The popular FAILblog has an image from what I'm pretty sure is the Internal Revenue Service instructions on the definition of income, which includes this among the things that you must report:
Stolen property. If you steal property, you must report its fair market value in your income in the year you steal it unless in the same year, you return it to its rightful owner.
It's funny but true; thieves must pay income tax on stolen property they keep or face tax evasion charges. (As they say, it's how they got Capone.) But since the Constitution protects individuals from incriminating themselves, you can tuck it into the "Other Income" line.
In Sullivan v. United States, 274 U.S. 259 (1927), a liquor bootlegger was charged with tax evasion for not reporting his illicit income, and he argued that to do so would be self-incrimination in violation of the Fifth Amendment guarantee.
Justice Holmes, writing for the U.S. Supreme Court majority, first dismisses the idea that illegally acquired income is exempt from income tax:
We see no reason to doubt the interpretation of the Act, or any reason why the fact that a business is unlawful should exempt it from paying the taxes that, if lawful, it would have to pay. (274 U.S. at 263.)
Holmes then turns to the question of self-incrimination:
If the form of return provided called for answers that the defendant was privileged from making he could have raised the objection in the return, but could not on that account refuse to make any return at all.... It would be an extreme if not an extravagant application of the Fifth Amendment to say that it authorized a man to refuse to state the amount of his income because it had been made in crime. But if the defendant desired to test that or any other point he should have tested it in the return so that it could be passed upon. He could not draw a conjurer's circle around the whole matter by his own declaration that to write any word upon the government blank would bring him into danger of the law. (274 U.S. at 263-64.)
Holmes then punts on the question of deductions:
It is urged that, if a return were made, the defendant would be entitled to deduct illegal expenses, such as bribery. This by no means follows, but it will be time enough to consider the question when a taxpayer has the temerity to raise it. (274 U.S. at 264.)
In law school, one of my more significant papers touched on mob lawyers, particularly Frank Ragano, who represented Santo Trafficante. Trafficante paid his taxes each year on what could only have been primarily illegal income. (Interestingly, it was Ragano who was later convicted of tax evasion.)
The Iowa Attorney General’s office on Monday charged the former manager of the Iowa Film Office with misconduct in office and filed first-degree theft charges against principals involved in the making of a 2008 film in Council Bluffs.
The charges are the first after an almost five month probe of mismanagement and abuse of the state’s tax incentive program for filmmaking. The scandal has prompted state officials to review the effectiveness of all Iowa tax credits programs.
Deputy Attorney General Thomas H. Miller said preliminary hearings would be scheduled in the next 20 days for Tom Wheeler, who was fired in September as manager of the Iowa Film Office; Wendy Weiner Runge, an Omaha native and executive producer of “The Scientist;” Matthias Alexander Saunders, another business owner and photography director; and three limited liability corporations tied to the movie.
We've been following the travails of Iowa's film tax credit program, which suffered from a lack of oversight and inflated claims about success common to many other state film incentive programs:
I guess real estate must be booming in Hawaii as officials there are looking to levy more taxes on it:
The Hawaii State Legislature has turned to the real estate industry in its search for additional revenue, proposing to levy a special 1 percent general excise tax on businesses that sell real property.
The proposed tax, which would take effect July 1 and sunset after five years, would be on the gross proceeds of a sale, minus a real estate salesperson’s commission and conveyance tax, and would apply to both commercial and residential properties.[...]
Real estate transactions currently are taxed by the state through the conveyance tax, which already has been used as a source of extra revenue.
Lawmakers last year took a three-tiered tax on real estate conveyances that stopped at 30 cents per $100 for purchases of $1 million or more and created a seven-tiered system that tops out at $1 for every $100 of purchases of $10 million and above for commercial properties.
I'm not sure what policy justification there is to soak real estate conveyances in such a way. Our friend Lowell Kalapa of the (unrelated but usually spot on) Tax Foundation of Hawaii had this to say:
Inasmuch as this bill probably is aimed at large landowners/developers, the cost of the tax will exacerbate what is already a very expensive market for real estate.
