Top PDF U.S. Federal Income Taxation of Individuals 2017

U.S. Federal Income Taxation of Individuals 2017

U.S. Federal Income Taxation of Individuals 2017

Moreover, recall the material in Part A. regarding how economic growth rates were much higher from the post-WWII era to the mid-1970s (when the top marginal rate was much higher than today) and have been notably lower since then (with much lower top marginal rates), even though the amount collected in aggregate income tax as a percentage of GDP has remained remarkably constant at the individual level and has been reduced substantially at the corporate level throughout this period. The robust growth rates in the post WWII era, however, may have had more to do with the devastated state of Europe (particularly Britain, Germany, and France) and Japan after the war and the quiescence of China and India, which were not major economic powers, resulting in the U.S. being a major net exporting nation during this period (whereas today the U.S. is a net importing nation). Moreover, the more evenly distributed gains from growth in the three decades after WWII demonstrated in Part A.—with the bottom 80% of the income spectrum actually garnering a bit more of the gains from growth than those at the top—may have had more to do with the much larger presence and strength of private-sector labor unions and such government spending programs as the GI bill (which allowed many to be the first in their families to attend college) than the tax rate structure. In short, these are empirical questions that are difficult to untangle and easy assumptions (often made by partisans with a particular point of view to forward) should be met with skepticism. The tax code may have much less power to affect these matters than is often assumed without sufficient evidence.
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An Empirical Analysis of Determinants of Recent Federal Personal Income Tax Evasion in the U S

An Empirical Analysis of Determinants of Recent Federal Personal Income Tax Evasion in the U S

The estimated coefficient on MAXTAX is positive and statistically significant at the 2% level. In this case, a one percentage point increase in the maximum marginal personal income tax rate would elicit a 3% increase in the aggregate degree of federal personal income tax evasion. The coefficient on the Tax Reform Act of 1986 is negative and statistically significant at the 1% level. Based on Halvorsen -- Palmquist [1980], the interpretation of this coefficient is that the Tax Reform Act of 1986 elicited a temporary reduction in personal tax evasion of roughly 12-13%. The estimated coefficient on the TFTEN variable is negative and statistically significant at the 2.5% level. In this case a 1% increase in the ratio of the tax free interest rate yield on high grade municipals to the federally taxable interest rate on ten year Treasury notes would elicit a 5.77% reduction in tax evasion. The estimated coefficient on the variable THREE is positive and statistically significant at the 1% level. In this case, a rise in the interest rate yield on three year Treasury notes of 100 basis points would elicit a 2% increase in the degree of income tax evasion. Once again the DIS variable exhibits a statistically insignificant coefficient. However, the second war in Iraq, Operation Iraqi Freedom (GULFWAR2), appears to have elicited a 1.9%-2% temporary increase in income tax evasion [Halvorsen -- Palmquist, 1980]. Finally, there are the two IRS policies. The estimated coefficients on both AUDIT and PENALTY are negative and statistically significant at the 1% level. A rise in the audit rate of 1% (nearly doubling the use of this policy tool) would appear to reduce personal income tax evasion by roughly 18%, whereas a 1% increase in the IRS penalty assessment rate would reduce personal income tax evasion by 3%. Thus, it appears that more aggressive IRS enforcement policies can be effective tools in mitigating the degree of federal personal income taxation.
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73rd institute on federal taxation

73rd institute on federal taxation

both IrS and state payroll tax audits of traveling workers have proliferated in recent years. In audits of U.S. workers, the IrS looks at issues involving “tax homes,” traveling too long to one location without adequate breaks in service, substitution of per diems for taxable wages, and, more generally, the alleged operation of “abusive” expense reimbursement arrangements. Audits of international travelers challenge withholding exemptions and failure to track US-source income. States audit both for alleged underwithholding, and for failures to track and tax employees who travel for work to the state for more than a short period of time. This session discusses how to handle all such audit issues. Mary B. hevener, Esq., Partner, Morgan, Lewis & Bockius LLP, Washington, DC
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Investment Specific Technological Change, Taxation and Inequality in the U S

Investment Specific Technological Change, Taxation and Inequality in the U S

In the model of Guerreiro et al. (2017) routine jobs performed by low skill agents can be taken over by automation units. As the marginal cost of producing robots changes across steady states, routine labor wages and employment change in the same direction, given the assumption of substitutability. They study the problem of optimal taxation and find that it is optimal for the government to provide a lump sum rebate financed by taxes on automation units. This result follows from an information asymmetry problem (in the spirit of Mirrlees, 1971), whereby the social planner cannot distinguish between routine or cognitive workers and is thus unable to condition transfers on individuals’ types. Our paper contributes to this literature by analyzing the macroeconomic impact of these mechanisms and quantitatively accounting for their effects on income inequality in the US economy.
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Taxation of Interest Income

