’t be surprising that that his economic solution looks similar to what President Obama would endorse.

Allison says that the “Republican Party can appeal to ‘Judeo-Christian values’ as long as the sun shines and their voices hold out. But they’ve abandoned the most basic moral value of all: fairness.” While he may have a valid point, Allison muddies the argument by his misunderstanding of both taxation and fairness:

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Blog author: jcarter
Thursday, March 15, 2012
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As society becomes more secularized, the calls for churches to pay their “fair share” become more vocal. Erik Stanley, senior legal counsel for the Alliance Defense Fund, explains why churches should remain exempt from paying taxes:

Why is your church tax exempt? Why should it continue to be tax exempt? If I were to sit down and ask you these questions, would you have a clear and coherent answer? I suspect this is something we seldom think about. After all, tax exemption for churches has always been given and we assume, because of its historical longevity, it always will be given.

The fact that many Americans cannot explain why churches are tax exempt indicates a forgotten history and is emblematic of a society that has systematically devalued the church as a beneficial societal institution.

Read more . . .

In “Stop Coddling the Super-Rich” investor Warren Buffett, one of the world’s wealthiest men, makes a case for upping the tax rate on the “mega-rich” in America. In a response published on National Review Online, Acton Research Director Samuel Gregg observes that “this is a broken record that Mr. Buffett has taken to re-playing over the past five years.” He points out that the U.S. tax system is already heavily progressive (no pun intended) and that the label “mega-rich” may not be as obvious as Buffett would like us to believe:

It’s safe to say that a substantial number of these people operate small-to-medium-size businesses that don’t play the corporate welfare game a la General Electric, that are already subject to some of the world’s highest corporate tax rates (most of which is paid by the owners of companies), that reinvest much of their income in expanding their activities and taking on new risk, and, above all, that employ people. They are the engine of growth and employment in America today — not the United States government. Why on earth would we disincentivize them from creating value and jobs by raising their taxes?

Read Samuel Gregg’s “Taxing Warren Buffett” on NRO.

Blog author: jballor
Friday, June 17, 2011
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Today at Capital Commentary I discuss the size and scope of the tax code in the US relative to its basic purposes.

In “Back Door Social Engineering,” I argue, “When governments run huge deficits in part because of the complexity of its tax system and the ability of people and institutions to engage in large-scale (and legal) tax avoidance, there is something deeply wrong with the system.”

The basic purpose of taxes is to raise money for the government, not to determine social behavior. We have laws for that.

Read the whole thing here.