In addition, if this measure is adopted, it may open the door for other general excise tax impositions and additional rates which may result in a convoluted general excise tax system.
Tax Foundation President Scott Hodge appeared on Fox News Channel's "Your World with Neil Cavuto" on February 4, 2010 to discuss what lessons Washington can learn from a state like New Jersey, which has seen the out-migration of wealth in recent years due in part to high taxes.
District of Columbia officials have proposed a series of regulations clarifying how the 5-cent bag "fee" (actually a tax) operates, from the Washington Post:
The proposed regulations, which will become law following a 30-day public comment period, state the tax will apply to bakeries, delicatessens, grocery stores, convenience stores that sell food, restaurants, street vendors that sell food, liquor stores as well as "any business that sells food items."
The tax also will apply to stores that sell both food and non-food items, such as many pharmacies, regardless of whether a customer purchases food or another item.
But the new regulations, published in the D.C. Register, state the tax will generally not apply to bags used to package goods inside food stores.
For example, a customer cannot be charged for bags used inside a store to "package bulk items, such as fruit, nuts, grains or candy."
Bags that package newspapers, prescription drugs, laundry or dry cleaning are also exempt, as are "paper carryout bags provided to a customer to take away food from a restaurant."
2. Tax Policy Blog: Don't be deterred by the bland name. The Tax Foundation, a nonpartisan tax-research group based in Washington, presents changing tax policy on the federal, state and local levels in a digestible style. Though they highlight the work of scholars, the posts are written to appeal to a neophyte. The site recently, for example, waded through the reactions of experts and columnists to the tax proposals mentioned in President Obama's State of the Union Address. Prior to the speech, the site also posted questions to ponder in anticipation of Obama's proposals on middle-class taxes, replete with current tax stats, of course.
The cold, hard fact is this - according to a report by the Tax Foundation, a nonpartisan research organization, state tax incentives for film production are out of control. The report criticizes such giveaways and argues they fail to spur economic growth or raise tax revenue.
Despite the benefits frequently trumpeted by boosters, these refunds come at a great cost. If we continue allowing filmmakers to qualify for subsidies covering up to 42 percent of their in-state production costs, experts estimate that Michigan's film incentives will mean a net loss of $98 million this year and another $120 million in 2011.
Senator Cassis is right on the mark. While supporters argue that movie production incentives will drive the rich and famous to Michigan and boost the state's economy, in truth, that is not happening. Movie production incentives fail to encourage economic growth and fail to raise revenue.
Senator Cassis is wise to confront this issue. Hopefully Michigan legislators will follow suit and decide to revamp their law on movie production incentives. As we state in our Special Report, "Until then, filmmakers will continue to enjoy the bounty while taxpayers are left with the bill."
The day after the bill was introduced representatives from various film industry organizations showed up at a House Economic Growth Committee hearing to beg lawmakers not to repeal their special tax break. This provides a lesson that helps answer the question of why many tax expenditures are so hard to get rid of. The benefits are concentrated within a relatively small pool of individuals or businesses, in this case mostly the filmmakers, that will fight tooth and nail to keep their carve-outs, while the costs are dispersed among the rest of the taxpayers who individually are not likely to have a large incentive to fight the special interests. Hopefully Iowa's lawmakers have the rest of the taxpayers in mind and will repeal the film tax credit.
In Iowa, a day after the introduction of a bill (SF 2118) that would abolish the state's corrupt film credit program, the legislature's House Economic Growth Committee heard testimony from the film industry, which has a different solution: make the credit bigger.
Elizabeth Carvlin at State Tax Today (subscription) is reporting that film industry leaders suggested capping the credit at $75 million per year instead of the current $50 million, which film production companies went through all too quickly on purchases such as a Mercedes and a Land Rover that film producers kept for themselves.
Roth CPA's Joe Kristan has been on top of this story, and for an overview of how rapidly these unjustifiable tax giveaways have spread from state to state, see our recent Tax Foundation Special Report by Will Luther.
