Senator Sees Big Reporting Gap In Stock Options

Senator Carl Levin of Michigan has discovered what he calls a “huge gap in stock option reporting” that is costing the government billions in lost revenue. Levin is teaming up with Senator John McCain to propose a bill that will prevent this from happening in the future. Check out the Associated Press story on this new development below.

A multibillion-dollar gap between what public companies book as expenses for their executives' stock options and what they report to the IRS under two sets of rules is costing the Treasury billions in lost revenue, a key senator says.

Companies continue to report deductions for stock options to the Internal Revenue Service that far exceed what they are accounting and disclosing to shareholders as hits against their bottom line, Sen. Carl Levin, D-Mich., said Wednesday. He released new IRS data showing that the total gap for corporations in 2008 was $52 billion.

To close the gap, Levin and Sen. John McCain, R-Ariz., have proposed legislation that would require that the tax deduction for stock options not exceed the expense for options reported in financial statements.

IRS Issues Regulations on 10-Percent Tax on Tanning Services Effective July 1

Just days after Jersey Shore star Snookie and Senator John McCain brought media attention to the now famous tanning tax, the IRS has issued a new press release regarding the regulations on the 10 percent tax due to take effective July 1^st.

In general, providers of indoor tanning services will collect the tax at the time the purchaser pays for the tanning services. The provider then pays over these amounts to the government, quarterly, along with IRS Form 720, Quarterly Federal Excise Tax Return.

The tax does not apply to phototherapy services performed by a licensed medical professional on his or her premises. The regulations also provide an exception for certain physical fitness facilities that offer tanning as an incidental service to members without a separately identifiable fee.

You can download a PDF version of the regulations courtesy of FederalRegister.gov by clicking here.

John Mccain: I Would Never Tax Snooki's Tanning Bed

From CNN.com:

During the ten minute sneak peek of “Jersey Shore” season two, we see the effects the Obama administration has had on our dear friend Snooki’s lifestyle: the girl has been reduced to getting her faux glow with a spray tan.

Among the many revelations Schnickers made within those few minutes – she’s found love with an “amazing gorilla juicehead”; she gets crazy when handed "a bottle of freaking SoCo" – one of them was political.

“I don’t go tanning anymore, because Obama put a 10 percent tax on tanning,” Snooks said after her juicehead sprayed her face with one last coat of self-tanner, just to be on the safe side.

“I feel like he did that intentionally for us. McCain would never put a 10 percent tax on tanning. Because he’s pale and he would probably want to be tan," the pint-sized fist-pumper explained.

McCain confirmed Snooki's assertions in a tweet.

The Arizona Senator wrote, “@Sn00ki, u r right, I would never tax your tanning bed! Pres Obama’s tax/spend policy is quite The Situation but I do recommend wearing sunscreen!" To which Snooks responded: "Haha Yes!"

Top 10 Tax Related Lies from the Candidates

Election Day is just a few hours away, and although most people have already decided which candidate they are voting for, there are still many people who are undecided. To help the readers of my blog who are trying to sort through all of the lies that the candidates have been spreading I have put together the following list of the top 10 tax related lies this election season.

1. McCain’s claim that Obama’s plan will increase taxes on 50% of small business revenue.
Facts: The candidates have both been trying hard to win the hearts of small business owners waiting too see which candidates plan better benefits their business. McCain’s statement however, was simply false. Studies have found Obama’s plan will not raise taxes for the large majority of small business owners and McCain’s numbers were very inflated.

2. Obama’s claim that for every dollar that he has proposed in new spending, he has also proposed an additional cut so it matches.
Facts: The Tax Policy Center (TPC) debunked Obama’s plan (as well as McCain’s) saying Obama’s plan would “substantially increase the national debt over the next ten years”. The only way Obama’s statement could possibly become a reality would be the introduction of some huge government spending cuts he has not yet mentioned.

3. McCain’s claim “Joe the Plumber” would face much higher taxes under Obama’s tax plan.
Facts: Obama’s tax plan does give higher taxes to some business owners, but only ones making over $200,000 a year. “Joe the Plumber” would actually be exempt from Obama’s tax increase, as well as the health coverage fine because of his business’ size.

