Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

Archive for August, 2002

Posted by taxguru on August 31, 2002

Keeping Up the Fight

I have to congratulate fellow Libertarian Karl Kimball for his persistence in working his butt off to allow the voters of Arkansas an opportunity to express their opinion about having to pay sales taxes on human foods and medicines. Animal food is already exempt. Karl has been spear-heading the effort to obtain enough petition signatures to satisfy the Secretary of State. Several thousand signatures were recently tossed out for ridiculous reasons. Now, Karl has come back with 27,000 more, which should be plenty.

As always, the fight isn’t even close to being over. The fans of high taxes are scared to death to allow voters to have any power when it comes to taxation. They will definitely be pulling several more dirty tricks and spending huge amounts of tax dollars to get the initiative kicked off of the ballot, as they have done dozens of times for similar tax cutting measures just in the nine years we have been living here.

The bureaucrats and other fans of big government have good reason to worry, if this poll is accurate. 72 percent of respondents have said they support the repeal of the sales tax on food and medicine. In typical fashion, the tax supporters claim that the respondents are too stupid to know what they are talking about.

KMK

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Posted by taxguru on August 31, 2002

Talking Tax Forms

Making sure that the tax system is accessible by everyone, IRS is planning to post on its web site talking tax forms for blind people to use in preparing their tax returns. Interesting; but I doubt that I would trust it. Many of the forms are so poorly designed and utterly confusing for those of us who can read them and their instructions, I can only imagine what the verbal equivalent will sound like.

KMK

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Posted by taxguru on August 31, 2002

Sinking Deeper

One of the main reasons I decided almost ten years ago to leave the PRC was the continuous steady erosion of freedoms and property rights. Having owned rental properties myself, as well as working with hundreds of clients who also were landlords, I knew all too well that the laws in that state were all slanted in favor of tenants and against the rights of property owners. The State Rulers in Sacramento operate under the assumption that all landlords are so stinking rich that they don’t need any rental income. Professional tenants who know how to work the system can easily live in a home for six months rent free, and can often actually make money by extorting landlords to pay them to vacate.

The scariest movie ever made from a landlord perspective is Pacific Heights, with Michael Keaton as the tenant from Hell who goads property owners into attacking him and then he brings charges and gets the property. These people actually exist. We had a psycho tenant on our Palomares Canyon ranch who used that movie as his guide and was actually telling people that he was going to get our property. Luckily, we were able to get him out without losing the property; but we are still so gun-shy about having tenants that we have refused several offers to rent the extra houses on our current ranch. Even though the laws in Arkansas aren’t as heavily biased in favor of tenants, we still don’t feel comfortable.

What triggered this rant is this article from the PRC that they have now passed yet another law allowing tenants to live rent free for even longer. Property owners have no rights. It is no coincidence that many of my clients have been liquidating their California rental properties and reinvesting tax free into rentals in other states, where private property rights are given more respect. It is also yet another confirmation that leaving the PRC was the smartest move I could have ever made.

KMK

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Posted by taxguru on August 30, 2002

Media CheerLeaders

So, who is really shocked to hear that business reporters only like to write good positive things about their subjects, giving readers the impression that the companies are well run and therefor good investment opportunities? This is a story I know all too well.

During the entire time of the dot-com boom, I received so much hate mail for pointing out that those businesses were doomed to failure and anyone stupid enough to buy their stocks would take it in the shorts. However, since all of the big business press were describing the business world as different and the normal business cycles as non-existent, I was out-numbered and ridiculed for sticking to the old fashioned basics of financial analysis.

How many of those so-called financial experts, who were doing nothing more than parroting company press releases, are still considered credible today? Unfortunately, most of them are still out there and they don’t seem to be tarnished by their incompetent and downright irresponsible cheerleading for ridiculous business plans and insanely over-valued stocks.

