Tag Archives: Tax

12 US States Boosted Their Gasoline Tax Today, But Illinois’ Is The Biggest

Today, gasoline taxes are rising in a dozen U.S. states. The following infographic shows where gasoline taxes are going up today and it’s based on data from the Institute on Taxation and Economic Policy.

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California is among the states with increases and taxes in the Golden State are going up by 5.6 cents. That now equates to 47.3 cents per gallon, meaning California once again has the highest gasoline prices in the country.

But, the increase is particularly notable in Illinois given, as Statista’s Niall McCarthy notes, that the state hasn’t altered its gas tax since 1990. It’s bumping its gas tax by 19 cents to 38 cents a gallon.

As IllinoisPolicy.org’s Vincent Carudo and Joe Barnas detail below, Illinoisans will shoulder one of the nation’s heaviest tax burdens at the pump – and the DMV.

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On June 28, Gov. J.B. Pritzker signed into law a $45 billion infrastructure plan that will bring Illinois drivers a record gas tax hike and higher vehicle registration costs.

Those tax and fee increases will come in addition to tax hikes on cigarettes, e-cigarettes, parking and real-estate transfers, on top of new revenue from a massive gambling expansion that includes new casinos and legalized sport betting – all of which the Illinois General Assembly introduced and passed in a single day.

The gas tax hike is the most painful increase to come, doubling to 38 cents from 19 cents per gallon.

This will bump Illinois’ total gas tax burden to the third-highest in the nation, and possibly higher if local governments exercise their increased taxing authority under the plan. An Illinois Policy Institute analysis found the typical Illinois driver will pay at least $100 more on gasoline each year under a doubled gas tax.

Illinois is one of just seven states where drivers pay layers of both general sales taxes and special excise taxes on gasoline at the state and local levels. Those multiple layers mean drivers filling up in Chicago, for example, will pay 96 cents in taxes and fees on a $2.46 gallon of gasoline – an effective tax burden of 39%.

The infrastructure plan also hikes Illinois’ vehicle registration fees to among the highest in the nation. Illinois drivers of standard vehicles weighing 8,000 pounds or less will see registration fees jump to $148 from $98.

The gas tax hike kicks in July 1, and motorists will pay more for license plate stickers starting in 2020.

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Taken together, increases in the gas tax and vehicle registration fees alone erase any promised income tax savings included in Pritzker’s progressive income tax plan, which Illinoisans will vote on in November 2020.

Under Pritzker’s proposed progressive tax system, a married couple in Illinois with two kids earning the $79,168 median annual income and paying the average property tax bill of $4,157 would see $195 in total tax relief, according to the Pritzker administration’s online “fair tax calculator.”

But if that same family uses two cars on a regular basis, their budget will take a $300 hit – a $200 gas tax increase and a $100 vehicle registration fee hike.

Notably, the gas tax will be tied to inflation, meaning it will automatically rise annually. This allows state lawmakers in future years to avoid blame from frustrated motorists.

Based on current inflation projections, the gas tax will rise almost a penny a year. Lawmakers’ inflation mechanism could drive the gas tax to 43.5 cents by 2025, nearly 25 cents per gallon more than it is now.

Using the most recent inflation forecasts for the United States, the gas tax will grow just short of a penny each year until 2025 – a 130% increase.

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The new law lets Chicago raise its local gas tax by an extra 3 cents, which would put it at 8 cents. It allows Lake County and Will County to impose a gas tax of up to 8 cents per gallon. DuPage, Kane and McHenry counties would be able to double their 4-cent-per-gallon gas taxes to 8 cents.

According to state projections, the doubled gas tax alone will raise $1.2 billion, with $560 million going to the state and $650 million to local governments.

If Chicago and the collar counties increase their motor fuel taxes – along with automatic yearly inflation-tied increases at the state level – residents could soon be looking at the highest average gas tax burden in the country.

The Illinois Policy Institute outlined a plan in May showing how Illinois could finance $10 billion in new capital spending without tax hikes.

