Category Archives: Taxation

New York’s “Poor Doors”: A Next City Explainer

Source: Ariella Cohen, Next City, July 22, 2014

Why do I keep seeing headlines about a “poor door”?
The term is quite literal. It refers to a second entrance in a luxury condo building for tenants living in units reserved for lower-income renters. It has become shorthand for segregation of people based on how much rent they can pay…. But what raises the hackles of critics is the fact that the developers building separate entrances for two classes of residents are receiving subsidies for the affordable units through an inclusionary housing program intended to create mixed-income communities. These developers are receiving lucrative tax abatements in exchange for the creation of affordable units and sometimes, like at One Riverside Park, also receiving a valuable floor area bonus in exchange for units. In the case of One Riverside, Extell is selling that floor area bonus for a profit to a developer looking to build nearby….. Plus, the two-class entrances is part of a larger trend of segregating buildings by rent levels; in a growing number of mixed-income buildings, owners are barring rent-stabilized tenants from using amenities open to their more affluent neighbors. In one Upper West Side building called Stonehenge Village, tenants weren’t allowed to pay extra to use the gym on the lobby level even after local pols intervened on behalf of tenants and public advocate Letitia James filed a discrimination complaint….

Hobbled IRS can’t stem ‘dark money’ flow / Mystery political spending to continue unabated through midterm elections

Source: Julie Patel, Center for Public Integrity, July 15, 2014

….The tea party scandal, combined with Congress systematically stripping the IRS of resources and clout over decades, has led to an exempt organizations division that has all but quit regulating politically active nonprofits in any consistent, demonstrable way, a six-month Center for Public Integrity investigation reveals.

The investigation, which involved a review of thousands of pages of IRS documents and interviews with more than two dozen current and former IRS employees and administrators, finds the agency’s nonprofit regulation division has:
– Bled 14 percent of its staff positions during the past two decades while the number of nonprofits it regulates has grown by more than 40 percent.
– Scaled back inquiries, as the number of nonprofit group tax returns investigated recently fell by 10 percent, from 11,699 in 2011 to 10,575 last year. Applications for “social welfare” nonprofit status jumped 27 percent from 1,777 to 2,253 during the same time.
– Reduced the number of denials for exempt status for social welfare nonprofits from nearly 4 percent during the early 1980s to less than a quarter-percent in 2013.
– Softened, tabled or reversed course on at least a dozen proposed policy positions or enforcement plans after criticism from politicians and lobbyists….

Corporate Expatriation, Inversions, and Mergers: Tax Issues

Source: Donald J. Marples, Jane G. Gravelle, Congressional Research Service, CRS Report, R43568, May 27, 2014

Recently, several high profile companies have indicated an interest in merging or plans to merge with a non-U.S. headquartered company, including Pfizer and Chiquita. Pfizer, for example, was interested in merging with a smaller British firm, AstraZeneca, and moving headquarters to the UK. For Pfizer, which has accumulated substantial profits in subsidiaries in low tax foreign countries that would be taxed if paid to the U.S. parent, the territorial tax system is likely the most important tax benefit from such a merger. This “second wave” of inversions again raises concerns about an erosion of the U.S. tax base. Two policy options have been discussed in response: a general reform of the U.S. corporate tax and specific provisions to deal with tax-motivated international mergers. Some have suggested that lowering the corporate tax rate as part of broader tax reform would slow the rate of inversions. Although a lower rate would reduce the incentives to invert, it would be difficult to reduce the rate to the level needed to stop inversions, especially given revenue concerns. Others tax reform proposals suggest that if the United States moved to a territorial tax, the incentive to invert would be eliminated. There are concerns that a territorial tax could worsen the profit- shifting that already exists among multinational firms. The second option is to directly target the merger inversions. The President’s FY2015 budget proposes to treat all mergers as U.S. firms if the U.S. firm’s shareholders have 50% or more ownership of the combined firm or maintains management and control in the United States. Similar legislation has also been introduced in the 113th Congress. …

Addressing the Need for More Federal Revenue

Source: Citizens for Tax Justice, July 8, 2014

From the summary:
America is undertaxed, and the result is underfunding of public investments that would improve our economy and the overall welfare of Americans. Fortunately, Congress has several straightforward policy options to raise revenue, mostly by closing or limiting loopholes and special subsidies imbedded in the tax code that benefit wealthy individuals and profitable businesses.

Part I of this report explains why Congress needs to raise the overall amount of federal revenue collected. Contrary to many politicians’ claims, the United States is much less taxed than other countries, and wealthy individuals and corporations are particularly undertaxed. This means that lawmakers should eschew enacting laws that reduce revenue (including the temporary tax breaks that Congress extends every couple of years), and they should proactively enact new legislation that increases revenue available for public investments. Parts II, III, and IV of this report describe several policy options that would accomplish this. This information is summarized in the table to the right….

