How Effective Will the Health Insurance Premium Tax Credit be at Providing Affordable Health Care?

The Affordable Care Act was enacted on March 23, 2010. The act states that starting in 2014, individuals and families can take a new Health Insurance Premium Tax Credit to help them afford health insurance coverage purchased through an Affordable Insurance Exchange. Exchanges are expected to operate in every state and the District of Columbia. The premium tax credit will be refundable so that taxpayers who have little or no income tax liability can still benefit. The credit also can be paid in advance to the taxpayer’s insurance company to help cover the cost of premiums. To be eligible for the premium tax credit, an individual must be an applicable tax payer, defined as: (1) a taxpayer or lawfully present alien with a household income between 100 percent and 400 percent of the federal poverty line for the taxpayer's family size, (2) who may not be claimed as a dependeant by another taxpayer, and (3) who files a joint return if married.

The Government believes that Exchanges will offer Americans competition and choice as insurance companies compete for business on a level playing field, which is expected to reduce costs. It is also believed that the exchanges will give small businesses the same purchasing power as big businesses. But will this actually be the result of this government initiative?

There are several reasons why government intervention to create a universal health care system may fail. First, we are already operating in an economy based on capitalism, so introducing socialistic measures my prove to be ineffective. Health insurance providers are already competing with each other in order to attract consumers. As a result, if we do not already have affordable health insurance, then by placing these companies in a bubble so that they can compete against each other, health insurance is not likely to somehow become more affordable. Second, it appears that the decision to enter into the exchange is going to be voluntary, and not mandated by law. As a result, the options of health insurance providers to choose from may also be very limited. Lastly, the government seek to exclude anyone who does not fall within the poverty levels established by the government, this would exclude most taxpayers in the middle and upper class. As a result, this plan would only work for low income individuals, and these are the individuals who are already receiving some form of governmental health insurance from welfare assistance.

On the other hand, this initiative may be successful if all businesses, both large and small, make the decision to switch to companies that are apart of the exchange because the health insurance providers would then have no choice but to either offer a better deal, or become a part of the exchange themselves. Then perhaps the middle class employees would stand a chance of benefiting from this initiative through the efforts of their employers as they bargain for the lowest rates. So while they may not be able to claim the premium tax credit, they may be able to receive affordable health insurance.

I would like to see the cost of health care be dramatically reduced in the United States. The overall health awareness and rating of the United States could imporove if more individuals were able to afford health insurance so that they may visit medical facilities on a regular basis, instead of on an as needed basis. I think that the premium tax credit is a good start in the right direction, but the government needs to stop assuming that it is the poor who do not have health care and realize that many middle class individuals also cannot afford health insurance. By choosing to base the premium tax credit on poverty lines, it makes it difficult for these individuals to obtain health care, and they would still have to rely on their employers to bargain for the lowest possible rates.

What do you think about the Health Insurance Premium Tax Credit? You have the right to be heard, and your suggestions are welcomed by the IRS. A public hearing is scheduled for November 17, 2011 at 10 a.m., in the auditorium of the Internal Revenue Building located at 1111 Constitution Avenue, NW., Washington DC. The government encourages comments and suggestions but me be submitted by October 31, 2011. Please visit http://www.irs.gov/newsroom/article/0,,id=220809,00.html for more information.

Should the Wealth in America be Redistributed?

There is great concern throughout the United States concerning the inequality of the distribution of wealth. One study shows that the top 20% of the wealthiest individuals in America controls 80% of the nations wealth. It has been argued that the Republicans are to blame for this result because of their partiality to taxing the rich. While Republicans argue against socialistic reforms, they are in essence committing a socialistic act by refusing to impose higher taxes on the rich. As a result, the bulk of the wealth remains with the top 20% of the wealthiest individuals in America. Today there are people protesting on Wall Street in hopes of ending the greed of executives, in hopes of helping the poor, and in hopes of having the wealth of our nation redistributed.

While it is alarming that there is such a great disparity in the distribution of wealth amongst our nation, I do not believe that redistribution of wealth is the answer. Redistribution of wealth will not encourage the poor to aspire to work nor will it eliminate the current welfare system. It is also very unfair to take money earned from individuals who were financially savvy, ambitious, hardworking, or lucky enough to be the descendants of individuals who were financially savvy, ambitious or hardworking, and distribute to others. The wealthy individuals in America donate money to the charitable organizations in an effort to help the poor, feed the homeless, provide medication, and many more. Is it really fair to demand that they start distributing their wealth so that everyone can be on the same level financially?

