The Dutch are well known for Delft pottery, wooden shoes, legalized prostitution and windmills. Perhaps not surprisingly, many of those things haven’t caught on in all areas of the world (oh c’mon, tell me that you have a pair of wooden shoes in your closet).

I have a feeling that list of things that aren’t spreading like wild fire is about to grow…

Effective in 2012, Dutch drivers will be monitored by GPS and will pay taxes on a per-kilometers-driven basis. For the average passenger car, the rate will be about € 0.03 per kilometer (or roughly $.07 US per mile). Drivers of trucks, commercial vehicles and less fuel efficient cars will pay more. Public transit and cabs will be exempt from the tax.

Additionally, the cost will increase for drivers at peak times.

How will it work? GPS will track the time, hour and place each car moves and send the information to a billing agency. The billing agency will deduct the taxes directly from drivers’ accounts.

If it works as anticipated, the Dutch government estimates that traffic will drop by 15% – and rush hour traffic will drop by 50%. Minister of Transportation Camiel Eurlings believes that carbon emissions will be cut in half.

Interestingly, the law will abolish current road taxes and sales taxes for cars. The final numbers should work out so that 6 out of 10 drivers are better off under the new scheme and reportedly, tax revenue will remain the same.

According to the German newspaper, Deutsche Welle, the tax will increase every year until 2018.

The news has stirred interest in nearby Germany with top German automotive expert Ferdinand Dudenhoeffer saying that Germany should “take the progressive (Dutch) model as an example.” Interesting for sure. But there’s one or two (or three or four or five) obstacles: namely Audi, BMW, Mercedes, Porsche and Volkswagen. Long considered an automaker’s paradise, Germany tends to be known for heavier, more luxurious, power cars – not so much the cheaper, smaller more efficient cars encouraged under the Dutch scheme. With that in mind, in a tough economy, Germany is highly unlikely to adopt a policy which might negatively affect the car industry any time soon.

But that doesn’t mean that it’s not on the radar of other countries. Singapore already utilizes Electronic Road Pricing, a pay-per-use principle, and in the UK, there is a congestion charge for some drivers in the designated Congestion Charge Zone (CCZ). Which makes you wonder… Which country, if any, will be next?

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Netherlands, Ferdinand Dudenhoeffer, Germany, auto industry, price per kilometer, auto tax

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If you ask a Mainer about taxes, you’re liable to get an earful: Mainers have one of the highest tax burdens in the nation. Nonetheless, on election day, Maine voters turned down proposals to cut taxes.

In a slow economy, Maine voters were leery of a proposal that would result in cuts in services. The controversial ballot issue, Question 4, asked voters if they wanted to limit future increases in state and local government spending and taxes to the rate of inflation plus population growth. The measure was known as the Taxpayer Bill of Rights campaign, or TABOR. Those opposed to the measure referred to it as “TABOR II” since a similar proposal was turned down in 2006.

Those in support of TABOR claimed that the bill would put more money back in taxpayer’s pockets. Critics wondered what the actual result of would be, as many state and local services were already facing cuts. Public schools are already operating under frozen budgets.

Voters also rejected a proposal to cut excise taxes on some vehicles and exempt hybrid and fuel-efficient vehicles from sales tax. Measures to encourage the purchase of cleaner cars are popular in states like Colorado but critics feared that tax cuts would have to be made up somewhere else. In that way, it wasn’t so much a tax cut as a shift in taxation.

While tax measures on the ballots were overshadowed by publicity over questions about making medical marijuana more available (yes) and gay marriage legal (no), the tax votes may be indicative of the mood of the nation on the eve of a huge election year… Only time will tell.Similar Posts:

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What challenges are the IRS facing this year? Apparently not the complexity of the Tax Code.

The Treasury Inspector General for Tax Administration (TIGTA) released its perspective two weeks ago on the most serious management and performance challenges confronting the IRS. The top 10 challenges in order of priority are:

1. Modernization;
2. Security;
3. Tax Compliance Initiatives;
4. Implementing Tax Law Changes;
5. Providing Quality Taxpayer Service Operations;
6. Human Capital;
7. Erroneous and Improper Payments and Credits;
8. Globalization;
9. Taxpayer Protection and Rights; and
10. Leveraging Data to Improve Program Effectiveness and Reduce Costs.

