Rubio introduces “Refund Act” to empower states to help pay down the national debt

U.S. Senator Marco Rubio today introduced the Returned Exclusively For Unpaid National Debt (REFUND) Act. This legislation would allow states to identify and return unwanted federal funds to the federal treasury in order to help pay down the $16.7 trillion national debt. The REFUND Act has 16 original cosponsors in the Senate and a companion bill, H.R.282, has already been introduced in the U.S. House of Representatives by Representative Chuck Fleischmann (TN-3).

“Excessive spending is fueling our growing debt, yet states have little say in what happens to federal money if they choose not to spend it,” said Rubio. “The REFUND ACT can help end the ‘use-it-or-lose-it’ mentality which encourages states to take debt-financed money from Washington. Instead it will empower them with a way to help slow the steady rise of the national debt.”

“Many state officials and leaders realize the national debt is an increasing burden to our children and grandchildren and want to help stop Washington’s spending spree to help alleviate that burden. The REFUND Act will give states an opportunity to end the practice of spending money we don’t have and serve as an incentive for them to help pay down the debt and re-embark on a path toward economic growth and opportunity.”

The REFUND Act would allow any state to designate federal funds as “unwanted” through a resolution from the state legislature, which would then be allocated towards debt reduction at the Treasury Department. The REFUND Act would require that an annual report be submitted to Congress each year detailing the amount deposited by each state. The REFUND Act has been endorsed by the Council for Citizens Against Government Waste (CAGW) and the National Taxpayers Union (NTU).

Original cosponsors of the REFUND Act are Senators Lamar Alexander (R-TN), John Barrasso (R-WY), Roy Blunt (R-MO), Saxby Chambliss, (R-GA), Dan Coats (R-IN), Tom Coburn (R-OK), John Cornyn (R-TX), Mike Enzi (R-WY), Jim Inhofe (R-OK), Johnny Isakson (R-GA), Mike Johanns (R-NE), Ron Johnson (R-WI), Mitch McConnell (R-KY), Rand Paul (R-KY), Jim Risch (R-ID) and David Vitter (R-LA).

The question is will the states put the best interests of the American people first? Or will they keep the money.

Many times state political leaders argue that if we don’t take the money it will go to another state. Now, that excuse could become invalid. Let’s see if this gets passed in a divided Washington, where two thirds of the politicians want more taxes and more spending.

Taxes in Florida Explained

April is National Tax Burden Month. WDW – Florida is providing information on taxes in Florida. The following information is from the Florida portal on taxation:

For decades, Florida has had one of the lowest tax burdens in the country, according to the independent research organization Tax Foundation. For 2013, Florida will place the fifth-lowest tax burden on its residents and businesses. But not all taxes are created equal, and the state collects in a variety of ways that residents need to be aware of.

Income Tax

The strength of Florida’s low tax burden comes from its lack of an income tax, making them one of seven such states in the U.S. The state constitution prohibits such a tax, though Floridians still have to pay federal income taxes.

Estate Tax

Florida also does not assess an estate tax, or an inheritance tax. No portion of what is willed to an individual goes to the state.

Intangibles Tax

Floridians no longer need to pay taxes to the state on intangible goods, such as investments. The law requiring that tax was repealed in 2007.

Sales Tax

The state charges a 6% tax rate on the sale or rental of goods, with some exceptions such as groceries and medicine. Additionally, counties are able to levy local taxes on top of the state amount, and most do—55 of the 67 Florida counties added local sales tax to the state tax in 2012. The highest amount added to the sales tax was 1.5% by 7 counties in 2012, bringing the total sales tax to 7.5% in those counties; that will increase to 8 counties in 2013. For a complete list of the additional sales tax rates by county, visit the Florida Department of Revenue: http://dor.myflorida.com/dor/forms/2013/dr15dss.pdf

Use Tax

State sales tax needs to be paid for internet or other out-of-state purchases, even if no tax was charged at the time of purchase, or were charged at a rate less than the Florida sales and use tax rate. While this includes taxable items bought in Florida, it mostly applies to items bough outside of the state which were brought in or delivered. Florida residents are required to report these sales and pay the use tax on them personally.

Property Tax

Though the state government does not collect any property taxes, local governments receive much of their funding through these taxes. These rates are assessed at the local level and can vary by county, and they are based on the value of the property. Property taxes in Florida are some of the highest in the country, although there are several exemptions to try to lighten the load on some Floridians.

Property Tax Exemptions

Homestead Exemptions are available on primary residences in Florida. These exemptions can be available up to $50,000. However, only the first $25,000 of this exemption applies to all taxes. The remaining $25,000 only applies to non-school taxes.

Widow(er) Exemptions of $500 are available to widows and widowers who have not remarried. If you were divorced at the time of your ex-spouse’s death, you do not qualify for this exemption.

