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Ac-“customed” to Waste?
Posted By: Pete Sepp - 08/05/13

All too many federal agencies can be cited for having budgetary skeletons in their closet, and U.S. Customs and Border Protection (CBP) is no exception. From poorly managing a drone fleet purchase, to making questionable demands for more employees, CBP has raised fears for the security of taxpayers’ wallets in the past. Yet, Congress has an opportunity to ease future fears, over a controversial new CBP project, before it can cause a fiscal fright.

Two years ago, the U.S. Department of Homeland Security (DHS) concluded a letter of intent with the United Arab Emirates to build a “pre-clearance” facility at Abu Dhabi airport which would allow travelers to the U.S. to clear customs before arriving on American soil. So far, so good: pre-clearance can not only save time and reduce congestion at U.S. points of entry, it can also help ease the way for tourists who contribute to economic activity while visiting here.

Now for the not-so-good:

  • According to Airlines for America statistics, Abu Dhabi airport accounted for less than 600 passenger arrivals per day to the U.S. in 2012, ranking it #80 on the list of top origin points to our country.
  • Right now, no U.S.-based carriers even fly from the Abu Dhabi International Airport back to here.  All other CBP pre-clearance zones in Canada, Ireland, and the Caribbean serve many airlines, including U.S.-flagged ones.
  • The primary beneficiary of the deal would be Etihad Airways, the state-owned airline of UAE. Thanks to this status Etihad enjoys an advantage over private airlines around the world that are subject to corporate profit taxes of their home countries. Which brings us to …
  • Another advantage conferred by the United States under the auspices of the Export-Import Bank (Ex-Im), whose risk-taking and subsidization have long been a concern for taxpayer advocates such as NTU. Etihad snagged $593 million in loan guarantees from Ex-Im last year for aircraft purchases, and could qualify for preferential financing that our own airlines (by definition) can’t get through Ex-Im.
  • Meanwhile, The Wall Street Journal is reporting that over the preceding year (before overblown sequester scare tactics), the wait times for getting through customs at stateside airports have “increased dramatically.”

All these drawbacks lead to one long question: Given CBP’s service challenges at existing airports, is it really a good idea to plow ahead with a facility whose use will be comparatively scarce in the near term, and give another leg-up to an airline backed by its own government as well as ours, at the expense of an already overtaxed flying public?

And “overtaxed” is an understatement. As NTU has often noted, the typical overall government tax and fee burden of 20 percent on a $300 domestic airfare is higher than the average effective rate a middle-class American is likely to pay on his or her 1040 income tax return. International air travelers can have it even worse, with impositions such as separate departure and arrival taxes along with a passenger agricultural inspection fee (which the Obama Administration ill-advisedly considered raising in 2009) and a customs fee.

Proponents of the CBP station at Abu Dhabi argue that the investment of U.S. tax dollars will be minimal since UAE will pick up 85 percent of the project’s expense under the current agreement. But that’s little comfort to tax-weary travelers in America (see above), who remain worried that whatever share they will be forced to commit could escalate if construction or operating costs are not contained. Meanwhile, there’s that pesky matter of how best to apply CBP’s fee collections as well as appropriations from general funds – should they be used to expedite higher-priority passenger and cargo entry-exit services?

Many Members of Congress seem to think so. In June, the House of Representatives passed an amended FY 2014 DHS Appropriations Bill specifically blocking the Abu Dhabi pre-clearance scheme. In May, a bi-partisan group of 11 Senators echoed the sentiment of their House colleagues in a separate letter to DHS Secretary Janet Napolitano, questioning whether the agency’s “decision was made as a result of a risk based analysis.”

Alas, earlier this month DHS announced it was moving forward with a data-sharing agreement that could pave the way for the facility’s activation, even as it faces a concerted petition effort from interested industry groups with considerable clout.

Regardless of the politics involved, the taxpayer aspects of the issue deserve further exploration – that goes not only for the Abu Dhabi pact but also the ever-troubling direction of the Ex-Im Bank. Allowing the free market and fiscal responsibility to sort out needs from niceties would provide some badly-needed bone-rattling for those accustomed to budgetary business as usual in Washington.

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A $46 Million Tax Refund?
Posted By: Michael Tasselmyer - 06/28/13

In a recent blog post, the Arlington County Taxpayers Association (ACTA) highlights a finding from the Treasury Department that in 2011, the IRS sent over $46 million in fraudulent tax returns to 23,994 recipients registered at a single Atlanta address.

A report from the Treasury Inspector General for Tax Administration also listed other instances of mass amounts of fradulent returns being sent to single addresses in Atlanta, including "11,284 refunds worth a combined $2,164,976 to... a second Atlanta address; 3,608 worth $2,691,448 to a third; and 2,386 worth $1,232,943 to a fourth," according to CNSNews.

