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Lunch Beat

Bramwell's Lunch Beat: ‘Tampon Tax,’ Beating the IRS, Tax-Exempt Schools

Jan 8th 2016
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The ‘tampon tax,' explained
Sarah Larimer of the Washington Post wrote that last year, California Assemblywoman Cristina Garcia kicked around the idea of introducing legislation that would make feminine hygiene products exempt from sales taxes in America's most populous state. She didn't pull the trigger just then. But at a meeting in October, she heard from women in her district, and they talked a lot about their daily struggles and “how it all adds up,” she said. On average, according to Garcia's office, women in California pay $7 per month for 40 years in taxes on tampons and sanitary napkins. Statewide, it adds up to more than $20 million annually. These products, her office said, â€œare a basic necessity” that should not be taxed. And so this week, Garcia announced Assembly Bill 1561, which proposed an end to the “tampon tax.” “I just want people to realize this is not insignificant,” said Garcia, a Democrat. “Especially if you're on a tight budget.”

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What happens after you beat the IRS in an audit
Richard Rubin of the Wall Street Journal wrote that getting audited by the IRS and losing results in paying more in taxes and, perhaps scared of a repeat defeat, a likelihood to report much more income in future years. But what happens when you beat an IRS audit? According to a study released this week by the National Taxpayer Advocate, self-employed taxpayers who got audited and came out unscathed reported less income in future years, an average of 35 percent lower three years after the audit. Having learned where the edge is, they seem to skate closer to it. “The audit process might provide currently compliant taxpayers with a ‘window' on potential opportunities for both legal and illegal tax avoidance,” the authors write. “In addition, such taxpayers may infer that the risk of a future examination is low.” The findings back up one of the core truths of tax compliance: If you think you're being watched, you comply more faithfully.

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Richest US schools could lose tax status in endowment proposal
A US congressman is floating an idea that's likely to find opposition from the wealthiest colleges: devote 25 percent of a school's annual endowment income for financial aid or lose tax-exempt status, wrote Janet Lorin of Bloomberg. The bill, aimed at addressing the skyrocketing cost of college, is expected to be introduced during the congressional session that began this month and could undergo changes in the meantime, said Rep. Tom Reed (R-NY), who is sponsoring the measure. No co-sponsors are attached to the bill. Under the proposal, almost 100 endowments with assets of more than $1 billion would be required to give that percentage to lower college costs for middle- and low-income students. If they didn't comply for three consecutive years, they could lose their nonprofit status. Reed said he is concerned about rising costs while the institutions enjoy fiscal benefits, such as tax-free investments and tax deductions for donors to the schools.

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House Dems want states to test gas tax alternatives
A pair of House Democrats is pushing the Obama administration to allow states to search for alternatives to the 18.4 cents-per-gallon gas tax that is currently used to finance federal transportation projects, wrote Keith Laing of The Hill. Rep. Peter DeFazio (D-OR) and Del. Eleanor Holmes Norton (D-DC) said states should begin experimenting with new infrastructure funding mechanisms now, despite Congress passing a five-year, $305 billion highway bill last year. They said the highway bill does not address a shortfall in transportation funding that forced lawmakers to turn to a package of about $70 billion worth of offsets from the federal budget to pay for five years worth of construction projects. The measure includes a grant program known as the Surface Transportation System Funding Alternatives that provides $95 million to help states study alternatives to using dwindling gas tax revenue to pay for transportation projects.

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Quick Links:

  • Should more accounting firms use ‘blind' methods to improve their diversity? (Going Concern)
  • New year, new tax rules: What you need to know (Wall Street Journal)
  • Ben Carson vs. the IRS (Wall Street Journal)
  • Ben Carson's tax plan (Cato Institute)
  • Ben Carson's 14.9% flat tax would really be 30.2% tax for most (Tax Justice Blog)
  • Dora the Tax Haven Explorer? Viacom accused of persecuting tax-avoidance whistleblower (Tax Justice Blog)
  • Boeing must disclose tax-break savings, Washington State Department of Revenue rules (Seattle Times)
  • You won the $700 million Powerball jackpot! Here's your tax bill (CNN)
  • A realistic gambit on tax reform (The Hill)
  • Corporate tax dodgers: Demanding tax ‘reform,' superrich CEOs of profiteering multinationals are fooling no one (Salon)
  • If banning negligent low-income households from taking tax credits is such a great idea, why stop with them? (TaxVox)
  • France investigates Karl Lagerfeld for tax evasion (Associated Press)

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