Senior Citizen Exemptions are available in http://dor.myflorida.com/dor/property/taxpayers/pdf/FLsrhx.pdfcertain counties and cities only. They are valued up to $50,000 for residents 65 years old and older who have gross income below $20,000 in 2001 dollars, adjusted for inflation. This exemption is in addition to the Homestead Exemption.

Blind Person Exemptions of $500 are available to Floridians who are legally blind.

Total and Permanent Disability Exemptions are available for homeowners who have a total and permanent disability. Quadriplegics who use their property as a homestead are exempt from all property taxes. Others who must use a wheelchair for mobility or are legally blind and have a gross income below $14,500 in 1991 dollars, adjusted for inflation, can be exempt from all property taxes as well.

Veterans Exemptions exist in a number of different forms.

  • A veteran documented as disabled by 10% or more in war or service-connected events can earn an additional exemption of $5,000 on any owned property.
  • An honorably discharged veteran who is totally and permanently disabled or requires a wheelchair for mobility due to their service can be exempt from all property taxes. In some circumstances, this benefit can be transferred to a surviving spouse.
  • An honorably discharged and disabled veteran who is 65 or older who was a Florida resident when they entered military service may be eligible for an additional exemption. The disability must be permanent and must have been acquired as a result of the military service. The property tax will be discounted based on the percent of the disability.
  • Members of the military deployed during the last calendar year can receive exemptions based on the percent of time during the year they were deployed.

Other Taxes

Florida collects taxes on many other goods and services residents pay for. Documentary Stamp Taxes are assessed on documents that transfer interest in Florida real property, such as warranty deeds and quit claim deeds. Additional taxes are charged for fuels, tobacco products, communications services, and more. For a full of account of taxes charged in Florida, see the website.

Corporate Income Tax

While individuals do not have to pay income taxes, the same is not true for all types of businesses in Florida. Corporations and artificial entities that conduct business, or earn or receive income in Florida, including out-of-state corporations, must file a Florida corporate income tax return unless exempt. They must file a return even if no tax is due. Sole proprietorships, individuals, estates of decedents, and testamentary trusts are exempted and do not have to file a return. S Corporations are usually exempt as well, unless federal income tax is owed. The Florida Corporate Income Tax rate is 5.5%.

For more information about the types of businesses in Florida, click here.

Reemployment Tax (formerly Unemployment Tax)

Eligible businesses must also pay the Reemployment Tax. Formerly called the Unemployment Tax before being renamed in 2012, this tax is used to give partial, temporary income to workers who lose their jobs through no fault of their own, and who are able and available to work.

 

Illegal aliens receive $Billions Yearly via IRS Loophole

As part of National Tax Burden Month WDW –  Florida presents this column with videos of well known and documented tax fraud.

NBC Eyewitness News 13 in Indiana reports on a massive IRS tax loophole which provides over $4 billion per year in tax credits to millions of illegal aliens. In many cases recipients of American taxpayers’ misused monies have never set foot in the United States.

Watch this exposé put together by News 13 investigative reporter Bob Segall. He spent three months looking into this tax loophole:

Indiana is approximately 1700 miles northeast of the Mexican border.

A device known as the Additional Child Tax Credit is being used to pay for children living in Mexico — who have never lived here. One illegal admitted through an interpreter that his address is being used to file tax returns for numerous children, including multiple nieces and nephews. “If the opportunity is there and they give it [to him] why not take advantage of it?” he asked in Spanish. As a stunning example, thousands in tax credits have been awarded to an illegal alien who claimed 20 children live in a single trailer, that actually housed just one little girl.

“Our tax code should not reward those who enter the country illegally,” said Rep. Vern Buchanan (FL-13). “This is unacceptable, which is why last year I voted to immediately end the abuse of the Child Tax Credit by requiring those filing a claim to provide a Social Security number – a requirement that would save taxpayers $10 billion over the next decade.”

The IRS is aware of the magnitude of this fraud yet has done nothing to rectify it. In fact, this is the IRS website giving ten tips on how to apply. The application forms are easily downloadable.

J. Russell George, Treasury Inspector General for Tax Administration says report after report sent from his office has been ignored by the IRS. 

Watch the below video as the Honorable J. Russell George, Inspector General, Treasury Inspector General for Tax Administration, delivers his opening statement at an oversight hearing on Administration of the First-Time Homebuyer Tax Credit. October 22, 2009.

Rubio: States need a refund

Congress should authorize them to return federal spending to pay down the debt.

While American families everywhere are cutting costs, Washington still can’t seem to rein in its reckless spending, leaving our national debt skyrocketing to the detriment of future generations. This neglect of our fiscal health is unacceptable. It is imperative we begin paying down the debt — starting yesterday.

