QUOTE OF THE DAY
CNBC: Facebook paid no income taxes in 2012
Facebook didn't pay any federal or state income taxes last year and will receive a hefty tax refund, according to a recent report.
How did the social network manage to swing such a nice tax break?
Well, according to the Citizen for Tax Justice report the company benefited from the tax deductability of executive stock options, which reduced all of its income taxes by $1.03 billion in 2012.
The company also has another $2.17 billion in extra tax-option breaks to carry forward in the future, according to the report, which means Facebook gets to deduct a total of more than $3 billion in current and future taxes, according to the report.
Politico: Health care exchanges and the two Americas
In the Obamacare era, there are two Americas.
Half the states have refused to set up the health insurance exchanges, ignoring a Friday deadline for states to take on core requirements of the law. They’ll hand over the keys to the Obama administration, which will play an outsize and risky role in driving critical health insurance decisions that are typically the province of state governments.
Barring any surprise last minute Friday announcements, in those 25 states — nearly all led by Republican governors — the feds must set up health insurance exchanges. Enrollment starts in October, and on Jan. 1 those online marketplaces are supposed to provide affordable health coverage for millions of Americans.
Republicans who voted against the law and still clamor to repeal Obamacare believe the feds are heading for a nationwide failure.
NPR: In Kansas, A 'Glide Path' To No Income Taxes. Will It Work?
Kansas Gov. Sam Brownback has put the state on what he calls a "glide path to zero" income tax. But that glide path is far from being clear or smooth.
On the face of it, Brownback seems to enjoy a remarkably strong political position. He's a conservative Republican, flanked by GOP supermajorities in both legislative chambers. His allies helped purge moderate Republicans from the state Senate in last year's election.
"I think the road is open," Brownback says. "I think we do provide an alternative model. I think we do provide a red-state model."
In 2012, Kansas eliminated the state income tax for about 190,000 small businesses and cut the rate substantially for high-income individuals.
"We're going from the highest-tax state in the region, to the lowest-tax state in the region," Brownback says.
Businessweek: The Tax Preparers Who Love Obamacare
Ana Maria Costanza likes the Affordable Care Act—a lot. “I read the whole 900 pages,” the H&R Block (HRB) tax preparer exclaims happily in a TV ad. “It literally took me weeks.” Most people have a different reaction to the thought of wading through new government regulations, and that’s the point. “I know the law,” Costanza tells the camera with a big smile, “and I can help you figure it out.”
Tax-prep companies have long looked for ways to diversify their businesses, and Obamacare may be the perfect opportunity. H&R Block is pitching what it calls a tax and health-care review so customers can be ready when the law’s income-based subsidies begin kicking in next year. Uninsured Americans will need to figure out whether they qualify for the insurance subsidies, how much they could receive, and whether it makes more financial and medical sense to get coverage or skip it and pay the penalty for violating the law. The group of taxpayers eligible for the subsidies—families of four earning between $31,000 and $94,000 a year—falls right into the sweet spot of storefront tax preparers. “This is an intersection that uniquely positions us to respond to their needs in new ways,” says Meg Sutton, senior adviser for tax and health-care services at H&R Block.
For now at least, the company isn’t charging for the reviews. The idea is to create relationships with customers so they’ll return for regular filing help and perhaps for ongoing advice as family circumstances and tax burdens change. The IRS will require taxpayers to file paperwork disclosing their medical coverage starting in 2015. Scott Schneeberger, an analyst at Oppenheimer, says H&R Block could bill $5 a head for filling out health-related forms. “They can charge for that added complexity very justifiably,” he says. Sutton declined to say what kind of fees the company is considering.
Neither Jackson Hewitt nor Liberty Tax Service, two major competitors, are pitching health-insurance advice, but Mark Steber, Jackson Hewitt’s chief tax officer, says he sees it as a logical evolution. He’s already noticed more queries about health care this year, thanks in part to his rival’s TV ad. “There’s going to be a tremendous change to the industry,” Steber says.
At a minimum, according to Schneeberger, the subsidies in Obamacare could motivate low-income earners who aren’t required to file returns to do so, potentially increasing the number of new customers by more than the typical 1 percent a year. About 60 percent of Americans pay advisers for help with their taxes, according to Oppenheimer, and H&R Block files about 18 percent of those returns. The company’s stock is up more than 30 percent this year, which Schneeberger says is a sign that the prospects for growth already have investors excited. Says Mike Tuffin, managing director of the consulting firm APCO Worldwide’s Washington office: “Most consumers hate math, and there’s a lot of math here.”
Bloomberg: Obama Deficit Vow in Speech Leaves Billions to Be Found
President Barack Obama said the proposals in his State of the Union speech won’t increase the U.S. deficit “by a single dime.” He didn’t say they’d be free.