State lawmakers could have achieved a more responsible plan by focusing on maintenance infrastructure, reforming costly prevailing wage mandates and using an objective project selection process, while dedicating revenue from legalized sports betting and sales taxes on gasoline to transportation infrastructure.

Instead, state leaders once again chose to demand more of already-overburdened Illinois taxpayers.

Source: ZeroHedge

 

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Double Irish With A Dutch Sandwich

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What is the Double Irish With A Dutch Sandwich?

(Investopedia) The double Irish with a Dutch sandwich is a tax avoidance technique employed by certain large corporations, involving the use of a combination of Irish and Dutch subsidiary companies to shift profits to low or no tax jurisdictions. The scheme involves sending profits first through one Irish company, then to a Dutch company, and finally to a second Irish company headquartered in a tax haven. This technique has made it possible for certain corporations to reduce their overall corporate tax rates dramatically.

BREAKING DOWN Double Irish With A Dutch Sandwich

The double Irish with a Dutch sandwich is just one of a class of similar international tax avoidance schemes. Each involves arranging transactions between subsidiary companies to take advantage of the idiosyncrasies of varied national tax codes. These techniques are most prominently used by tech companies, because these firms can easily shift large portions of profits to other countries by assigning intellectual property rights to subsidiaries abroad.

The double Irish with a Dutch sandwich is generally considered to be a very aggressive tax planning strategy. It is, however, famously used by some of the world’s largest corporations, such as Google, Apple and Microsoft. In 2014, it came under heavy scrutiny, especially from the United States and the European Union, when it was discovered that this technique facilitated the transfer of several billion dollars annually tax-free to tax havens.

How it Works

The process involves two Irish companies, a Dutch company, and an offshore company located in a tax haven. The first Irish company is used to receive large royalties on goods, such as iPhones sold to U.S. consumers. The U.S. profits, and therefore taxes, are dramatically lowered, and the Irish taxes on the royalties are very low. Due to a loophole in Irish laws, the company can then transfer its profits tax-free to the offshore company, where they can remain un-taxed for years.

The second Irish company is used for sales to European customers. It is also taxed at a low rate and can send its profits to the first Irish company using a Dutch company as an intermediary. If done right, there is no tax paid anywhere. The first Irish company now has all the money and can again send it onward to the tax haven company.

The End of the Double Irish With a Dutch Sandwich

Due largely to international pressure and the publicity surrounding Google’s and Apple’s use of the double Irish with a Dutch sandwich, the Irish finance minister, in the 2015 budget, passed measures to close the loopholes and effectively end the use of the double Irish with a Dutch sandwich for new tax plans. Companies with established structures will continue to benefit from the old system until 2020.

Source: by Julia Kagen | Investopedia

California Tops National Poverty Rate As Prime Tax Donkey Demographic Plans “Exodus” From State

Despite efforts by state legislators at creating a socialist utopia, California still has the highest poverty rate in the nation at 19%, despite a 1.4% decrease from last year according to the Census Bureau. 

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Poverty and income figures released Wednesday reveal that over 7 million Californians are struggling to get by in the second most expensive state to live in, according to the Council for Community and Economic Research‘s 2017 Annual Cost of Living Index. 

And while California has a “vigorous economy and a number of safety net programs to aid needy residents,” according to the Sacramento Bee, one out of every five residents is suffering economic hardship – which is fueled in large part by sky-high housing costs, according to Caroline Danielson, policy director at the Public Policy Institute of California. 

“We do have a housing crisis in many parts of the state and our poverty rate is highest in Los Angeles County,” she said, adding that cost of living and poverty is often highest in the state’s coastal counties. “When you factor that in we struggle.”

Silicon Valley residents in particular are leaving in droves – more so than any other part of the state. Nearby San Mateo County which is home to Facebook came in Second, while Los Angeles County came in third.

They’re looking for affordability and not finding it in Santa Clara County,” said Danielle Hale, chief economist for realtor.com.

