Home Buyers Rushing to Meet Sales Tax

Some home buyers who rushed to sign sales contracts to meet an April deadline for an up to $8,000 tax credit, may not get their money after all. Deadline to claim a federal tax credit as banks and title companies deal with a crush of closings.

Home buyers hoping to get the tax credit have until June 30 to close their deals. But the U.S. Senate failed to pass a bill that contained an amendment that would have extended that deadline to Sept. 30. The real-estate industry stepped up calls for an extension of the closing deadline in recent weeks amid concerns that some buyers might miss the deadline after a last-minute home-buying rush led to bottlenecks at banks, appraisal firms and title insurers. The Post-Standard last week said they have clients who won’t close before the deadline.

The American Recovery and Reinvestment Act of 2009 offered first-time home buyers an $8,000 credit for purchases made before Dec. 1, 2009. Then Congress passed a second law, the Worker, Home-ownership and Business Assistance Act of 2009, which extended the deadline to April 30 and added a $6,500 credit for repeat home buyers. Buyers had to close their deal by June 30. But a Senate bill that included the extension failed to secure enough votes last week and has been shelved.

The National Association of Realtor said that as many as 180,000 contracts that were signed by April 30 might miss the June 30 closing deadline. But it is unclear how many of those sales won't happen as a result of missing the tax credit.

New York’s Sales Tax on clothes to Close Budget

New York's leaders are studying the sales tax on clothing and other taxes and fees to balance a budget they are still drawing up, after failing to meet an April 1 deadline according to the Associated Press.

Two state officials said one of the so-called "revenue raisers" under discussion would increase the state's 4 percent sales tax on clothing. One of the officials said the proposal includes three or four tax-free clothes shopping periods each year, including before school begins in the fall and at the December holidays. Purchases of footwear and clothing under $110 are currently exempt. The officials spoke on the condition of anonymity because of the sensitivity of the talks.

Democratic Gov. David Paterson told reporters two specific taxing ideas increases in the rate on online reservations and rental cars weren't under discussion, but when asked if a clothing sales tax proposal was being discussed he said he wouldn't comment on ideas "piece by piece."

Legislative leaders will soon brief rank-and-file lawmakers on details of the talks. Lawmakers would be forced then to accept Paterson's budget provisions as part of an emergency spending bill or shut down government. The budget so far includes raising the cigarette tax to the highest in the nation. In addition, Paterson's proposal to cap all local property taxes among the nations highest appears unlikely at this point.

Cigarette Tax Hike in New York is good for Public Health

Cigarette taxes in New York would jump by $1.60 a pack under a tentative deal reached between Gov. David A. Paterson and legislative leaders, which would give New York the nation’s highest state cigarette taxes.

The average price in New York City, which imposes its own cigarette taxes, will be even higher, nearly $11 a pack. Those who prefer other tobacco products will also be forced to pay significantly more. The tax on smokeless tobacco will more than double, to $2 an ounce from 96 cents an ounce, starting on Aug. 1. And the wholesale tax on cigars, dips and other kinds of tobacco will rise to 75 percent from 46 percent.

The legislation will also include a plan to begin collecting taxes on cigarettes sold off the reservation by Indian tribes in New York, an issue that has provoked confrontations between State Police officers and protesting tribe members in years past.

The proposal would generate $440 million in revenue this year, helping close a state budget gap estimated at over $9 billion. But it is unclear whether there are enough votes to approve the plan in the State Senate, where Republicans have threatened to vote against any emergency budget bill that includes tax increases and some Democrats oppose efforts to collect taxes on cigarettes sold by the tribes.

“I think it’s wonderful,” said Peter Slocum, an official with the American Cancer Society. “Increased cigarette taxes have been one of the major successful public health interventions in the last decade in driving smoking rates to record lows in New York City and a lot of other parts of the country, too.”

Oil and Gas Industry Debated on Tax Break

The oil and gas industry measure by Senator Bernie Sanders, a Vermont independent, failed to muster even a simple 51-vote majority, although 60 votes were needed to pass it.

It was offered as an amendment to a bill that would extend unemployment insurance for hundreds of thousands of jobless workers whose benefits ran out last month and also renew a set of popular business tax breaks. The bill faces a key procedural vote on Wednesday, but it appears doubtful that Democratic leaders will be able to muster the 60 votes needed to advance the bill to a final vote.

Only 35 senators backed the Sanders' amendment as a number of Democrats joined the Republican opposition to defeat it. Sanders argued that big oil companies making billions in profits do not deserve the tax breaks at a time when the nation is facing record budget deficits and rising debt.

"With a record-breaking $13 trillion national debt and an unsustainable federal deficit, the last thing we should be doing is giving tax breaks to oil and gas companies that have been making enormous profits," Sanders said.