Taxation of Interest Income

Under existing tax law, income from bonds faces a higher effective tax rate than income from virtually any other financial or real asset, since the entire nominal return is fully taxable. The resulting tax arbitrage leads to those in high tax brackets borrowing heavily to buy more lightly taxed assets, while the bonds issued end up being owned by those in lower or zero tax brackets. As documented by Gordon and Slemrod (1988) using U.S. data for 1983, corporations and richer individuals saved enough in taxes on their large net interest deductions to offset essentially all corporate and personal income taxes collected on all other forms of income from capital. At least ignoring implications for the market interest rate, the existing tax treatment of interest income/payments seems to generate not only a large revenue loss and large distortions to portfolios, but also perverse distributional effects, with corporations and the rich saving substantially on taxes through their interest deductions and the poor paying taxes on their positive interest income.
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Recent Developments in Federal Income Taxation: The Year 2016

Recent Developments in Federal Income Taxation: The Year 2016

series of land-use restrictions that affected the LLC’s development, including a moratorium on development and a requirement that all roads within subdivisions be paved. To comply with the paving requirement would have cost the LLC approximately $7 million. To make development more economical, Mr. Boree developed and submitted for approval a higher-density development plan featuring residential, commercial and recreational areas, but following the county’s adoption in 2006 of a requirement that developers pave certain roads leading to developments, the Borees sold the remaining lots to a developer and realized a gain of approximately $8.5 million. The taxpayers reported their gain as long-term capital gain. In an opinion by U.S. District Judge Coogler (sitting by designation), the Eleventh Circuit affirmed the conclusion of the Tax Court (Judge Foley) that the taxpayers’ gain was ordinary income. In reaching this conclusion, the Eleventh Circuit rejected the taxpayers’ argument that their purpose in holding the property had changed when the land use restrictions adopted by the county in 2005 and 2006 made development of the property prohibitively expensive, and that the Tax Court therefore had erred in considering their purpose in holding the property during periods of time prior to its sale in 2007. Considering the taxpayer’s purpose in holding property in the years leading up to its sale, the court reasoned, is consistent with prior decisions of the Fifth and Eleventh Circuits, including Suburban Realty Co. v. United States, 615 F.2d 171 (5th Cir. 1980) and Sanders v. United States, 740 F.2d 886 (11th Cir. 1984). Further, the court concluded, the taxpayers’ attempts to respond to the land use restrictions by proposing a higher density development and taking other actions are “evidence of strategic and thorough involvement in pursuit of developing the property [that] indicates that the Borees were holding the property for sale in the ordinary course of business right up until they sold it.” The court similarly rejected other arguments raised by the taxpayer.
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Teaching Federal Income Taxation Using Socioeconomics

Teaching Federal Income Taxation Using Socioeconomics

19. The assignment of income principles focus on who is the taxpayer. This is important because of the progressive rate structure of the federal income tax system. If taxpayers in high brackets could easily shift their income to taxpayers in lower brackets, there would be very few high bracket taxpayers left by the end of the year. The assignment of income rules, therefore, protect the integrity of the federal tax structure by insuring that the appropriate party is taxed on income. Thus, for example, a parent cannot assign income from his employment to his child and thereby shift the incidence of taxation to that child. See Lucas v. Earl, 281 U.S. 111, 114–15 (1930).
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On the political economy of income taxation

On the political economy of income taxation

Roemer (1999) restricts to quadratic tax functions with no work disincentives but with political parties. Perhaps the model closest in spirit to the one we propose below is in Snyder and Kramer (1988), which uses a modi…cation of the standard (nonlinear) income tax model with a linear utility function. The modi…cation accounts for an untaxed sector, which actually is a focus of their paper. This interesting and stimulating paper considers fairness and progres- sivity issues, as well as the existence of a majority equilibrium when individual preferences are single peaked over the set of individually optimal tax schedules. (Su¢cient conditions for single peakedness are found.) Röell (1996) considers the di¤erences between individually optimal (or dictatorial) tax schemes and social welfare maximizing tax schemes when there are …nitely many types of consumers. Of particular interest are the tax schedules that are individually optimal for the median voter type. This interesting work uses quasi-linear utility and restricts voting to tax schedules that are optimal for some type. Brett and Weymark (2017) push this further in a continuum of types model by characterizing individually optimal tax schedules. Then they show, un- der conditions including quasi-linear utility, that if the set of tax schedules is restricted to individually optimal ones, the individually optimal tax for the median voter is a Condorcet winner.
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Taxation of Unreported Personal Income