4. Obama’s claim that “independent studies have looked at their respective plans and concluded that his tax plan provides three times the amount of tax relief to middle-class families than McCain’s.”
Facts: The study that Obama is referring to, done by the TPC, did indeed cite this information. However, the TPC failed to include the candidates individual health care tax plans. When you factor in the health care plans, McCain actually gives more tax breaks to middle-class families, and the “three times as much tax relief” no longer works.

5. McCain’s claim that earmarks have tripled in the last five years.
Facts: McCain has used earmarks repetitively throughout the campaign as one of his main points. He has spoken out profusely against them and stated he does not himself partake on requesting them. However, he made the mistake of publicly stating earmarks have tripled, when in fact they have dramatically declined in the past 5 years.

6. Obama’s claim that McCain’s health care tax plan is a loss for the average family.
Facts: Obama makes a point of saying the average plan costs $12,000 and McCain’s $5,000 tax credit will not cover that. However, Obama is basing these figures on two assumptions; the employer will drop the workers insurance, and the workers wages will not increase to offset the loss. A lot of times employers will drop insurance benefits but raise wages to make up most of the difference. In this case, a $5,000 tax credit would more than offset the difference.

7. McCain’s claim that Obama will tax home heating oil.
Facts: In reality, Obama has not proposed a single plan to raise taxes on electricity or home heating oil. In fact, he proposed a $1,000 per family rebate for increased heating oil costs.

8. Obama’s claim that McCain’s tax plan, gives CEOs of Fortune 500 companies an average of $700,000 in reduced taxes, while leaving 100 million Americans out.
Facts: When Obama says that McCain’s plan will give CEOs reduced taxes he is being somewhat misleading. He is referring to the Bush tax cuts, which do in fact benefit a majority of wealthy Americans. However, McCain wants to extend the breaks which are due to expire in 2011, therefore he is not creating new tax cuts but rather extending existing breaks.

9. McCain’s claim that he wants to “double the dividend from $3,500 to $7,000 for every dependent child in America.”
Facts: Although McCain used the term “dividend” incorrectly (he meant exemption), that is not the point. He says he wants to double the exemption, but studies find his plan will actually only increase the exemption by 50% or so.

10. Obama’s claim that under my tax plan, 95% of Americans will get a tax cut.
Facts: Although Obama’s plan does give a high percentage of Americans a tax cut, the actual amount is actually 81.3%. The number, while still high, is not 95%.

Experts See Little Difference Between Obama's & McCain's Plan for Small Businesses

From Kansas City.com:

As the presidential campaign is in its final week, John McCain and Barack Obama each argue that his tax plan is better to help the ever suffering small-businessman.

Tax experts, however, suggest that the candidates' blueprints for helping small business are virtually identical for all but 2 percent to 3 percent of the highest-income small businesses. For them, McCain's plan is more generous.

The issue has been a campaign centerpiece since the emergence earlier this month of "Joe the Plumber," an Ohio voter who would benefit under Obama's plan but favored McCain's because it preserves the current tax brackets.

"Joe's dream is your dream," McCain said Monday night at a rally in Pottsville, Pa. "It's to own a small business that will create jobs, and the attacks on him are attacks on small businesses all over this nation. They should be ashamed."

Here's what the candidates actually propose. McCain wants to leave in place President Bush's tax cuts of 2001 and 2003 that lowered the top tax bracket from 39.6 percent to 35 percent and lowered the capital gains tax, a tax on profits, to 15 percent.

Obama would let those tax cuts expire on Jan. 1, 2011, as called for under current law, for individual tax filers whose adjusted gross income exceeds $200,000, and for joint filers whose adjusted gross income is more than $250,000.

The Democratic nominee assured a rain-soaked crowd Tuesday in Chester, Pa., "If you make less than a quarter of a million dollars a year, which includes 98 percent of small business owners, you won't see your taxes increase one single dime."