It’s not just housing prices driving the exodus, of course. Punitive taxes – more than twice as much as some other states, are eating away at disposable income. Nearby Arizona’s income tax rate is 4.54% vs. California’s 9.3%, while the new tax bill may accelerate the exodus.

As Michael Snyder of the Economic Collapse Blog pointed out in May…

Reasons for the mass exodus include rising crime, the worst traffic in the western world, a growing homelessness epidemic, wildfires, earthquakes and crazy politicians that do some of the stupidest things imaginable.  But for most families, the decision to leave California comes down to one basic factor…

Money.

Mass Exodus

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As you may or may not be aware, we’ve mentioned the flood of various types of Californians fleeing the state for various reasons; be it wealthy families who want to keep more of their income safe from the tax man, or poor residents leaving the Golden State because they are being crushed by the high cost of living. 

To that end, the Orange County Register notes a significant out migration of people in their child-raising years – as the largest group leaving the state, some 28%, are those aged 35 to 44. 

According to IRS data from 2015-2016, the latest available, roughly half of those leaving the state make less than $50,000 per year, while roughly 25% of those leaving make over $100,000. 

What did the OC register conclude?

Thanks to unaffordable housing, California’s moderate wage earners are going to have to leave the state, while only the wealthy and the impoverished residents will remain. 

But the big enchilada in California — by far the largest source of distortion in living costs — is housing. Over 90 percent of the difference in costs between California’s coastal metropolises and the country derives from housing. Coastal California is affordable for roughly 15 percent of residents, down from 30 percent in 2000 and 30 percent in the interior, from nearly 60 percent in 2000. In the country as a whole, affordability hovers at roughly 60 percent.

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Over time these factors — along with prospects of reduced immigration — will impact severely the state’s future. California is already seeing its population aged 6 to 17 decline. This reflects a continued drop in fertility in comparison to less regulated, and less costly, states such as Utah, Texas and Tennessee. These areas are generally those experiencing the biggest surge in millennial populations. –OC Register

And according to ULI, 74% of California millennials are considering an exodus

Where to? 

As we noted in June, these are the top 10 California counties that people are leaving, and where they’re headed (via the Mercury News): 

1. Santa Clara County

Out of state destinations: Arizona, Nevada, Texas and Idaho

In state destinations: Alameda, Sacramento, San Joaquin, Santa Cruz and Placer counties

2. San Mateo County

Out of state destinations: Arizona, Nevada, Texas and Washington

In state destinations: Alameda, Contra Costa, Santa Clara, Sacramento, and San Francisco counties

3. Los Angeles County

Out of state destinations: Nevada, Arizona, and Idaho

In state destinations: San Bernardino, Riverside, Ventura and Kern counties

4. Napa County

Out of state destinations: Arizona, Idaho, Nevada, Florida and Oregon

In state destinations: Solano, Sonoma, Sacramento, Lake and El Dorado counties

5. Monterey County

Out of state destinations: Arizona, Nevada, and Idaho

In state destinations: San Luis Obispo, Fresno, Santa Cruz, Sacramento and San Diego counties

6. Alameda County

Out of state destinations: Arizona, Nevada, Idaho, and Hawaii.

In state destinations: Contra Costa, San Joaquin, Sacramento, Placer, and El Dorado counties

7. Marin County

Out of state destinations: Nevada, Arizona, Oregon and Idaho.

In state destinations: Sonoma, Contra Costa, Solano and San Francisco counties

8. Orange County

Out of state destinations: Arizona, Nevada and Idaho

In state destinations: Riverside, Los Angeles, San Bernardino, San Diego and San Luis Obispo

9. Santa Barbara County

Out of state destinations: Arizona, Nevada and Idaho.

In state destinations: San Luis Obispo, Ventura, Los Angeles, Riverside and Kern counties

10. San Diego County

Out of state destinations: Arizona and Nevada

In state destinations: Riverside, San Bernardino, Imperial, Orange County and Los Angeles

Source: ZeroHedge