Excessive and ineffective spending is an important cause of our growing debt, yet states have little say in what happens to federal money if they choose not to spend it. They essentially have two choices: use it, or lose it to someone else. There is no option to stop those funds from being spent elsewhere, which is why I am reintroducing the Returned Exclusively for Unpaid National Debt, or “REFUND,” Act next week in the Senate.

The REFUND Act will allow states to identify and return unwanted federal funds to the federal treasury for the specific purpose of paying down the national debt. This prevents the Treasury from continuing its current practice of spending the returned funds elsewhere, which provides no real incentive for states to turn away federal funds.

The legislation would also end today’s “use it or lose it” mentality, which encourages states to take debt-financed money from Washington. For example, two years ago, the state of Florida was allocated $2.4 billion in federal stimulus funds for a high-speed-railway project, but turned down the money because it would have put the state on the hook for more spending in the long run. The money was then offered under a new bidding process for other states to fund their own high-speed-rail programs. Under the REFUND Act, Florida would have been able to use that money toward paying down our $16 trillion debt.

The national debt is a crushing burden to our children and grandchildren; many state officials and leaders realize this and want to make responsible decisions to help alleviate that burden. These fiscally responsible states should be allowed to divert Washington’s spending spree toward debt reduction and do their part to end the practice of spending money we don’t have.

Read more at National Review Online.

Exposing Tax Filing Costs

As part of National Taxpayer Burden Month, Watchdog Wire is presenting a series of interviews, columns and videos dealing with the current progressive income tax system. The current income tax was created 100 years ago with the passage of the Sixteen Amendment to the US Constitution.

As part of our National Tax Burden Month activities we are highlighting a series of videos produced by Kerry Bowers, the State Director for Nevada FairTax. For 13 years Bowers lived in Florida, the last 4 as the Panhandle Director for the Florida FairTax Educational Association.

According to the Fair Tax website:

The FairTax is a national sales tax that treats every person equally and allows American businesses to thrive, while generating the same tax revenue as the current four-million-word-plus word tax code. Under the FairTax, every person living in the United States pays a sales tax on purchases of new goods and services, excluding necessities due to the prebate. The FairTax rate after necessities is 23% and equal to the lowest current income tax bracket (15%) combined with employee payroll taxes (7.65%), both of which will be eliminated.

Bowers support to FFTEA and AFFT has been through legislative expertise specific to HR 25/S 122, computer presentations, and video productions. The following is a video presentation exposing the true tax filing costs born by every taxpayer.

To video more video presentations by Kerry Bowers go to his YouTube Channel.

RELATED COLUMNS:

When is your tax freedom day?

VIDEO: Buchanan Tax Reform panel raises disturbing future without major changes

Disclaimer: The author is on the Board of Directors of the Florida FairTax Educational Association

VIDEO: Buchanan Tax Reform panel raises disturbing future without major changes

Congressman Vern Buchanan (FL-13) hosted a panel on Tax Reform on March 29, 2013. Buchanan is the only member of the powerful US House of Representatives Ways and Means Committee from Florida. The panel members were:

  • Neal Boortz is a former nationally syndicated radio talk show host who co-wrote the Fair Tax Book with former Congressman John Linder. The book calls for the replacement of the income tax with a consumption tax.
  • Dan Mitchell is a senior fellow with the Cato Institute, which is a public policy research organization dedicated to the principals of individual liberty, limited government, free markets, and peace. Mitchell is an expert on tax reform and a strong advocate of a flat tax.
  • National Federation of Independent Business (NFIB)/Florida Chairman Jerry Pierce. The NFIB is is the leading small business association representing small and independent businesses. The NFIB supports modifications to provide tax relief and certainty to small businesses.
  • Susan Nilon is the general manager of WSRQ radio, a radio show host and writer who advocates a progressive tax that taxes wealthy individuals at a higher rate than low income individuals.

The forum was moderated by WWSB/ABC 7 news anchor John McQuiston.

Watch the METV video of the entire panel discussion:

Every panel member opened by saying the current income tax system is broken. Susan Nilon asked if there was the political will to actually fix it. Each panel member addressed their solution to fix the system, ranging from repeal of the Sixteenth Amendment (which created the progressive income tax) to returning to a simpler form of taxation.

Of note was all agreed the current progressive tax system has failed. Boortz pointed out that progressive taxation was first outlined in the Communist Manifesto. Boortz, speaking for the Fair Tax, said that repeal was the best solution long term. Both CATO’s Dan Mitchell and NFIB’s Jerry Pierce agreed. Pierce noted that this was not the official NFIB position but his alone.