My colleague Joe Henchman, the Tax Foundation's Tax Counsel and Director of State Projects, is submitting written testimony today to the House Judiciary Commercial and Administrative Law Subcommittee on the Business Activity Tax Simplification Act, which would establish a clear physical presence standard to apply to online retail transactions and prevent burdening interstate commerce.
The subcommittee is scheduled to host a hearing titled "State Taxation: The Role of Congress in Defining Nexus" today at 11 a.m.
"Our written testimony makes two broad points," Henchman writes. "First, the physical presence standard limits destructive and likely unconstitutional state efforts to export tax burdens, efforts that stifle interstate commerce and harm economic growth. Second, a uniform physical presence standard would decrease transaction costs for interstate commerce, especially small businesses using mail and the Internet."
South Dakota took the crown this year in the annual State Business Tax Climate Index. After a number of years of finishing second to Wyoming, South Dakota had the best business tax climate in the nation. Perhaps owing to their humble nature, South Dakota seems to have its minds made up to not repeating their performance. HJB 1002 if passed would impose a 6% corporate tax. A tax of this sort would destroy South Dakota's Index score as well as send wrong message to business.
While it might be hard to say why a democrat lost the Massachusetts senate seat, it's easy to know why South Dakota would fail in terms of a business friendly environment.
Ald. Toni Preckwinkle captured the Democratic nomination for board president by a 2-1 ratio over her nearest rival in a low-turnout primary election that still produced a decisive referendum on the controversial tenure of President Todd Stroger.
Chosen by Democratic leaders four years ago to replace his ailing father, John, in the general election, Stroger found himself under near-constant fire for his combative style, a penny-on-the-dollar sales tax increase and his decisions to hire friends and relatives.
"The message is clear," Preckwinkle told her cheering supporters shortly after 9 p.m. "Now is the time to repeal the Stroger sales tax. Now is the time to end patronage."[...]
All three Stroger rivals [had] pledged to roll back the remaining portion of the tax hike, after a restive County Board last year cut the hike in half, with O'Brien vowing to do it immediately and the other two rivals over time.
Chicagoans are still paying Stroger's 10.25% sales tax rate, the highest big-city rate in the United States; a part-reduction to 9.75% takes effect on July 1, 2010. Maybe sooner now?
Local governments' efforts to collect discriminatory taxes from online travel services amount to a revenue grab from out-of-staters and ultimately harm interstate commerce, according to a new Tax Foundation report. Read Tax Foundation Special Report, No. 175, "Cities Pursue Discriminatory Taxation of Online Travel Services."
City officials in 22 states have, with limited success, sought to reinterpret hotel occupancy taxes to apply to amounts paid by consumers for online travel booking services (such as Expedia, Orbitz and Priceline).
The key findings:
• Local officials in 22 states have sought to reinterpret hotel occupancy tax ordinances to apply to amounts paid by consumers for online travel booking services, with limited success.
• In traditional hotel transactions, travelers book a room and pay a hotel tax (and sometimes also sales tax) based on the amount they pay the hotel. Online travel companies facilitate such transactions between consumers and hotels, and keep part of what the consumer pays as a service fee.
• Online travel companies do not own or operate hotels and generally do not resell hotel rooms as wholesalers, placing their facilitation services outside the proper scope of hotel occupancy taxes. There is no evidence that companies collect taxes and "pocket" them.
• Taxation of retail services is justifiable, but when cities tax only Internet-based travel facilitation services (and do so at a high rate), such discriminatory taxation suggests that the real motivation is to shift tax burdens to non-residents, which burdens the free flow of interstate commerce.
• Cities should not expect easy revenue from pursuing such claims but rather extended litigation and a negative impact on tourism.
• Proposed federal action to establish hotel occupancy as the proper base would be in line with existing precedents, maintain settled tax practices, and prevent damage to the national economy. Such action would not jeopardize currently collected state and local hotel tax revenue.