Both candidates' comments have created confusion by giving the impression that the term "small business" is somehow a special tax designation. It's not.

"People think that small businesses pay a tax and their tax is being increased," said Eric Toder, a tax analyst at the Tax Policy Center, a nonpartisan research organization in the nation's capital. "There is a perception that more people are affected by this than actually are."

So who's right?

Roughly 75 percent of small businesses file as individual tax filers, not corporations, and most report their business income using various tax forms, called schedules, for income from business ventures, farming or rental properties.

Using these three income-reporting categories, the Tax Policy Center has concluded that 1.9 percent of all individual filers reporting business income would see their taxes go up under Obama's plan. Of those who get more than 50 percent of their income from business ventures, 2.7 percent would pay higher taxes.

7 Ways the Next President can Improve our Economy

It is no secret that the American economy is under pressure, and politicians are scrambling to present every solution possible. It does not help that all of this is happening in the middle of an already important presidential election. Since there are long and short term goals involved, many people are concerned with what the next president can do to fix the economy. To help my blog readers make their own educated decisions, I have brainstormed and put together the following list of ways the next president can fix the economy.

1. Reputation Repair

With the stock market going up one day and down the next, good foreign investor relations need to be kept intact. The money we are spending on the bailout plan does not all belong to us, and it does not all go to American companies. A lot of our economic security lies in the hands of foreign investments, and the next president should work to improve these relations. We need to show investors that we can and will manage our money and policy better than in the past.

2. Prioritize Agenda

With so many important items on the agency, it is hard not to get caught up in too many things at once. History has shown us that problems ignored usually get a lot worse, and end up at the top of the list eventually any ways. Prioritizing his agenda early can save the next president both time and money and focus on getting the job done right the first time.

3. Improve Congressional Relationships

The relationship between legislative and executive branches has been negative for too long. If we could make this relationship more open and less attacking perhaps they might come to more well rounded, honest decisions. It is hard to get any bill passed into law with an unhappy congress, so keeping the relationships friendly and professional will benefit the country as a whole.

4. Reduce Outsourcing

With the tough economy, more and more companies are looking to outsource their manufacturing. However, the problem is that doing so can make the economy even worse. While it may be cheaper for a company to outsource, it gives valuable jobs to other countries. If the government could give these companies some incentive to produce their goods at home it would create more American jobs, and benefit the whole economy.

5. New Energy Policies

While both candidates recognize the changing climate and the attention it needs, these are only words. The winner needs to come up with a clear and concise energy policy that addresses foreign oil dependency as well as all of our individual dependency on oil. Exploring, funding, and distributing alternative energy will save the country billions in the long run and can create “green collar” jobs in the meantime.

6. Promote Innovations

By funding and rewarding technological and medical innovation and discovery, we can increase our countries competitiveness in the global market. These new discoveries will provide a service to all Americans who benefits from them, and by developing ways to reduce our dependence on foreign oil we can stop sending so much of our money to foreign producers.

7. Market Regulation

By closely monitoring trading activity and spending, we can help prevent market manipulation and hopefully prevent another mess like the one we are in now. This is an issue that both candidates have addressed, as the image of corporate “fat cats” has angered the American public. Senator Barack Obama was quoted as saying, "the American economy does not stand still, and neither should the rules that govern it. Old institutions cannot adequately oversee new practices. Old rules may not fit the roads where our economy is leading."

Candidates' tax-cut rhetoric swamps voters

From the Seattle Times:

In an outbreak of class warfare, John McCain and Barack Obama swapped sharply worded charges over tax cuts Saturday, each accusing the other of shortchanging middle-income Americans at a time of economic hardship for millions.

McCain, in a paid weekly radio address and at a North Carolina rally, fired the first volley, likening Obama to the socialist leaders of Europe and saying he wanted to "convert the IRS into a giant welfare agency, redistributing massive amounts of wealth at the direction of politicians in Washington."

Obama responded at a St. Louis rally that attracted 100,000 people, saying his rival "wants to cut taxes for the same people who have already been making out like bandits, in some cases literally."