The news comes in the wake of accusations that the tax-collecting agency may have unfairly targeted certain groups based on political factors. The errors apparently stemmed from innappropriate assignment of Individual Taxpayer Identification Numbers (ITIN) to questionable applications. According to the law, only those eligible to receive Social Security Numbers can receive an ITIN. Poor oversight and a lack of internal controls at the IRS lead to improper assignment of ITINs; in these cases, the errors were particularly costly.

For more, check out the ACTA's original post here.

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Taxing Everything under the Golden State Sun
Posted By: Lee Schalk - 06/07/13

After the recent $6.2 billion tax increase, one would hope that California legislators’ thirst for tax hikes would have been satisfied. But in recent weeks, we’ve witnessed various attempts by state “leaders” to ransack their constituents’ wallets yet again – even as the Golden State struggles to stay afloat.

Nothing is safe from the mad men in Sacramento, who are now fixated on tobacco, cars, oil, soda, ammunition, grocery bags and more. It wouldn’t be a stretch to say that the California Legislature has never seen a tax hike or government project it didn’t like. Meanwhile, the mass exodus of taxpayers and their income continues, and health care costs are beginning to soar.

Recent Left Coast lowlights:

  • The Senate passed a monstrous $2.3 billion car tax hike (SB 11) last week.
  • The Senate Appropriations Committee Chairman hopes to pass a whopping $2 per pack cigarette tax hike this summer (despite voters rejecting a $1 per pack hike last June).
  • That same committee just gave the nod to a brand new tax on ammo purchases (SB 53).
  • Oil and soda tax hikes are expected to be pursued in January.
  • Lawmakers have been pushing for a tax on grocery bags to reach further into Californians' pockets.

These tax hikes wouldn’t just hurt car owners, smokers, firearm enthusiasts, and grocery shoppers (though that probably covers quite a few Californians). This batch of tax hikes, if enacted, would scorch all citizens and businesses in the state, especially the working class. It’s time for lawmakers to pursue fiscal responsibility (the state increased spending by 42 percent from 2000-2010) as aggressively as they are pursuing these tax increases.

Tax fighters should continue to hold the line in the Golden State and can take action by clicking HERE.

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The Late Edition: May 28, 2013
Posted By:  - 05/28/13

Today’s Taxpayer News!

NTU’s Pete Sepp voices concern over the lack of transparency in public-private partnerships between the investment branch of the CIA and various for-profit companies. Read the full story from CRN News.

In the wake of Apple’s talking-to last week over its tax practices, it’s worth taking a look at the rates companies pay in corporate income taxes. See this interactive graph from the New York Times indicating the taxes paid by S.&P. 500 companies from 2007 to 2012.

Congress had a productive weekend, forming four separate investigation teams to dig to the bottom of the IRS scandal, says the Daily Caller.

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Internet Sales Tax Would Be Bad for Small Businesses
Posted By: Brandon Arnold - 05/22/13

Our former Director of Government Affairs, Paul Gessing, penned a great op-ed about the so-called “Marketplace Fairness Act,” which is better known as the internet sales tax bill. Opponents of this massive expansion of government power have claimed it is necessary to help the small business community. Paul, however, notes that some small businesses would actually be devastated by the legislation:

One Albuquerque-based business owner has stated he would no longer sell his product online under an Internet taxation regime as set up under the Marketplace Fairness Act. The issue is not an unwillingness to have his consumers “pay their fair share,” but the compliance costs that involve submitting documentation, often on a monthly basis even if his company has no sales in that particular jurisdiction.

He is by no means the only small business owner to face negative repercussions from Congressional overreach on Internet sales. It is one big reason why Ebay, Etsy, and their small, but numerous sellers oppose the Act while the online behemoth Amazon has become one of its primary advocates.

The “Marketplace Fairness Act” isn’t about helping small businesses. Paul pegs the bill for what it really is: an attempt by state tax collectors to get their hands on as much of your money as they possibly can.  You can read more about the issue here, here, and here.

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The Late Edition: April 24, 2013
Posted By:  - 04/24/13

Today’s Taxpayer News!

NTU joined a host of fiscal conservative organizations in support of the Helping Sick Americans Now Act, which offers market-based alternatives to some ObamaCare provisions.

Minnesota is considering adding a fourth-tier income tax bracket that would raise the rate from 7.9 percent to 9.4 percent for individuals beginning at the $80,000 income level.

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The Late Edition: April 22, 2013
Posted By:  - 04/22/13

Today’s Taxpayer News!

A roundup of last week’s "Tax Week" blogs:

  • A look at the costs of tax complexity in both hours and dollars, which are both on a decidedly upward trajectory.
  • Even members of Congress have their share of trouble trying to make sense of the complex tax code.
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Urgent! Help Stop Harry Reid's Internet Tax Hike
Posted By: Nan Swift - 04/19/13

In case you haven’t heard, Senate Majority Leader Harry Reid is trying to ram a controversial Internet sales tax bill through the Senate. The bill could come to the floor at any time! It is very important that we stop this abuse of power and urge Senators to oppose the so-called “Marketplace Fairness Act" (MFA).

