Saturday, July 19, 2008

WHAT’S THE BUZZ? TELL ME WHAT’S A HAPPENNIN’

* TAX GIRL Kelly Phillips Erb posts about a study that suggests “IRS Car Charity Rules Drives Donations Down”. Kelly tells us -
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The accounting firm of Grant Thornton reports that between tax year 2004 and 2005, the number of car donations valued at more than $500 dropped by approximately 67%. The total value of donations fell more than 80%.”

In a comment on the post I wrote –

“. . . are they speaking from the point of view of the charitable deductions claimed on Schedule A or from that of the charities that solicit donations of used vehicles? Are they saying that taxpayers are claiming smaller deductions or that individuals are donating less vehicles?

The total dollar amount of charitable deductions claimed for donating vehicles would certainly decrease under the new laws. Taxpayers can no longer attempt to get away with deducting the full ‘blue book’ value of a ‘clunker’ that had to be towed away. They are now, in most cases, limited to the sale proceeds of the donated car as reported by the charity on Form 1098-C. This was the intended purpose of the legislation
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According to the Grant Thornton press release the % drops represent changes to the deductions claimed on Schedule A, comparing IRS statistcs for 2005 returns (the first year the rules applied) to 2004 returns, and not necessarily to the actual number of automobiles donated to charity.

As I mentioned in my comment, donating a car to charity avoids all the agita and aggravation of a private sale of a used car. Just as donating all your unwanted “stuff” to Goodwill avoids all the agita and aggravation of a yard or garage sale.
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* Kelly also reports that “Stimulus Checks Not Encouraging Consumers to Spend”. This comes as no surprise to me.
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* The Summer issue of Tax Watch, the Tax Foundation's quarterly tax policy newsletter, is available to download. Highlights from the issue include:
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· Sizing Up Obama's Social Security Tax Plan
· Senate Testimony: Time to Clean Up the Tax Code
· U.S. States Lead World in High Corporate Taxes
· High Gas Prices Fuel Tax Debates
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In discussing America’s tax burden the newsletter points out that it varies widely state by state. In terms of “Tax Freedom Day” (highlight is mine) - “Taxpayers in Connecticut, New Jersey, New York, California and Washington work the longest to pay their tax bills.” And, “The lowest tax burden in 2008 was in Alaska. . . Mississippi had the second lowest burden, followed by Montana, West Virginia and Alabama.”

In discussing Obama’s Social Security and income tax proposals Tax Foundation Senior Economist Gerald Prante says –

Obama has called for the top federal income tax rate to revert from 35% to 39.6%. Add to that an uncapped payroll tax rate of 12.3% and the typical state’s top income tax rate, and the result is a top marginal tax rate of between 55 and 61%.”

* Say it isn’t so!

Speaking of the Tax Foundation, its TAX POLICY BLOG also reports that “Speaker Pelosi has suggested another round of economic stimulus” in it’s post “
Economic Stimulus: Take Two”. The post correctly comments (highlight is mine) -
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Every time the government collects revenue, holds it, then sends it back in the form of rebates, some of that money disappears. The first round of stimulus checks will cost up to $862 million in lost enforcement revenue and administrative costs, an absolute deadweight loss to the economy. Instead of utilizing this "revolving door" of taxation, perhaps citizens could keep just a little more of their paychecks and buy gasoline with their own money. If giving money back to the taxpayers provides stimulus, letting taxpayers keep their paychecks also provides stimulus in the form of...wait for it...consumption and savings.”
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The “Yellow Rose of Taxes” Kay Bell also discusses a second round in her post “Rebates: One Down, One To Come?” at DON’T MESS WITH TAXES. I echo her two requests of Congress “if the rebate sequel does indeed happen” -
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First, please don't send us costly mailings saying we're going to get the money and then a second one that says the check is in the mail. We'll take your word for it in order to save the country a few bucks.

And second, don't promise us delivery dates. I know it was done with the best of intentions, but many folks were frustrated when their rebates didn't synch up with the payment schedule.”
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* Kay also provides us with detailed lists of summer and fall “sales tax holidays” in her post “Sales Tax Holidays On Tap”. New Jersey was nowhere to be found on the lists.

* The TAX RESOLUTIONARIES blog discusses a Tax Court Case (Ralph D. Konchar, et ux. V. Commissioner, Tax Court Summary Opinion 2004-59) that concerned itself with the question “Is Mary Kay Cosmetics A Hobby, Trade or Business?”.

TTFN

1 comment:

Bruce said...

I have a client who will be interested by this. I was surprised however to find no link to the case Ralph D. Konchar, et ux. V. Commissioner, Tax Court Summary Opinion 2004-59 I have a web address from edumacation.com. It has a much more in-depth briefing. I am sending both to this particular client.
Thanks Robert.