Archives For Senate

As House Speaker John Boehner backed down on the debt ceiling and partial government shutdown, he was already focusing on the next battle with Democrats—taxes.

The country may have averted disaster on Wednesday, but the partisan differences on taxes are a sign that the dysfunction of the past year is unlikely to subside within the foreseeable future. Continue Reading…

The non-partisan United States Conference of Mayors reported on Friday that cities and counties across the country would be losing out on $1.7 billion in new revenue this year because Congress has yet to pass the bill that allows states to tax Internet sales.

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A measure to extend state sales tax to all online purchases is getting the attention of some major lobbyists.  With a Senate vote on the Marketplace Fairness Act (MFA) expected as early as tomorrow, stakeholders are making their voices heard.

In one corner, there’s the forces of major retail like Best Buy, Wal-Mart, and the online giant – Amazon.com. They’re joined by the bipartisan National Governors Association and smaller retail owners in the years-long fight to require state sales tax be applied to all internet purchases.

Logo of the Securities Industry and Financial ...

The MFA has its big-gun supporters, but they’ve got powerful competition from the likes of eBay, Overstock.com and most recently, Wall Street; the Securities Industries and Financial Markets Association (SIFMA), which represents hundreds of companies including Goldman, Sachs & Co., Morgan Stanley, and E*TRADE Financial Corp, recently came out in opposition to the bill in fear of it leading to a financial transactions tax on bonds, stocks and derivatives. Continue Reading…

Its closing time, online shoppers. Your days of tax-free purchases could soon be over, so order your whiskey and flat screen television fast. Late last week, by a 75-to-24 vote, the Senate made clear its support for a national sales tax on a variety of internet purchases.

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What’s the difference between Paul Ryan’s “path to prosperity” and the Senate Democrats’ budget proposal?

This sums it up pretty well:

Budgeted   New Tax Revenue Over the Next Decade

Democrats $975,000,000,000
Republicans $0

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House Lawmakers Pass Three-Month Increase in Debt Ceiling

04-08-11 at 18-32-29

(Photo credit: SpeakerBoehner)

WASHINGTON, Jan 24 — A bill to raise the nation’s borrowing authority that includes a provision to require Senate lawmakers to pass a budget or lose their paycheck passed the House on January 23. House lawmakers passed the No Budget, No Pay Bill of 2013 (HR 325) by a vote of 285 to 144. The legislation, which raises the debt ceiling through May 19, would allow lawmakers time to negotiate spending cuts required under the Budget Control Act. Continue Reading…

The deal was a last ditch effort to save automatic spending cuts and tax hikes induced by the fiscal cliff from crippling the economy; in that regard it was a success. It comes with a silver-lining though — Congress now has two more months to resolve trillions of dollars in sequestration. Embrace yourselves for the fiscal cliff, part two.

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Since the dawn of the internet users have enjoyed shopping, for the most part, tax-free. A 1992 Supreme Court Ruling said that states could not collect sales tax from businesses that do not have a physical presence in that state. As such, online retailers have enjoyed a competitive advantage over most local retailers, except in the 4 states (DE, NH, OR, MT) without a sales tax. For example, if a California resident wanted to buy a stereo that cost $100, they could head to their local electronics store and pick one up for a total charge of around $110, factoring in state and local sales taxes. Or, they could search the web for deals, likely find the stereo for a cheaper or discounted price, and purchase it without any sales tax added. Even if they did not find a better deal, they’d still save nearly 10% on their purchase by buying online. Shipping costs might makeup for this difference, but nowadays most online retailers offer free shippping deals for members or for orders over a certain amount. As such, consumers are switching to online shopping as their preferred method of retail purchasing, hurting local stores and state revenues. In California alone, the state loses nearly $1 billion each year from uncollected sales tax on internet purchases. Nationally, the trend has been spiraling upward for years. According to the US Census Bureau, over 76% of American households own a computer, and Americans enjoy nearly universal internet access. Given the above, it’s no wonder that e-commerce sales have nearly quadrupled in the last decade (see infographic below).