"John McCain is so out of touch with the struggles you are facing that he must be the first politician in history to call a tax cut for working people 'welfare,' " Obama said.

Based on the candidates' tax proposals, Obama would provide more assistance to low-income and middle-income taxpayers than McCain.

Take a family earning the national median income of $50,233, as calculated by the Census Bureau for 2007. The family would pay $4,837 in federal income taxes for 2009 under McCain's plan, vs. $4,309 under Obama's proposal, according to a mathematical program that University of Southern Maine economics professor Jeffrey Gramlich helped develop.

McCain & Palin: Obama tax plan will 'spread the wealth'

From CNN.com:

Sen. John McCain's camp on Monday continued its weekend assault on Sen. Barack Obama's tax plan, which it called an attempt to "spread the wealth."

Speaking at a campaign event in St. Charles, Missouri, McCain said Obama "wants to spread the wealth around."

A chorus of boos rang out as the senator from Arizona continued, "He believes in redistributing wealth -- not in policies that grow our economy and create jobs and opportunities for all Americans. Sen. Obama is more interested in controlling who gets your piece of the pie than in growing the pie."

In Colorado Springs, Colorado, Alaska Gov. Sarah Palin also continued her line of attack from the weekend, but softened her tone in that she didn't call Obama's plan outright socialism.

"Our opponent's plan is just more big government, and John and I think that that is the problem, not the solution," she said. "Instead of taking your hard-earned money and spreading your wealth, we want to spread opportunity so people like you and Joe the plumber can create new wealth."

Biden defends Obama tax-cut plan in Wash

From the Associated Press:

Democratic vice presidential candidate Joe Biden said Sunday that a Barack Obama administration would help the middle class by cutting its taxes, answering Republican claims that Obama's plan represented redistribution of wealth.

Republican presidential candidate John McCain on Saturday likened Obama to the socialist leaders of Europe, saying the Democrat wanted to "convert the IRS into a giant welfare agency, redistributing massive amounts of wealth at the direction of politicians in Washington."

In response, Biden on Sunday repeatedly linked McCain to President Bush's tax policies, saying that the wealthy and big corporations have received millions of dollars in tax cuts that could have gone to the middle class and small businesses.

"It's not just because it's fair, it's what makes the economy go. The rich do fine when the middle class is going," Biden told an audience at a rally with Washington Gov. Chris Gregoire and other state Democrats vying for office. Thousands of supporters filled Cheney Stadium in this heavily blue-collar region about 40 miles south of Seattle.

"John McCain has been a party to the most significant redistribution of wealth in American history and it has been all the wrong way," he said. "There's not one fundamental economic issue that John McCain disagrees with George Bush on."

Joe the Plumber Eligible for Obama Tax Cut?

From ABC News.com:

ABC News' Chris Bury is outside Toledo, near the home of Samuel Joseph Wurzelbacher, a/k/a "Joe the Plumber," and reports that Wurzelbacher -- such a key part of Sen. John McCain's critique of Sen. Barack Obama's economic proposals -- acknowledged that he wants to purchase the plumbing business for $250-280,000, not that he would net that much in profits.

He would make much less, he said.

Which would seem to indicate that he would be eligible for an Obama tax cut, not that he would be subject to the tax increase from 36% to 39% Obama would impose on those making more than $200,000 per person, or $250,000 per family.

Wurzelbacher this morning told ABC News' Diane Sawyer that he was talking about, in Diane's words, the prospect, the hope that someday he would make $250,000.

"Well, exactly," he said. "Exactly. I mean, not that I don't want to be taxed. You have to be taxed. But to -- just because you work a little harder to have a little bit more money taken from you, I mean, that's scary. You know, as opposed to other people. I worked hard for it. Why should I be taxed more than other people?"

Diane asked, "If those people should not be taxed additionally, even though they're in the top 5% of America, what about people who make $1 million? Or $5 million?"

