RBOC

  • Can I say again how much I hate it when people mess with kerning on grant applications?
  • My (recently retired) FIL called DH to tell him to be sure to put money in IRA Roths.  DH told him we’ve got that covered.
  • DH helped break up a dog fight that happened across the street from our house (intact pitbull being walked by a ~10 year old girl slipped its halter going after a Labrador) and got bitten.  :(  He had to get a tetanus booster and 3 days worth of topical antibiotics. The dog was super friendly to humans, but accidentally got DH’s finger as DH was trying to help the laborador’s owner separate them.  The woman who owns the Labrador stopped by our house to say her dog had to undergo ear surgery and that the pitbull’s owner (the grandfather in this scenario) was a total jerk and wanted to know if we’d seen how the fight had started, which we hadn’t.
  • My January conference reimbursement for doing job interviews for a position in our department was audited because I bought $21 of folding chairs and left them there instead of flying them back to the university.  (The chairs were because the hotel ran out and we didn’t want the job candidate sitting on a bed with the interviewers(!))  Fortunately I didn’t believe the hotel when they said that getting extra chairs wouldn’t be a problem (hence neither reservation nor wait list) and got advance permission from both the department head and the dean in case of emergency.
  • We got a big tax refund this year, even after paying next year’s estimated taxes, not unexpected given we had a $7,500 credit from buying the Honda Clarity last year.  In terms of how the Republican tax bill affected us:  we’re paying slightly less tax but not a huge difference.  This is mainly because we live in a Red State with low state income etc. taxes (high property taxes, but low property values) and we’ve finished paying our mortgage so we weren’t getting big federal deductions anyway (some of the self-employment tax changes also helped, I think, and we weren’t deducting business expenses which would have hurt).  People in blue states with high income taxes and high property values are going to be hurt much more.  We didn’t bother adding up our charitable donations this year for the first time because there was no way we were going to hit the limit, so I guess it was a bit less paperwork.
  • Strongly considering using a slightly different specification in this graph because it currently looks like a condom.
  • My car is gradually succumbing to plastic fatigue.  Another door handle broke this week, this time the part that you open from the inside rather than the part from the outside.  $45 to replace ($35 part plus $10 s/h), and easier to replace than the other part (in that it doesn’t require as much strength to unscrew all the necessary bolts).  I really should just get a new car.  Maybe this summer.  I will miss it.
  • My mom is retiring!  At age 72 it will cost her retirement money to keep working based on how her public pension is structured.  (They don’t structure them like that much anymore.)  They’re planning on staying put for a while.  Part of me is surprised because they are West-Coasters at heart, not midwesterners (despite having lived there, as my mother has pointed out, for 34 years).  Part of me is not surprised because their inertia is very strong and anything that takes planning can take a decade to actually happen if they’re not given an external deadline.  My mom hopes to devote her time to politics and research, which are both good things.
  • In case you’re wondering what’s happening with the kitchen renovation… we’ve paid for most of it so far (months ago), our dining room is full of appliances in boxes, and we are stuck on the step in which someone removes our ice maker and replaces it with cabinets.  Home Depot is like, we can do drawers there but we can’t do cabinets that look like your current cabinets.  The place the cabinets came from is like, yeah, we don’t make those anymore but you can get them custom-copied from this other local business.  But the other local business is only open M-F, 9-5 and has been playing a lot of phone tag with DH.  And so we wait…
  • My BIL is getting a full back and shoulders tattoo.  It’s a reminder of the generation gap between X and millennial about how normal that is for someone just a little bit younger than us and how unusual for us.  (How daring and hidden most Gen X tattoos are/were.  How expressive they are for younger folks.  I don’t think I know a single millennial other than my sister who doesn’t have at least an ankle tattoo.)

Ask the grumpies: Thoughts on most recent budget

OMDG asks:

What are your thoughts on the budget that just got passed?

This was asked a year ago, and as per usual, we’ve put off the hard questions to the end.  The budget that got passed was awful.  It’s increased the deficit while becoming way less progressive, meaning there’s LESS investment in our future.  We’re neither spending more on nor saving more for the future.

That said, it could have been a ton worse.  The phone calls that we all made last year really did make a difference.  The marginal tax rate structure ended up not being as terrible as it could have been.  There were lots of horrible things that didn’t end up in the budget.  Even small things like not giving a tax advantage to teachers for buying supplies got saved from chopping.  Other investment things did get axed (like moving expenses), but it could have been worse.

As for us, we haven’t done our taxes yet, but I think we will have benefited given our income and the changes in marginal tax rates combined with the biggest cuts not really affecting us given where we live and our lack of mortgage interest situation.   This is our first year in which it truly makes no sense to itemize (last year we were like $200 of giving over the part where itemizing makes sense), and the new tax bill’s treatment of state/property taxes means that there’s not even any point to adding up our donations.  So that should save time.