A couple of North East states may be starting to think a little clearer on film tax credits. Among other proposals, Rhode Island Gov. Don Carcieri has proposed eliminating the state's credit in the 2010-2011 budget. We applaud Gov. Carcieri for this sensible move. This would save the state $1.9 million annually.
Massachusetts Gov. Deval Patrick has come out with a less ambitious proposal to temporarily limit the state's tax credit program to $50 million for each of the next two fiscal years, saving the state $75 million a year. Patrick apparently believes that funneling taxpayer money to film producers and movie stars is great for the state, except when the budget is tight. But if the credit pays for itself, as is so often claimed of film tax credits, how can Massachusetts afford to not keep the credit? Don't be fooled by these broken window fallacies, the seen versus the unseen; the answer is that the credits don't pay for themselves.
Film credits have become so popular among lawmakers that it has essentially created a national bidding war between states. As film credit programs spread to new states and increase in value, lawmakers must keep bumping up their state's credits to even maintain the same level film production in their state. There is no real job creation going on, just jobs being shifted from one state to another. The same is true for the often cited economic benefits flowing into the small towns where filming takes places. The big winners here are film makers and movie stars, who have learned to leverage states against one another to maximize their subsidy. As the video at the Massachusetts Film Office so eagerly points out, it feels great to have movie stars hobnobbing around your town. But when you get down to the economics, film credits are a bad idea.
A much better policy would be to eliminate the credit altogether and instead cut taxes for all Massachusetts businesses regardless of how glamorous their industry may be. Check out our Special Report No. 173 for more information on film incentives.
Phoenix, AZ, passed a measure to begin taxing groceries in order to fill their budget gap. Groceries battle property as one of the most despised forms of taxation. The arguments that are used against grocery taxes are usually based on the regressive nature of the tax and on the concept of taxing a necessity. There are some counter arguments for taxing groceries. A small percentage discount given to everyone seems like a rather inefficient way to deliver aid to the poor. A specific program targeted to those in need would be a more efficient method. Grocery taxes are also a stable source of revenue. The current economic recession has shown states that depend on unstable sources of revenue have ended up in financial crisis.
Disclaimer: An assumption has been made in the analysis. The increase in the taxable base will be used to lower the overall rate. The lower overall rate on all products will reduce the economic distortions cause by the tax initially.
As Gerald blogged yesterday, Reuters posted and then retracted a story on middle-class tax increases. It suggested that all of the Bush tax cuts might expire at the end of the year, imposing a huge tax hike on low-, middle- and upper-middle income people.
The White House weighed in immediately because the Administration considers itself to be super-solicitous of the "middle class" (however defined). No one should be surprised that the Administration is apoplectic over a wire story that suggests it might let the entire package of Bush tax cuts expire, most of which benefitted people making less than $250,000, the threshold chosen by the Administration as the demarcation between those who deserved their Bush tax cuts and those who didn't.
The Administration's outrage is a bit overdone, though, for three reasons:
Democrats didn't support most of the middle-class tax cuts in 2001. The only Bush tax cut provisions that enjoyed any Democratic Party support in 2001 were the 10% rate and the doubling of the child tax credit from $500 to $1,000. In running for president, Obama made the political calculation that the middle- and upper-middle income tax cuts (marriage penalty relief, cutting the 28% rate to 25%, and cutting the 31% rate to 28%) were unassailable; hence the $250K threshold promise. (Throw AMT relief in that basket.) In his progressive heart, Obama can't really believe those cuts were virtuous. And now the Administration is desperate for big new sources of tax revenue, so there is suspicion that middle-class tax hikes are coming. As many commentators are pointing out, the new fiscal commission is exactly the vehicle that could deliver those tax hikes in a way that would look as if the President were being forced to do it, that he didn't break his tax promise willingly.
Bush's middle-class tax cuts were huge. Even now the President uses the phrase "mostly for the wealthy" in describing the Bush tax cuts as a package, which is false (at least by his own, new definition of wealthy -- over $250K). Even the most anti-Bush tax think tank in town, Citizens for Tax Justice, can't come up with numbers that portray the tax cuts for people over $250K as reaching 50% of the whole package.