Do you remember the story of the three little pigs? Lets use them as an example. Now lets assume that the three little pigs were each given the same amount of money and were told to use it to build a home so that they would not be eaten by the big bad wolf. One built his house out of straw, the other out of wood, and the other out of bricks. When the wolf came, only one house was sturdy enough to withstand his huffing and puffing, the house made of bricks. So the third little pig was the wisest of the three. Now because he was wise enough to build a house that will last, his children will likely inherit that house. Now he allowed the other two little pigs to dwell in the house with him so that they would not get eaten by the wolf. Should he do more? Under redistribution of wealth, he would be forced to give a share of his home to the other two little pigs that were afforded the same opportunity to build a similar home, but chose a cheaper alternative due to either laziness or lack of aptitude. Is that really fair? This example shows that even when you give the same amount of money to individuals, if you do not control how and where the money is spent, there are some who will squander their wealth away, and others who will make wise investment decisions. As a result, disparity in wealth will always exist, and redistribution of wealth will not work in the United States. It will not cure our economic problems.

I believe that the United States is a place where the opportunities are limitless. However, many Americans have become dependent on a welfare system, and not enough on a system that should be based on capitalism. The focus of the United States government should be focused on how can the economy be stimulated in order to create jobs? Not in order to reduce the disparity in wealth. Americans must also become dedicated to learning and obtaining the skills for the jobs that are actually on demand. These are the jobs that American companies hire foreigners to perform because there are few Americans who possess the knowledge and skill to perform. The real beauty about America is that if you cannot find a job, it is really easy to create one of your own, and become your own boss. The question is are you willing to take that risk and invest in yourself, rather than wait around for others to invest in you?

How Effective is Obama's Plan to Tax the Rich?

President Obama proposes to tax anyone earning over one million dollars per year at the middle-class tax rate of about 20 percent. This implies that the rich are currently paying less than the middle-class who earns an average of about $50,000 per year. Why is the president not attempting to tax the rich more than the middle-class? It was suggested that the president is fearful that the rich would not create jobs, and invest their money off shore rather than here in the United States.

Are the Rich Creating Jobs Recently?

The belief that the rich are the job creators in the United States is misguided. According to Professor Robert Reich, 99 percent of small business owners account for the new jobs created (robertreich.org). According to Reich, the rich are sitting on two trillion dollars and are not creating new jobs (robertreich.org). Due to the state of the current economy, more and more individuals are becoming self-employed due to the lack of job creation. So if the rich are not creating new jobs, why is the president attempting to give them the benefit of being taxed like the middle class? In fact, it would be more beneficial to tax the rich at the bracket intended because it would create a greater incentive to actually create jobs, as there are numerous tax benefits to creating corporations.

What if the Rich Take Their Money out of the US and Invest Off Shore?

If you recall from my previous blog on the IRS attempt locate funds held in off shore accounts, the IRS has the authority to tax the income of all United States citizens whether it was earned in the United States or abroad. Not only that, anyone who fails to report their off shore accounts are subject to additional penalties. So should the president fear the rich investing their funds elsewhere?  The answer is very clear. Even if the rich does decide to do this, the income that they earn off shore would be taxable.

The real problem exists with the Tax Codes that are currently in place. There are too many loopholes and credits given to the rich that they end up paying a lower percentage in taxes than the middle class. If the president is going to attempt to tax the rich, he should approach this matter based on fairness. The lower and middle class are taxed based on their earnings, and the rich should be also. The various tax brackets were created for a reason, and it is time that they are implemented on everyone. By taxing the rich at the same rate as the middle class, the president implies that the rich now pays less than the middle class. As a middle class individual, I find this to be quite disturbing. I pay my taxes based on my respective tax bracket, and I see no reason why everyone should not be required  to do the same.

However, if the president really wants to be effective in creating jobs in the United States, he should focus on offering some sort of tax credit or tax deduction to individuals for creating jobs, whether rich or poor. This credit should be similar to the tax credit or tax deduction given for donations made to charity. Individuals are always seeking tax write-offs, and this would be a great way to incentivize job creation. When the First-Time Home Owner's Tax Credit was introduced, there was a major boom in the real estate industry. By introducing a Business Owner Credit, the president may realize the same results.