John McQuiston, the moderator, asked if changing the current system in any meaningful was was politically possible. Mitchell noted that during the 1990s Congress passed meaningful welfare reform and likened the tax reform challenge as doable. Congressman Buchanan indicated that from his meetings with President Obama and others that there is a six month window of opportunity to make meaningful changes.

The Fair Tax was most discussed by panel members. Mitchell noted that even though he was on the panel to represent the flat tax he had debated in favor of the Fair Tax. Nolan was concerned that the low income taxpayers would be negatively impacted. Boortz pointed out that under the Fair Tax, those making minimum wage would see a negative 23% tax while those making $31,000 would have a zero tax bill.

The issue of tax loop holes for corporations came up  repeatedly. Corporations like GE have lobbyists who are paid to insure they pay no taxes and these lobbyists have been successful. Boortz pointed out that corporations pay no taxes. Rather individual stockholders and the consumers bear the burden of the taxes levied on the products and services provided by corporations.

The question of charitable deductions came up. Mitchell pointed out that all academic studies of charitable giving show that two things drive individuals to give – wealth and disposable income. For example the bill signed by President Obama in January limits itemized deductions for those making over $450,000 to 3%. The closing of loopholes already includes limiting deductions for high wealth individuals.

During the presentation the audience showed its appreciation for the panel and Rep. Buchanan by their applause. Boortz pointed out this type of event is critical if tax reform is to take place. Without the power of the people nothing will happen. Boortz pointed out that with the implementation of the Fair Tax and elimination of the progressive income tax, “it will be the greatest transfer of power from government to the people since the American revolution.”

At the end of the discussion both Rep. Buchanan and Jerry Pierce warned that the United States faces a financial meltdown in the next 3 to 8 years. Mitchell noted that by 2040 Greece spending will be at 300% of their GDP, while America’s spending will be at 450% of GDP. The disaster is eminent noted Rep. Buchanan but he believe a bi-partisan agreement is possible within the next six months.

If none is reached then America’s fiscal downfall is set. The question is not if, but when.

Rep. Vern Buchanan to Hold Forum on Tax Reform

Sarasota, Florida – U.S. Representative Vern Buchanan announced today that he will host a forum on tax reform. Buchanan is Florida’s only member of the powerful U.S. House Ways and Means Committee, which is reviewing current federal income tax law and chairman of the small business working group.

“The current tax code punishes everyone from families to employers trying to compete in the global marketplace,” said Buchanan. “I am working in Congress to fix our broken tax code. My goal is a simpler, fairer, pro-growth tax code that helps get Americans back to work.”

Buchanan noted that various proposals have been put forth for tax reform in the United States, including a flat tax, a sales tax or keeping the present code with some simplification or modification in the tax structure.

The panel for the forum includes:

  • Neal Boortz is a former nationally syndicated radio talk show host who co-wrote the Fair Tax Book with former Congressman John Linder. The book calls for the replacement of the income tax with a consumption tax.
  • Dan Mitchell is a senior fellow with the Cato Institute, which is a public policy research organization dedicated to the principals of individual liberty, limited government, free markets, and peace. Mitchell is an expert on tax reform and a strong advocate of a flat tax.
  • National Federation of Independent Business (NFIB)/Florida Chairman Jerry Pierce. The NFIB is is the leading small business association representing small and independent businesses. The NFIB supports modifications to provide tax relief and certainty to small businesses.
  • Susan Nilon is the general manager of WSRQ radio, a radio show host and writer who advocates a progressive tax that taxes wealthy individuals at a higher rate than low income individuals.

The forum will be moderated by WWSB/ABC 7 news anchor John McQuiston.

The event will be held at 11:00 a.m. on Friday, March 29, 2013 at New College of Florida’s Mildred Sainer Pavilion, 5313 Bay Shore Rd, Sarasota, FL 34243.

The event is free and open to the public. Please call 941.951.6643 or click here to RSVP.

Sinkholes: Florida taxpayers’ looming financial disaster

Sinkholes have been in the news recently when Mr. Jeff Bush went missing after his bedroom was swallowed up. Efforts to find Mr. Bush have been stopped.

See the  map below to understand the extent of the Florida sinkhole problem:

Click on map for a larger image.

The tragedy of Mr. Bush is overshadowed by the potential costs of paying sinkhole claims by Citizens Insurance Corp. 

According to the September 2012 Citizens Property Insurance Corporation rate hearing, “Citizens lost nearly $1 billion on sinkhole losses occurring in 2007-2011 with a loss ratio for sinkhole business for 2011 of 877%. This created net loss for the PLA for year ended 12/31/11 and resulted in less financial resources to pay for future hurricanes.”

Unlike private carriers Citizens is not able to manage risk and reduce policy counts to manage such risk. As an insurer of last resort, created by Florida statute, Citizens must write most risks that apply for coverage.

