Tax season spurs debate about fiscal responsibility

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Babby momma’s and baby daddy’s getting Paid: TAX TIME

by John W. Fountain III on February 28, 2011

It’s tax season. Baby momma’s and baby daddies are finally getting the payoff of having kids that they really can’t take care of, really can’t afford or really don’t want.

It’s that time of year when there is an influx in the number of temporary license plates on the cars driving down Chicago and North avenues, Division and Madison streets.

Stores like Diana Shoes, City Sports, Kneeknockers and Footlocker located at the Madison and Pulaski shopping center in nearby Garfield Park see an increase in shoppers despite the recent recession. It’s the time of the year when everyday people from the hood become what one of my friends calls “thousandaires.”

I didn’t want to write about it because who am I to judge? But I made several comments on Facebook about “hoodrats with income tax checks,” and friends encouraged me to continue the discussion here. They said it couldn’t be any worse than my previous comments about a woman and her “rugrats.” And the truth of the matter is that we do talk about the subject in barbershops, beauty shops, nail salons and in grocery stores. Some of us just never admit out loud that we are making stereotyped assessments.

And my initial remark was made out of malice, but a friend eventually replied, “We spreading some knowledge now.” She preceded, “I’m just hoping the sistas will put a little to the side for a rainy day, in their kid’s account, school, and tuition (other than materialistic stuff, TV’s, shoes, clothes, jewelry). You look good, but you’re still broke.”

I continued to play the antagonist: “They gon’ buy a car that lasts ‘til August, get drunk, high, let they baby daddies take some and go shoppin!”

The real gem of the conversation came from Tonie. She wrote, “You know that these girls get all this money, don’t even let those black dollars circulate in the community not one god damn time. They go get any and everything with an Italian last name. ‘Nails done by the Korean’s, fake hair by Europeans’ and the Chinese — if they just save half of the checks for 2 years, they can take they section 8 and buy a home for their 2-6 kids.”

The fact is that we secretly joke about these women and men in our social circles, but the H&R Blocks and Jackson and Hewitts are ready to prey on those willing to sacrifice their hard-earned bucks for a quick payday. It’s part of the vicious circle of high-interest lenders in urban communities that we reported on earlier. Inner cities fall victim to the high-interest amid the short-sightedness of fast cash.

“We, black folks were never taught fiscal responsibility because we were never used to having nothing,” says Tonie.

What do you think?

Yes, 47% of Households Owe No Taxes.

By DAVID LEONHARDT

Published: April 13, 2010

Enlarge This Image

[pic]That’s the portion of American households that owe no income tax for 2009. The number is up from 38 percent in 2007, and it has become a popular talking point on cable television and talk radio. With Tax Day coming on Thursday, 47 percent has become shorthand for the notion that the wealthy face a much higher tax burden than they once did while growing numbers of Americans are effectively on the dole.

Given that taxes are likely to be one of the big political issues of the next few years — and maybe the biggest one — it’s worth understanding who really pays what in taxes. Once you do, you can get a sense for our country’s fiscal options. How, in other words, will we be able to close the huge looming gap between the taxes we are scheduled to pay and the services we are scheduled to receive?

The answer is that tax rates almost certainly have to rise more on the affluent than on other groups. Over the last 30 years, rates have fallen more for the wealthy, and especially the very wealthy, than for any other group. At the same time, their incomes have soared, and the incomes of most workers have grown only moderately faster than inflation.

So a much greater share of income is now concentrated at the top of distribution, while each dollar there is taxed less than it once was.

Focus Question: What is progressive, proportional and regressive taxation?

Progressive

A taxation structure, which progressively increases the percentage of a citizen's income (or wealth), which is paid in tax as income (or wealth) increases. The consequence should be that the more well off are taxed at a higher rate than are the less well off. Canadian income tax is of this form although recent changes in taxation regulations have made it somewhat less progressive than before.

Proportional

A tax system in which the tax collected is in constant proportion to the income being taxed, i.e. as income rises so tax rises proportionately.

Regressive

A tax structure which requires the more well-off to pay a lower percentage of their income (or wealth) in tax than a less well-off citizen. Sales tax and the federal goods and services tax (GST) are of this type as these taxes remain constant regardless of one's income. The consequence is that the more well-off citizen pays a smaller percentage of their income to cover the tax on a new refrigerator than does a less well-off person.

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Excise Tax: Should you pay extra tax on Soda?

Taxes levied on the manufacture or sale of goods or services are called excise taxes. These taxes account for four cents out of every dollar collected by the government. Those who pay an excise tax usually pass its cost along to the final consumer. If competition is strong or the product is subject to relatively elastic demand, however, producers are likely to absorb some or all of the excise taxes themselves.

Politicians are frequently attracted to excise taxes because most people are unaware that they are paying them. While many items are subject to an excise tax, nearly three-fifths of the government’s excise receipts come from taxes on alcoholic beverages, gasoline, and tobacco. These are mass-consumption goods on which poor families spend a larger percentage of their incomes than do wealthy families. For example, in Chicago, excise taxes raise the price of gas, cigarettes, and alchohol. Families wealthy enough to shop online or drive to shop elsewhere can save by avoiding these taxes.

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Recently, Illinois proposed a tax on soft drinks and other sugar-sweetened items. What do you think about this tax?

The Purpose of Taxes

Our country has hated taxes since the start. In fact, it was a primary cause of the Revolutionary War against the British (1775-1783). So why do we pay them?