"Well, I mean, quite honestly, why should they be penalized for being successful?" Wurzelbacher asked. "I mean, that's what you're telling me. That's what it sounds like you're saying. That's wrong. Because you're successful, you have to pay more than everybody else? We all live in this country. It's a basic right. And Obama wants to take that basic right and penalize me for it, is what it comes down to. That's a very socialist view and it's incredibly wrong. I mean, $250,000 now. What if he decides, well, you know, $150,000, you're pretty rich, too. Let's go ahead and lower it again. You know it's a slippery slope. When's it going to stop?"

John McCain proposes new package of tax breaks

From: LA Times.com:

In an effort to seize the initiative in tackling the nation's financial troubles, John McCain on Tuesday outlined a $52.5-billion package of new tax breaks that he said would stimulate the economy and ease the money problems of many Americans.

Aiming his pitch largely at senior citizens who could be crucial swing voters in states with older populations such as Pennsylvania, McCain said he would lower the tax rate on their withdrawals from retirement accounts to 10% this year and next.

The Republican presidential nominee also proposed cutting the capital gains tax in half for two years, suspending taxes on unemployment benefits for workers making less than $100,000, and ordering the Treasury Department to guarantee 100% of Americans' savings for six months to calm fears of bank failures.

"If I am elected president, I will help to create jobs for Americans in the most effective way a president can do this -- with tax cuts that are directed specifically to create jobs and to protect your life savings," he told a cheering crowd of about 1,000 in the gymnasium of a community college here in the Philadelphia suburbs.

The new slate of proposals is an addendum to the Arizona senator's already expansive tax-cutting plans and his call to use $300 billion of the $700-billion rescue package to buy up bad mortgages and reset them with more favorable terms. It is part of McCain's effort to right his campaign and regain voters' trust in his handling of the economy, an area in which more voters favor his opponent, Illinois Sen. Barack Obama.

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McCain Unveils New Economic Plan

According to the International Herald Tribune, on Tuesday presidential hopeful John McCain announced a new economic proposal with a focus on helping American struggling in the uncertain economy. Earlier in the week Democratic nominee Barack Obama announced a new plan of his own, and with Obama polling better on economic issues it is no surprise that McCain was so quick to release a new plan.

"If I am elected president," McCain said near here, "I will help to create jobs for Americans in the most effective way a president can do this: with tax cuts that are directed specifically to create jobs and protect your life savings."

His plan, estimated to cost $52 billion, relies on an array of tax-relief measures: It would ease the burden on people withdrawing money from retirement accounts; reduce capital gains taxes on stock profits; accelerate tax write-offs for stock losses; and temporarily suspend the tax on unemployment insurance benefits.

"These are all targeted at people who have been hurt by the recent financial crisis: seniors, savers, workers, people who are trying to get to college," said McCain's chief economic adviser, Douglas Holtz-Eakin.

"We're putting a lot of cash into the hands of people because that's the near-term duress," he told Reuters separately. "What businesses are looking for right now are customers."

McCain Makes New 401k Proposal

From the CNN.com:

John McCain proposed suspending the requirement that investors begin drawing down their IRAs and 401Ks soon after age 70, his second major economic proposal of the week.

"We must also protect investors – especially those relying on their investments for retirement," McCain told the crowd at a campaign event in La Crosse, Wisconsin Friday.

"Current rules mandate that investors must begin to sell off their IRAs and 401Ks when they reach age 70 and one half. To spare investors from being forced to sell their stocks at just the time when the market is hurting the most, those rules should be suspended."

Earlier this week, McCain unveiled a $300 billion plan for the government to purchase mortgages at full value from banks and directly re-negotiate the terms with homeowners. The plan has drawn criticism from economists and from the Obama campaign, which has charged that it would mean major profits for lenders and saddle taxpayers with the cost.

It's Time to Think Big on Tax Cuts

From the Wall Street Journal:

John McCain needs to show the nation that he has the economic recovery plan to restore long-term economic growth. To do that, he needs to refocus his campaign with a new tax plan. Mr. McCain should come out for an alternative, optional flatter tax system, which he has already supported.