Florida property owners received their property insurance bills and found the line item “FL HURRICANE CAT FUND PREMIUM RECOUPMENT”.

When Watchdog Wire asked Citizen Insurance: Is this recoupment a tax increase on all homeowners? The reply was, “Yes, all Floridians assume the potential for assessments should Citizens run into a deficit situation.”

This “recoupment” is a tax on every Florida property owner.

According to Citizens Insurance, ”Citizens may levy an Emergency Assessment when Citizens incurs a deficit in any year and that deficit exceeds the amount to be collected by the Regular Assessment.” See Florida Statue 627.351(6).

Florida taxpayers may be the next sinkhole victims – a sinkhole called Citizen Insurance.

Florida House rejects Obamacare Medicaid expansion

John Hayward from Human Events reports:

On the eve of convening of the 2013 session, the House Select Committee on the Patient Protection and Affordable Care Act rejected the expansion. A Senate counterpart committee postponed consideration of the issue, which is sure to be one of the biggest controversies of the session.

Scott, a Republican who bitterly fought President Barack Obama’s national healthcare plan as a candidate and in his first two years as governor, stunned conservative supporters on February 20 when he endorsed a three-year expansion of Medicaid, provided the federal government picks up the full cost for the first three years as promised.

“There’s definitely a fight between the governor and the (state) legislature over this. The Republicans in the legislature are much more fiscally conservative than his actions have shown him to be,” said Susan MacManus, a Tampa-based political scientist at the University of South Florida.

Republican legislative leaders have been openly hostile toward the plan, emphasizing that state lawmakers will make the final decision in drawing up a budget for next fiscal year.

The Florida based James Madison institute released the following statement:

The House made the right decision today to not draft a committee bill expanding Medicaid under PPACA provisions. Many Members expressed valid concerns that this could hurt the people that it is aimed at helping. State leaders should focus on providing more access to quality care — expanding a program that is inefficient in this effort is not a way to do that.

Additionally, in our recent poll of 600 registered Florida voters more than 63 percent said they are wary that the federal government would keep the funding level promises made, and clearly many House Members share this worry. If history is any indicator, costs of such programs are often underestimated and there has been examples of the federal government going back on their promise before. These issues cannot be ignored.

IRS website instructs Grades 3 – 5 public school students on why taxes are good

The IRS has produced a comprehensive website, lesson plans and instructional materials to teach public school children about taxes. The IRS website is titled, “Understanding Taxes“.

Kids.gov supports the teaching of elementary school children about taxes. Explaining Taxes to Students Lesson Plan (Grades 3 – 5):

Overview: Your students may be curious about what taxes are and why we pay them. The Internal Revenue Service has a great Understanding Taxes website. The teacher section has lesson plans, interactive activities and printable components for middle school and high school students.

Here are excerpts from the Grades 3 – 5 student lesson plan:

  1. Explain that taxes are collected to pay for things that we all share, like roads, parks, and playgrounds. We also share in the cost of services such as the public school system or the police department. Activity – Ask students to list other government services that might be funded by taxes. Here is an Online 2011 Federal Taxpayer Receipt where data can be entered to see how tax money was distributed across government programs.
  2. Tell students that there are different types and amounts of taxes based on where a person lives and his/her income. Talk to students about:
    1. Income Tax – Explain that most people in the country have money taken from each paycheck to pay income taxes so the federal government can pay for things like national defense, inspecting food, researching cures for diseases, and helping with disasters. Activity – Ask the students to create a list of goods and services they share with the family members of their household. If their parents pay them for chores, ask whether they think they should give some of this back to pay for these goods and services. Using a weekly allowance as a paycheck and setting a fixed tax rate, have students calculate their “net pay.” Have students discuss how the tax income should be divided between the goods and services they listed.
    2. Sales Tax – When a student wants to buy something with his own money, he finds out about sales tax when his purchase unexpectedly costs more than the “sticker price”. Explain that states and cities charge taxes on almost everything that is purchased so they can provide their own services, and that the sales tax rate can vary from state to state. Activity – Have students examine receipts to compare the “sticker price” of items to the final cost of the items with sales taxes included. Optional Activity – Have students calculate sales tax and the final cost of an item using the sales tax rate for your state.
    3. Property Tax – Explain how every year, some adults pay taxes to the local government based on their house’s value. Explain that properties are assessed periodically to determine their value. Even in rented property, explain that the property taxes still get paid, but they’re probably included in the monthly rent. Probe – Ask students to speculate on what happens to the amount of property tax owed when home improvements, like adding a new bathroom or finishing a basement, are made. Optional Activity – U.S. property tax rates vary from state to state, typically .2 to 4%. Have the students calculate the property tax for 3 properties at different values using the same tax rate. [My emphasis]

At the end of the lesson plan is this activity:

Discuss with students that not everyone agrees on taxes. The Boston Tea Party is a good historical example of introducing the idea of resistance to taxes. (Note the illustration about Colonialists attacking a hapless tax collector.)