To pay for Government

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To Redistribute Wealth

Taxes redistribute wealth by taking money some people and giving it to others. For example, the Medicaid program pays medical bills of poor people. Much of the funding for the Medicaid program comes from taxes from the federal government. These taxes are collected, mostly, from people who have more money that people who get Medicaid benefits. In contrast, poor people who benefit, pay little or no tax.

To Promote Certain Industries

Some taxes are designed to benefit certain industries. Tariffs are taxes on goods entering into a country. For example, corn that is imported to the United States, the importing business must pay this tax and then must sell their corn for more money. This import protects American corn producers.

To influence consumer spending Patterns

In Chicago the local government has created tax incentives to lure businesses here. For example, Chicago offers certain businesses the opportunity to pay less or no real estate tax. Businesses and politician claims this brings jobs to the community and helps circulate money helping other businesses as well.

To Discourage Certain Behaviors

Certain behaviors, like smoking and drinking carry a sin tax. Or a tax created by the government to discourage people from buying those items. This increases the products, substantially for the consumer.

The Taxes you Pay

|TAX |WHAT IT IS |

|FEDERAL TAXES |

|Federal Income Tax |Each individual will have this tax taken out of his or her paychecks. The amount is|

| |based on a percentage of their income that increases according to your total income.|

|Corporate Income Tax |Corporations also must pay a % of their profit in taxes. This usually translates to|

| |higher prices for you. |

|Estate and Gift Tax |The estate tax is levied on a person’s property after death if that person is worth |

| |more than $1.5 million. The gift tax was created to prevent wealthy persons from |

| |giving away their money or property and avoid the estate tax. |

|Social Security and Medicare taxes |These are taxes out of your paycheck that pay for these government programs |

| |specifically. |

|STATE AND LOCAL TAXES |

|Sales Tax |This is the principle source of income for state and locals governments and will be |

| |charged on nearly everything you buy. |

|Property Taxes |Taxes on buildings and land. |

|User Taxes |Taxes on gasoline, license and registration, hunting, and fishing licenses, and |

| |tolls. These usually have a direct relationship, for example, fishing license fees |

| |pay to maintain the habitat. And the one everyone hates in Chicago, Parking taxes.|

|Personal Income |Like the federal income tax, only taken out by the state. |

|Inheritance Tax |Like the Estate tax, but taken out by the state. |

|Payroll Taxes |These are taxes collected to finance unemployment insurance, health, disability, and|

| |retirement programs. |

John a. Powell: Regionalism and Race

I grew up in Detroit, in a very large, very loving family. My family was from the South, where my parents were sharecroppers. Which meant, for the most part, they didn’t deal in the cash economy. They dealt in barter. If any of you don’t know about Mississippi and sharecroppers, it’s poorer than poor. Although, I didn’t realize we were poor until I left to go to college at Stanford.

Growing up on the east side of Detroit, I used to hear about all these white people but I couldn’t see very many of them. So I thought it was a myth, until I got to Stanford. Then I started getting a perspective of the community that I had lived in.

In my childhood neighborhood you now see a lot of vacant lots. They are not parks or “open space.” In Detroit, about one-third of the lots—and the houses—are vacant. Today, the average cost of a house is $6,000. Needless to say, the tax base has completely eroded. The people who have left are the people with resources who would help the tax base. They’ve left behind an infrastructure built for two million people that is serving less than a million. The school system has recently been given the dubious honor of being the worst in the country. So, I would say that I grew up in a place where there was declining opportunity—where the chance of succeeding was constantly moving further and further away.

So what’s the solution? In places like Cleveland, led by the Black community, they have implemented tax-base sharing program that attempt to spread the wealth from wealthier parts of their cities. When we started this work five years ago, people were saying it’s not possible because the racial tensions were too great and a relationship between the city and the suburbs couldn’t happen. But its happening and now Detroit is asking our help to come up with a platform that will replicate Cleveland. It can be done, but it has to be embraced in a very deliberate way and it has to be led by the Black community. Cleveland is the only metropolitan area that I know of where a metropolitan effort in terms of regionalism has been led by the inner city and the black community.

Magic Johnson and the Tax Refund Rip-off

Tuesday, April 7, 2009

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Why is Johnson using his considerable fame and influence to peddle tax anticipation loans to poor people?

From HuffPo:

If you watched the NCAA basketball Final Four, you couldn’t miss former Michigan State star Earvin “Magic” Johnson. He was constantly being interviewed or shown on camera.

There is another place you can find Magic Johnson: doing commercials for Jackson Hewitt’s “Money Now.” “Money Now” is a tax refund loan operation.

Tax refund loans (also called refund anticipation loans) are in a class of financial products marketed primarily to poor people.

Someone described tax refund loans as a payday loan guaranteed by your tax return.

That hits the nail on the head.

Like payday loans, the fees and interest rates on tax refund loans are outrageous.

According to the San Francisco Chronicle, the annualized interest rate for tax loans is 40% to 500%.

According to IRS data, 8.7 million people took out a tax refund loan in 2007. Of those 8.7 million who got the loans, 67% received an Earned Income Tax Credit.

The Earned Income Tax Credit is a program aimed to help the working poor. Only 17% of all taxpayers get it.

When 2/3 of the borrowers come from less than 1/5 of the population, it doesn’t take a genius to see the business model. Tax refund loan vendors must view the working poor as easy pickings.

Now… I admire Johnson as one of the greatest NCAA basketball players of all time, but am ashamed that instead of informing his community about the free tax filing services that are available at libraries, online, schools, and other organizations, he’s peddling a sordid business that preys on the poor and financially illiterate.

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