Heads-up:
Those of you doing the DON Method may want to start adding a new column in your accounting. I shudder to think what an audit of someone’s sales tax claim would look like.
How you can resist funding the government → about the IRS and U.S. tax law/policy → how is tax law/policy/administration changing? → state sales tax deduction on federal taxes;
The recently-released Summary of the Chairman’s Mark for H.R. 4520: Jumpstart our Business Strength (JOBS) Act gives some idea of what the next big tax-reform bill to meander through Congress might look like.
There’s nothing too crazy in there yet — any revolutionaries hoping to see the tax code scrapped in favor of a national sales tax will have to be satisfied with a “blue ribbon” group that the bill impanels to gravely consider such radical measures. But there are a couple of items that may be of interest to Picket Line readers:
Sec. 501. Deduction of State and local general sales taxes in lieu of State and local income taxes. Permits deduction of sales tax in lieu of state income tax for . IRS will publish tables that estimate sales taxes for taxpayers in each state with various incomes and family situations.
Currently, when figuring out your federal income tax bill, you can deduct from your income any local and state income tax that you’ve paid. However, ever since a tax “simplification” measure was passed, you aren’t allowed to deduct any local or state sales taxes. That seems to be unfair to residents of states with high sales taxes, or with only a sales tax and no income tax (last I checked, there were nine such states), especially when compared to residents of those few states that have income taxes but no sales tax at all.
Back before , you could deduct all of the state and local taxes you paid. You figured out your sales tax deduction either by carefully keeping track throughout the year, or (more likely) looking up an estimate in an IRS-maintained table of how much the average taxpayer with an adjusted gross income like yours paid.
The current bill’s text would restore the sales tax deduction, though I can’t tell from my casual reading of it whether it adds this to the state & local income tax deduction, or if you have to choose one or the other. (Some earlier reports about this legislation have said that this is what the bill will do.) The bill mentions the IRS-maintained tables, but not the option of deducting your actual payments.
This might be good news to some people using the income-lowering method of tax resistance, as their state sales tax payments might very well exceed their income tax payments (or they may live in a state without a state income tax) and this will give them an additional federal deduction.
Sec. 881. Qualified tax collection contracts. Authorizes the Secretary to enter into qualified tax collection contracts with private collection agencies to perform certain services related to the collection of unpaid tax. Provides that the United States shall not be liable for any act or omission of any such collection agency. Permits a civil action against a collection agency, but not against the United States, for unauthorized collection actions.
Don’t you wish you could get away with putting “and furthermore, you can’t ever sue me, neener neener” at the end of everything you write?
Anyway, this is that proposal to let the IRS hire bounty hunters to go after debts it’s having a hard time collecting on its own. Won’t that be fun.
Today’s collection of links:
- Bankrate.com gives us a little more detail about the new federal income tax deduction for state and local sales taxes. According to them, you do have to choose between the deduction for state sales taxes and state income tax, and you can take either the actual sales tax you paid (save those receipts) or a guesstimate from an IRS-supplied table.
- Washington Post columnist David Ignatius looks at the budget and the budget deficit and sees that something has to give. He asks: Why not the military budget? “[T]he United States is still spending billions for weapons systems that were conceived to fight an adversary that has already been defeated — the Soviet Union.” My advice: Don’t hold your breath, David.
- “The prisoner was taken away in the middle of the night 19 months ago. He was hooded and brought to an undisclosed location. He has not been heard of since. Interrogators reportedly used graduated levels of force on the prisoner, including the “water boarding” technique — known in Latin America as the “submarino” — in which the detainee is strapped down, forcibly pushed under water and made to believe he might drown. His 7- and 9- year-old sons were also picked up, presumably to induce him to talk.” It doesn’t seem that long ago that I had the hope that I might never read a description of my country that began in such a way, but there it is in ’s International Herald-Tribune.
- I mentioned that Craig Murray, Britain’s ambassador to Uzbekistan, had written a report condemning the intelligence services of the United States and of Britain for winking at torture in Uzbekistan in exchange for intelligence extracted from the torture chambers. Suspecting, I’m guessing, that Murray leaked this report to the press himself, the government pulled out the stops to smear Murray’s reputation and is making moves to withdraw his security clearance, which would also remove him as ambassador. I marvelled at the time when I read how forthrightly Murray condemned torture, and I wondered why we don’t hear more such straight talk. I guess now I know.
- Seymour Hersh — he broke the My Lai story, and he had the straightest scoop on the manipulation of intelligence by the Dubya Squad before the war in Iraq (and he had it at the time, while it was happening, and the rest of the media is still just catching up). If any other journalist were telling this story I’d be a lot more skeptical.