Click here to Take Action!

Anyone who remembers their history will recall that the institution of the Senate was born out of the “Great Compromise” by the framers of our Constitution. James Madison described the Senate as a “necessary fence” against “fickleness and passion.” What is happening in Washington today is a far cry from that noble vision.

Instead, the Senate is preparing to take up a bill that would undo essential taxation principles and expose America’s taxpayers to predatory state revenue administration tactics. By allowing state tax enforcers to demand sales taxes from businesses outside their borders, the unfair MFA would heap heavy burdens on small businesses and hinder tax competition among the states.

Clearly, legislation with such broad-reaching consequences and the capacity to inflict widespread harm should be fully considered via committees and hearings with time for public input – not hastily muscled over the finish line.

Want to learn more about the MFA? Here are some great resources:

If the Marketplace Fairness Act was such a good deal for taxpayers, there would be no need for the underhanded tactics Senator Reid is using. We need to stand up to his legislative bullying. Your urgent help is needed! 

Take Action today!

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The Late Edition: April 17, 2013
Posted By:  - 04/17/13

Today’s Taxpayer News!

NTU recently urged the Arkansas senate to reject the Governor’s costly Medicaid expansion plans.

Minnesota seeks more revenue through a proposal to raise the alcohol excise tax by as much as $2 dollars per 12-pack, says the San Francisco Chronicle.

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Long Arm of Tax Complexity Reaches Overseas
Posted By: Douglas Kellogg - 04/17/13

Being an American taxpayer is always a chore, but for those who may live abroad or have some foreign connection, their status as American taxpayers allows the U.S. government to further invade their lives. This continuing advance of the IRS on foreign residents is a major reason, in addition to high rates, that we’ve seen a rise in Americans renouncing their citizenship.

What is making this situation so, pardon the pun, taxing? Americans abroad have already been subject to a uniquely unfair double-taxation system, where they can owe the IRS income taxes even if they made no U.S.-based income. Now, new regulations, like those in the FATCA law, add to the pain and fear felt by taxpayers outside our borders.

There are many stories about the travails of taxpayers in these situations. A New York Times piece from 2012 highlights a variety of them. One typical example is a Canadian man who has never resided in the U.S., but who could lose his inheritance from his American-born parents because he had not been filing U.S. tax returns (of course making up the returns includes thousands in fees).

That type of difficulty is just the tip of the iceberg, but very much worth noting because it demonstrates how the double-tax standard affects people who are below the threshold for owing income tax but still (unbeknownst to many of them) must make out tax returns.

It is the 2010 FATCA regulations added on top of the 1970 Report of Foreign Bank and Financial Accounts requirement that subject taxpayers abroad to an even more invasive IRS than U.S. residents. And, it goes both ways. As Andy Quinlan of the Center for Freedom and Prosperity put it in a recent Daily Caller piece:

Included as a provision to help pay for the 2010 HIRE Act, FATCA essentially conscripts foreign financial institutions (FFIs) as deputy tax collectors for the IRS, and even expects them to pay for the privilege. FFIs are required to identify all of their American clients, spy on their financial activities, and report their information and activities to the IRS. …

It is this tag team that body slams taxpayers, requiring the full revelation of all foreign bank accounts if one has at least $10,000 total in non-U.S. banks. As a Reason article discusses, this can mean you are responsible for disclosing all your accounts to the IRS if your spouse has an old overseas account with $10,000 in it. Just one example of how easy it is to become subject to these laws that always seem to have been sought in the name of chasing down evil tax evaders.

It is FATCA that has gone so far as to cause foreign-based banks to even refuse to take Americans seeking accounts, even expelling American customers! The law requires the banks to provide the IRS with information on their customers who are “U.S. persons or foreign entities with substantial U.S. ownership.” Otherwise, most FATCA rules take effect in 2014, and with them the beginning of serious penalties non-compliant banks will face:

(paying the IRS) 30-percent of any payments of U.S. source income, as well as gross proceeds from the sale of securities that generate U.S. source income, made to (a) non-participating FFIs, (b) individual accountholders failing to provide sufficient information to determine whether or not they are a U.S. person, or (c) foreign entity accountholders failing to provide sufficient information about the identity of its substantial U.S. owners.

Is it any wonder Marylouise Serrato is quoted in the Daily Mail saying, “Americans abroad are terrified. We've had people pay tens of thousands of dollars in fines… Now…we're seeing a lot of people speak openly about it (renouncing citizenship) and come to us for information.”

These struggles for our compatriots abroad highlight a couple disturbing trends in tax complexity. First, that no power is too invasive for the IRS; and second, that Congress’ pursuit of  “the rich” continues to ensnare the decidedly non-rich in red tape and tax obligations that are completely unfair.

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