Probe – Ask students to speculate on the consequences if a large number of people refused to pay taxes. [My emphasis]

Many consider this indoctrination and not education. What do you think?

Killing charitable deductions slowly – the sunset of PEP and Pease

Roberta Flack’s 1973 hit tune “Killing Me Softly with His Song” comes to mind when writing about how the tax codes have dramatically changed effective January 1, 2013. Two of the major changes are charitable deductions under the Personal Exemption Phase-out (PEP) and the Pease deduction cap under 26 US Code § 68.

According to the Indiana University Foundation:

As of January 1, 2013, itemized deductions will be limited in several ways:

The Pease limitations will reduce the amount of certain itemized deductions high-income taxpayers can claim: either 3% of the taxpayer’s income over the modified adjusted gross income limit, or up to 80% of certain deductions (whichever amount is less).

The taxpayer threshold for claiming medical expenses as an itemized deduction will be increased from 7.5% of AGI to 10% (though individuals age 65 and older will continue to use the 7.5% threshold from 2013 to 2016).

As was the case in 2012, the option to deduct state and local sales taxes rather than income taxes will not be available.

Kelsey Snell from Politico wrote in December, 2012, “Tax rate increases aren’t the only way in which Democrats are aiming to collect more tax dollars from the rich — they’re also looking to resurrect a dormant pair of oddly named laws that targeted the wealthy for decades.”

Snell states:

Known as PEP and Pease, they’re a little bit like the original “Buffett rule.”

The Personal Exemption Phase-out, or PEP, and the “Pease” deduction cap — named for the late Rep. Don Pease (D-Ohio) — were introduced in the 1990s to try to help balance the budget by getting the rich to chip in more. PEP reduced the value of exemptions for high-income earners by as much as 2 percent for every $2,500 earned over a set amount. Pease limited itemized deductions for the wealthy.

Read more.

According to Barbara E. Little, an associate with New Jersey based Schnader Attorneys at Law in their Tax and Wealth Management Department and the Trust and Estates, Nonprofit and Higher Education Practice Groups.:

On January 2, 2013, President Obama signed into law the “American Taxpayer Relief Act of 2012” (ATRA). In this Alert, we explore the good news and the bad news that charitably minded individuals received with the passage of ATRA.

Bad News

Let’s start by getting the bad news out of the way. ATRA revived the itemized deduction limitations, also known as the “Pease Amendment” (named after Congressman Donald Pease, the amendment’s proposer in the 1990s). Under Pease, total itemized deductions are reduced by 3 percent not to exceed 80 percent, of the amount the taxpayer’s adjusted gross income exceeds the threshold amount – $250,000 for single filers, $275,000 for heads of household and $300,000 for married filing jointly (indexed for inflation). Charitable deductions are included in the limitation equation.

Depending on the taxpayer’s income level and other deductions, this limitation could adversely affect charitable contributions. For example, consider a married couple with $60,000 of itemized deductions ($25,000 mortgage interest, $10,000 state taxes and $25,000 charitable deduction) and an adjusted gross income of $450,000. The couple’s adjusted gross income exceeds the threshold by $150,000. The couple must reduce their total itemized deductions by 3 percent of $150,000 or $4,500.

The other bad news is that two charitable deductions were not extended: 1) contributions of book inventories to public schools; and 2) corporate contributions of computer inventory.

Good News

One piece of good news is that under ATRA, once again, individuals 70½ years of age or older may make tax-free IRA distributions to charitable organizations. The maximum distribution amount is $100,000 per individual, per tax year.

Speaking with a Florida donor to local charitable organizations he bemoans the fact that under ATRA his personal exemptions are eaten up by other, primarily tax deductions, thus limiting his charitable giving. He is concerned that ATRA is written so that non-profit organizations, many of which are faith based, will be irreparably harmed. With the passage of ATRA the new charity will be government and its ability to redistribute tax revenues to those non-profits it see as fit for public donations.

The new normal is “government charity” at every level.

Listen to Roberta Flack singing Killing Me Softly:

[youtube_sc url=”http://youtu.be/4mpqXu0z3wU”]

Senators Marco Rubio (R-FL) and Rand Paul (R-KY) will respond to the State of the Union speech

Earlier today, U.S. Senator Marco Rubio (R-FL) rehearsed the Republican Address to the Nation. Senator Rubio is set to deliver a live response from the Speaker’s conference room in the U.S. Capitol, immediately following the President’s State of the Union address. He will pre-record the same speech for Spanish-language networks earlier this evening. At the same time Senator Rand Paul (R-KY) will give the TEA Party Address to the Nation from the National Press Club in Washington, D.C. Viewers will be able to watch Senator Paul’s speech live on the conservative website RedState.com.

