Wealth Tax Looms As Greeks Forced To Declare All 'Assets' To Tax Authority

The USA is only a little behind Greece in heavy debt usage so Greece may offer a vision of what is in all our futures

In Greece's ongoing collapse into utter farce, The Greek finance ministry confirmed some more details of the long-planned registration of all kinds of private wealth that will go into effect in February 2017. As KeepTalkingGreece reports, more than 8,500,000 tax payers registered in Greece will be called to declare all moveable and immovable assets, their total “wealth”, and even cash they possess even if it is below 100 euro.

Furthermore, the taxpayers will have to register changes in their assets when they occur and not annually.

And under the new scheme, Greeks are mandated to have registered everything they own, with taxpayers having to add moveable and immovable possessions such as paintings, antiques, jewelry, even historical weapon, etc but also the cash they have in their wallets or under the mattress.

“Taxpayers must declare all the cash they have in their hands, even one euro!” an official from the Finance Ministry told newspaper To Vima on conditions of anonymity.

Within a month, the taxpayer will have to submit a modification statement, if there are any changes in his possessions status.

"This will affect any case of property transfer or acquisition, but not of income, which is being declared each year, and are directly updated by the tax authorities.

The simple question every Greek (and European and American and Japanese) citizen should be asking - why does the government want to know this? ...and besides what gives them the right to invade the citizenry's privacy to such a degree?

The answer is sadly simple. The road the dystopian "wealth tax" endgame has been long-written. As we pointed out in 2011, the "muddle through" is dead... and there are only painful ways out... And now it is time to face the facts. What facts?

The facts which state that between household, corporate and government debt, the developed world has more than $20 trillion in debt over and above the sustainable threshold by the definition of "stable" debt to GDP of 180%.

The facts according to which all attempts to eliminate the excess debt have failed, and for now even the Fed's relentless pursuit of inflating our way out this insurmountable debt load have been for nothing.

The facts which state that the only way to resolve the massive debt load is through a global coordinated debt restructuring (which would, among other things, push all global banks into bankruptcy) which, when all is said and done, will have to be funded by the world's financial asset holders: the middle-and upper-class, which, if BCS is right, have a ~30% one-time tax on all their assets to look forward to as the great mean reversion finally arrives and the world is set back on a viable path.

But not before the biggest episode of "transitory" pain, misery and suffering in the history of mankind. Good luck, politicians and holders of financial assets, you will need it because after Denial comes Anger, and only long after does Acceptance finally arrive.

The truth is far, far uglier than anything anyone in a position of power will tell you because acknowledgment would imply the need to come up with solutions that involve more than merely extending the event horizon for a little longer. Alas, even politicians now realize there is only so far that the can can be kicked.

There is one thing we would like to bring to our readers' attention because we are confident, that one way or another, sooner or later, it will be implemented.

Namely a one-time wealth tax: in other words, instead of stealth inflation, the government will be forced to proceed with over transfer of wealth. According to BCG, the amount of developed world debt between household, corporate and government that needs to be eliminated is just over $21 trillion. Which unfortunately means that there is an equity shortfall that will have to be funded with incremental cash which will have to come from somewhere. That somewhere is tax of the middle and upper classes, which are in possession of $74 trillion in financial assets

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IRS Increases 'Marriage Penalty,' Unmarried Cohabitants To Get Twice The Mortgage Interest Deduction

There are a thousand good reasons to never get married: in-laws, divorce attorneys, and the inevitable ravages of age on one’s attractiveness come immediately to mind.

But there are also significant tax hits that come with getting hitched, or as they’ve collectively been coined, the “marriage penalty.” For example, the 28% tax bracket kicks in at $91,150 of income if you’re single, but at only $151,900 — an amount basic math tells you is less than double $91,150 — for married taxpayers. In addition, single taxpayers start to lose 3% of itemized deductions when adjusted gross income exceeds $258,250; married taxpayers, however, will lose itemized deductions once adjusted gross income exceeds only $309,900.

Late last week, the IRS exacerbated the marriage penalty by offering a very large reward for unmarried taxpayers who co-own a home: double the mortgage interest deduction available to married taxpayer.

In AOD 2016-02, the IRS acquiesced in the Ninth Circuit’s decision in Sophy v. Commissioner, in which the appeals court overturned a Tax Court decision and allowed a same-sex, unmarried, co-habiting couple to each deduct the mortgage interest on $1.1 million of acquisition and home equity debt. In reaching its conclusion, the Ninth Circuit determined that the mortgage interest limitation is meant to apply on a per-taxpayer, rather than a per-residence, basis. The AOD issued by the IRS confirms that the Service will follow this treatment.

Let’s take a look at what this means:

Mortgage Interest Deductions, In General

Section 163(h)(3) allows a deduction for qualified residence interest on up to $1,000,000 of acquisition indebtedness and $100,000 of home equity indebtedness. Should your mortgage balance (or balances, since the mortgage interest deduction is permitted on up to two homes) exceed the statutory limitations, the mortgage interest deduction is limited to the amount applicable to only $1,100,000 worth of debt.