Under this proposal, Americans could file their income taxes under the existing tax code or they could choose instead to pay taxes under a simpler code with fewer deductions but lower tax rates. Building on work already done by Steve Forbes and House Budget Committee member Paul Ryan, a Wisconsin Republican, Mr. McCain could propose an optional tax system with just two rates, 10% and 25%, compared to the six rates of the current code ranging from 10% to 35%.

What's more, such a proposal would include a cut in income taxes, and tax rates, for every American who pays taxes. The alternative system would impose no income taxes on the poor and what is often called "the working class" (the bottom 40% of income earners who don't pay federal income taxes now). This proposal would also eliminate federal income taxes on the middle class, the middle 20% of income earners who pay only 4.4% of all federal income taxes today.

The new tax system would allow most Americans to file their taxes on a single sheet of paper, saving them the hundreds of dollars they spend today to have their taxes professionally prepared.

And such a tax reform would be an antidote to the class warfare, neocollectivist tax policies of Barack Obama. If implemented, it would also jump-start the economy. Under this optional tax system, savings would increase and investment would soar as capital around the world is drawn to a suddenly more confident U.S. economy.

This new surge of capital would end the credit crunch, and allow old businesses to expand and new ones to start. Wages would grow, along with the overall economy. And as the world invested in America, the dollar would strengthen, as happened in response to the tax cuts that generated the 1980s Reagan boom. This would ease inflationary fears and pressures on the Fed.

With a strong dollar, the Fed would be under less pressure to try to revive the economy through monetary policy. That would give Mr. McCain the flexibility to push for a new "price rule," which would base monetary policy on prices of a basket of commodities, including gold.

Tax Misrepresentations in Last Night’s Debate

Last night was the second debate between Senators Barack Obama and John McCain, and as usual there were numerous misrepresentations of the facts. Thanks to The Tax Foundation Blog, who have reviewed the CNN transcript, below are the tax related errors from both candidates.

Obama's Errors

Early in the debate, Sen. Obama took a shot at the fiscal policies of President Bush:

But I think it's important just to remember a little bit of history. When George Bush came into office, we had surpluses. And now we have half-a-trillion-dollar deficit annually.

When George Bush came into office, our debt -- national debt was around $5 trillion. It's now over $10 trillion. We've almost doubled it.

And so while it's true that nobody's completely innocent here, we have had over the last eight years the biggest increases in deficit spending and national debt in our history. And Sen. McCain voted for four out of five of those George Bush budgets.

First, on the issue of a surplus when Bush came into office, it's somewhat unfair to say that he inherited a surplus situation given that a recession began the month he took office. (The deficits of the recent years are another story.) Regarding the claim that we have had $500 billion deficits annually under Pres. Bush, that is not entirely true. The deficit for the fiscal year that was just completed (Sept. 30) was estimated to be $438 billion. However, the highest deficit of the seven years previous was $413 billion in FY 2004. The average deficit in that eight year period was $248 billion (which includes a surplus year of FY 2001) and the average deficit of the past four years has been $292 billion.

It is true that for FY 2009, the deficit will likely be astronomical and higher than $500 billion, but we have not had "half-a-trillion dollar deficits annually" under Pres. Bush. As for the debt rising from $5 trillion to $10 trillion, the starting point is closer to $6 trillion than $5 trillion (5.7) when Bush assumed office.

As for the claim that Sen. McCain voted for Bush's budgets, there are many parts of the budget that are voted upon each year. And actually, Sen. McCain voted against two of the major provisions that added to the national debt: the 2001 and 2003 tax cuts. (More on this later.)

On the issue of Sen. McCain's tax cuts, Obama said this about who would benefit:

Now, when Sen. McCain is proposing tax cuts that would give the average Fortune 500 CEO an additional $700,000 in tax cuts, that's not sharing a burden.

The $700,000 figure is only an "additional" tax cut for those CEOs if you do not count the Bush tax cuts that have already been put in place. Since those tax cuts are set to expire, that's a technically valid point. But this is somewhat misleading voters when he says "additional tax cuts" because it can be interpreted by many that those CEOs would be getting that much in tax cuts on top of the tax cuts they have received from the Bush tax cuts, which are set to expire on Jan. 1, 2011.

