Wednesday Links: Taxes on Hipsters and the IRS Scandal Continues

May 15, 2013

The FBI has opened an investigation into the targeting of conservative groups by the IRS. The inspector general delivered the entire report to Congress on Tuesday and the IRS released a statement in response.

An article in the Atlantic examines how a Pigovian tax on hipsters might play out, referencing a poll that shows 27 percent of Americans would support such a tax. The conclusion to such a plan (no matter how you feel about hipsters): hipsters will adapt their behavior, as people do in response all taxes.

A New York Federal reserve study shows that about 80 percent of people cut spending in response to the decrease in personal income from the expiration of the payroll tax holiday. Only 2 percent increased their debt due to the decreased take home pay, according to the study.

Advocates in Connecticut want the state legislature to raise its cigarette tax by 95 cents a pack. This would increase the tax to $4.35 a pack. We have plenty of research on cigarette taxes and why they might not get the revenue they would like.

On the topic of small business tax reform, Bloomberg BusinessWeek points out that there isn’t really a clear definition of what constitutes a small business. In the current code, small business classification has nothing to do with the numbers of employees or amount of revenue, but with how the company is organized. Most companies in the U.S. are organized as a pass-through (partnership, sole proprietorship, s-corp) instead of a traditional corporation (c-corp). This is one reason why many call for parity between the individual and corporate rate through the reform process.

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