Taxation of Unreported Personal Income

vsak pravni subjekt v trenutku sprejema poslovne odločitve pravico vede- ti, s katerim davkom bo obdavčen njegov dohodek oziroma kolikšna bo njegova davčna obveznost. Ustavno sodišče ni zapisalo, da bi to veljalo samo za dobroverne poslovne subjekte, zato je vprašljivo, ali bi bila ustav- no-skladna odločitev o odmeri davka po davčnih stopnjah, ki so se po pri- dobitvi neprijavljenega premoženja zvišale, če bi davčni zavezanec uspel dokazati, da je to premoženje pridobil pred povečanjem davčnih stopenj. Opći porezni zakon ima posebne določbe glede zastaranja davčne ob- veznosti, ki izvirajo iz dohodkov, ugotovljenih po 63. členu ZPD (o za- staranju drugih obveznosti Šimović et al., 2010: 281–282). Glede rela- tivnega zastaranja je v četrtem odstavku 94. člena OPZ predpisano, da začne triletni relativni zastaralni rok teči po preteku leta, v katerem je po izvedbi postopka ugotavljanja izvora premoženja ugotovljeno, da obsta- ja podlaga za obdavčitev. Glede absolutnega zastaralnega roka pri tovrs- tnih dohodkih pa je v drugem odstavku 96. člena predpisano, da preteče po poteku šestih let, odkar je zastaranje prvič začelo teči. Taka določitev zastaranja, ki velja od novele zakona v letu 2012, ni povsem nesporna,
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Chapter 6 FEDERAL INTERNATIONAL TAXATION

Chapter 6 FEDERAL INTERNATIONAL TAXATION

Note that IRC §351 is not restricted in any sense to application only to US corporations. Compare IRC §351(a) and the definition of “corporation” at IRC §7701(a)(3). It is obvious that there is potential here for transactions to escape taxation, however IRC §367 would then apply. The general rule of IRC §367(a) is that gain is recognized on a transfer of property to a foreign corporation, notwithstanding the deferral provisions of Subchapter C. This is accomplished by providing that a “foreign corporation shall not ... be considered to be a corporation” for purposes of the application of the Subchapter C provisions. Note, for example, that IRC §351(a) provides for no gain or loss if property is “transferred to a corporation.” The most important exception to this rule is for property that will be used in the active conduct by the foreign corporation of a trade or business in a foreign country in accordance with IRC §367(a)(3). Exceptions to this exception, requiring gain recognition on transfer, apply to certain types of property that are likely to be resold promptly or are highly fungible, such as inventory, receivables, foreign currency or foreign currency denominated investments, and interests in leased property. (IRC §367(a)(3)(B).) Gain is also required to be recognized on certain transfers of intangible personal property, such as patents or know-how, even though used in an active trade or business, based on the theory that the same or a similar business purpose could be achieved by means of a license, where the property remains in the hands of the US developer of the intangible. A further theory could be that it is
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On the Optimality of Optimal Income Taxation

On the Optimality of Optimal Income Taxation

Our main assumption is that the productive abilities of different individuals are independent and identically distributed random variables. Also, our mechanism design approach is based on a condition of budget balance in expectation, i.e., it is required that the expected level of output per capita is not less than the expected level of consumption per capita. With a given finite number of individuals, the Mirrleesian income tax may therefore violate the public sector budget constraint, provided that budget balance holds on average. However, we show that, as the number of individuals grows without limit, the law of large numbers implies that the probability of a budget surplus or deficit converges to zero.
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On the Political Economy of Income Taxation

On the Political Economy of Income Taxation

The literatures dealing with voting, optimal income taxation, and implementation are integrated here to address the problem of voting over income taxes. In contrast with previous articles, general nonlin- ear income taxes that a¤ect the labor-leisure decisions of consumers who work and vote are allowed. Uncertainty plays an important role in that the government does not know the true realizations of the abili- ties of consumers drawn from a known distribution, but must meet the realization-dependent budget. Even though the space of alternatives is in…nite dimensional, conditions on tax requirements such that a major- ity rule equilibrium exists are found. Finally, conditions are found to assure existence of a majority rule equilibrium when agents vote over both a public good and income taxes to …nance it. JEL numbers: D72, D82, H21, H41 Keywords: Voting; Income taxation; Public good
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The Optimal Income Taxation of Couples