In TIGTA’s twelve page memo (downloadable here as a pdf), the agency offers an assessment of the major IRS management challenge areas for fiscal year 2010.

“Complexity of the Tax Law” did not appear on this year’s list of challenges. TIGTA felt that the IRS had bigger fish to fry.

Not surprisingly, TIGTA found that many of the IRS Modernization Project milestones were “significantly over budget” and “significantly behind schedule.” That would explain why it ranks first on the list of challenges faced by IRS.

Also a top challenge? Taxpayer data security. Identity theft is a growing concern as more and more taxpayer data is stored in IRS computer systems and transmitted online. The IRS has demonstrated, through internal audits, that there are concerns with respect to both accessing private data and the stability of the data at IRS sites. Additionally, phishing and other targeted taxpayer scams are on the rise, which is an area of serious concern.

Another challenge worth noting: taxpayers with international activities. It’s no surprise to see this on the list considering the emphasis that the current administration is putting on offshore accounts. As US revenues shrink, US corporate revenues abroad are growing. In fact, TIGTA reports that US-based corporations more than tripled their foreign profits between 1994 and 2004, from $89 billion to $298 billion. Yet, considerably more than half of those profits were earned in low-tax or no-tax jurisdictions. Tracking that income is a serious concern to the acting Commish.

It’s always interesting to see what shows up on the list as top tax concerns. It often serves as a heads up to targeted enforcement practices and other shifts in policy. However, I have to say, this go around, I still can’t wrap my head around tax complexity not remaining a top issue. It’s a huge issue. Maybe the bigger problem is that we’ve become nearly apathetic to the cause. Perhaps it’s so complex that we don’t even think about it anymore? Kind of how we don’t even blink when we hear the word “billion” nowadays. The Code is not becoming less complex, maybe we’re just getting used to it.Similar Posts:

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Times are tough in Chicago. You can only tax the citizenry so much – and Chicago already shares the distinction of being one of the most taxed cities in America.

The solution? Enforcement. No big surprise there.

But enforcement costs money. What if you could get your enforcement for free? What if… you could convince taxpayers to rat each other out? Brilliant. And so, Chicago Mayor Daley has introduced a “Tax Whistleblower Program” for 2010.

The program would reward taxpayers who turn in those with unpaid business taxes. Taxpayers who successfully bring in money to the city would receive a percentage as blood money bounty.

A good way to destroy the competition, perhaps? The Revenue Department is counting on it. Ed Walsh, a Revenue spokesperson says: “It would probably be … a business knowing that a competitor is not remitting a tax. An employee [of the tax-dodging business] could know that, too. Typically, you need to provide some type of incentive.”

Nice.

This way, all businesses in Chicago could live in fear of their competition – and their neighbors. But a little fear is healthy, right?

Who knows if other cities will follow suit? I’m setting up my telescope, just in case…
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Information involving potential fraud with respect to the first time homebuyer’s credit continues to make headlines. After initial reports that over 100,000 refunds were perhaps inappropriately distributed, the IRS has released more data about fraud relating to the credit.

Officials from the Internal Revenue Service testified before Congress that as much as $600 million of taxpayer credits are “suspicious.” Of those, the IRS suspects that 73,799 claims totaling almost $504 million appear to have been distributed to individuals who would not qualify as first time homebuyers. And – wait for this one – 582 taxpayers under the age of 18 years old, including several 4 year olds, applied for and received the credit. The legislation does allow for minors to apply for the credit but as young as 4? That seems to indicate some kind of attempt at income shifting or other manipulation from parents who were ineligible for the credit.

And it gets worse. More than 19,000 taxpayers have been identified as making application for the credit for properties that were not even purchased in the first place. Nearly 74,000 taxpayers already owned a home, apparently under the impression that the “first time homebuyer’s” bit didn’t apply to them. Many were over the income limit or applied for more credit than they were entitled to received.