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State of The Estate Tax

July 26, 2012 — 1 Comment

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Senate Democrats, who are united in support of higher income tax rates for millionaires and billionaires, are fragmented due to disagreements on how to tax the estates of the wealthiest Americans.

Democrats including Mark Pryor of Arkansas and Mary Landrieu of Louisiana resisted a proposal from President Barack Obama to tax individual estates of more than $3.5 million — roughly three in 1,000 — at a top rate of 45 percent. The split among Democrats, who control the Senate, will give Republicans more influence on the issue after the Nov. 6 election.

As a result, when the Senate votes today on a bill to extend income tax cuts that expire Dec. 31, the proposal will not touch upon the estate tax issue.  Democratic leaders in the Senate chose instead to focus on an issue on which almost all of them agree: Obama’s plan to let income tax cuts expire for the top 2 percent. 

Democrats who balked at Obama’s proposal say they are worried about the effect of increasing the estate tax rate and lowering the per-person exemption to $3.5 million from $5.12 million for farms and small businesses. Not surprisingly, Republicans favor the $5.12 million exemption, which means a compromise on the issue would be more generous to estates than Obama’s plan. 

Democrats, who currently control 53 seats in the 100-member Senate, are trying to muster a majority for Obama’s plan to extend most of the income tax cuts first enacted in 2001 and 2003. Republicans can use Senate rules to require a 60-vote threshold, meaning that the income tax plan isn’t expected to advance. 

The politics of the estate tax center on two numbers: the per-person exemption and the top tax rate. The exemption matters most to business owners, farmers and ranchers who can use it to avoid estate tax liability. 

For billionaires, the rate is the priority. 

This year, the per-person exemption is $5.12 million and the top rate is 35 percent. Obama agreed to those parameters as part of a December 2010 deal with Senate Republicans that also extended expiring tax cuts and created a payroll tax cut. 

Under those numbers, which Republicans want to extend, 3,600 estates would pay taxes, or fewer than 0.2 percent of estates, according the nonpartisan Joint Committee on Taxation (JTC). 

Obama proposed a $3.5 million per-person exemption and a 45 percent top rate, returning to parameters that were in effect in 2009. That would require 7,200 estates, or about 0.3 percent, to pay taxes.

If Congress does nothing, as would be the case if the Democratic bill and no others became law, the exemption would drop to $1 million and the rate would rise to 55 percent. Under that regime, the tax would affect about 2 percent of estates, or 55,200, according to the JCT.

The U.S. is expected to collect $11 billion in estate and gift taxes in fiscal 2012, according to the Congressional Budget Office. Obama’s plan would raise $9 billion more, and allowing the $1 million exemption and 55 percent rate to take effect would raise an additional $22 billion beyond Obama’s proposal, according to JCT.

Backing Off 

Senate Majority leader Harry Reid, a Nevada Democrat, included Obama’s estate-tax proposal in the first draft of his bill. He then backed off after hearing objections from some Democrats. 

This is not to say that the Estate tax issue will not be dealt with it will just be addressed in a different piece of legislation.

The same dynamic occurred in April 2009, as 10 Senate Democrats joined Republicans in a test vote that showed majority support for a $5 million exemption and 35 percent top rate.

Small Businesses

Under current rules, the tax would affect about 200 small businesses and 100 farmers, according to the Joint Committee on Taxation. That would jump to 2,700 and 2,400, respectively, if Congress doesn’t act. The numbers under Obama’s proposal would be 400 and 300, respectively. 

Despite the death-tax rhetoric that has overwhelmed arguments for keeping the estate tax.  The tax reduces concentrated wealth, is relatively efficient because it doesn’t tax people as they earn, and affects only a few people. 

For those who wish to read the bills in their entirety the Senate Democrats’ bill is S. 3412 and the Republican proposal is S. 3413.

JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.