The Tax Man Cometh, But Sometimes Collects Less
By Renu Zaretsky :: June 30th, 2014
The FATCA wait is over. The Foreign Account Tax Compliance Act goes into effect tomorrow. It is designed to prevent tax evasion by US citizens with more than $50,000 held in foreign banks, investment funds, and other institutions. China is the latest nation to join about 80 other jurisdictions in the implementation and enforcement of the US law.
Can super-rich residents boost an island’s economy? In an attempt to come back from the recession, since 2013 US territory Puerto Rico has allowed US citizens to pay minimal or zero taxes if they become residents for at least 183 days a year. As of now, some 200 traders, private equity moguls, and entrepreneurs have grabbed the deal. But “you are dealing with one of the lowest-income populations in the US on a per capita basis. How much does it really help to import billionaires?” asks TPC’s Kim Rueben.
Tax revenues fall short in Wisconsin. The state had expected growth of 1 percent over the past year, but instead, revenues fell by 0.4 percent. Republican Governor Scott Walker cut the state’s income tax brackets for the 2013-2015 budget. The state’s income taxes dropped 4.6 percent, while revenue from sales tax grew by 5.2 percent and corporate income tax grew by 3.2 percent.
Blame some of it on the cliff? Pennsylvania’s GOP blames that state’s $213 million decline in April income tax payments on the deal made between President Obama and Congress in early 2013. To avoid falling off the fiscal cliff, lawmakers agreed to boost rates on capital gains and dividends earned in 2013. Many wealthier taxpayers reported income from those sources with their 2012 tax returns to take advantage of the lower 2012 rate. Pennsylvania is one of 33 states with a broad-based personal income tax that saw income tax revenue fall from January to April, 2014 compared to the same period last year.
Kansas can’t blame the cliff entirely. The state projected $651 million from personal income tax in 2013, but collected just $369 million. State income tax cuts that went into effect in 2012 favored certain kinds of income as part of Republican Governor Sam Brownback’s effort to boost job growth. Yet hiring has been modest. Despite big spending cuts, the state’s budget woes have been something to behold.
NASBO’s tracking all state budgets. The National Association of State Budget Officers website has updated its interactive tool to track each state’s fiscal plan. Something to bring to the beach?
Congress is not in session this week. The Daily Deduction will return to its regular schedule next week, July 7.
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