Over 3,000 taxpayers did not file with a Social Security number, using an ITIN instead. The IRS issues ITINs to individuals who need a taxpayer identification number but who are not eligible for a Social Security Number. Both resident and nonresident aliens are eligible to apply for an ITIN but the numbers of taxpayers with ITINs claiming the credit has lead some to believe that significant refunds were paid to those illegally living in the country and not eligible for the credit.

All honest mistakes? Not quite. The IRS has flagged at least 8,000 claims for criminal fraud. Currently, 115 are under investigation as criminal cases.

Despite all of the bad news, realtors and not surprisingly, bankers, want to extend the credit. Some on Congress seem to agree including Sen. Johnny Isakson (R-GA), who wants to expand the credit to dole out refund an additional $17 billion. Billion.

However, the White House is not as positive. Treasury Inspector General J. Russell George said, “Based on the administration of the credit today, I am very concerned about the IRS’s ability to effectively administer the credits that are claimed before the Dec. 1 deadline, let alone any credits that may be claimed within future extended deadlines.”

In response, the National Association of Realtors had this to say: “Without congressional action now, the market and our national economy may freeze again — possibly as soon as this month.”

Which begs the question: why not watch and see? Is it possible that a market solely driven by government incentives to buy isn’t a real market at all? Fraud notwithstanding, is the credit just creating false demand or accelerating existing demand? If we give an incentive to buy today instead of tomorrow, who buys tomorrow? Do we keep incentivizing until we can’t stop?

This worries me (yes, I’m channeling a little Tim Gunn here). I’m not really a fan of tax policy solely to manipulate behavior in the first place (home mortgage interest deduction, for example). But once you start, how do you pull the plug?
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Soooo… You know that I wasn’t a fan of the first time home buyer credit. It was touted as a “stimulus” for middle class taxpayers to make home buying more affordable. The idea was that folks would rush to buy homes, thus buoying the housing industry, getting banks going again and more or less saving the planet. At least that’s how I remember it being pitched.

Initially, it was all good news related to the credit. After the IRS paid out nearly $10 billion to 1.4 million taxpayers, Moody’s Economy.com chief economist Mark Zandi reported that almost 400,000 new and existing home sales were attributable to the tax break. So good. Only, the report went on to say that some of those home sales were actually attributable to being “stolen from future demand” meaning that taxpayers simply had an incentive to buy now as opposed to later. The suggestion is that the housing market will slow post-credit (indications are that it’s already happening).

Despite the slowing, the credit did some good even if it was financed by the Treasury. So, of course we should extend the credit, since it’s so great and all, right? I mean, that’s what Congress is saying. For example, Senate Finance Committee Chair Max Baucus (D-MT) supports a three-month extension of the credit and similar bills are pending in the House.

Maybe not so fast. The IRS announced earlier this week that it is investigating more than 100,000 “doubtful claims” related to the credit. In fact, to date, the IRS has instigated 107,000 civil claims related to the credit – about 8% of the taxpayers who’ve applied for the credit. A quick turn of the math shows that to be up to $800 million in potentially false credit.

It’s not all individual fraud, either. According to a House Ways and Means oversight committee, the IRS is investigating 167 “criminal schemes” involving the credit.

And that’s just in the early stages of review.

Sheesh. I figured that what would really happen is just that it would nearly drain the Treasury and perhaps artificially push up home prices. I clearly underestimated the efficacy of the criminal mindset.

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The proposed excise tax on “Cadillac” health care plans is raising a lot of controversy. Opponents, like Health Care for America Now (HCAN), believe that it might affect middle class Americans and instead, urge increasing the income tax on families making more than $250,000 per year. They’re touting their plan with ads like this one:

The commercial is paid for by HCAN, which is a section 501(c)(4) issue advocacy organization. The organization describes itself as “a national grassroots campaign of more than 1,000 organizations in 46 states representing 30 million people dedicated to winning quality, affordable health care we all can count on in 2009.”

