Tag Archives: Taxes

$800 Billion Stimulus Program Failed Terribly and Mostly Benefited the Wealthy, MIT Economist Finds

By Brad Polumbo

The federal government has spent an astounding $42,000 per federal taxpayer on so-called “stimulus” efforts since the pandemic began. Where did all that money go? Well, as it turns out, one of the biggest stimulus programs, the Paycheck Protection Program, failed miserably.

At least, that’s the finding of a new study from MIT economist David Autor and nine coauthors. They examined the $800 billion Paycheck Protection Program, which gave “loans,” most of which won’t have to be paid back, to businesses. It was created by Republicans and Democrats in Congress alike in hopes of helping businesses preserve their employees’ jobs for the duration of the COVID-19 crisis.

The study tracks the money to see where it ended up and what it achieved. The results… aren’t pretty.

The analysis shows that even though 93 percent of small businesses received loans from the program, only between 2-3 million jobs were preserved. The program spent an astounding $170,000-$257,000 for each job it helped preserve! That’s, erm, a lot more than most of those jobs even pay.

Moreover, the study finds that only 23 to 34 percent of the program’s dollars went to workers who would’ve otherwise lost their jobs—meaning the vast majority went to “business owners and shareholders.” (Oh, and a whole bunch was lost to fraud, too).

The authors conclude that the program’s benefits were “highly regressive,” meaning it benefited the wealthy more, with about 75 percent of the benefits flowing to the top 20 percent of earners.

Does all this sound like an effective use of $800 billion in taxpayer money?

Some might be tempted to focus on the positives, and note that the program did help some people. But we cannot evaluate government policies without considering the opportunity cost, the trade-offs. What could private individuals have done with that $800 billion? After all, every dollar the government spends must, directly or indirectly, come from taxpayers.

Between donating to private charity and investing in private businesses and jobs, it’s hard to imagine a scenario where that money doesn’t create more jobs and wealth if left in private hands. But then politicians wouldn’t have a shiny “stimulus” program to point to as an “accomplishment” on the campaign trail.

It’s sad, but not very surprising, that political expediency trumped economic efficiency in such a major federal spending program.

Source: FEE.org

Brad Polumbo (@Brad_Polumbo) is a libertarian-conservative journalist and Policy Correspondent at the Foundation for Economic Education.

Treasury Warns ‘enormous Challenges’ This Tax Season Could Lead to Delayed Refunds

Sophie Mann
January 10th, 2022

The Treasury Department has issued a warning that annual tax refunds and some other services may be delayed this year due to “enormous challenges,” including the ongoing pandemic and budget cuts at the IRS that have led to fewer staffers.

During a call with reporters on Monday, agency officials said they are anticipating a “frustrating season” for U.S. taxpayers, according to an account in The Washington Post. 

Partly responsible for the delays is the massive amount of extra work the Internal Revenue Service has been required to take on due to several rounds of federal stimulus packages. 

According to the Post, in December of 2021, the IRS still had 6 million unprocessed individual returns – typically, at that point in the year, the service has about 1 million unprocessed returns.

The watchdog group the National Taxpayer Advocate released a report over the summer showing the IRS ended its last filing season with more than 35 million individual and business tax returns that had still not been processed – a figure roughly four times the number from the year prior to the pandemic.

This year, the IRS will begin accepting individual income-tax returns January 24. Individuals are being encouraged to file early to avoid processing delays.

IRS Commissioner Chuck Rettig said that while planning for this filing season is “a massive undertaking,” IRS teams have been “working non-stop” to prepare. 

Americans Continue to Flee States With Higher Taxes

EMEL AKAN 
August 23, 2020

WASHINGTON—States with the highest tax burdens, such as New York, Illinois, and California, continue to lose residents this year as tax rates have a significant effect on the growth and prosperity of the states, economists say.

“The evidence is clear that competitive tax rates, thoughtful regulations, and responsible spending lead to more opportunities for all Americans,” according to the “Rich States, Poor States” report by the American Legislative Exchange Council (ALEC), a conservative nonprofit organization.

The annual report ranks states based on their competitiveness and economic outlook by examining the policy choices made by the states and their impact.

In 2019, Utah ranked No. 1 for economic outlook, followed by Wyoming, Idaho, Indiana, and North Carolina; the state has earned the top ranking for 13 consecutive years.

According to Jonathan Williams, ALEC’s chief economist, Utah has implemented many reforms “that have been ahead of the curve.”

Utah’s lawmakers saw the unfunded liability problem in the state pension system and took bold actions to fix it after the financial crisis of 2008. The state also revised its property tax system.

“It’s not just a theory. This is really playing out in practice. And we see Americans continue to move into Utah. And Utah is just booming right now,” Williams told the show “NTD Business.”

“We continue to see this phenomenon where Americans vote with their feet. And they’re voting very strongly away from states with high tax burdens and less economic opportunities,” he said.

The states that gained the most in population over the past decade were Texas (more than 1.2 million, 15th on the economic outlook list) and Florida (more than 1.1 million, 7th on the list).

According to Williams, these states provide a pro-business environment, better tax policy, and more economic competition.

The bottom five states on the economic outlook ranking were New York, Vermont, New Jersey, Illinois, and California.