Annual Report on Public Authorities in New York State

Source: State of New York, Authorities Budget Office, July 1, 2014

From the press release:
The Authorities Budget Office has released its annual report on the finances and activities of New York’s 568 state and local authorities. Some of the significant findings and observations presented by the ABO include:
• The operating expenses of state authorities for 2013 totaled $30.3 billion, an increase of 17.6 percent from 2009. State authority operating expenses increased approximately $1.5 billion over 2012. This while adjusted staffing levels at state authorities declined by more than 2,800 staff in the last 5 years. …
• LDCs [Local Development Corporations] rarely are a major factor in large economic development/job creation projects. For example, of the 195 LDCs that reported operating expenses in 2013, only 25 awarded grants. These grants averaged nearly $395,000, yet produced less than one job per grant. Similarly, 43 LDCs made loans that were outstanding in 2013. The average LDC loan created fewer than five jobs, but was valued at more than $213,300. Forty-eight percent of LDCs reported that they provided no direct financial assistance to economic development projects. ….
• The ABO looked at IDA [Industrial Development Agency] projects that were first approved in 2009 and remained active in 2013. These 186 projects have received $126 million in financial assistance based and created 4,500 new jobs. More importantly, 25 IDAs reported that those projects, taken together, created more jobs than originally promised. The projects at 27 IDAs generated fewer jobs than anticipated, and 10 IDAs saw an actual decrease in existing jobs at those assisted projects…..

Heal the Suffering Children: Fifty Years after the Declaration of War on Poverty

Source: Francine J. Lipman, Dawn Davis, University of Nevada Las Vegas, William S. Boyd School of Law Legal Studies Research Paper, May 3, 2014

From the abstract:
Fifty years ago, President Lyndon B. Johnson declared the War on Poverty. Since then, the federal tax code has been a fundamental tool in providing financial assistance to poor working families. Even today, however, thirty-two million children live in families that cannot support basic living expenses, and sixteen million of those live in extreme poverty. This Article navigates the confusing requirements of an array of child-related tax benefits including the dependency exemption deduction, head of household filing status, the Earned Income Tax Credit, and the Child Tax Credit. Specifically, this Article explores how altering the definition of a “qualifying child” across these tax benefits might provide financial relief for working families. The Article concludes that the elimination of outdated citizenship or residency requirements would reduce taxpayer confusion and result in more effective tax benefits to help lift working families out of poverty.

Just Say No: Corporate Taxation and Corporate Social Responsibility

Source: Reuven S. Avi-Yonah, University of Michigan Law & Econ Research Paper No. 14-010, April 13, 2014

From the abstract:
This article will address the question whether publicly traded US corporations owe a duty to their shareholders to minimize their corporate tax burden in any way that they may be able to get away with from a purely legal perspective. First, however, to render the subsequent discussion a bit more concrete, I will describe a recently unveiled case study of corporate tax aggressiveness.

As Good As It Gets? Hard Lessons from NYC Contracts

Source: Mark Brenner, Labor Notes, June 25, 2014

Train and bus operators with Transit Workers Local 100 did better than expected, but no union was able to escape the political box created by Democrats who refuse to tax the rich. New York City teachers and transit workers just ratified contracts that will define what’s possible for the 250,000 city workers still in negotiations. The deals show how little juice is left for public sector unions trying to deliver using traditional tools at the bargaining table or in the political arena. If these are the limits in a union stronghold like New York—where one in four workers is a union member and 70 percent of the public sector is organized—the news isn’t good for conventional strategies elsewhere. What can be done better? To avoid a collision course with taxpayers, public sector unions need to upend the bipartisan consensus and put raising taxes back on the table. To achieve that, they’ll have to make an aggressive case to voters that strong public services, and the workers who provide them, are worth it—and that corporations and the super-rich should pay the tab. They’ll also have to challenge politicians, especially Democrats, who’ve made their peace with austerity….

Changes in Tax Revenue Since 1929

Source: Lydia Austin, Roberton Williams, Tax Policy Center, Tax Notes, June 16, 2014

From the abstract:
This Tax Fact examines sources of federal and state & local tax revenue, from 1929 to the present. The composition of revenues at all levels of government changed dramatically with World War II, but has remained roughly stable since. At the federal level, payroll taxes have grown dramatically, and individual income taxes remain a major source of revenue. At the state and local level, sales and property taxes account for about one-third of revenues.

Funding Challenges in Transportation Infrastructure

Source: Pew Charitable Trusts, May 5, 2014

Roads, bridges, and transit are funded through a partnership of the federal government, states, and localities. Over the past 10 years, all levels of government have experienced challenges in funding transportation infrastructure. Revenue for the highway trust fund, the source of most federal funding for the country’s roads and transit infrastructure, has fallen short of expenditures for more than a decade.

These gaps are expected to continue growing in future years. To date, the federal government has made up the difference through a combination of drawdowns from trust fund balances and, starting in 2008, transfers from the general fund. The Congressional Budget Office projects that, by the latter half of 2014, balances in the trust fund will be so low that payments to states and localities may need to be delayed and that in fiscal year 2015, balances will be completely exhausted.1 And the challenges extend beyond the federal level; state funding for roads and transit fell by one-fourth in real terms between 2003 and 2011.

The federal and state governments are having difficulty maintaining transportation investments in large part because they rely heavily on the gas tax, a declining revenue source, to pay for road and transit infrastructure. This revenue has fallen substantially in real terms across all levels of government over the past decade as a result of changing driving habits and increased fuel efficiency. In addition, federal and many state gas taxes remain a fixed amount per gallon, even as transportation construction costs increase. This means that the revenue generated by each gallon of gas doesn’t go as far as it did in the past in paying for transportation needs.

Ultimately, understanding the nation’s transportation funding challenges requires recognizing the role that each level of government plays in supporting this critical infrastructure….