KMK

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Posted by taxguru on August 30, 2002

Voting To Eliminate Income Taxes

If they can keep it from being kicked off the ballot, as always happens here in Arkansas, voters in Massachusetts will have the unique opportunity to vote to repeal their state income tax. Predictably, the doom & gloomers are out in full force forecasting the end of the world if the initiative actually passes. According to this piece from Fox News, the pro-tax forces are ahead in the polls, with 49% of people favoring keeping the tax and only 39% supporting its repeal. With over two months until the election, anything is possible. As always, I am rooting for the elimination of a tax and hoping that the Mass. voters will show people in other states that such a positive change is in fact possible.

KMK

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Posted by taxguru on August 29, 2002

Taxing Rain

As I have described before, state and local governments have recently shown the highest level of creativity in coming up with new ways to squeeze money out of the little people. They are even amazing grizzled old veterans like me.

This is the first time I have heard of a property owner being taxed on the amount of rainwater that s/he doesn’t hold onto and allows to run off into the sewer system. Jonathan Adler of NRO has a good analysis of the pros & cons of this. He comes to the proper conclusion; that the main purpose of this new tax is for the money; not to encourage people to capture rain water.

This is in Winona, Minnesota. I can’t wait to see how they top this in the PRC (People’s Republic of California). How about a tax on earthquakes? It could be based on the Richter Scale reading.

KMK

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Posted by taxguru on August 29, 2002

Accounting Rock Stars

I like Edwin J. Feulner’s analogy of the corporate accounting scandals being similar to a typical episode of VH-1’s Behind the Music show about drugged out rock stars.

He again reminds us that no corporate accounting scandal comes anywhere close to the corrupt accounting being done by our rulers in DC. Rather than stopping their hi-jinks, as most corporate crooks have, our rulers will continue, with ever more money.

KMK

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Posted by taxguru on August 29, 2002

All Money Belongs To Our Rulers

Larry Elder has a good summary of the mindset of our rulers in DC, as enunciated by that pathetically whiney Senator from Connecticut, Joseph Lieberman. He and his Fellow Travelers actually consider any reduction in tax rates to be government spending. This is a not very subtle way of stating that all income generated by everyone in this country automatically belongs to our rulers and they will decide how much of it we are allowed to keep for ourselves. The similarity between this thinking and how they handle things in Communist countries is frightening.

KMK

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Posted by taxguru on August 29, 2002

Stay In The Real World

This time of year, leading up to a big election, always causes a lot of confusion for people who fail to distinguish between the real world of actual tax laws and the fantasy world with scads of changes promised by our rulers and wannabe rulers.

Case in point: there is a lot of discussion about tax breaks for investors, such as making some dividend income tax free and increasing the capital loss deduction from the insanely low maximum of $3,000 per year to a higher amount, such as $20,000. Nobody is even mentioning the possibility of eliminating the ceiling on the deduction in order to make it consistent with the unlimited amount of capital gains that are taxable per year. That would be just too fair for our rulers to ever consider.

While these would all be great improvements in the tax system, it would be completely idiotic to modify your investment strategies based on these promises. There is very little chance of most of these changes making it through the liberal controlled Congress, who will portray them as just more tax breaks for the evil rich. Their Fellow Travelers in the media will echo those lies, as they always do.

Any changes that do survive and become real will most likely be watered down quite a bit. There is also the issue of the effective date of any change. Will it be retroactive to January 1, 2002 or will it only apply to sales after the law is enacted? There is no way to know because our rulers have never been consistent in regard to effective dates.

KMK

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Posted by taxguru on August 29, 2002

Out of Sight, Out of Mind

While it’s a great idea, there is no chance that our rulers will agree with this idea of eliminating tax withholdings and requiring people to actually write checks for their taxes. That would let too many people understand exactly how much they are paying and possibly cause them to rebel against higher taxes. This scam has been extremely effective in confusing most people as to their actual tax burden. As long as they receive a refund when they file their 1040s, they think they are coming out ahead.

My prediction is that, instead of reducing or eliminating withholdings, we will be seeing more types of transactions subject to it, such as sales of stocks and real estate (which are already required for some sellers).

KMK

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