Reference

Reich, R. (2011). "Taxing the Rich, The Obama Way." Retrieved on September 27, 2011 from: http://robertreich.org/post/10360054909.

How Much Taxation is Too Much Taxation?

Many citizens of the United States may have been wondering why do we pay taxes on our income, and then have to pay taxes on items that we purchase with that income? At what point will the Federal and State Governments determine that the people have been taxed enough? Is there even such a thing as being over-taxed?

We are Taxed on Airline Tickets

On August 5, 2011, the IRS announced that Congress has reinstated the Airline Ticket Taxes and apparently there was a lapse in the Federal Aviation Administration ("FAA") authorization because it states that this authorization will apply "retroactively" to the airline ticket taxes for passengers who traveled during the lapse of the FAA's authorization. As a result of the bill Congress passed, passengers who purchased tickets prior to July 23, 2011 and traveled between July 23 and August 5, 2011, are not entitled to a refund of the airline ticket excise tax. Additionally, the IRS intends to provide relief for passengers and airlines with respect to ticket taxes that were not paid or collected because of the lapse. Makes you wonder how many people actually noticed the additional fee labeled as "federal taxes" on their receipts. As if airline tickets were not expensive enough. So not only do we have to pay to check in our bags, we pay more federal taxes.

We Pay Taxes on Goods and Services

Now not only do we pay taxes to the federal government, but some of us pay income taxes to the state. Well if that was not enough, some states also imposed a sales or use tax on goods purchased by consumers. At least 45 states impose sales and use taxes on the retail sale, lease and rental of many goods, as well as some services. Many cities, counties, transit authorities and special purpose districts impose additional local sales or use taxes. A sales tax is collected by the seller at the time of sale, while a use tax is self-assessed by a buyer who has not paid sales tax on a taxable purchase. Luckily for consumers, there is no Federal sales or use tax.

We Pay Estate and Gift Taxes (Also called Inheritance Tax)

The Estate Tax is a tax imposed by the Federal Government and states against the "taxable estate" of a deceased individual. A Gift Tax is a tax placed on taxable gifts such as a transfer of an estate as a gift from one individual to another. So individuals who receive an inheritance, proceeds from a life insurance, or property, etc, from a living or deceased person is subject to this form of taxation. So not only will the Federal Government tax the estate or gift, so will the state. Is this form of double taxation fair?

We Also Pay Property Taxes

So not only do individuals pay taxes on the income they receive, they in turn must use that income to pay taxes on any taxable property owned as determined by most states. Property includes both real and personal property. So we are subject to taxes for the houses, land, and vehicles, etc. that we may own even though we likely paid taxes on the items when we first purchased them. These taxes are often paid annually.

These are just a few examples of the type of taxes that citizens of the United States may face, and there may be others not listed. At what point will the Federal Government and states realize that individuals are over-taxed? We are taxed on our income, then taxed on the items we purchase with that income. Is this the type of power we gave to our government, and if so, how do we take it back? The Federal and State Governments may issue refunds each year to those who may qualify, but it hardly compensates us for the taxes that we pay on a daily and annual basis. Yet despite paying these taxes, our economy is still declining. How much more would consumers purchase and revive this economy if their income were left untaxed?

What do you think, are we over-taxed here in the United States?

Reference

http://www.irs.gov

Top 10 Reasons Taxpayers Use as Support for Not Paying their Income Taxes to the IRS

     There are several interesting arguments offered by Taxpayers and Attorneys in support of their opposition to Federal Income Taxes. I have narrowed it down to my favorite ten (10) Arguments:

(10) The Federal Income Tax System is "Voluntary," so a person can choose whether to pay income taxes to the government. - This would explain why the IRS then voluntarily chooses to levy bank accounts and garnish the wages of individuals. If you won't pay your taxes voluntarily, the IRS will voluntarily take it from you. You decide which is preferable.

(9) The only individuals required to pay Federal Income Taxes are Federal Employees. - I think that Federal employees would be the first group to be exempt from Federal Income Taxes because they are already being paid from the taxable income of others by the Federal Reserve.

(8) Only Foreign Income is Taxable. - If the United States were able to track down the money that many individuals have stored in foreign countries, we would not be in a deficit today. It is their inability to tax foreign income that signifies the need to tax the income locally.