So many shocking things have happened that rational expectations are shaken. No one thought this Congress and Administration would allow the estate tax to reach full repeal, as it did on January 1, a month ago. But they did, violating every premise of progressive tax policy. And quite aside from politics, it's a nightmare for executors. Following that shocker was the health bill train wreck, resulting in a level of political and fiscal uncertainty that is almost unprecedented for a non-crisis situation.
So why couldn't the entire package of Bush tax cuts expire, as the Reuters article suggested? Many provisions in the new Budget are totally unrealistic -- everyone knows they won't happen -- yet the revenues are tallied right along with the realistic ones.
All that said, the expiration of the Bush tax cuts for people over $250K are realistic expectations, and the Reuters article should have noted that the President's new Budget is clear about which provisions it currently intends to allow to expire.
"The IRS has been handling more calls than they have ever handled before. They are actually -- with the staffing that they have -- they are doing better in the sense that they are handling more calls. But the problem is that we are getting more calls. There's more demand for our live assistance. There's more demand for our correspondence. People are communicating with us. So my recommendation - partly why I made this the number one most serious problem is because bad things happen to taxpayers if they can't get through to the IRS."
She also discusses aggressive enforcement procedures that often encourage a cycle of noncompliance among taxpayers without producing revenue. Over the last 10 years, the number of levies issued by the IRS against taxpayers increased by 1600 percent and the number of liens filed increased by 475 percent. This is compared to overall inflation-adjusted collection revenue in the same period, which declined by 7 percent.
The popular Drudge Report website is linking to a Reuters article claiming that Obama's budget outlined on Monday would amount to "backdoor tax increases for middle-class families." Here's how the article starts off:
The Obama administration's plan to cut more than $1 trillion from the deficit over the next decade relies heavily on so-called backdoor tax increases that will result in a bigger tax bill for middle-class families.
In the 2010 budget tabled by President Barack Obama on Monday, the White House wants to let billions of dollars in tax breaks expire by the end of the year -- effectively a tax hike by stealth.
While the administration is focusing its proposal on eliminating tax breaks for individuals who earn $250,000 a year or more, middle-class families will face a slew of these backdoor increases.
The targeted tax provisions were enacted under the Bush administration's Economic Growth and Tax Relief Reconciliation Act of 2001. Among other things, the law lowered individual tax rates, slashed taxes on capital gains and dividends, and steadily scaled back the estate tax to zero in 2010.
If the provisions are allowed to expire on December 31, the top-tier personal income tax rate will rise to 39.6 percent from 35 percent. But lower-income families will pay more as well: the 25 percent tax bracket will revert back to 28 percent; the 28 percent bracket will increase to 31 percent; and the 33 percent bracket will increase to 36 percent. The special 10 percent bracket is eliminated.
What the article does not mention is that Obama's budget extends all of the Bush tax cuts for single returns making less than $200,000 and married returns making less than $250,000. Whatever you think of Obama's proposed budget and tax policies, this omission in an article entitled "Backdoor taxes to hit middle class" is either evidence of intentional deceit or terrible reporting.
The reporter also seems to not fully understand the alternative minimum tax. She writes:
Millions of middle-class households already may be facing higher taxes in 2010 because Congress has failed to extend tax breaks that expired on January 1, most notably a "patch" that limited the impact of the alternative minimum tax. The AMT, initially designed to prevent the very rich from avoiding income taxes, was never indexed for inflation. Now the tax is affecting millions of middle-income households, but lawmakers have been reluctant to repeal it because it has become a key source of revenue.
Without annual legislation to renew the patch this year, the AMT could affect an estimated 25 million taxpayers with incomes as low as $33,750 (or $45,000 for joint filers). Even if the patch is extended to last year's levels, the tax will hit American families that can hardly be considered wealthy -- the AMT exemption for 2009 was $46,700 for singles and $70,950 for married couples filing jointly.