The president’s wish list, involving a mix of one-time and continuing costs, amounts to billions of dollars largely to boost the economy and job creation. Just how many billions will become clearer when he submits his budget proposal to Congress in mid-March.
Obama’s initiatives include $50 billion for bridge repairs and other “urgent” infrastructure projects, $1 billion for manufacturing-innovation centers, and undisclosed amounts for research, clean energy, education, worker training and preschool for 4-year-olds in the U.S.
How much support the proposals get in Congress depends in part on how Obama would pay for them and on the broader political atmosphere. Republican lawmakers were skeptical.
“With a $16 trillion debt, he actually called for more spending, too --- though he didn’t say how he would pay for it or even how much it would cost,” said Senate Republican Leader Mitch McConnell of Kentucky.
While Republicans criticized the president for trying to raise taxes to expand government, Obama said the new spending he’s proposing would promote job creation and economic growth. His budget won’t be released until after a March 1 deadline for Obama and Congress to avert $1.2 trillion in automatic spending cuts known as a sequester.
Washington Post: D.C.’s odd resistance to more charter schools
ONLY 34 PERCENT of D.C. public-school students are in top-quality schools. The District — particularly struggling neighborhoods east of the Anacostia River — is in urgent need of schools that can perform. So one would think that the city would be clamoring to welcome a renowned charter nonprofit that wants to bring its record of educational success with disadvantaged students to the nation’s capital.
Instead, there is misplaced concern about the growth of charter schools and worrying talk about whether they should be curtailed.
Rocketship Education, which operates some of the highest-performing elementary schools in California, has submitted an application to open charter schools in the District, targeting underserved students in Wards 7 and 8. The proposal — as well as interest from other national charter networks — comes, The Post’s Emma Brown reports, as an increasing percentage of public-school students attend charter schools instead of traditional schools. The 34,673 students enrolled in charter schools last fall represent 43 percent, up from 41 percent in 2011, of the city’s public-school students, and officials envision a day when half the city’s public-school students will attend charters.
Some worry that this growth weakens traditional schools and could lead to a shrunken system that could not operate a viable system of neighborhood schools. Never mind that the competition from the charter schools helped spur traditional schools to undertake needed reforms or that recent years have seen a stabilization of enrollment in the public-school system and even a slight increase this school year.
Real Clear Markets: President Obama's No-Growth State Of the Union
By far the best line from this week's dueling State of the Union messages came from Florida senator Marco Rubio. Nice and simple, and right to the point:
"Presidents in both parties -- from John F. Kennedy to Ronald Reagan -- have known that our free-enterprise economy is the source of our middle-class prosperity."
That's a brilliant summary of pro-growth policies, on the supply-side and in a free-market context.
Kennedy slashed tax rates and held down the budget. So did Ronald Reagan, who borrowed Kennedy's ideas: smaller government, lower tax-rate incentives, and a thriving middle class, where the economic pie grows ever larger.
In short, the Kennedy-Reagan policies were growth policies.
On the other hand, while President Obama quotes John F. Kennedy, he doesn't draw the dots to Kennedy's supply-side tax reforms. He does mention the phrase "tax reform," but he's not talking about lowering rates across the board while broadening the base to reduce deductions. Rather, he means penalizing companies that operate overseas and favoring companies at home that do what he wants them to do.
Think of it as taxation as a form of industrial policy, replete with tax targeting. This is decidedly anti-growth. And while opposing the sequester spending cut, Obama wants another $800 billion in taxes. More anti-growth.
Fiscal Times: Raise the Minimum Wage and Get Minimum Jobs
Like those of all modern presidents, Barack Obama’s State of the Union speech was filled with agenda-list items, long-held hobby-horse issues of his party, and inflated claims of the success of his own policies. Most of the content could have been lifted from campaign speeches in 2012, probably 2008, and arguably every Democratic campaign for the last 40 years. Kirsten Powers, the liberal analyst on Fox News, wrote in a column for USA Today that the speech made it seem that “President Obama's chief speechwriter has been replaced by a cliché-generator circa 1960.”
Among the blizzard of clichés was a surprising throwback to 2007. President Obama focused on middle-class economic issues, which came as no surprise after having taken criticism over his inaugural speech, which hardly mentioned jobs and the economy at all. The White House didn’t make that mistake on Tuesday evening, with 32 mentions of “jobs” peppered throughout the address, and a pledge to focus on economic growth and job creation. However, included with that commitment to focus on job expansion came a new proposal to raise the federal minimum wage from its current $7.25 per hour to $9 per hour.
