It’s the end of the year and usually the time we offer some sage advice about all the wonderful things you can do tax-wise to make yourself a better person this year and next. Well, last year’s advice is probably still good.
What worries me more this year is the national debt and what it means to every tax-paying family. Being unfamiliar with what $7.4 trillion in debt looks like in numbers, I searched and found the U.S. National Debt Clock. It’s really interesting, because in the time that I went to get a cup of coffee the government spent $50 million.
In 1983, I did an article on debt for one of my college writing classes. The national debt then was $1.4 trillion. Twenty-one years later that works out to an increase of around $285 billion a year. The debt has never actually gone down from one year to the next, even in the Clinton years when we supposedly had a surplus. Now it’s growing at $500 billion a year, $330 billion of which is interest.
What all this means is that someday someone has to pay this back through tax collections. A family of four (as of this date) owes roughly $120,000 in addition to the annual taxes they already pay.
About a week or so before the elections at the time the largest ever corporate tax reform bill was signed into law, my editor asked me for a year-end article. After reading parts of the new law, I decided on Fahrenheit $7.4 trillion, a look at the most unusual provisions of the Jobs Creation Act of 2004 (loosely speaking). I assured my editors that the IRS wouldn’t examine Bankrate.com just for being a little critical.
1. Bull’s-eye. A measure to simplify excise taxes on bows and arrows. The bow and arrow was good enough for the original Americans, and after a few hundred years must still be considered a formidable weapon. The simplification was so complicated that a month later Congress had to pass a bill to correct it. They realized they didn’t hit the mark.
2. The one that got away. Currently, a 10-percent excise tax is imposed on specified sport fishing equipment. Examples of taxable equipment include fishing rods and poles, fishing reels, artificial bait, fishing lures, line and hooks, and fishing tackle boxes. Revenues from the excise tax on sport fishing equipment are deposited in the Sport Fishing Account of the Aquatic Resources Trust Fund. Money in the fund is spent, subject to an existing permanent appropriation, to support federal-state sport fish enhancement and safety programs.
In an effort to reduce sport fish safety the new tax law reduces the excise tax to 3 percent. The seas will never be the same again when you couple it with the following provision.
Currently the tax code imposes a 10-percent tax on the sale by the manufacturer, producer or importer of specified sport fishing equipment. A 3-percent rate, however, applies to the sale of electric outboard motors and sonar devices suitable for finding fish. The new law repeals the 3-percent excise tax on the motors and sonar and the 10-percent tax becomes 3 percent on everything else. Although I don’t recall ever seeing George W. fishing, who can forget those pictures of his father bass fishing in the Florida Keys? The fish were looking for a new home even before the election outcome.
3. No cheers for the bottlers. One measure that didn’t pass would have provided an income tax credit for the cost of carrying tax-paid distilled spirits in wholesale inventories. Realizing that Kerry supporters would be drinking heavily for the next four years, Congress exercised fiscal restraint.
4. Three cheers for the bottlers. In a not-so-rare act of holiday cheer, Congress suspends the occupational taxes of bottlers and other liquor dealers for three years.
5. A whale of a tale. Congress provides a charitable deduction for a whaling captain charged with the responsibility of maintaining and carrying out sanctioned whaling activities. The term “sanctioned whaling activities” means subsistence bowhead whale hunting activities conducted pursuant to the management plan of the Alaska Eskimo Whaling Commission. This must mean something to someone somewhere.
6. Only in the movies. There’s a special tax break for movies produced in the United States and a still-better tax break if it is shot in a distressed area of the Delta Regional Authority. The Republicans believe it would be a good idea for left-leaning filmmakers to spend some time along the Mississippi River. Besides, who’s not ready for a remake of Deliverance? Maybe Michael Moore would be interested.
7. What is the purpose of your visit to the United States? Congress provides a tax break for foreigners wagering on a United States horse or dog race. Of course this only applies if the bet is placed from outside the U.S. on a legal wager to be paid from funds pooled in the U.S. Withholding of tax is still required on illegal wagers.
8. Let’s talk about something else. The Senate version of the bill provides for protection of U.S. workers from competition of Foreign Workforces. Apparently the Jobs Creation Act of 2004 was not an appropriate forum to contemplate this subject as it was cut in the conference agreement.
9. A lot of hot air. Congress repeals a 4.7 percent customs duty on imported ceiling fans. Home Depot, estimated to sell half of all ceiling fans in this country, literally blows away the competition.
10. It’s not whether you win or lose, it’s whether you get your tax break. Sports franchise owners, a worthy group, get a break on deducting the cost paid for purchasing another franchise. This measure is estimated to give a 5-percent increase to the value of sports franchises, which the owners can take to the bank, not Uncle Sam.