I would gladly pay that money back if it meant that everyone in our situation and better situations had to pay and we could invest in our country’s future again.

Grumpeteers, what are your thoughts on the latest federal tax situation?

Adventures in OMG are we going to have to pay huge amounts of taxes on our slightly under a year in paradise?

Back when we went to Paradise for my leave, we spent hours and hours researching the tax situation.  We read lots of stuff online.  We read articles published in tax journals available from the uni library.  We talked to friends and colleagues who had taken out-of-state leave recently, including one who had both gone to Paradise for leave and who had used a professional accountant.  We called up the tax board in Paradise and asked.

Everything was unanimous (well, except a couple of random internet Q/A things that didn’t really look legit)– if we lived there less than a year, kept our residence here, didn’t register to vote or get a driver’s license etc., then we would only have to pay taxes on income directly from places in Paradise.  We would be considered non-residents, and non-residents only have to pay taxes from Paradise-sources, not from, say, my University salary.

So, of course, the other day in the mail we got two scary tax documents from the Paradise tax board asking us for our 2015 Paradise state taxes.  Apparently the fact that we sent our federal taxes from a Paradise address meant that they expected us to file a return.

Which freaked us out, because our state taxes where we normally live are a pittance compared to state income taxes in Paradise.  We’re talking thousands of dollars if all of our income counted.

So we redid the internet searching and DH called the tax board in Paradise again.

Turns out we had a 1099 from an honorarium I got in Paradise, and although I normally don’t have to pay Paradise state-income taxes on honoraria from Paradise (which I tend to get once every few years), since I was living in Paradise at the time, I did need to pay state income taxes on that income.

So we just needed to file a non-resident tax form, which is a pain, but the only part we’re going to be taxed on is the honorarium plus a small penalty.

We’re talking maximum $100, not the thousands we’d been envisioning.

Whew.

That was a bit terrifying there, but we can handle $100.

Update:  After about 6 hours of dealing with Paradise non-resident state tax forms, we ended up owing $46 plus $48 in late penalties and interest, for a total sum of $94.  So I guess the penalty wasn’t so small after all!

Ask the grumpies: Why did they stop taking social security taxes out?

High earner asks:

I just noticed that for the last few months of 2014, there was no social security tax deducted from my salary, and then in January, it went back up to where it was before that. Does that make any sense???

then a follow-up:

I think I just figured it out. Do they deduct the standard percent each month of the calendar year until you reach the maximum based on the annual taxable limit of $117,000, and then they stop deducting?

We at grumpy rumblings thank high earner for answering hir own question.  (Note:  In 2015, the maximum amount of taxable earnings is $118,500.)  When policy makers talk about eliminating the tax cap on Social Security, this is what they’re talking about.

We are pro- this tax cap elimination because it comes as a surprise to most people the first time they hit it!  (And it’s a lot more progressive than cutting Social Security benefits for people who need them, though some cuts make sense given longer working lives.) In the mean time, though, we wish we earned more money so we could take advantage of it…

Haig-Simons Taxes: Is the tax system unfair to paid labor?

Sometimes economics blows your mind.

There’s an idea in economics of what fair taxes should look at.  There are several concepts of fairness, including vertical and horozontal equity.  We’ve talked about why there are progressive marginal tax rates before.

Back to the concept that messes with your mind.

“Ideal” taxes are termed Haig-Simons taxes (technically it’s taxes under the Haig Simons Income Definition… but that’s a mouthful).  These suggest that if unpaid work is equivalent to paid work, it should be taxed equivalently. The idea being that by its nature, the tax code discourages work that produces income (generally for elastic secondary earners) even though it should be treating it neutrally.   So there shouldn’t be a tax advantage to cleaning your own floors–or rather, there shouldn’t be a tax penalty to paying someone else to do so.

Would SAHP be willing to be taxed at 150K or whatever the going rate on salary.com is that year? Probably not. Not what we call politically feasible.

So what we do instead is dependent daycare credits or tax exemptions for childcare, but they only cover a fraction of daycare most places and they have their own problems with changing people’s behavior. And that’s only daycare.  What about the tax advantage to building your own deck rather than paying someone else to do it?

Of course, the tax system is also used to change behavior on purpose– to decrease negative externalities (ex. second hand smoke) and increase positive externalities (ex. giving to charity), and sometimes bleeding heart liberals add a little paternalism in there to keep people from harming themselves (libertarians say let them harm themselves!)  So those uses of the tax system are not included in Haig-Simons.

What do you all think?  Given that we tax labor market production (you know, to fund defense and other public goods), is it unfair to tax labor market production but not home production?