“Pay your TAB Act”

I am looking at the following:

It is sponsored by Laura Friedman, a U.S. Representative from southern California. You can probably guess which party.

This proposed bill would create the following:

(a)   A new excise tax of 23.8%

(b)  On “covered” loans

(c)   To the extent all covered loans exceed $1 million.

I presume the 23.8% comes from the maximum capital gains rate (20%) plus the Obamacare net investment tax (3.8%).

Not sure about the $1 million. It does appear to shield the average person, but, then again, I remember when principal residence mortgage interest was deductible without limit; then limited to debt of $1 million; and now limited to debt of $750 grand. No grand point here - just saying that it is difficult to go through life without knowing history.

A “covered” loan would exclude:

(1)  Home acquisition loans

(2)  Home equity loans under $3 million

(3)  Vehicle loans under $100 grand

(4)  Certain education loans

(5)  Trade or business loans

(6)  Certain margin loans

I am not immediately feeling a home equity loan of $3 million.

Same comment on spending $100 grand for a car.

Not my clowns, not my circus, but let’s continue.

In the contemporary spirit of reporting any economic pulse to the fisc, there would of course be Form 1099 reporting.

Lines of credit would be rudely treated, as the 23.8% tax would be due on the maximum allowable borrowing limit, not the amount you actually borrow. You may want to sleep on that before you sign up.

There is some relief to avoid taxing the same loan twice. For example, if you sell a car (with a loan) and buy a car (with a loan), you would be permitted to deduct tax paid (on the loan) on the car sold. Unfortunately, the deduction would be a capital loss, meaning a possible deduction limit of $3,000 per year because Congress has failed to adjust this limit for inflation since 1977. To put that into context, the average price of a new home in 1977 was under $60 grand.

I assume the proposed bill is pointed at wealth and its distribution in society. I also assume that wealth is defined as anyone-having-more-than-Laura-Friedman-or-her-House-staffers, as that seems to be the repetitive refrain to such economically subliterate bleating. It gets - frankly – irritating to be scolded by people we would not introduce to our friends.

Many if not most of us understand the need to deossify wealth concentration and maintain lanes for economic mobility. That is, for example, why we have gift and estate taxes. In isolation, they are a minimal addition to annual tax revenues, and one could credibly debate whether they are worth the complexity lobbed into the tax Code. They are however an evergreen font of professional fees for tax lawyers and CPAs - me included.

Likewise, many if not most of us recognize an accelerating negative Flynn effect in society. A critic might point to Congress as a vivid example. If we keep regressing, these people will have to rediscover fire.

I miss when southern California contributed desirable things to the country, such as movies we actually wanted to watch.

 

Lawless In Seattle

Did you hear that Seattle has a new income tax?

Sort of. Eventually. But maybe not.

The tax rate is 2.25 percent and will tag you if you are (1) single and earn more than $250,000 per year or (2) married and earn more than $500,000.

This is big-bucks land, and we normally would not dwell on this except…

Washington state has no income tax.

Let us get this right: Seattle wants to have an income tax in a state that has no income tax. Washington state considered an income tax back in the 1930s, but the courts found it unconstitutional.

You or I would live within the Seattle city limits … why?

Surely there are nice suburbs we could call home. Heck, Bill Gates and Jeff Bezos do not live in Seattle; they live in the suburbs.

There appear to be legal issues with this tax.

The state constitution, for example, requires taxes to be uniform within a class of property. The pro-tax side questions whether income is “property.”

The anti-tax side provides the Power Inc v Huntley case (1951), wherein the Washington Supreme Court stated:

It is no longer subject to question in this court that income is property.”

Must be something cryptic about the wording.

Then there is a law that bans Washington cities from taxing net income.

The pro-tax side argues that they are not taxing “net” income. No sir, they are taxing “adjusted” or “modified” or “found-under-the-cushions” income instead.

The anti-tax side says: seriously?

Then you have the third issue that Washington cities must have state authority to enact taxes.

The pro-tax side says it can do this under their Licenses and Permits authority.

RCW 35A.82.020

Licenses and permits—Excises for regulation.

A code city may exercise the authority authorized by general law for any class of city to license and revoke the same for cause, to regulate, make inspections and to impose excises for regulation or revenue in regard to all places and kinds of business, production, commerce, entertainment, exhibition, and upon all occupations, trades and professions and any other lawful activity: PROVIDED, That no license or permit to engage in any such activity or place shall be granted to any who shall not first comply with the general laws of the state.

No such license shall be granted to continue for longer than a period of one year from the date thereof and no license or excise shall be required where the same shall have been preempted by the state, nor where exempted by the state, including, but not limited to, the provisions of RCW 36.71.090 and chapter 73.04 RCW relating to veterans.

I am not making this up, folks.

Here is the mayor:

This legislation will face a legal challenge.”

And green is a color.

But let me tell you something: we welcome that legal challenge. We welcome that fight.”

Then why pick a fight, Floyd?

… lowering the property tax burden …, addressing the homelessness crisis; providing affordable housing, education and transit; … creating green jobs … meeting carbon reduction goals.”

Got it: verbigeration, the new college major. It will get you to that $15 minimum wage. At least until those jobs go away because they are too expensive.

Speaking of expense: who is bankrolling this issue while it is decided in court? Has the city banked so much money that a guaranteed legal battle is worth it?

If we need to pack the courts, will you be there with me?” thundered a councilperson.

Pack the courts? Should we bring bats too?  

The pro-tax side wants to be sued, hoping that a judge will legislate from the bench.

Needless to say, the anti-tax side is resisting, with calls for “civil disobedience.”

With exhortations not to file returns.

The state chair of the Republican party is encouraging

“… non-compliance, non-violent and non-paying”

Sounds almost Gandhi-esque.

It appears that neither side has any intention to observe – heck, even acknowledge – any pretense of law.

I am at a loss to see how this is good for anybody.