Payroll Tax Cut Extended!

In the waning days of 2011, Congress passed, and the President signed, a bill to extend the 2 percentage point payroll tax cut – through February.

Congressional fights over this very temporary cut are likely to heat up quickly as the new February 29 deadline fast approaches.

But, as a result of the 2011 payroll tax cut (and the ongoing temporary cut) the Social Security Trust Fund can no longer cover its benefit payments from net payroll tax contributions.

From a Washington Post Article:

For the first time in the program's history, tens of billions of dollars from the government's general pool of revenue are being funneled to the Social Security trust fund to make up for the revenue lost to the tax cut. Roughly $110 billion will be automatically shifted from the Treasury to the trust fund to cover this year's cut, according to the Social Security Board of Trustees. An additional $19 billion, it is estimated, will be necessary to pay for the two-month extension.

Therefore, America is now at a point where payroll tax contributions to the trust fund are no longer sufficient to cover benefit payments, and the deficiency has to be made up by the general fund. This change makes Social Security's troubling numbers even more dire.

Idaho Sales Tax Revenues: Going Up???

Rep. Shirley Ringo (D-Moscow) is now proposing a reform plan for the Idaho Sales Tax. The plan reduces the sales tax rate from 6% to 5% but eliminates numerous exemptions and thereby broadens the base on which that tax is applied.

According to an Idaho Statesman article:

Their plan would retain the production exemption on sales of goods and equipment used by agriculture and other businesses and continue to exempt health care. But it would lift 21 exemptions and exceptions. The biggest hit would be felt in service industries, from lawyers and accountants to hair-stylists and auto repairmen. Other transactions subject to tax would include real estate commissions, construction materials, electricity and other utilities, transportation, trade-ins, lottery tickets and commercial aircraft.

The addition of the tax to many service industries is a significant change in the Idaho Sales Tax. Supporters of the plan believe that elimination of exemptions will raise $371 million of new revenue despite the fact that the actual rate is being lowered.

Additional commentary and analysis of this plan can be found at the Tax Foundation here.

Gifting real property to a family member? Make sure to file that gift tax return…

According to a recent Forbes article, the IRS has recently been compiling data on intra-family property transfers from county and state officials in a number of States including Connecticut, Florida, Hawaii, Nebraska, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Virginia, Washington state and Wisconsin. A Federal judge has recently allowed the IRS to serve a "John Doe" summons to the California State Board of Equalization.

This means that State real estate transfer records are actively being used to ferret out intra-family gifts of real property for audit.

Moral of the story, don't forget to file your federal gift tax returns!

2012 Presidential Candidate Tax Plan Comparison Chart

The Tax Foundation has nifty website that lays out each Presidential Candidate's Tax plan in an easy to understand chart format.

The user chooses the Candidates to compare, and the chart breaks each candidate's plan down by category (e.g. Corp. Inc. Tax, Estate Tax etc.).

This is a very useful and informative tool, so check it out!

2012 Presidential Hopeful Tax Plan: Gingrich

Newt Gingrich, Republican hopeful, has recently outlined his tax proposals. The highlights are here.

Gingrich's plan appears to allow taxpayers to choose between either (1) the current tax code (with the Bush/Obama tax cuts made permanent) or (2) a flat income tax at a 15% rate.

Additionally, his plan

• Eliminates capital gains tax,
• Reduces Corporate Income tax to 12.5%,
• Allows for 100% expensing deduction for new equipment,
• Eliminates the "death tax."

The optional flat tax (15% on income) would:

• Preserve charitable deduction, mortgage interest deduction and provide for a personal deduction of $12,000 for every American.

For more information, the Tax Policy Center has an interesting blog post that analyzes the economic effect of Gingrich's plan on both American households and federal revenues.