Now assume for a moment that you and your non-spouse lifemate/bookie/Japanese body pillow go halfsies on your dream house, owning the home as joint tenants. And assume the total acquisition mortgage debt is $2,000,000 and the total home equity loan $200,000, making total debt $2,200,000, with each of you paying interest on only your $1,100,000 share of the debt.

Are each of you entitled to a full mortgage deduction — since you each paid interest on only $1,100,000 of debt, the maximum allowable under Section 163 — or is your mortgage deduction limited because the total debt on the house exceeds the $1,100,000 statutory limitation?

In 2012, the Tax Court concluded that the answer was the latter. In Sophy v. Commissioner, this issue was surprisingly addressed for the first time in the courts (it had previously been addressed with a similar conclusion in CCA 200911007), with the Tax Court holding that the $1,100,000 limitation must be applied on a per-residence basis.

Thus, in the above example, even though the joint tenants each paid mortgage interest on only the maximum allowable $1,100,000 of debt, each owner’s mortgage interest deduction would be limited under the holding in Sophy because the maximum amount of qualified residence debt on the house — regardless of the number of owners — is limited to $1,100,000. Assuming the joint tenants each paid $70,000 in interest, each owner’s limitation would be determined as follows:

$70,000 * $1,100,000 (statutory limitation)/$2,200,000 (total mortgage balance) = $35,000

Instead of each owner being entitled to a full $70,000 interest deduction, the Tax Court concluded that the mortgage interest deduction was limited for both because the total debt on the house exceeded the statutory limits. The court reached this conclusion after examining the structure of the statute and determining that the plain language required the applicable debt limitation to be applied on a per-residence basis:

Qualified residence interest is defined as “any interest which is paid or accrued during the taxable year on acquisition indebtedness with respect to any qualified residence of the taxpayer, or home equity indebtedness with respect to any qualified residence of the taxpayer.” Sec. 163(h)(3)(A)

The court then added, “The definitions of the terms ‘acquisition indebtedness’ and ‘home equity indebtedness’ establish that the indebtedness must be related to a qualified residence, and the repeated use of the phrases “with respect to a qualified residence” and “with respect to such residence” in the provisions discussed above focuses on the residence rather than the taxpayer.

In an illustration of how multiple smart people can look at the same set of facts and reach a different conclusion, late last year the Ninth Circuit reversed the Tax Court’s holding, deciding instead that the $1,100,000 limitation on qualified debt is determined on a per-taxpayer, rather than a per-residence basis.

Key to the Ninth Circuit’s decision was the statute’s treatment of married taxpayers who file separate returns for purposes of deducting mortgage interest. Section 163(h)(3) provides that “in the case of” a married taxpayer who files a separate return, the $1,000,000 limit on qualified residence interest and $100,000 of home equity interest are reduced to $500,000 and $50,000 respectively. The Ninth Circuit placed great emphasis on the use of the phrase “in the case of,” noting that it suggests an exception to the general limitations, and that aside from that specific exception, married taxpayers filing separately should be treated identically to married taxpayers under Section 163.

The statute gives each separately filing spouse a separate debt limit of $550,000 so that, together, the two spouses are effectively entitled to a $1.1 million debt, the same amount allowed for single taxpayers. Thus, the point of the language was to treat two married taxpayers who file separately the same as married taxpayers or a single taxpayer, which indicates that the limitations are to be applied on a per-taxpayer, rather than a per-residence basis.

Lastly, the court reasoned that if the limitation is to be applied on a per-residence basis, there would be no need to impose a 1/2 limitation on married couples filing separately. If the limit were indeed intended to be $1,100,000 per house, then married couples who live together but file separately would be forced to split the limit; there would be no need to add additional language to the statute to accomplish that result. If the $1,100,000 limitation is to be applied on a per-taxpayer, basis, however, the limiting language would serve a purpose, as it would prevent a married couple who files separately from deducting interest on a total of $2,200,000 and get twice the benefit of a married couple who files jointly.

Impact

The impact of Sophy and the Service’s subsequent acquiescence are a bit muted in the wake of the Supreme Court’s 2013 decision in Windsor and its 2015 ruling in Obergfell, which together represent a seismic shift in the treatment of same-sex couples for federal tax purposes. Going forward, same-sex couples who are legally married under state law will no longer be forced to file as unmarried taxpayers; rather, any couple that is married under state law, same-sex or otherwise, will only be permitted to file married filing jointly or married filing separately. In other words: same-sex couples — welcome to the marriage penalty!!

Cohabitation, of course, is not limited to same-sex couples, and so the Service’s decision to allow each taxpayer who co-owns a house to claim an interest deduction on the full $1,100,000 of debt — provided they are not married filing separately — should be a welcome one for many.

SOURCE

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