(7) Taxpayers can refuse to pay Federal Income Taxes for religious or moral grounds by invoking the First Amendment. - I can hear the United States Attorneys arguing "separation of church and state prevents you from invoking your religious and moral beliefs on the government also."

(6) Wages, Tips and other Compensation received for personal services are not income because there is no personal gain when a person exchanges labor for money. - If this were true, then the only income that's taxable would be income that you did not earn from personal services, like inheritance, gambling, investments, etc. There would be more of an incentive for people to work however, wouldn't it? However, the IRS defines income as compensation received from services. The IRS is not concerned with the nature of the service.

(5) The Internal Revenue Service is not an Agency of the United States.  - I found this argument to be rather amusing. If the IRS is not an Agency of the United States, then who are they working for? Is that why we are in a deficit? Where is our hard earned dollars going? Unfortunately, pursuant to section 7801, the Secretary of the Treasury has full authority to administer and enforce the internal revenue laws and has the power to create an agency to enforce such laws.  Therefore, the IRS is an agency of the United States.

(4) African Americans can claim a tax credit for reparations for Slavery and other Oppressive Treatment. - Wouldn't this be nice? However, the Federal Government will Prosecute anyone who attempts to claim the "Black Tax Credit." The government essentially argues that a tax credit is a grace, it is not an entitlement.

(3) Compelled compliance with the Federal Income Tax Laws is a form of Servitude in violation of the Thirteenth Amendment. - I was rather amused by this argument. The reason why this argument fails is because if an individual does not want to pay Federal Income Taxes, the solution is simple, "STOP WORKING," or "WORK FOR FREE, or FOR GOODS, or IN EXCHANGE FOR OTHER SERVICES." Go back to the barter system.

(2) Federal Income Tax Constitutes a Taking of Property without Due Process in violation of the Fifth Amendment. - This argument is actually very clever. If we consider our income to be property, then this is a valid argument. The problem with enforcing this law is the forum in which it would be brought. The case would be a Federal Case and your impartial judge would likely not be so impartial because your taxes pays his salary. Also, the same Constitution that granted this right also granted the Government the right to tax. Therefore, the taxpayer is likely to lose this case before a tribunal that is its own judge and jury.

(1) Individuals have the right to refuse to pay Federal Income Taxes and accept the fact that they won't get a refund for that year, thus eliminating the need to file a Federal Income Tax Return. - This argument makes a lot of sense. If someone refuses to pay Federal Income Taxes, they simply would not be entitled to a refund. This would reduce not only the paper work involved with filing income tax returns, but it would reduce the income tax refunds paid out every year. However, the IRS only issues refunds to individuals who have paid taxes beyond their statutory requirements in conjunction to tax credits for which they are eligible. Therefore, if no one pays the statutory requirement, the government would be forced to find alternative means to raise revenue, which is possible. This is the strongest argument I found in support of not paying Federal Income Taxes.

How Effective is the IRS Voluntary Disclosure Initiative of Offshore Accounts?

     Today, the IRS has issued a press release informing taxpayers that the deadline for the second special Voluntary Disclosure Initiative of Offshore Accounts has been extended from August 31, 2011 to September 9, 2011, due to the presence of Hurricane Irene on the east coast. According to the IRS, those who come forward voluntarily will get a better deal than those who wait for the IRS to find their undisclosed accounts and income. This initiative requires that individuals report any funds being held in foreign accounts. The 2011 initiative, proposes a new penalty framework that requires individuals to pay a penalty of 25 percent of the amount in their foreign bank accounts in the year with the highest aggregate account balance from 2003 to 2010. Some taxpayers will be eligible for 5 or 12.5 percent penalties in certain narrow circumstances. Individuals will also be required to pay back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency penalties. Lastly, all original and amended tax returns must be filed by the deadline. There are several pressing questions that come to mind: (1) Is it even legal for the US Government to tax individuals on income held offshore, (2) What about income earned offshore that is held offshore, and (3) Who would consider coming forward only to be taxed and penalized?

Is This Initiative Legal?

    Article I, Section 8, Clause 1 of the US Constitution gives Congress the power to Tax and it certainly has exercised that power. According to IRS Publication 525, "if you are a US citizen or resident alien, you must report income from sources outside the US on your tax return unless it has been deemed exempt under US law. This is true whether you reside inside or outside the US and whether or not you receive a Form W-2, Wage and Tax Statement, or 1099 from the foreign taxpayer. This applies to earned income as well as unearned income such as dividends, capital gains, pensions, rents, and royalties.

