Posts Tagged ‘Tax Foundation’

Olympic Winnings Subject to our Worldwide Tax System

August 9th, 2012 No comments

People ask me all the time, “Why is the tax code so complicated?”

My one sentence answer: “It’s riddled with countless exceptions and exemptions.”

Sen. Marco Rubio (R-FL) has proposed the winnings earned from medals by Olympians should be exempt from federal income tax.

We often see politicians spending far too much time advocating for measures that would ultimately have at most a marginal impact on a select few. Rubio’s suggestion is a perfect example.

I’m not looking to take away from the spectacle that is the Olympics. But millions of Americans work hard for their paychecks despite knowing a large cut is going to Uncle Sam.

Standing against the proposal, the Tax Foundation points out a far more significant policy issue with the current tax code:

[W]hy is the U.S. taxing this foreign earned personal income in the first place? The United States and Eritrea stand as the only countries to enforce a world-wide taxation system for personal income.

America’s worldwide income tax system combined with increasing foreign interest reporting is why we are seeing the expatriation rate significantly increase.

Expatriation is a very involved process. So involved that this 5,000+ word blog “Why people expatriate” is merely a starting point for those considering.

And yet, more and more of those considering are actually following through.

But Senator Rubio won’t spend time addressing the issues raised by our worldwide tax system. Those are too important too think about how to tackle.

New York Expands Film Tax Credit Program

July 27th, 2012 No comments

I give a thumbs up for the HBO series Boardwalk Empire. The title refers to the longest boardwalk in the world, located in Atlantic City, NJ.

But the series hasn’t been filmed in New Jersey. $5 million was spent to build a 300 foot long boardwalk in Brooklyn in order to shoot scenes there. In March, filming for the upcoming Season 3 began at Historic Richmond Town on Staten Island. Season 3 is set to air this fall.

New York is a popular place to television and film producers because of the State’s post-production tax credit. Post-production refers to editing activity after filming is complete, such as visual effects, color correction, sound editing and mixing.

The State has become even more attractive to producers after Governor Cuomo earlier this week signed legislation expanding the post-production tax credit. From the Governor’s press release:

Under the new law, the qualified film and television post production credit increases from 10 percent to 30 percent in the New York metropolitan commuter region, including New York City and Dutchess, Nassau, Orange, Putnam, Rockland, Suffolk and Westchester counties. An additional five percent (for a total of 35 percent) in tax credits would be available for post-production expenditures in locations elsewhere in the state.

In contrast, California does not offer a specific post-production tax credit. Although the cost of visual effects may qualify for the credit in the Golden State, the movie also must be filmed in the state. New York’s post-production credit does not have that requirement.

Whether a film tax credit program is good policy is another story. The folks at the Tax Foundation released this report in April, and made these key findings:

  • Film tax credits cost states revenue and require either higher taxes or lower government spending elsewhere.
  • At best, film tax incentives largely shift production from one sector to another without producing a net increase in economic activity or employment.
  • However, the program is unlikely to produce a self-sustaining state film industry.
  • Content restrictions raise concerns about censorship.

Film tax credits are also known to invite tax fraud. For example, Dennis Brouse was convicted in March for claiming improper tax credits exceeding $9 million from the Iowa Film Program.

These points must not have carried significant weight to New York lawmakers, as the new legislation received strong support. Only time will tell whether the initiative generates a net positive to the State.

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