Repeal the NCAA Ticket Tax Break

If you want to get good football or basketball season tickets at a top tier NCAA program, you often have to make an additional “contribution” to the school.  For the best seats at Syracuse University, the university requires a “donation” $700 per year (plus an additional donation of $10,000 over five years).  You might think that since those donations are required to get the seats, they are just part of the ticket price and certainly shouldn’t qualify for a tax subsidy, but you’d be wrong.  80 percent of the donation is allowed as a charitable deduction.  Thus, for the well-heeled sports fan sitting court-side, the federal government rebates more than one-quarter of the required donation.  (80% of the top income tax rate, 35%, equals 26%.)  Since the deduction carries over to state income taxes, most states also implicitly rebate a portion of the cost.

An excellent article at Bloomberg.com estimates that this tax break costs the Treasury at least $100 million per year, and possibly as much as $1 billion.

This is one of my least favorite tax breaks, even though I am now a beneficiary of it. (Unlike Gov. Romney, I take full advantage of the charitable deductions allowed to me.) I thought that Congress’s official scorekeeper, the Joint Committee on Taxation (JCT), must have estimated the cost of this idiotic provision, but as recently as July 25, they declined to provide an estimate. (JCX-62-12)

The provision was originally enacted as part of the Technical Corrections Act of 1988 (showing how short-lived the spirit of tax reform was after TRA86). The rationale was that “The proposal would eliminate otherwise unavoidable valuation controversies between the IRS and many individual taxpayers as to the proper treatment of payments to college athletic scholarship programs.” (JCX-15-88) That is, of course, absurd since the proper treatment is to make the payments nondeductible since there is a clear quid pro quo. To add insult to injury, the 1988 act made the tax break retroactive to 1983.

JCT at the time listed the revenue cost as negligible. (JCX-32-88) I’d be surprised if it’s as big as $1 billion per year, but it’s clearly non-negligible. And it makes no sense as policy to provide giant subsidies to rich sports fans and/or the most successful college sports programs in the nation.  As Bloomberg points out:

The 10 to 15 most powerful football programs, including LSU, probably don’t need the tax break to persuade fans to pay up for seats, Richard [president of LSU's booster organization] says.

“It’s commonly said of LSU that roughly 80 percent of the state’s business is done in a five-hour period Saturday night in the premium seating area,” Richard says.

Thanks to Paul Caron at TaxProfBlog for flagging the Bloomberg article.

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Top 10 Reasons to Vote for Mitt Romney

1.             You crave the excitement of not knowing what your president will say or do next.

2.           Women can’t be trusted with their own bodies.

3.           It’s been nine years since we invaded a Middle Eastern country.

4.          Sunrise through smog is so beautiful.

5.           Rich people don’t have enough money.

6.          You’ve never experienced a Great Depression.

7.           You’d like to see steeplechase on the White House lawn.

8.           You want to protect mass murderers’ access to semi-automatic weapons.

9.          You want to see what the Supreme Court would do with a couple more Scalias on the bench.

10.      You’re afraid that if Mitt loses, Republicans will nominate someone even crazier in 2016.

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Public Service Message: Americans are Awesome

Kate Trono is cycling across country to raise money for the National Brain Tumor Society in her dad's memory

At a time when many of us are unhappy with many of the rest of us for supporting an evil socialist/selfish plutocrat (choose 1), I have a public service message: This country is full of great people.

I ran into one today while bicycling. I had stopped after a long climb to take a picture of one of my favorite vistas. Another bicyclist stopped, clearly winded from her climb up the other side of the hill. I was feeling quite superior until I noticed that she had four fully loaded packs on her bike. She told me that she’d ridden about 3,580 miles farther than I did to get to that point, having started her trip in San Francisco two months ago. Her bike and packs weighed 90 pounds. Mine totals about 25. She’s a strong woman.

More impressive is the cause that has propelled her all these miles through heat and rain and over mountains. Her dad and a close family friend were both victims of aggressive brain tumors that slowly disabled them and ultimately took their lives. Kate decided to turn her grief into something positive. Her long, hard bike ride is a fundraiser for the National Brain Tumor Society, which is funding research and awareness to try to find a cure for this terrible disease, and help patients, family, and friends cope with it in the meantime.

Meeting Kate also reminded me that Americans are among the most generous people in the world, at least when it comes to private philanthropy.  When my son Paul and I biked across country to raise money for Partners In Health, 300 people contributed an average of $360 (or 10 cents a mile) for a total of $108,000. My fundraiser achieved the kind of bipartisan support that is only a wistful memory in the corridors of power in Washington.  I learned that my friends were engaged in amazing philanthropic activities themselves. And they were so supportive. It made our cross-country bike ride a truly amazing experience.

At 25, Kate’s a lot younger than I was and has few friends able to pony up 10 cents a mile, which in her case would be about $400 since she’s taken a longer route.  But a self-supported ride across country is way harder than what Paul and I did (we went with a company that carried our clothing and provided on-road support). And she is a great person who you would like instantly. I did.

So why not take a break from the angst and rancor of the election season and help Kate honor her father’s memory by contributing to the National Brain Tumor Society.  You can find a link on Kate’s website (www.pedalingforacure.com).   And pass this on to your friends.

Imagine if something like this went viral.  Really.  It is why Al Gore invented the internet.

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PS, Yes, I did steal that line from Jon Stewart.

About Mitt Romney's $5 Trillion Tax Cut

Here’s Governor Romney at Wednesday night’s debate, responding to President Obama’s critique of his tax plan:

First of all, I don’t have a $5 trillion tax cut. I don’t have a tax cut of a scale that you’re talking about.

…

I’m not looking for a $5 trillion tax cut. What I’ve said is I won’t put in place a tax cut that adds to the deficit. That’s part one. So there’s no economist that can say Mitt Romney’s tax plan adds $5 trillion if I say I will not add to the deficit with my tax plan.