“When you look at the bottom states again, you see those states that have the highest tax rates, and they’re not phasing out, either,” economist Arthur Laffer, who co-authored the report, said on Aug. 11 during a webinar hosted by ALEC.

Both California and New York, for example, have proposals for large tax increases, he noted.

New York is “a treasure for America,” but “even treasures can have their gooses cooked over taxes, and I think that’s what you’re really seeing here,” Laffer said.

New York maintains the second-highest top marginal personal income tax rate and the highest top marginal corporate income tax rate, according to the report. The state lost more than 1.3 million residents between 2009 and 2018 to more economically competitive states.

The report also shows that big reforms have significantly helped states such as Wyoming, Oklahoma, Wisconsin, Delaware, and Montana. These states improved their national rankings in 2019 by keeping their spending in check, which allowed them to reduce tax burdens, Williams said.

“You’re seeing just a migration of people out of these high tax states,” Stephen Moore, economist and a co-author of the ALEC report, said during the webinar.

“And it’s really putting stress on the budgets of these states like New York, Connecticut, New Jersey, and Rhode Island. These states are being kind of bled to death, year after year,” he said.

According to Moore, despite the pandemic, several states, including Utah, South Dakota, Nebraska, and Iowa, have already balanced their budgets this year without massive income taxes.

The report illustrates each states’ competitiveness and economic outlook using 15 equally weighted policy variables, including tax rates, regulations, spending, and right-to-work labor policy. It also examines trends from past decades as well as policy choices made in 2019.

Follow Emel on Twitter: @mlakan

Michigan Supreme Court Rules Against Overreaching County Tax Collector

MATTHEW VADUM  
July 21, 2020

The Michigan Supreme Court ruled that counties may not keep for themselves as a windfall funds left over from the sale of real property for unpaid taxes, an unconstitutional practice the property owner’s lawyers denounce, calling it “home equity theft.”

According to the Pacific Legal Foundation (PLF), a public interest law firm headquartered in Sacramento, California, that represented the property owner, the decision may be good news for property owners in Michigan, but there are still 12 other states in the country that allow similar practices, including Arizona, Colorado, Massachusetts, and Nebraska.

The U.S. Constitution forbids excessive fines and the unauthorized taking of property.

Michigan “twisted the foreclosure process into nothing more than government-sanctioned theft, allowing officials to seize and sell the property of delinquent taxpayers—and keep all proceeds above what’s needed to pay off the debt,” according to a PLF summary.

“Michigan law allows bureaucrats to kick people out of their homes and steal their life savings to collect on debts as small as $8. This is neither fair nor constitutional. Predatory government foreclosure particularly threatens the elderly, sick, and people in economic distress.”

“No one in Michigan should lose the entire equity in their home or land for falling behind on their property taxes,” said Christina M. Martin, a PLF staff attorney.

“We will continue the fight to help other vast numbers of people whose nest eggs have been robbed by this abuse of tax foreclosure law. [The] decision sends a message across the country that this kind of abuse should not be tolerated in the United States any longer.

“This decision will protect people across Michigan by prohibiting county governments from stealing from struggling property owners.”

According to the Michigan Supreme Court’s ruling July 17, in the case cited as Rafaeli LLC v. Oakland County, the plaintiff Rafaeli LLC owed $8.41 in unpaid property taxes from 2011, which grew to $285.81 after interest, penalties, and fees. Oakland County foreclosed on Rafaeli’s property for the delinquency, selling it at auction for $24,500, and keeping all the sale proceeds in excess of the taxes, interest, penalties, and fees.

Rafaeli had bought a rental property in Southfield for $60,000 in August 2011, but failed to remit the 2011 taxes due on the property in the amount of $536.24. Rafaeli sent a payment to the county in August 2012, but the payment fell short of the amount owed. He sent another payment in January 2013 but still owed $8.41, plus $2.26 in interest, penalties, and fees. The delinquency was never paid, and on March 1 that year, the property was forfeited to the county.

A second plaintiff, Andre Ohanessian, owed about $6,000 in unpaid taxes, interest, penalties, and fees from 2011. His property was auctioned off for $82,000, and the county retained the entire sale price.

The issue in this case, the court stated, is whether the county has “committed an unconstitutional taking by retaining the surplus proceeds from the tax-foreclosure sale of Rafaeli’s and Ohanessian’s … properties that exceed the amount plaintiffs owed in unpaid delinquent taxes, interest, penalties, and fees under the General Property Tax Act.”

The court held that “defendants’ retention of those surplus proceeds is an unconstitutional taking without just compensation” under the Michigan state constitution, and remanded the case “to the Oakland Circuit Court for proceedings consistent with this opinion.”

“There is, in fact, a traditional right for a debtor that traces all the way back to England and colonial days … and fortunately, the Michigan Supreme Court recognized that,” Martin told The Epoch Times in an interview.

“The government can seize your property to pay a debt, but it does so subject to the traditional requirement that it sell the property and that it refund the extra profits to the former owner.

“This decision will end the practice in Michigan, perhaps the worst state in the country on the topic until now, and it will hopefully also send a message to those dozen other states, because if they don’t [change their ways], Pacific Legal Foundation is coming for them. We want to end this practice in the United States.”