Tax On Funk Food

In an effort to alter bad eating habits of its citizens, the Hungarian government plans to bring in “tax on hamburgers.”

“Ministry of studying the likely effects of introducing taxes called” hamburger tax ‘, “said economics minister Gjergi Matolči on the site of the Assembly.

“Psychoanalysis of dietary habits in recent years and their effects on health shows that eating too much fatty and salty food reasons more problems,” noted the minister.

“To stop this process, various ministries are studying taxes that could be introduce, their economic effects, but it is still unclear which products will be to relate, and how to used the profits from these taxes,” he added.

If being a “hamburger tax”, a fast food restaurant chains will be able to protest to him as a discriminatory measure, since the Hungarian cuisine is not easy.

IRS Announces VCAP Relief from Debt Extinguishment for Certain Issuers of Tax-Exempt Bonds

Internal Revenue Service (“IRS”) Announcement 2011-19 provides relief from debt extinguishment for certain issuers purchasing and holding their own tax-exempt securities under the Tax Exempt Bonds Voluntary Closing Agreement Program (“TEB VCAP”).

Notice 2008-41, modified by Notice 2008-88, and extended by Notice 2010-7 to December 31, 2010, provided temporary rules allowing state and local governmental issuers to purchase and hold their own tax-exempt obligations for temporary holding periods. This rule prevented extinguishment of the purchased obligations under § 103 and §§ 141-150 of the Internal Revenue Code (“Code”). These temporary rules provided relief from liquidity constraints in the tax-exempt bond market during the financial crisis.

For various reasons, some issuers that purchased their bonds under the temporary rules were unable to resell their bonds by December 31, 2010. Other issuers are experiencing an ongoing need to purchase and hold their own tax-exempt obligations due to certain financial challenges.

Closing agreements executed under this program provide that the extinguished bonds are treated as remaining outstanding for purposes of § 103 and §§ 141-150 beginning from the later of January 1, 2011, the expiration of the temporary rules, or the date the issuer purchases its obligations.

The closing agreement will require the issuer to:

(1) submit a resolution of its intent to resell or currently refund the extinguished tax-exempt bonds no later than 180 days after the closing agreement is signed;

(2) submit representations or an unqualified bond counsel’s opinion the bonds are outstanding legal, valid and binding obligations of the issuer under State law and, if treated as outstanding under the closing agreement, will qualify as tax-exempt obligations of the issuer under § 103 of the Code;

(3) pay a fee based on the formula described in the Announcement. The TEB VCAP requests are due no later than December 31, 2012 under the operating procedures described in section 7.2.3 of the Internal Revenue Manual.

Simplifying federal tax code will decrease fraud

USA TODAY's article "Inmates stole $39 million from the IRS in 2009" serves to highlight that the wealthy are not the only ones trying to get extra money back, avoid taxes or pay less than their compulsion under the current federal tax system. Income tax evasion and fraud cut across all income tax brackets.

A complex system of exemptions, deductions and credits creates a state of mind that others aren't paying their fair share, so why should I? It creates a false insight of tax evasion and fraud as victimless crimes. But the victims are the countless taxpayers who pay and file their taxes in a timely, precise manner. They are supporting financially all the tax cheats.

It is time to make simpler the tax code and stop using it to advance political agendas or to accomplish social engineering.

Every year, I pay my Pennsylvania income tax, and I am reminded how simple and fair it is. Take your income and increase it by the current tax rate, a flat 3.07%, and arrive at your tax obligation. Simple. There are very few adjustments, credits or exemptions. The system is fair. Low-income Pennsylvanians have their tax compulsions forgiven. For Pennsylvania retirees, Social Security and pension income do not count as taxable income.

By using the Pennsylvania income tax system, much of the fraud and abuse that occur with the current federal income tax system could be eliminated

Obama to recommend break for states on jobless aid

President Obama is expected to recommend easing the burden on states that on loan to provide jobless benefits during the economic downturn by allow them to postpone debt payments to the federal unemployment trust fund for two years.

The proposal in his upcoming 2012 budget is likely to be embraced by states frantic for help as they struggle to shore up budget shortfalls. But it is being disapproved of by congressional Republicans as a job-killer that will eventually inflict higher taxes on employers who pay the cost of most jobless aid.

Obama is likely to discuss the suggestion with Republicans on Wednesday, when House Speaker John A. Boehner (R-Ohio) and other House GOP leaders join him for lunch.

White House Press Secretary Robert Gibbs said the president thinks the steps future in his budget outline would reduce the burden on states providing jobless aid, and would give state officials time to "reduce what they offer and how they pay for it." Obama's budget is expected to be revealed Monday.

The proposal is not the only gauge to help states run the fiscal fallout from persistent unemployment, said one person familiar with the discussion.

Yet Republican leaders in the House and Senate have made it clear they have little interest in providing federal help to cash-strapped states, as Democrats did last year when they forbidden Congress. At the time, Obama approved a states' aid bill to keep teachers on the job and give medical care for lower-income residents.

"There will be no post security of the states," Rep. Eric Cantor (R-Va.), the House majority leader, said recently.

Thirty states owe almost $42 billion to the federal unemployment insurance trust fund, and the president's proposal would congeal for two years their interest payments to the federal government. Obama's plan would also halt the tax adds to that kick in automatically to pay it off.

Congressional Republicans say the Obama proposal would obstruct job growth by allowing states to eventually increase the tax on employers who pay for unemployment benefits.