“We know our economy’s stronger when we reward an honest day’s work with honest wages,” Obama told the joint session of Congress. “But today, a full-time worker making the minimum wage earns $14,500 a year. Even with the tax relief we’ve put in place, a family with two kids that earns the minimum wage still lives below the poverty line. That’s wrong.” The President worked in a shot at wealthy CEOs at the same time: “In fact, working folks shouldn’t have to wait year after year for the minimum wage to go up, while CEO pay has never been higher.”
Built in Chicago: Let’s Stop Lying about Learning
I realize that each of us has our own version of the 3 biggest lies and I’m sure that everyone’s list morphs over time depending on their own experiences and disappointments. I say disappointments because there are no happy outcomes from lies – even little white lies – so, by and large; I’ve concluded that honesty remains the best policy. It would be nice if the people who run our K-12 school systems (the management and the union “leaders”) felt the same. But, regardless of whether they or anyone else responsible will ever admit it, there are certain real-world lies which persist – especially when they are repeated ad nausem by the highest politicians in the land - and these are so pernicious that it almost seems like our civic duty to call bullshit on them from time to time. As Thomas Jefferson said “a continual circulation of lies among those who are not much in the way of hearing them contradicted will in time pass for the truth.”
Lie Number One, of course, is that everyone can afford to and should own their own home. I feel that this crock has pretty much imploded over the last few years although I sense a creeping rebirth of the same kind of delusionary thinking when I hear the President talking about how the JOBS legislation is such a triumph of democracy (small “d” for sure) since pretty soon every Tom, Dick and Harry will be able to buy and own cheap stocks and their “piece of the American Dream” through new and virtually unregulated crowd-funding vehicles which will let just about anybody with a “story” raise money from the masses.
Do I even need to add “whether this new class of “investors” can afford it or not” or “whether they have the slightest clue as to what they’re investing in or the risks inherent in the investment”? Talk about learning nothing from the fake financial statements and phony real estate appraisals which let the crooked banks create huge numbers of bogus loans in order to lend just about anything to anyone. Imagine how closely anyone will be scrutinizing the net worths and required levels of sophistication of the tens of thousands of cab drivers and convenient store operators who will now become stock speculators on the side.
Lie Number Two – another favorite of the DC crowd is that every kid in American needs and is entitled to a 4-year college education whether they (and/or their parents) can afford it or not. And, frankly, whether they want it or not; are capable and likely to be successful in the pursuit or not; and/or whether they would be much better served and far more likely to ultimately find a job if they pursued a shorter, less costly, and better suited program to get some practical vocational training and to get on with their lives without mortgaging their future with student loan obligations. Since I have an obvious dog in this particular fight, I won’t say anything more on the subject.
It’s the third big lie that’s really killing our kids’ futures and, not surprisingly, it has nothing to do with getting thru a college education- it’s all about the diminished likelihood of getting to a college education. By the time many of these kids are of college age, the damage is already done and they’re long gone from the system. And honestly, the ones who remain are basically no better served by the continued pretense that we’re effectively teaching them much of anything useful or of value in today’s globally competitive world. So what’s the third big lie?
Lie Number Three is that in education, and specifically in the classroom, that “one size fits all”. It’s the job security lie that ignores how differently each of us learns and pretends that a single instructor standing in front of a classroom full of kids can effectively teach anything to all of them at the same time. It’s true that the one thing this approach will convincingly teach each of those students is that we still think of schools as industrial-style factories turning out standardized automans with a premium on rote memorization and repetition rather than rigorous reasoning and problem solving. But it doesn’t have to be that way.
Chicago Tribune: Jackson Jr., wife intend to plead guilty to charges
Jesse Jackson Jr. faces up to five years in prison after being accused of diverting $750,000 in campaign funds for personal use and his wife Sandi faces up to three years in prison for understating their income on tax returns for six years, their lawyers say.
Jackson Jr., 47, a Democrat from Chicago, was charged in a criminal information today with one count of conspiracy to commit wire fraud, mail fraud and false statements. He faces up to five years in prison, a fine of up to $250,000 and other penalties.
Sandi Jackson was charged with one count of filing false tax returns. She faces up to three years in prison, a fine of up to $250,000 and other penalties.
Jackson Jr. is accused of diverting $750,000 in campaign funds for personal use.
Federal authorities allege that Jackson Jr. used campaign funds to purchase a $43,350 men’s gold-plated Rolex watch, $5,150 worth of fur capes and parkas, and $9,588 in children’s furniture. The purchases were made between 2007 and 2009, according to the criminal information, which authorities noted is not evidence of guilt.
Other expenditures listed by prosecutors include $10,105 on Bruce Lee memorabilia, $11,130 on Martin Luther King memorabilia and $22,700 on Michael Jackson items, including $4,600 for a "Michael Jackson fedora."
The government also alleged that Jackson Jr. made false statements to the House of Representatives because he did not report approximately $28,500 in loans and gifts he received.
CARTOON OF THE DAY