- And because reckless killing of innocents in the service of endless wars isn’t just for foreigners, Jonathan Magbie, a man who had been paralyzed from the neck down since he was four years old, who required around-the-clock nursing care, who moved his wheelchair by pushing a lever with his chin, who was about five feet tall and weighed about 120 pounds, was sent to prison last week as a first-time offender after being convicted of marijuana possession. He died there because he was unable to breathe on his own and his mother was unable to convince his jailors to let him have his ventilator.
Jonathan Magbie meeting President Reagan in during the proclamation of National Respiratory Therapy Week
- “Our prison system is both a devastating moral blight on our society and an overwhelming economic burden on our tax dollars, taking away much needed resources from schools, health care and affordable housing. The prison system is corrupting our society and making us more threatened, rather than protecting us as its proponents claim. It is a system built on fear, racism, and the exploitation of poverty. Our current prison system has no place in a society that aspires to liberty, justice, and equality for all.” So says Architects / Designers / Planners for Social Responsibility, which is asking professionals to pledge “to not participate in the design, construction, or renovation of prisons.”
One part of the last big tax package passed by Congress brought back the federal income tax deduction that you can take for any state and local sales taxes you paid. You can take either this deduction or a deduction for state and local income taxes.
In either case it’s an itemized deduction, so it will only matter to you if you find it worthwhile to itemize. If you live in a state that has a sales tax, unless you’ve been keeping receipts all year you’ll probably take this deduction by looking up your estimated sales tax in Publication 600, which the IRS released .
Don’t expect a windfall. The amount you’ll find in the table maxes out at about half of the standard deduction, and if you’re trying to resist your income tax through The DON Method you’ll be lucky to reach 10% of the standard deduction. So unless you’re already itemizing, this may not change your calculations at all. But note that if you bought a big ticket item like a vehicle or home, you can add the sales tax from that purchase to what you look up in the table.
The new 1040 form is available on irs.gov. I was surprised to see that there is no longer a “tuition and fees” deduction listed on the form.
It turns out that this deduction — and the deduction for teachers who buy classroom supplies with their own money, and the itemized deduction for state and local sales taxes — expired in , and that while Congress was expected to renew them , they didn’t get around to it before the IRS’s deadline to get ’s forms to the printer (and they still haven’t gotten around to it). Other tax breaks for education, such as the Hope and Lifetime Learning credits, did not expire and are still in effect.
It’s very possible that Congress will try to throw together a last-minute tax bill that restores these deductions, but it’s also possible that they won’t. If you were relying on any of these to get under the tax line, you may want to look for a back-up plan.
Some tabs that have schlepped past my browser window in recent days:
- The University Alliance for Democracy and Justice (Coordinadora Universitaria por la Democracia y la Justicia) in Nicaragua issued a call for increased tax resistance and a general strike (translation mine):
In the face of the massacre by the Ortega-Murillo government of the Nicaraguan people, from the University Alliance for Democracy and Justice we call on the private sector and to Nicaraguan society in general, to strengthen their actions of tax resistance and to stand firm in the face of state violence, declaring a general strike for 48 hours or until the Ortega-Murillo government complies with the following conditions:
- Stop the cruel paramilitary repression in Masaya and other territories besieged by the National Guard and Sandinista Youth shock troops.
- Send invitations to the United Nations High Commissioner for Human Rights, the European Union, and the Inter-American Commission on Human Rights, to establish permanent missions of these organizations in our country.
The call is to use every civic mechanism we have at our disposal to curb these criminal acts of the Ortega-Murillo government.
We cannot live normal lives while they massacre our brothers!
- A survey of thousands of smokers in California showed that more than a third of them had used legal methods to get around the state’s prohibitive excise tax on tobacco, and nearly one in five had used illegal techniques. And that survey was taken before a $2-per-pack hike in the tax rate took effect. “About a third of cigarettes in California are estimated to be from out-of-state (and thus tax-avoiding) sources.”
- More tales of traffic ticket issuing camera or radar boxes being destroyed: from France & Italy; Saudi Arabia, Rhode Island, and France; and France & Italy again.
- One of the features of the big tax law that Republicans passed last year was one that caps the tax deduction for state and local taxes. This has the effect of raising taxes on wealthier people from high-tax states. These tend to be the Democrat-leaning, wealthier, coastal states, and so this has been seen as partially a partisan poke at the Democrat’s donor base and a thumb-in-the-eye at blue states in general — increasing the amount they’re subsidizing their red cousins. But blue state lawmakers are getting creative and trying to deny the U.S. Treasury this extra tax money. Some of these workarounds would even have the effect of allowing people to deduct more than before.
- No surprise: IT security at the IRS is a mess. Attention hacktivists: strike while the iron is hot.
- The ranks of war tax resisters in Lleida, Catalonia have risen to about fifty. Resisters there typically redirect tax money to non-governmental organizations and then declare an equivalent tax credit on their tax returns.
- The opposition coalition in Sri Lanka urged people to stop paying taxes if the government goes through on its plans to pay compensation to former members of the Tamil Tigers insurrection.