Responding to Sen. McCain's comments about tax policy, Sen. Obama made many claims about his tax plan and that of his opponent in rapid succession in this portion of the debate:

So let's be clear about my tax plan and Sen. McCain's, because we're not going to be able to deal with entitlements unless we understand the revenues coming in. I want to provide a tax cut for 95 percent of Americans, 95 percent.

If you make less than a quarter of a million dollars a year, you will not see a single dime of your taxes go up. If you make $200,000 a year or less, your taxes will go down.

Now, Sen. McCain talks about small businesses. Only a few percent of small businesses make more than $250,000 a year. So the vast majority of small businesses would get a tax cut under my plan.

And we provide a 50 percent tax credit so that they can buy health insurance for their workers, because there are an awful lot of small businesses that I meet across America that want to do right by their workers but they just can't afford it. Some small business owners, a lot of them, can't even afford health insurance for themselves.

Now, in contrast, Sen. McCain wants to give a $300 billion tax cut, $200 billion of it to the largest corporations and a hundred thousand of it -- a hundred billion of it going to people like CEOs on Wall Street.

He wants to give average Fortune 500 CEO an additional $700,000 in tax cuts. That is not fair. And it doesn't work.

Sen. McCain's Errors

Like Sen. Obama, Sen. McCain repeated many of the same misleading statements on tax policy that he has made on the campaign trail throughout the campaign season

Early in the debate, Sen. McCain made it a point to complain about the $10 trillion national debt:

We obviously have to stop this spending spree that's going on in Washington. Do you know that we've laid a $10 trillion debt on these young Americans who are here with us tonight, $500 billion of it we owe to China?

If Sen. McCain is concerned with the national debt, his tax proposals do not show it. That's because over the next ten years, according to the Tax Policy Center, Sen. McCain's tax proposals would grow the national debt by over $4 trillion. He can't cut that much spending by just going after earmarks. (Sen. Obama also doesn't balance the budget under his tax plans and likely spending over the next ten years, according to TPC.)

On the issue of tax history, McCain made this statement to attack Obama's tax plan:

But he wants to raise taxes. My friends, the last president to raise taxes during tough economic times was Herbert Hoover, and he practiced protectionism as well, which I'm sure we'll get to at some point.

My friends, that depends upon your definition of "tough economic times." Pres. George H.W. Bush raised taxes in 1990, a period of stagnant economic growth. And FDR, who followed Hoover (take note, Joe Biden, if you are reading) in 1933, raised taxes throughout the 1930s and 1940s.

In that same portion of the debate, McCain also criticized Obama for frequently changing his tax plan. While it is true that many key parts of Obama's tax plan started off murky in this campaign and became clearer as the campaign moved on (payroll tax cap and capital gains, to name two), a similar problem is that Sen. McCain had different plans at different times of the day. Both he and Sen. Obama will say one thing on the stump and tell organizations like the Tax Foundation or Tax Policy Center something else. Sen. McCain does that with his rhetoric about how he would provide Americans with an alternative flat tax (a la Fred Thompson), as well as repeal the AMT, when in fact he would merely patch it. Furthermore, his position on tax policy has changed rather significantly given his opposition to the 2001 and 2003 Bush tax cuts, and now his support for the extension of those tax cuts plus many more tax cuts.

The Candidate’s Tax Returns Compared

Thanks to the TaxProf Blog, below is a chart comparing the tax returns of the four major presidential and vice presidential candidates (Sen. Barack Obama, Sen. John McCain, Sen. Joe Biden, and Gov. Sarah Palin). As you can see, Mr. Biden donated the lowest percent of his income to charity, but made more in the past two years than Mrs. Palin.