IRS Announces 2011 Air Transportation Tax Rates

The Internal Revenue Service today announced the 2011 inflation adjustments to the excise taxes on air transportation.

Excise taxes apply to the domestic segments of taxable air transportation and to the use of international air facilities. The Airport and Airway Extension Act of 2010, Part IV, signed into law on Dec. 22, 2010, extends these excise taxes to air transportation that begins or is paid for no later than March 31, 2011.

These excise taxes are adjusted annually for inflation:
•    For 2011, the excise tax on the domestic segment of taxable air transportation is $3.70, unchanged from 2010.
•    The excise tax for 2011 for international flights that begin or end in the United States is $16.30, up from $16.10 in 2010.
•    The tax on use of international air facilities also applies at a reduced rate to departures of interstate flights that begin or end in Alaska or Hawaii. For 2011, the international air facilities tax on these flights is $8.20, up from $8.10 in 2010.

The new rates take effect Jan. 1, 2011.

Tax cut deal: What to expect in your paycheck

Come January, you'll start to see some changes in your paycheck, as the new Social Security tax break that President Obama signed into law Friday takes result. The measure, part of a sweeping package of tax cuts, will decrease the amount of money workers pay into Social Security in 2011, which will mean more take-home pay for many workers, although not for all.

Workers normally pay 6.2% on their first $106,800 of wages into Social Security. As a result of the tax cut deal passed by the House on Thursday night, they will only pay in 4.2% in 2011. So, for every thousand dollars in wages per paycheck up to the cap, one would only have $42 withheld (4.2% x $1,000), rather than $62 (6.2% x $1,000).

But given how late in the year it is, it may take employers a pair of pay periods to get everything working as it should. Employers typically need a few weeks to program and test their new payroll systems. The IRS just issued guidance on Friday morning, a few weeks later than normal because Congress waited until the very last minute to render its decision on tax policy for 2011.

"It could be the third paycheck of the year before you see a 'normal' check," said Scott Mezistrano, senior manager of government relations of the American Payroll Association.

Here's what that might mean:

Say you make $1,000 a paycheck. Your first paycheck in 2011 may have $62 withheld -- or $20 too much -- because your employers' payroll tax system has not been fully re-programmed, Mezistrano said. To compensate you for that, only $22 may be withheld in your second paycheck (4.2% x $1,000 - $20).

And, with any luck, by your third paycheck in 2011, everything will be set to the right dial. The IRS on Friday asked employers "to adjust their payroll systems as soon as possible but not later than Jan. 31, 2011. For any Social Security tax over withheld during January, employers should make an offsetting adjustment in workers' pay as soon as possible, but not later than March 31, 2011."

How much more they will net relative to this year depends on whether they qualified for the expiring Making Work Pay credit. That credit provided up to $400 to any working individual making less than $75,000 (or up to $800 for working couples making less than $150,000).

For instance, individuals who make $50,000 will see a bump of $1,000 in take-home pay, which is $600 more than the Making Work Pay credit they got this year. For a couple at that income level, it will mean $200 more than they received under Making Work Pay.

For people making less than $20,000 (or couples making less than $40,000), they may actual see a drop of about $210 on average in their take-home pay relative to this year, because the payroll tax break will be worth less to them than the Making Work Pay credit was.

The IRS noted that the Social Security tax break for 2011 will have no effect on your future Social Security benefits, which are based on your career earnings.

Deal on Bush-era tax cuts

In an eleventh-hour compromise, United States President Barack Obama struck a deal with his well-established Republican opposition to extend Bush-era tax cuts for another two years.

The cuts, introduced in 2001 by the former President, George W. Bush, were set to end on December 31 since Congress was forbidden from making them permanent under rules at the time. The situation saw both the White House and the opposition digging in their heels as the deadline approached.

President Barack Obama had initially hoped to protect the tax cuts for middle-class Americans while allowing the benefit to lapse for the richest two per cent a distinction that Republicans sought to block.

Under the bargain struck this week, Mr. Obama will have his way at smallest amount on one item on the White House agenda the extension of unemployment benefits and a payroll tax cut that will improve the lot of ordinary Americans.

In remarks following the negotiations, Mr. Obama said he “completely disagreed” with the Republican view that the tax cuts, including for the wealthiest, should be made permanent. “A permanent extension of these tax cuts would cost us $700 billion at a time when we need to start centering on bringing down our deficit,” he said.

He, however, said he would not accept the “chilling prospect” faced by middle-class Americans of a tax rise on January 1, 2011, and unemployment insurance payouts drying up. “Make no mistake; allowing taxes to go up on all Americans would have raised taxes by $3,000 for a typical American family. And that could cost our economy well over a million jobs,” he said.

While the deal marks the breaking of a stalemate that could have spelt economic doom for millions of American households still reeling from the effects of the downturn, some experts noted that Mr. Obama has endangered the support of his liberal base.
Economist Paul Krugman recently argued against precisely such a deal, saying: “Mr. Obama should draw a line in the sand, right here, right now. If Republicans hold out, and taxes go up, he should tell the nation the truth, and denounce the blackmail attempt for what it is.”

Under the bipartisan deal, American families will retain not only the Bush-era tax cuts, but also those introduced under Mr. Obama.

Mr. Obama said that in exchange for a temporary extension of tax cuts for the wealthiest, middle-class tax credits such as the Earned Income Tax Credit and the Child Tax Credit would persist, as would the American Opportunity Tax benefitting nearly eight million students.

The agreement will also see unemployment insurance extended for a further 13 months, a direct benefit to nearly three million Americans.