First off, Congress almost always passes an AMT patch retroactively, not in advance of the tax year. And to say that lawmakers have been reluctant to repeal it because it's a key source of revenue, such a statement is just wrong. Every year, lawmakers have patched it, and the current AMT revenue only amounts to about 2 percent of total income tax revenue, or less than 1 percent of total federal revenues...far from a "key revenue source." And the last sentence is just misleading as it implies a family making $48,000 is going to get hit by AMT without explaining that a tax return pays the higher of its alternative minimum tax and ordinary income tax.
Update: According to a new link on Drudge, Reuters has pulled this story.
The Colorado General Assembly is currently considering a slew of tax increases. The proposals, mostly targeting specific products, are a result of low revenue collections over the last couple of years combined with the political unpopularity of broad based tax increases. But there are problems with many of the proposals. Several of the bills would extend the retail sales tax to business-to-business transactions, which is universally acknowledged by tax experts as an economically damaging policy. Lawmakers are also trying to pass an "Amazon tax."
Read more about the proposals in Fiscal Fact No. 208, "Handful of Proposals Would Push Colorado Away From the Proper Tax Base".
Taxes should be used to raise revenue for essential government services, not punish certain taxpayer and reward others. If the services that Colorado is providing to its citizens are not worth paying for with broad-based taxes, then maybe they should reconsider their spending priorities.
In his State of the State address on January 26, Wisconsin Governor Jim Doyle (D) trumpeted his progress on lowering Wisconsin residents' state-local tax burden:
Eight years ago, I made a campaign pledge to get us out of the top 10 highest taxed states in the nation. People scoffed, because when I became Governor, we were ranked 4th in the country in state and local taxes. And we had not been out of the Top 10 in 22 years.
But year after year, we worked hard to hold the line. And I've lived up to my pledge. Today we rank 15th. And when you look at what we pay in both taxes and fees, we rank 24th. Our tax ranking has improved for six consecutive years - unprecedented in state history.
When Governor Doyle took office, Wisconsin's state-local tax burden was indeed 4th highest in the country, and it has gone lower since. But it's 9th, not 15th, and that's a rise from 10th in 2007. In 2002, state-local taxes consumed 10.5% of income in Wisconsin; in 2008, it was 10.2%. So that is a reduction, just not as much of a reduction as Governor Doyle claims.
As Pres. Obama releases his budget Monday, you can be assured of one thing: Republicans will take aim at the president for the massive deficit projections that the president's budget will include.
Just like Democrats did when Pres. Bush released his annual deficit-ridden budget every February, Republicans will talk a good game about the huge deficits that the country is facing. But let's look at this seriously for a second. While the deficit has grown in part as a result of Obama's policies (most notably the stimulus bill), there would still be significant deficits had Obama done nothing, and there are massive deficits on the horizon having little to do with the stimulus bill.
If Republicans want to be taken seriously on the deficit issue by anybody who actually understands the reality of the fiscal situation of the government, they have to answer yes to one or more of the following questions:
(1) Do you support reducing spending on Social Security? (2) Do you support reducing spending on Medicare? (3) Do you support reducing spending on national defense? (4) Do you support raising taxes?
As my former colleague Josh Barro pointed out on his Twitter page, "the GOP position of no new taxes, no Social Security cuts, no Medicare cuts, and no Defense cuts is fantasyland budgeting."
Regarding the Social Security option, last week when the Senate debated the existence of a fiscal task force, every Republican in the Senate supported the Baucus Amendment, which read: "Notwithstanding any other provision of law, it shall not be in order in the Senate or the House of Representatives to consider any bill or resolution pursuant to any expedited procedure to consider the recommendations of a Task Force for Responsible Fiscal Action or other commission that contains recommendations with respect to the old-age, survivors, and disability insurance program established under title II of the Social Security Act."