Who will be the most watched: Marco or Rand?

Frank Hagler from Policy Mic reports:

For the third year in a row, two Republicans have been selected to give the GOP response to the SOTU address. Senator Marco Rubio (R-Fla.) will give the “official” GOP response and Senator Rand Paul (R-Ky.) will give the Tea Party Express response. This unusual practice started in 2011.

After the Tea Party helped usher in a Republican majority in the House of Representatives, they began exercising their power in the party. The Tea Party Express tapped Michele Bachmann to give a response that was televised to the nation. Tea Party Express Chairwoman Amy Kremer explained “The Republican Party doesn’t represent everybody in the Tea Party movement, and they certainly don’t speak for us.”

Scott Conroy from Real Clear Politics reports:

With Kentucky Sen. Rand Paul set to deliver the Tea Party’s third annual response to the State of the Union speech on Tuesday, the pressure is on for the group to prove its ongoing influence, particularly amid growing criticism from establishment Republicans who accuse it of promoting un-electable candidates at the larger GOP’s expense.

In an interview with RCP, Tea Party Express Chairwoman Amy Kremer acknowledged the moment’s significance.

“I really think it’s more important than ever for us to do it this year because there have been reports of the Tea Party’s demise, but we’re absolutely still here and focused and engaged,” Kremer said. “The Republican Party doesn’t represent everybody in the Tea Party movement, and they certainly don’t speak for us.”

The TEA Party is flexing its muscles with the creation of the TEA Party Community website. Launched on February 2, 2013 the site now has over 109,000 members.

The struggle within the Republican party pits the old guard lead by Karl Rove, against the conservative faction lead by Senator Paul, Michele Bachmann and others. It was the old guard that gave Florida the likes of former Governor Charlie Crist who won the state house as a Republican, lost the race as an Independent for the US Senate seat currently held by Rubio. It is expected that now Democrat Crist will run against incumbent Republican Governor Rick Scott in 2014.

Conroy notes, “Now, with Paul eager to rev up the Tea Party engine just as a new civil war against establishment Republicans appears on the horizon, the setting will look familiar.”

Perhaps now is the time for a civil war within the GOP?

Status of Educational Choice Programs in Florida “Unclear”

The Friedman Foundation for Educational Choice has release the 2013 edition of “The ABCs of School Choice“. The report shows the strength and weaknesses of school choice in Florida.

According to the Foundation website , “Florida has two private school choice programs (special-needs vouchers, limited tax-credit scholarships). The state also has a charter school law and enables public virtual schooling. Limited open enrollment exists, both for intradistrict and interdistrict public school choice. ”

The Foundation notes:

The status of school choice in Florida is unclear. Unfortunately, in an unprecedented decision, the Florida Supreme Court struck down the state’s groundbreaking Opportunity Scholarships voucher program for children in chronically failing public schools. The court declared that the program violated the state Constitution’s education article, specifically the requirement to provide a “uniform” public education. Contrary to state supreme courts in Wisconsin and Ohio, the Florida court decided that the Legislature may not provide educational options beyond those in the public schools. Still, the court limited its decision to Opportunity Scholarships only, leaving untouched Florida’s other school choice programs.

Earlier in the same case, a Florida appellate court struck down Opportunity Scholarships under the state’s Blaine Amendment. That ruling ran counter to years of Florida Supreme Court rulings on the Blaine Amendment permitting “incidental” benefits to religious organizations as the by-product of programs designed to advance the general welfare. The Florida Supreme Court did not review that issue, and the validity of the appellate court’s holding is unclear under Florida law.” [My emphasis]

A constitutional amendment was on the November 2012 ballot to eliminate the Blaine Amendment but it failed to garner the votes to pass. Unions and even some TEA Party activists were against the amendment.

Florida’s two educational choice success stories are:

Florida Tax Credit Scholarship Program

Enacted 2001 • Launched 2001

Florida provides a tax credit on corporate income taxes and insurance premium taxes for donations to Scholarship Funding Organizations (SFOs), nonprofits that provide private school scholarships for low-income students and foster care children and… Read More

John M. McKay Scholarships for Students with Disabilities Program

Enacted as a Pilot Program 1999 • Expanded 2000

Florida’s John M. McKay Scholarships for Students with Disabilities Program allows public school students with disabilities or 504 plans to receive vouchers to attend private schools or another public school. Read More

Despite the uncertainties surrounding vouchers, tax credit programs are completely consistent with the Florida constitution, even as interpreted by Holmes, because they involve private rather than public funds. –Quote from the Institute for Justice (April 2007)

Florida Braces for 13 Tax Increases in 2013

According to the Heritage Foundation, “New Year’s Day was tough for taxpayers. Thirteen tax increases kicked in. The deal that Congress and President Obama struck that finally—but only partially—avoided the fiscal cliff resulted in seven tax increases. Those hikes combined with six tax increases from Obamacare that also began on New Year’s Day.”