Tax Profs Agree: Gov. Palin's Tax Returns Are Wrong

From Tax Prof Blog:

Jack Bogdanski (Lewis & Clark) & Bryan Camp (Texas Tech) have independently reviewed the tax issues raised by the release of Gov. Palin's 2006 and 2007 tax returns and financial disclosure form, as well as the remarkable opinion letter issued from Washington D.C. tax lawyer Roger M. Olsen. Jack and Bryan conclude that there are serious errors in Gov. Palin's returns as filed and that she and her husband owe tens of thousands of dollars in additional taxes.

Jack Bogdanski, There's No Debate: Palins Owe Thousands in Back Taxes:

There is no serious debate (at least, none that has been brought to our attention) about the fact that at least the amounts paid for the children's travel -- $24,728.83 in 2007, according to the Washington Post -- are taxable. The campaign's tax lawyer has got at least that much of the law, and perhaps more, wrong. ... The Palins, who had their tax returns done by HR Block, simply got it wrong. And the fact that the state payroll office got it wrong, too, doesn't erase the Palins' unpaid tax liability.

Bryan Camp, A Brief Analysis of Governor Palin's Tax Returns for 2006 and 2007:

The release of an opinion letter by attorney Roger M. Olsen dated September 30, 2008, has stirred up the pot once again about the accuracy of Sarah and Todd Palin’s 2006 and 2007 tax returns. Not only that, but Mr. Olsen’s letter raises a couple of new issues.

This paper focuses on five problems: three raised in the tax returns and two new ones raised by Mr. Olsen’s letter. Here’s a summary of the five problems and my conclusions, for those who want to cut to the chase. My analysis will follow.

1. The Palins did not report as income some $17,000 that Governor Palin’s employer (the State of Alaska) paid her as an “allowance” for her travel. Can they do that? Yes, most likely.

2. The Palins did not report as income some $43,000 that the State of Alaska paid the Governor as an “allowance” for her husband and children’s travel. Can they do that? No, most likely not.

3. The Palins deducted $9,000 on their 2007 return, claiming it was a loss from Mr. Palin’s snow machine racing activity. Can they do that? Most likely not, but more info could make the deduction o.k. If any of the above issues goes against the Palins they then risk getting hit with the section 6662 penalty for “negligence or disregard of rules or regulations.”

4. Can the Palins avoid the section 6662 negligence penalty by claiming that they reasonably relied either (a) on the W-2’s sent to them by their employer, which did not reflect either the $17,000 or the $43,000, or (b) on their tax return preparer H&R Block, or (c) on Mr. Olsen’s opinion letter dated September 30, 2008? The three reliance defenses are unlikely to succeed, but more info may make the (b) defense a good one.

5. Does Mr. Olsen have any exposure to sanctions by the IRS because of his letter? I believe Mr. Olsen’s letter probably violates 31 C.F.R. section 10.35. If so, he would be exposed to possible sanctions from the IRS Office of Professional Responsibility.

Palin tax returns for 2006 and 2007 released

From the Associated Press:

Sarah Palin is the breadwinner and husband Todd is, well — he takes a lot of deductions for his fishing and snowmachine racing careers, according to 2007 and 2006 federal tax returns released Friday.

Sarah Palin makes $125,000 a year as Alaska governor. Plus, since she took the job in December 2006, she hasn't paid taxes on the more than $17,000 she received in controversial per diem payments for working out of the family's lakeside home in Wasilla — some 575 miles from the capital of Juneau.

For the 2007 tax year, Todd Palin's self-employment brought him $66,893 in gross receipts — $49,893 from fishing and $17,000 from snowmachine racing. But, the returns show, he claimed so many deductions that he reported only $15,513 net profit from the fishing operation and claimed a $9,639 loss from his racing, leaving him with an overall net income of only $5,874. In addition, Todd earned $43,519 last year working part-time on the North Slope for BP Exploration.

The self-employment deductions left the Palins, who have four dependent children, with a 15 percent tax rate for 2007 and a rate of less than 10 percent for 2006. Todd Palin also deducted for the business use of their home in Wasilla. A fifth child was born to the couple this year.

An Associated Press analysis of the returns released by the McCain campaign also reveals that the Palins underpaid their estimated taxes with an April extension and likely owe interest.

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