Okay.  Now we know that Gov. Romney’s tax plan does not call for a $5 trillion tax cut.  Which means that we now officially know nothing at all about Mitt Romney’s tax plan.

Previously, Governor Romney has said that his tax plan would cut all individual income tax rates by 20%, eliminate the AMT, eliminate the estate tax, and eliminate taxes on investment income for low- and middle-income taxpayers.  He would also extend all of the Bush-era tax cuts that are scheduled to expire at the end of 2012.

Those tax cuts would reduce federal revenues by $480 billion in 2015 over and above the cost of extending the Bush tax cuts.  Allow for some growth in income, and the total comes to over $5 trillion over ten years.

Gov. Romney also has a super-secret plan to close loopholes and deductions on high-income taxpayers to make up the lost revenue without raising taxes on low- and middle-income households.  Efforts by the Tax Policy Center to test whether such a plan might exist have been met with furious criticism from the Romney campaign and its allies,  Through several iterations, the critique has been: (1) that’s not our plan, and (2) we won’t tell you what the plan actually is.

On Tuesday, there was a hint of specificity.  Governor Romney floated a trial balloon:  he’d pay for his tax cuts by capping deductions at $17,000.  As Ipointed out yesterday, that plan probably doesn’t work either in the sense that it will either (a) add to the deficit, or (b) raise taxes on middle-income households, both of which the Romney camp has strenuously disavowed.  Of course, it’s hard to tell what that plan would or would not do because again there are no details.  I assume that if the TPC tried to analyze it, Romney would reply that (1) that’s not our plan, and (2) we won’t tell you what the plan actually is.

In fact, it’s pretty clear that even Gov. Romney doesn’t know what this incarnation of his secret plan is.  Last night, he said:

And I’m going to work together with Congress to say, OK, what — what are the various ways we could bring down deductions, for instance? One way, for instance, would be to have a single number. Make up a number, $25,000, $50,000. Anybody can have deductions up to that amount. And then that number disappears for high-income people. That’s one way one could do it.

So the deduction threshold is not necessarily $17,000.  It is “make up a number.”  That’s helpful.

The bottom line is that we have no idea how Gov. Romney will make up the revenue lost due to the tax cuts he has specified in some detail.  Obviously, Gov. Romney doesn’t either.  The odd thing is that he seems to think that this is irrelevant.

It sounds like some sort of confidence game.

Romney to typical millionaire:  ”Hey there.  Have I got a deal for you!  How would you like to save a quarter million bucks in 2015?  Sounds good, doesn’t it?”

Millionaire:  ”Uh, sure.  What do I have to do to get the quarter million bucks?”

Romney:  ”Hey, don’t worry about that.  Those are just details.  Sign here.”

My guess is that the Romney behind Bain Capital would never have fallen for that scam.  Why does he think the voters should?

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More Than Half a Million Farmers Didn't Pay Income Tax in 2007

DES MOINES, IA - AUGUST 08: Republican presidential candidate Mitt Romney tours a corn field with Iowa Secretary of Agriculture Bill Northey (R) and farmer Lemar Koethe on August 8, 2012 in Des Moines, Iowa. (Image credit: Getty Images via @daylife)

I suspect that when Mitt Romney made his remark about the 47% of Americans who don’t pay income tax and won’t take personal responsibility, he was thinking about the mythical welfare queen staying at home collecting government benefits, although you’d think that a numbers guy would realize that slackers on the dole could only be a fraction of the giant swath of America that he’d dismissed.  As many  have pointed out, those who don’t pay income tax include most retirees who rely primarily on Social Security and a large group of working age people who pay significant Social Security and Medicare payroll taxes (as well as state and local taxes).

It also includes more than half a million farmers, who would seem to epitomize hard work and personal responsibility.  (Yes, farmers receive various subsidies, but those are concentrated on a handful of crops according to Brian Riedl of the Heritage Institution.  Two-thirds of agricultural output, including fruits, vegetables, livestock, and poultry “receive nearly nothing.”)

All told, based on data from 2007 income tax returns, 563,000 tax returns reporting farm income owed no income tax after credits.  That is 28% of such returns.  It is probably an underestimate because it excludes farmers whose incomes are so low that they don’t have to file a tax return.  (The 47% figure includes households who do not file tax returns.)

How do so many farmers avoid income tax?  In part, it is because farming qualifies for some special tax treatment.  The Joint Committee on Taxationlists seven agricultural tax expenditures, but they are comparatively small, totaling just $2.6 billion over five years.  Small businesses also qualify for various tax breaks, such as the ability to immediately deduct many equipment purchases.  (Larger enterprises must spread the deductions over several years.)  But my guess is that most of the farmers who escape income tax do it because they just don’t earn that much money.  Despite working really hard.

My guess is that Governor Romney is aware of this.  The picture above shows him talking to a farmer in Iowa and I assume that he has spoken with others.  I hope he will think about those farmers when he addresses the question of the 47% on Wednesday night.

The best response would be, “I’m sorry.  I was wrong.  I know that a lot of Americans are working really hard, doing the best for their families.  I don’t believe that the big problem in this country is that multi-millionaires like me are over-taxed and that hard-working middle-income families pay too little.  The big problem is that the benefits of hard work have been increasingly concentrated at the top while earnings of lower- and middle-income workers have been stagnant for decades.  I hope that my policies would help rectify that gross inequity, but until they do, I certainly don’t plan to add to the challenges facing the 47% by raising their taxes.”

That would be a flip-flop I could believe in.

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PS, My friend Lauren pointed out that the farmer in the picture is probably a millionaire.  Yeah, probably.  Mitt really does need to get out of the bubble.