The Optimal Income Taxation of Couples

Notice first that joint progressive income taxation featuring increasing marginal tax rates on family income, such as the system in the United States, display positive jointness and hence contradict our results. However, the central point to note is that welfare programs offering low-income support are always based on family income the phasing-out of those means-tested programs typically create high marginal tax rates at the bottom of the earnings distribution. As a result, the tax rate on spousal earnings is very high when primary earnings are low enough to bring the family into the phase-out range of transfer programs. On the other hand, the tax on the spouse is lower when primary earnings are high enough that the family is beyond the phase-out range. Hence, transfer programs in OECD countries do create negative jointness in the lower part of the primary earnings distribution. Then, if the income tax itself is individually based, such as the one operated by the United Kingdom, the tax rate on spouses never increases in the upper part of the primary earnings distribution and hence the global tax/transfer system displays negative jointness as our theory predicts is optimal.
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Optimal Capital Income Taxation

Optimal Capital Income Taxation

Hall and Jorgenson (1971) have shown, and the results of Samuelson (1964) imply, that in the context of a single firm that takes its pre-tax cost of financing as fixed and can deduct its cost of financing, the tax rate on capital income does not affect optimal capital accumulation if the firm is allowed to deduct economic depreciation from gross capital income when it computes taxable capital income. Thus, it might seem that economic depreciation and deductibility of financing costs provides another opportunity for non-distortionary taxation of capital income. However, unlike in the case of immediate expensing without deductibility of financing costs, the neutrality result for a single firm does not carry over to a general equilibrium framework. To illustrate why this neutrality result does not carry over to general equilibrium, I begin by illustrating the neutrality result for a single firm that takes the pre-tax cost of financing as fixed.
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Taxation of "Income in Respect of a Decedent"

Taxation of "Income in Respect of a Decedent"

Included in this category would be items such as unfinished work, employee bonuses and other income benefits, income from litigation such as patent infringement, inco[r]

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Chapter 6. Taxation of Individuals. Introduction

Chapter 6. Taxation of Individuals. Introduction

The scope of the Section 33 deductions is generally very much restricted as compared with business or trade-related expenses. This restriction stems from the very fact that expenses are deductible only if they are wholly and exclusively incurred in the production of the employment income. This general requirement implies that the expenses must be incurred in the performance of the employment duties. In any event, expenses incurred by an employee in the performance of his duties are more often than not either borne directly or reimbursed by the employer.

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The evolving role and definition of the federal funds rate in the conduct of U S  monetary policy

The evolving role and definition of the federal funds rate in the conduct of U S monetary policy

empirical purposes, each implies specific null hypotheses about relationships between the funds rate and the behavior of other aggregate time series. Surprisingly, however, many of these relationships have been accepted on faith and have not been tested in any systematic way. This paper offers evidence on the alternatives and re-examines whether, at this moment in history, the funds rate is best classified as instrument, intermediate target or indicator variable of the Federal Reserve’s monetary policy actions. The evidence suggests that the funds rate contains little unique information relative to its role as an indicator variable. Moreover, evidence of significant non-linearities among variables in a small VAR suggest that attempts to implement monetary policy through a Taylor Rule framework – beyond the conceptual difficulties already noted elsewhere 3 -- would complicate the task
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Indexation and the Taxation of Business and Investment Income

Indexation and the Taxation of Business and Investment Income

presented in charts 4 to 6 assuming that business income were to be indexed. Since the effective tax rates are for income from new investment, it makes no difference to the analysis whether the indexation is comprehensive or is only applicable to new assets and liabilities. The indexed real effective tax rates are shown in chart 7 for the case where inflation is assumed to be 5 per cent and investment is equity financed. The indexed effective tax rates are significantly lower than those shown in chart 4 because inflation no longer erodes the real value of capital consumption allowances. The pattern across industry groups and investment types remains largely unchanged reflecting the
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Optimal income taxation with asset accumulation

Optimal income taxation with asset accumulation

While the standard Mirrlees model focuses on the intensive margin (with notable exceptions, e.g., Chone’ and Laroque, 2010), the model we consider here focuses on the extensive margin. The periodic income y is the result of previously supplied e¤ort and is subject to some uncertainty. Natural interpretations for the outcome y include the result of job search activities, the monetary consequences of a promotion or a demotion, i.e., of a better or worse match (within the same …rm or into a new …rm); or again - for self-employed individuals - y can be seen as earnings from the entrepreneurial activity. It would not be di¢cult to include an intensive margin into our model in t = 1. Suppose, for simplicity, the utility function takes an additive separable form u 1 (c) v (n) ; where n represents hours
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U S  Taxation of Nonresident Aliens and Foreign Corporations: A Strategy for the International Capital Market Game

U S Taxation of Nonresident Aliens and Foreign Corporations: A Strategy for the International Capital Market Game

U S Taxation of Nonresident Aliens and Foreign Corporations A Strategy for the International Capital Market Game SMU Law Review Volume 42 | Issue 3 Article 5 1988 U S Taxation of Nonresident Aliens an[.]

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