Marijuana is getting cheaper. For some states, that’s a problem.

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Bags of marijuana sit on shelves in a building at the Los Suenos Farms facility in Avondale, Colorado, on Feb. 25, 2016. (Matthew Staver / Bloomberg)

Wholesale marijuana prices in Colorado have fallen by a third in just the past 12 months, continuing a price crash that began soon after the drug was legalized. Although this implies that some marijuana entrepreneurs are going to go bankrupt, the bigger financial hit will be felt by states that tax marijuana based on its price.

Marijuana prices are collapsing in Colorado and in other legalization states (e.g., Oregon, where the price can go as low as $100 per pound) because a legal business is dramatically cheaper to operate than an illegal one. Because states generally set their marijuana tax rates as a percentage of price, their revenue per sale sinks in direct proportion to the fall in marijuana prices. Ironically, in a bid for more tax revenue per marijuana sale, Colorado increased its marijuana tax rate from 10 percent to 15 percent last year, only to see the anticipated added tax revenue wiped out by falling prices in a year’s time.

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Internet sales tax will force small businesses to abide by tax codes in 9,646 different jurisdictions

Every business could face 46 separate audits (from the 45 states that collect sales taxes plus the District of Columbia).

Legislation on internet sales tax could subject small online businesses to up to 46 state audits. And since sales taxes vary among thousands of tax jurisdictions across the country, the chances that auditors will find mistakes—and slap the business owners with penalties—are very good. If truth-in-advertising requirements applied to legislation, says Heritage Action’s Dan Holler, the Marketplace Fairness Act would be renamed the Tax Audits from Hell Act of 2013.

 

 

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France proposes to tax the internet

France proposes an internet tax on American companies collecting personal data.

France is seeking new ways to raise funds.  Because of frustration with American technology companies that dominate its digital economy which are largely beyond the reach of fiscal authorities, France has proposed a new levy.  They are proposing an internet tax on the collection of personal data.

 

 

 

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Researchers say sugar should be regulated as a toxin

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Sugar and other sweeteners are so toxic to the human body that they should be regulated as strictly as alcohol by governments worldwide, according to researchers.

A spoonful of sugar might make the medicine go down. But it also makes blood pressure and cholesterol go up, along with your risk for liver failure, obesity, heart disease and diabetes.

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IRS Gives Tax Breaks to Breastfeeding Moms

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IRS says breastfeeding expenses are tax write-offs.

Breastfeeding is easier on the planet because formula takes energy to produce, transport, and it wastes space in landfills. Not to mention that breastfeeding is the most natural means of giving your baby the best possible start. Michelle Obama even promoted breastfeeding as a means of reducing childhood obesity down the line. And most recently, the Internal Revenue Service (IRS) announced tax breaks for breastfeeding moms.

 

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A Nation of 90,000 Governments – Maximizing Our Own Failure Points

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There are 90,000 government entities in the United States.

Thomas Frey:  The total number of governmental bodies in the U.S. is approaching a staggering number – 90,000. During normal economic times there is plenty of money to go around, but now every city, state, county, parish, township and special taxing district is competing for the same tax dollars that the federal government is.

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Tax Hikes and the Coming 2011 Economic Collapse

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Arthur Laffer predicts a gloomy year ahead because of taxes

ARTHUR LAFFER
People can change the volume, the location and the composition of their income, and they can do so in response to changes in government policies.
It shouldn’t surprise anyone that the nine states without an income tax are growing far faster and attracting more people than are the nine states with the highest income tax rates. People and businesses change the location of income based on incentives.
Likewise, who is gobsmacked when they are told that the two wealthiest Americans—Bill Gates and Warren Buffett—hold the bulk of their wealth in the nontaxed form of unrealized capital gains? The composition of wealth also responds to incentives. And it’s also simple enough for most people to understand that if the government taxes people who work and pays people not to work, fewer people will work.
People can also change the timing of when they earn and receive their income in response to government policies. According to a 2004 U.S. Treasury report, “high income taxpayers accelerated the receipt of wages and year-end bonuses from 1993 to 1992—over $15 billion—in order to avoid the effects of the anticipated increase in the top rate from 31% to 39.6%. At the end of 1993, taxpayers shifted wages and bonuses yet again to avoid the increase in Medicare taxes that went into effect beginning 1994.”
Just remember what happened to auto sales when the cash for clunkers program ended. Or how about new housing sales when the $8,000 tax credit ended? It isn’t rocket surgery, as the Ivy League professor said.
On or about Jan. 1, 2011, federal, state and local tax rates are scheduled to rise quite sharply. President George W. Bush’s tax cuts expire on that date, meaning that the highest federal personal income tax rate will go 39.6% from 35%, the highest federal dividend tax rate pops up to 39.6% from 15%, the capital gains tax rate to 20% from 15%, and the estate tax rate to 55% from zero. Lots and lots of other changes will also occur as a result of the sunset provision in the Bush tax cuts.
Tax rates have been and will be raised on income earned from off-shore investments. Payroll taxes are already scheduled to rise in 2013 and the Alternative Minimum Tax (AMT) will be digging deeper and deeper into middle-income taxpayers. And there’s always the celebrated tax increase on Cadillac health care plans. State and local tax rates are also going up in 2011 as they did in 2010. Tax rate increases next year are everywhere.
Now, if people know tax rates will be higher next year than they are this year, what will those people do this year? They will shift production and income out of next year into this year to the extent possible. As a result, income this year has already been inflated above where it otherwise should be and next year, 2011, income will be lower than it otherwise should be.
Also, the prospect of rising prices, higher interest rates and more regulations next year will further entice demand and supply to be shifted from 2011 into 2010. In my view, this shift of income and demand is a major reason that the economy in 2010 has appeared as strong as it has. When we pass the tax boundary of Jan. 1, 2011, my best guess is that the train goes off the tracks and we get our worst nightmare of a severe “double dip” recession.
In 1981, Ronald Reagan—with bipartisan support—began the first phase in a series of tax cuts passed under the Economic Recovery Tax Act (ERTA), whereby the bulk of the tax cuts didn’t take effect until Jan. 1, 1983. Reagan’s delayed tax cuts were the mirror image of President Barack Obama’s delayed tax rate increases. For 1981 and 1982 people deferred so much economic activity that real GDP was basically flat (i.e., no growth), and the unemployment rate rose to well over 10%.
But at the tax boundary of Jan. 1, 1983 the economy took off like a rocket, with average real growth reaching 7.5% in 1983 and 5.5% in 1984. It has always amazed me how tax cuts don’t work until they take effect. Mr. Obama’s experience with deferred tax rate increases will be the reverse. The economy will collapse in 2011.
Consider corporate profits as a share of GDP. Today, corporate profits as a share of GDP are way too high given the state of the U.S. economy. These high profits reflect the shift in income into 2010 from 2011. These profits will tumble in 2011, preceded most likely by the stock market.
In 2010, without any prepayment penalties, people can cash in their Individual Retirement Accounts (IRAs), Keough deferred income accounts and 401(k) deferred income accounts. After paying their taxes, these deferred income accounts can be rolled into Roth IRAs that provide after-tax income to their owners into the future. Given what’s going to happen to tax rates, this conversion seems like a no-brainer.
The result will be a crash in tax receipts once the surge is past. If you thought deficits and unemployment have been bad lately, you ain’t seen nothing yet.
Mr. Laffer is the chairman of Laffer Associates and co-author of “Return to Prosperity: How America Can Regain Its Economic Superpower Status” (Threshold, 2010).