What About Income Earned Offshore and held Offshore?

     Publication 54 holds that "If you are a US citizen or resident alien, your WORLDWIDE income generally is subject to US income tax, regardless of where you are living." However, taxpayers may be able to exclude $91,500 of their income as not taxable by the US, deduct part of their housing expenses from their income, or treat a limited amount of income used for housing expenses as not taxable under the Foreign Earned Income Exclusion and the Housing Deduction and Exclusion. However, they must meet the specified qualifications. So evidently, the US gave itself the right to tax US citizens and resident aliens no matter where they may reside or work.

Who Would Consider Coming Forward?

     With the additional taxes and penalties involved in this initiative, who would consider coming forward to report themselves? The number of individuals who came forward could not have been that great because the IRS has issued an award to whistle blowers who report these individuals. It would be interesting to see how many of the individuals that actually came forward did so voluntarily versus those who came forward after a close friend or relative (back stabber if you will), informed them that they have reported them to the IRS in exchange for a bounty. There is a popular maxim that individuals will continue to do what the law allows them to get away with, and will not stop until they are caught. So if this is true, I think it is safe to assume that the US needs to make the reward a percentage of the individual's foreign wealth for more whistle blowers to appear. They may find that if high enough, individuals my anonymously report themselves in order to collect a bounty on themselves. Maybe this should be added to the initiative to add a favorable incentive to turning yourself in. If I had money abroad, I would enjoy the freedom of not having my money taxed and this initiative provides no incentive for me to report myself. Maybe if I had a conscience, I would. But then again, my conscience would say "do you really want to pay taxes on money you probably already paid taxes on before you transferred it offshore? And why would you want to pay taxes now, when the US does not know about your money unless you tell them?" I think my conscience would say that I need more of an incentive, and this initiative does not offer one.

Reference

http://www.irs.gov/newsroom/article/0,,id=235695,00.html

IS THE WOMAN'S DISAPPEARANCE IN ARUBA AN INSURANCE SCAM OR MURDER?

     It is alleged that Ms. Robyn Gardner's disappearance is due to an attempt by Mr. Gary Giordano to collect on an accidental life insurance policy worth approximately $1.5 million. He is now being held in Aruba as a suspect of Ms. Robyn Gardner's disappearance, although no body has been found. Do you believe that this is a case of murder or insurance fraud?
     There are several interesting allegations that suggests that the two individuals planned this disappearance prior to the trip. First, it is alleged that the two individuals met on a dating site, and decided to take this trip to Aruba after dating for a very short period of time. Next, it is also alleged that prior to going on the trip, Mr. Giordano took out this policy which was authorized by Ms. Gardner. Now who would authorize that someone take out a policy on their life worth $1.5 million without a fear that they would be killed on that trip? This sounds like a plan to fake a murder, or disappearance if you will, so that the two may become rich and live happily ever after as millionaires. Finally, the two arrived safely in Aruba, and some time later, Ms. Gardner disappears, and there is no trace of her body. Does these allegations suggest murder or do they lean more towards insurance fraud?
     I strongly believe that the two planned this disappearance so that they could collect the insurance money. After all, it requires the death to be accidental, and what better way to prove an accidental death, than to fly to an island which is outside of the United States jurisdiction, and have the female disappear as many cases exist where individuals vacation on an island and never return to the United States. I can imagine Mr. Giordano pretending to cry his eyes out, make up a story about himself and Ms. Gardner swimming in the beautiful waters of Aruba, and suddenly, a shark similar to Jazz came along, and devoured her entire body, leaving nothing, not even a drop of blood, and so they will never find her body. Meanwhile, Ms. Gardner had already left the island on a boat, and sailed to Columbia, or even Venezuela where she waits patiently for Mr. Gardner to return with the cash.
     The details of this incident really leads me to conclude that Ms. Gardner is not dead, and she will likely not be found unless the Aruba officials search the surrounding shores. It is alleged that the dating site where the two met was "Match.com." If this is the case, they certainly know how to put couples together. The interesting is that of the many Americans who vacation on islands and fail to return to the United States, but were never considered newsworthy, what makes these two individuals worth air time?