Sales Tax Holidays

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Unless you live in Alaska, Delaware, New Hampshire, Montana, or Oregon, you probably pay sales tax on items you purchase in your favorite retail establishment. But you might be able to get a taste of what its like to be an Alaskan within the next few weeks.

17 states are giving back-to-school shoppers a break from paying sales tax on certain school-related purchases beginning July 29th and continuing into mid-August. Click here to see if your state is participating and how your special tax relief holiday works. The individual states determine the dates of their own tax holiday (usually only a two-day weekend), which types of purchases are exempt from sales tax and which are not, and also any special price limits. As of this morning, Massachusetts is likely going to join in since the state has brought in more revenue than anticipated in recent months. bringing the total number of participating states to 18.

These tax holidays are meant to stimulate the economy. There is also the added benefit of encouraging citizens to spend money on education and educational supplies, a behavior that is typically encouraged in this country anyway. Shoppers love these sales tax holidays, but retailers generally see them as extra work. Some who oppose the tax holidays say that they are a political gimmick.

Jeter, the IRS, and some guy named Chris – a Tax Relief Perfect Storm

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Baseball is full of tradition, and so is the IRS. The New York Yankees’ Captain Derek Jeter recently hit his 3,000th hit. A huge milestone in the game of baseball. Such trophies usually end up in the player’s shoebox, or in Cooperstown. However, in this case, Jeter’s 3,000th hit just happened to be a home run, and was caught by a “lucky” Yankees fan. Christian Lopez was the “lucky” Yankees fan who caught the ball and now needs a tax attorney and possibly even tax relief. After Lopez caught the landmark baseball, he gave the item of memorabilia to Jeter. Then, Jeter’s employer (the Yankees) then gave Lopez luxury seats for the remainder of the season and post-season, assuming the Yankees make the post-season, worth thousands of dollars. Based on Lopez’s windfall, whether categorized as a gift or as income, he’s likely going to have to pay the IRS something come April 2012. Lopez has indicated that if he does owe, his parents will help him out, which is fortunate. However, it would be a good public relations move for the Yankees to make an estimated tax payment on behalf of Lopez so his tax headaches can be avoided. Such is not unheard of in baseball circles, read the fine print for the San Francisco Giants World Series Ring Raffle. If would be wise for Lopez to review his options with a tax attorney, especially if his parents don’t foot the bill, or if the Yankees don’t step up to the plate.

Australian Pollution Tax

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Australia, one of the world’s biggest polluters due to their heavy reliance on coal-fired power, is introducing a new tax on emissions. The new tax will likely be a fixed Aus$23 (US$25) per tonne for carbon emissions and will affect 500 of the country’s worst offenders – only big businesses according to Prime Minister, Julia Gillard. The number of affected business was reduced from 1,000 to 500, and Gillard cites this change to emphasize that the tax will really only impact a very limited number of Australia’s big businesses.  However, the pollution tax will undoubtedly impact regular families as these affected businesses raise prices (somewhere in the neighborhood of Aus$406 per year).  The government has promised that 90% of all households would get tax relief in the form of tax cuts or pension boosts to help meet the rising living costs.  The tax is very controversial in Australia, but has been praised as “one of the most significant economic reforms in Australia for decades” (see AP news article).

A Little Good News for Employers

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The “FUTA surtax” was finally laid to rest this week. After 35 years and 8 separate extensions, the “temporary” tax expired and was NOT renewed this time, providing a little tax relief to employers.

I say “little” because it never was a huge tax. The 0.2% FUTA surtax was enacted in 1976 for the purpose of paying for unemployment benefits following the recession of the early 1970s. Mission accomplished by 1987, but the tax stayed on the books. Dave Camp of the House Ways and Means Committee led the opposition to renewal of the tax. Current or future unemployment benefits will not be affected.

Presidential Candidate Bachmann wants to “Deep-Six” the Tax Code

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Not familiar with the term? It means that she wants to get rid of it. Throw it out.  Bury it at sea. And that’s not all she would like to do if she were elected to the presidency. She is also interested in a one-year moratorium on federal income taxes to try to fuel the economy. These are bold ideas. Could be just campaign rhetoric.

Earlier in her career Bachmann worked as an attorney for the US Treasury Dept. representing the IRS against people who underpaid or failed to pay their taxes.

One thing is for sure, if the 3.8 million word tax code were really buried at sea, it would sink like a rock.

Taxes Around the World

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Some international tax news today. China is doling out tax relief to the poor by increasing the income threshold for workers who are required to pay taxes.  Those earning less than $540/mo. are exempt from income taxes now, whereas the threshold used to be $300/mo. This change will affect approximately $60 million people. Meanwhile, in Portugal the government announced extra taxes this year to help lower the nation’s debt. And Switzerland is raising taxes for rich foreigners.

Kenya Revenue Authority Cracks Down on Government Officials

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Despite only having been in existence since 1995, the Kenya Revenue Authority (Kenya’s equivalent of the IRS) apparently has some teeth. Under the country’s new constitution, which was promulgated in August 2010, even the top paid legislators have to pay taxes. Imagine that! So Kenya’s prime minister, Raila Odinga, is leading by example and paying what he owes in back taxes which came out to over $37,000. But many other lawmakers are not so excited about following suit, and some flat out oppose the rule. The Revenue Authority stated that it would seize their property and sell it at auction if they fail to pay what they owe.

U2 Scorned for Tax Dodging

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Activist group, Art Uncut, has planned a protest during U2′s performance at this weekend’s Glastonbury Festival in England.   The group has not said exactly what actions they will take to make their point.

Most people looking for tax relief don’t have the liberty of selecting which country they want to pay taxes in.  But in 1996 U2 went shopping around with the intention of moving their business affairs to a country with lower taxes, and they landed in the Netherlands.   Art Uncut’s position is that this “tax dodging,” (by U2 and others) although not illegal, is causing poor countries like the band’s native Ireland to grow even poorer.  Furthermore, it is their view that this move really undermines frontman Bono’s highly publicized campaigns aimed at reducing poverty in developing nations.

Interestingly, Forbes recently placed U2 at the very top of their list of highest paid musicians, earning $195 million over the relevant 12 month period.