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In 1999, my husband and I decided that our house was too big and empty for the two of us. So we did what many couples our age did: we got a dog. Our lab mix, Lyle, has been a part of our family ever since. He goes with us to Maine on vacation every year. He’s been camping with us across the Commonwealth of Pennsylvania and has splashed through the beaches of North Carolina. He has snatched the occasional pie on Thanksgiving (maintaining his “who me?” expression all the while covered in meringue). And as the first official “grandpuppy”, he even gets gifts from my mom at Christmas.

When we first got him, we dubbed him the “Six Million Dollar” dog. He had not been treated well as a puppy and when he found us at our local SPCA, he had serious respiratory and intestinal infections. He sneezed the entire way home and later, vomited continuously. As a result, we got to know our vet pretty well early on. Since then, he’s survived Lyme disease (twice!) and an attack from a dog down the street which resulted in several stitches. I would venture to say that we’ve paid as much for his care as we have for our three kids.

Since I filed my taxes today (hey, no judgments), I was reminded that deductions and credits allowed for children can be significant. Not so for pets. Except in the case of service animals, you’re not allowed any deductions for the care of pets. That may, however, be changing.

Rep. Thaddeus McCotter (R-MI) has introduced a bill, Humanity and Pets Partnered Through the Years (”HAPPY Act”) which would allow taxpayers to deduct up to $3,500 a year in pet care expenses. That may elicit a chuckle or two from his colleagues on the Hill but before they dismiss the idea, they should consider these statistics from the American Veterinary Medical Association:

• In 2006, nearly half of pet owners, or 49.7%, considered their pets to be family members.

• There are more than 72 million pet dogs in the U.S. and nearly 82 million pet cats. (taxgirl note: that’s roughly equivalent to the number of taxpayers that same year)
• The average veterinary expenditure per household for all pets was $366 in 2006.

The bill would allow a deduction for “amounts paid in connection with providing care (including veterinary care) for a qualified pet expense other than any expense in connection with the acquisition of the qualified pet.” Qualified pets would include legally owned, domesticated, live animals. So dogs yes, illegal ferrets and such, no. You can read the entire text of the bill here.

Clearly, animal rights groups think this is a good idea. “We think this is as much a health care bill as any,” said Nancy Perry, vice president of government affairs at the Humane Society of the United States. “It’s a human health issue to ensure that pets are provided with better care because of the role they play in our families.”

On the one hand, I’m a little skeptical. We are, after all, in a tough economy with a huge deficit. More tax cuts?

But I do *get* it. For many taxpayers, like me, pets are family. And the cost of providing quality care for a pet can be mind-boggling (our trip to Penn for Lyle’s emergency stitches ran over $1000). Maybe – and it’s a real maybe – the availability of deductions might encourage some pet owners to provide better care for their pets – if you’ve ever seen Animal Planet’s Animal Cops, you know what I’m talking about.

So, what do you think: should the care of pets be considered deductible?

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]]> http://www.taxgirl.com/is-mccotter-barking-up-the-right-tree-with-tax-deductions-for-pet-owners/feed/ 26 http://www.taxgirl.com/health-care-bill-passes-committee/ http://www.taxgirl.com/health-care-bill-passes-committee/#comments Tue, 13 Oct 2009 20:16:33 +0000 Kelly http://www.taxgirl.com/?p=4182

Are we one step closer to health care reform? The Senate Finance Committee sure gave that impression by putting forth a $829 billion health care bill today. The bill passed in committee by a vote of 14-9 with Sen. Olympia Snowe (R-ME) representing the lone committee member to not vote along party lines.

What does the vote mean? Nothing concrete – don’t get excited. It just means that the matter will go to the full Congress for debate. I wouldn’t expect that to be easy.

This version would be financed by reductions in spending for Medicare and other government programs (about $400 billion); new fees on the health industry; and taxes on the so-called “Cadillace” insurance plans (about $200 billion).

