(Jim Clark) – Columnist Jeff Quinn, CPA, did a good job of summarizing the tax effects of Congress’ American Taxpayer Relief Act of 2012 in the last issue of the Bonanza (“some good, some bad”). Jeff closes his column by pointing out with annoyance that politicians knew of the deadline for 17 months and waited until the last minute to address it. He could have added that the 152 page bill was given lawmakers to read 15 minutes before the vote.
I’ll leave the tax advice to Jeff but there were some aspects of the bill which were purely political and that’s my playground. For example Section 317 of the Act allows Hollywood producers to depreciate the cost of their film products in 3 years, not the 30+ years folks who build investment real estate must use. Depreciation is a non-cash business expense which shelters otherwise taxable income so the likes of Disney and Spielberg get huge tax breaks.
Section 318 of the Act provides for a “Liberty (tax free) Zone” where the now destroyed World Trade Center buildings used to be so guess where Goldman Sach’s $1.6 billion office complex is going to be built.
Section 329 of the Act provides an excise tax exemption for rum makers in Puerto Rico and the Virgin Islands. There is only one . . . Bacardi . . . who is estimated to save between $200 and $300 million annually from this provision. Not only that but Rum is made from sugar which receives price supports from US taxpayers. So, if you want to subsidize Goldman Sachs, movie producers and rum manufacturers with your tax dollars you got your wish. If you don’t I guess it’s too bad . . . maybe the solons who voted for that bill should have read it.
Jeff’s column points out that “middle class” marginal tax rates did not increase under the Act. Does that mean they got off Scot free? Reno Investment Advisor and Economist Bob Barone doesn’t see it that way when you add income and payroll tax changes together (both are deducted from paychecks). Using annual salary figures of $48,000, $60,000 and $72,000 Barone calculates that these earners’ 2013 effective tax rates will increase 13.43%, 13.11% and 12.91% respectively.
Who came out best and who worst under the American Taxpayer Relief Act? Writing in the National Security Forum former Reagan Administration National Security Advisor and Reno Business consultant Ty O. Cobb wrote:
“Senate leadership (was a loser). (They) fell into line and passed a compromise, but Harry Reid and Democrat leadership offered no plan. Reid (was) marginalized as Biden-McConnell relationship became the key to securing needed votes.”
“Well-off senior citizens no longer working won big. Hey, no cuts to Medicare, Social Security or Defense. Unless you are very wealthy, no tax increases and unless you are still working, no additional levies.” That sure applies to a lot of people in Incline/Crystal Bay.
Cobb continued: “Our grandchildren: major losers. They may not realize it but we have succeeded in foisting an enormous debt on future generations. The young continue to subsidize the rest of us – on Social Security, Medicare, Medicaid, government or other pensions/health care. Of course it is all unsustainable. Just wondering when they will figure that out.”
Well, like they say, people who admire sausage and legislation should not watch either being made.
(Jim Clark is President of Republican Advocates and has served on the Washoe County & Nevada State GOP Central Committees; he can be reached at firstname.lastname@example.org)