13 Tax Increases that Started January 1, 2013 in the fiscal cliff deal:

1. Payroll tax: increase in the Social Security portion of the payroll tax from 4.2 percent to 6.2 percent for workers. This hits all Americans earning a paycheck—not just the “wealthy.” For example, The Wall Street Journal calculated that the “typical U.S. family earning $50,000 a year” will lose “an annual income boost of $1,000.”

2. Top marginal tax rate: increase from 35 percent to 39.6 percent for taxable incomes over $450,000 ($400,000 for single filers).

3. Phase out of personal exemptions for adjusted gross income (AGI) over $300,000 ($250,000 for single filers).

4. Phase down of itemized deductions for AGI over $300,000 ($250,000 for single filers).

5. Tax rates on investment: increase in the rate ondividends and capital gains from 15 percent to 20 percent for taxable incomes over $450,000 ($400,000 for single filers).

6. Death tax: increase in the rate (on estates larger than $5 million) from 35 percent to 40 percent.

7. Taxes on business investment: expiration of full expensing—the immediate deduction of capital purchases by businesses.

Obamacare tax increases that took effect:

8. Another investment tax increase: 3.8 percent surtax on investment income for taxpayers with taxable income exceeding $250,000 ($200,000 for singles).

9. Another payroll tax hike: 0.9 percent increase in theHospital Insurance portion of the payroll tax for incomes over $250,000 ($200,000 for single filers).

10. Medical device tax: 2.3 percent excise tax paid bymedical device manufacturers and importers on all their sales.

11. Reducing the income tax deduction for individuals’ medical expenses.

12. Elimination of the corporate income tax deduction for expenses related to the Medicare Part D subsidy.

13. Limitation of the corporate income tax deductionfor compensation that health insurance companies pay to their executives.

Each of these 13 tax increases will slow the economy, meaning that businesses will create fewer jobs. Fewer jobs will make it even more difficult to land a job than it already is for the more than 12 million Americans looking for work.

President Obama demanded these higher taxes. Obama’s tax increases, in Obamacare and through the fiscal cliff deal, will not curb deficits and debt, because growing spending is driving America’s budget crisis. Congress needs to immediately turn its attention to the actual cause of our deficit and debt problem: too much spending. The proper way to address this problem is through reforms to entitlement programs.

President Obama promised the American people a “balanced approach” of tax increases and spending cuts to reduce deficits and debt. He has achieved the tax increase portion of that approach. Now Congress needs to force him to follow through on the spending cuts portion.

FairTax Proponents Seeking Support from Florida Rep. Vern Buchanan (CD-16)

In an email to supporters Mark Gupton, Managing Director for Florida FairTax Educational Assn., Inc., states, “In conjunction with the National FairTax Strategic Planning Committee, Americans for Fair Taxation and the FairTax Strategic Advisory Team, FFTEA will support their action by devoting a considerable amount of time, effort and resources towards a District Targeting Plan for Florida Congressional District 16.”

Rep. Vern Buchanan represents FL CD-16.

Rep. Buchanan is the only Florida member of Congress to serve on the powerful House Ways and Means Committee, which has jurisdiction over tax policy, international trade, health care and Social Security. Florida FairTax wants Rep. Buchanan to become a co-sponsor of HR 25 – Fair Tax Act of 2009.

It is generally believed that a tax reform plan will advance out of the House Ways & Means Committee during 2013.

“Tax related issues will be in two stages: 1. Dealing with the so called fiscal cliff and debt limit problems sometime in early 2013. 2. Followed by moving a tax reform plan from the W & M Committee to the entire House of Representatives for an eventual floor vote. We have received indications through various channels that FairTax will be on the agenda as one of the choices for the W & M Committee to hear. Chairman Camp is committed, more so than any previous Chairman, to having FairTax receive a vote. This is a major step forward and one for which we have the best chance of advancing FairTax,” notes Gupton.

Florida delegation members co-sponsoring HR 25 are:  Jeff Miller (R – 01), Ander Crenshaw (R – 04), John L. Mica (R – 07), Bill Posey (R – 08), Richard Nugent (R-11), Gus M. Bilirakis (R – 12) and Dennis Ross (R – 15). Florida makes up 13% of the co-sponsors.

Mr. Jim Hoey has agreed to accept a leadership role in FL-16 by becoming the Florida FairTax Congressional District Director. In addition, Florida FairTax has established a home page just for FL CD-16 which may be viewed by clicking here.