The latter is not expected to make it through the full House without significant changes. Notably, unions, which tend to support Democratic candidates, are insisting that the taxes be dropped. House Democrats may, instead, favor a surtax on high earning taxpayers (individuals with incomes of more than $500,000 or families with combined incomes of $1 million or more). Republicans are opposed to the surtax.

Notwithstanding that the Democrats have a majority in Congress and a limited amount of crossover support, don’t expect a vote any time soon. There are still many details to work out, including how to pay for the bill and whether to incorporate a public option.

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Philadelphia is a town known for its scrappy sports teams and its passionate fans. We’ve collectively cheered our world champion Phillies and wrung our hands over last minute Eagles’ losses. We’ve booed the drafting of Donovan McNabb, cheered Brad Lidge, mourned our beloved Harry Kalas and thrown snowballs at Santa. We’ve stood along Kelly Drive and screamed for half-marathoner Ryan Hall and cyclist George Hincapie and endeavored to catch a glimpse of Bill Cosby at the Penn Relays.

It’s rare that the worlds of sports and art collide in Philly in any kind of remarkable way. Until last month, the biggest challenge as between the two was figuring out where to put the infamous Rocky statue: it’s not quite art but reportedly, art museum attendance plummeted when the statue was moved to the sports complex. (It’s now back home at the museum.)

But that was before Harrisburg got involved. The state budget deal, which allowed Philadelphia to increase its sales tax by a penny in an effort to keep the city going, has one teensy little provision that’s getting quite a bit of press: an extension of the state sales tax to cultural performances and venues. Cultural performances and venues applies to the arts and music – but not to sports or movies. So yes to taxing the Cezanne exhibit at the Philadelphia Museum of Art, no to taxing “Zombieland” at the cinema. Hmm.

The deal would call for the creation of a special new fund for cultural institutions and the arts, including museums, orchestras, dance venues, theaters and zoos, previously budgeted as part of the general fund. Money from the general fund to the arts has already been cut due to budgetary restrictions and some venues, like historical museums and sites, have seen their budgets eliminated.

The idea is that *some percentage* of the the new tax (lawmakers have been silent as to the exact amount) would be used to establish the fund – it’s a bit unclear where the rest of the money would go. State Republicans, who had previously opposed new taxes, insisted on the tax expansion in reaction to revenue shortfalls. Supporters of the arts looked to Gov. Rendell (D) for help, but he suggested that tax increases were inevitable, with his spokesman claiming “we cannot do a budget without pain.”

In a cash strapped year, with revenues down, cuts are to be expected. Many in the City, myself included, admitted that they would prefer to see an expansion of the sales tax to save the arts over cutting other services, like police. But why not movies and sporting events?

One city resident that I spoke with suggested that it felt like “rural Pennsylvania’s chance to thumb its nose at the City” since a majority of the tax would be created and spent in Philadelphia. An interesting take, for sure, but not quite accurate. The tax would apply across the board to arts and cultural venues in the state. It would not just affect the Philadelphia Museum of Art and the Pennsylvania Ballet but also the Elmwood Zoo and the Michener Art Museum. It would not, however, affect the Eagles or the Steelers. You have to wonder why not.

Groups across the state have been working to scale back the tax expansion with varying amounts of luck. There have been, at times, rumors that the tax may now exclude nonprofits but include for profits; that zoos and museums may be excluded; that concerts at stadiums may be included but those at an actual hall may not… Rumors, all, and nothing substantiated. In fact, at this point, we’re not at all quite sure what will come out of any compromise bill.

Of course, it’s worth noting that our neighbor to the north, New York, decided not to tack on an additional tax for tickets after those who worked in the arts noted the domino effect that the tax might have. Reduced ticket sales means fewer customers for restaurants, hotels and retail shops. Fewer customers means lost revenue – lost revenue means layoffs. Layoffs mean less wage and income taxes. You get the picture.

It’s easy to think that tax cuts – and tax increases – happen in a vacuum but they don’t. Taxes are an integral part of our day to day lives. How we choose to prioritize those taxes, I think, says a lot about us.Similar Posts:

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