Regarding the Republican position on Medicare, GOP Chairman Michael Steele said that issue's off the table too, as he wrote in a Washington Post op-ed back in August: "That is why Republicans support a Seniors' Health Care Bill of Rights, which we are introducing today, to ensure that our greatest generation will receive access to quality health care. We also believe that any health-care reform should be fully paid for, but not funded on the backs of our nation's senior citizens."
Regarding Republican cuts to national defense, there's about a 1 in a 100 chance of that happening.
Regarding Republicans raising taxes, that's about a 1 in a million chance.
State Controller John Chiang issued a stern warning Friday about California's cash reserves, telling legislative leaders and Gov. Arnold Schwarzenegger they must act on nearly $9 billion in budget cuts the governor is seeking by March — or the state will run out of cash to pay its bills.
Without making those cuts — which Chiang says will pump $1.3 billion into the state's checking account — California would be broke by April 1, no fooling.
The state wouldn't climb back to what's considered a safe level of cash on hand, $2.5 billion, until later that month, when tax revenues are expected to begin flowing into Sacramento.
Almost forgot that today is Earned Income Tax Credit Awareness Day, as proclaimed by the IRS. From the IRS statement:
An expanded Earned Income Tax Credit (EITC) means larger families will qualify for a larger credit, offering greater relief for people who struggled through difficult financial times last year, the Internal Revenue Service said today.
The IRS and the Treasury Department marked EITC Awareness Day as their partners nationwide worked to highlight the availability of this important tax credit. EITC, which is in its thirty-fifth year, is one of the federal government's largest benefit programs for working families and individuals. Last year, nearly 24 million people received $50 Billion in benefits. The average credit was more than $2,000.
"As part of the economic recovery efforts, there have been important changes to expand EITC to benefit taxpayers," said IRS Commissioner Doug Shulman. "Today, more than ever, hard-working individuals and families can use a little extra help. EITC can make the lives of working people a little easier."
Eligibility for EITC depends on earned income and family size, among other tests. However, single people and childless workers also are eligible, although for smaller amounts. For tax years 2009 and 2010, the American Recovery and Reinvestment Act created a new category for families with three or more children and expanded the maximum benefit for this category.
To qualify for the EITC, earned income and adjusted gross income (AGI) for individuals must each be less than:
$43,279 ($48,279 married filing jointly) with three or more qualifying children
$40,295 ($45,295 married filing jointly) with two qualifying children
$35,463 ($40,463 married filing jointly) with one qualifying child
$13,440 ($18,440 married filing jointly) with no qualifying children
The maximum credit for tax year 2009 is:
$5,657 with three or more qualifying children
$5,028 with two qualifying children
$3,043 with one qualifying child
$457 with no qualifying children
The White House released a statement on it as well, available here.
Regardless of your position on the EITC, it is extremely complicated. In some cases, that is necessary for all the "safeguards" that Congress and the IRS must impose so as to avoid fraud. That being said, the instruction booklet for EITC is 68 pages.
The Mackinac Center in Michigan has this video describing more saga with Michigan's film tax incentive program, where Michael Moore has criticized corporate welfare but will receive it for the making of his recent film, "Capitalism: A Love Story."
Michigan features greatly in our new report on film tax credits, explaining how they are ineffective at economic development. Read it here. Michigan has one of the most generous film incentive programs, using substantial public resources to attract the industry to the state.
Also relevant to the Michigan film tax credit question is the appropriateness of using taxpayer dollars to subsidize viewpoints many of them probably disagree with.
The Tax Policy Blog is the official weblog of the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937. Our economists welcome your feedback. If you would like to send an e-mail to the author of a blog post, please click on that person's name to locate his or her e-mail address or visit our staff page here.
Disclaimer: All views expressed on the Tax Foundation’s Tax Policy Blog are those of the individual authors, and do not necessarily represent the views of the Tax Foundation, its Board of Directors, or its financial contributors. The Tax Foundation makes no representation concerning the views expressed, and does not guarantee the source, originality, accuracy, completeness or reliability of any statement, information, data, finding, interpretation, advice, opinion, or view presented.