Arthur Laffer:  People can change the volume, the location and the composition of their income, and they can do so in response to changes in government policies.

It shouldn’t surprise anyone that the nine states without an income tax are growing far faster and attracting more people than are the nine states with the highest income tax rates. People and businesses change the location of income based on incentives.

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Should Individual Tax Records Be Public Information?

 

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A recent essay in the New York Times raises the question as to whether individual tax payments should be considered public information.  It has been suggested that public disclosure of tax payments would create pressure to correct inequalities and loopholes in the current tax system.  Surprisingly, strict secrecy regarding tax records is a relatively modern aspect of the system.

In the first half of the 20th century, Congress twice required tax disclosure. In 1923 and 1924, individual and corporate taxpayers had to make public their tax payments but not entire returns. Proponents of disclosure said the measure would encourage tax compliance and reduce improper business conduct…

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28% of Americans are Tea Party Supporters

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Both political parties are concerned with the strength of this movement

A hefty 28 percent of all Americans identify themselves as supporters of the grass-roots Tea Party movement, according to a new Gallup poll released Monday.
The poll results suggest that along several demographic planes –including age, employment status and race– Tea Party supporters resemble the population at large. 79 percent of Tea Partiers, for example, are “non-Hispanic white”, as compared with 75 percent of the entire country.
The poll confirms, however, that Tea Party supporters overwhelmingly skew Republican and conservative. 49 percent of all self-identified Tea Party supporters classified themselves as Republican; a total of 92 percent were either Republican or Independent, with a mere 8 percent identifying themselves as Democrats.
The Gallup results diverge from those released last week by the Winston Group, a polling and strategy firm with conservative leanings. The Winston study indicates that only 17 percent of the population identifies itself with the Tea Party, suggesting a smaller base of support for the movement.
The Gallup results were based on telephone interviews with 1033 adults, age 18 and above, conducted from March 26-28. The poll results have a margin of error of four percentage points.

A hefty 28 percent of all Americans identify themselves as supporters of the grass-roots Tea Party movement, according to a new Gallup poll released Monday.

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Soda Tax Will Have Little Impact On Childhood Obesity

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Small increases in the cost of soda will have little impact on children

Small scale increases in the cost of soda likely have little impact on childhood obesity, according to a study published in the journal Health Affairs. Soda taxes have been proposed as a means for fighting obesity by several prominent health researchers, and some public health officials have sparked controversy by advocating for steep taxes on soft drinks to deter consumption. Yet, while previous research has shown that increased cost of soda leads to decreased consumption—a 10% price increase corresponds with an 8% reduction—there has been little analysis of how increased cost actually influences weight, and no analysis of this impact on children, they argue. To remedy that, the team of researchers from the RAND Corporation, the University of Illinois at Chicago and the Institute for Health Research and Policy used current data on state soda taxes and children’s weight to assess the influence of soda tariffs both on consumption and childhood obesity.

 

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States Consider Freezing Tax Refunds for Months

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Residents eager to get their state tax refunds may have a long wait this year: The recession has tied up cash and caused officials in half a dozen states to consider freezing refunds, in one case for as long as five months.States from New York to Hawaii that have been hard-hit by the economic downturn say they have either delayed refunds or are considering doing so because of budget shortfalls.

 

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The simplification mandate – Surpassing the complexity threshold

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“Our life is frittered away by detail …. Simplify, simplify.” — Henry David Thoreau

Ever have one of those days?

Run a day late on a credit card payment, and you’re dinged a $39 late fee.
 
Miss a traffic sign on our way across town – right in front of a cop – and get dinged another $150.
 
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