Opponents argued that removing the breaks for oil and gas drilling would hurt small producers as well as big oil companies. Meanwhile, the Senate passed a measure offered by Democratic Senator Al Franken that would establish a homeowner’s advocate office to help people having problems getting mortgages adjusted in the Home Affordable Modification Program.

The tax extenders bill would add about $80 billion to the deficit over 10 years, according to the Congressional Budget Office. The bill's $126 billion in spending would be offset in part by the increase in taxes on investment fund managers. The so-called carried interest proposal would have fund managers pay the ordinary income tax rate of 35 percent on a majority of earnings from managing investors' money. They now pay a 15 percent capital gains tax rate on those earnings.

The Senate bill would tax 65 percent of fund managers' income at the higher rate. A tougher version passed by the House of Representatives would tax 75 percent at ordinary income rates.

Bottle Tax Proposed by Baltimore City Council

It's mind-blowing that City Council is talking about taxing the energy used by Baltimore's dwindling base of manufacturers as an alternative to the "bottle tax" of 4 cents a drink. Baltimore had 13,000 factory jobs in April the least ever recorded since the Labor Department began keeping track. That's down from 27,000 in 2000 and 43,000 in 1990.

The Baltimore City Council has endorsed more than $43 million in new or higher taxes on items including income and telephone lines, largely adopting a wrenching budget-balancing plan laid out by Mayor Stephanie Rawlings-Blake.

The tax of 4 cents per container, exempting milk and fruit juice bottles, was proposed by Mayor Stephanie Rawlings-Blake in April as a way to help raise $50 million in new tax revenue to help eliminate a looming deficit and avoid city layoffs and cuts to fire and police operations. It is estimated to bring in $11.4 million in new revenues annually.

A deposit on bottles would make a lot more sense, though it wouldn't achieve the purpose of the tax, which is to raise revenues for the city. Instead, a deposit would raise revenues for citizens and nonprofits while augmenting the efforts already being made to recycle glass and plastic.

Extended Holiday tax Massachusetts

Massachusetts lawmakers appear to be preparing for an extended holiday from the sales tax holiday.

With marginal improvements seen in state revenue and questions over whether a badly-needed influx of federal Medicaid funds will come through, the Legislature isn’t in any rush to approve a sales tax holiday bill this year.

This is around the time of the year when store managers in Massachusetts start wondering if they’re going to need to get ready for a sales tax holiday weekend in August. There are usually some necessary preparations, if even just to make sure the store is properly staffed for the throngs of shoppers that will (hopefully) show up.

The Legislature and Gov. Deval L. Patrick should consider calls to hold a tax holiday in August but only if revenues stabilize and the state can justify forfeiting as much as $15 million in taxes. But the Retailers Association of Massachusetts thinks conditions are more favorable this time around for the popular holiday. The trade group revived its annual June ritual of asking its membership to call lawmakers and urge them to approve a tax holiday. The group wants the Legislature to set aside Saturday, Aug. 14, and Sunday, Aug. 15, for the sales-tax-free event.

Last August, retail sales fall an average of 30 percent below August 2008 for Retailers’ Association of Massachusetts members, following five years of growth for the month, said the group’s president, Jon Hurst.

Baltimore City Council proposed new energy tax

A City Council committee approved more than $15 million in new taxes and announced a deal with hospitals and universities that will net the city another $20 million over the next six years.

But the taxation and finance committee delayed action on a proposal to apply the city's energy tax to industrial businesses, over what its chairwoman, Councilwoman Helen Holton, described as "a technical issue."

During a session devoted to finding new revenue to narrow the city's $121 million budget gap before the end of the fiscal year on June 30, Holton announced that city officials had reached an agreement with hospitals and universities on a payment in lieu of taxes, or PILOT, that would take the place of a proposed $350 annual fee for beds.

Under the terms of the deal, which was signed by the presidents of the Maryland Hospital Association and the Maryland Independent College and University Association, the nonprofits would pay the city $5.4 million for the first two years and smaller payments in the next four.

According to a copy obtained by The Baltimore Sun, the deal would protect hospitals and universities from increases to telecommunications and energy tax rates over the six-year period, although they would experience rate increases this year. The committee voted to increase hotel room taxes, parking rates, an excise tax on billboards and the energy tax for residents, nonprofits and nonindustrial businesses.

The same cannot be said of the major new tax proposal City Council President Bernard C. "Jack" Young has put on the table this week to replace most of the revenue from the beverage tax. Ms. Rawlings-Blake proposed increasing energy tax rates for residential, commercial and nonprofit users. Mr. Young is proposing adding industrial users to the mix on the grounds that it's only fair that they, too, shoulder some of the burden.

But because of the vastly greater amount of energy used by industry, such an increase would not be equitable. Consider this: Increasing the rate for all commercial and residential customers by 15 percent and increasing the rates for nonprofits by more than 50 percent would raise about $8.2 million; adding industrial users would, by itself, raise $9.1 million a year. That's a big burden spread among a small number of firms.