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Trump Administration Plans To Reverse Tip-pooling Rule

The proposal by the Trump administration to rollback the tip-pooling rule is now open for public comment. The Department of Labor’s formal publication kick-started a month-long period for the public to provide feedback. If successful, the proposal reverses the rule passed by the Obama administration in 2011.

The rule permits restaurant employees to retain tips without being forced to share with non-tipped workers.The Department of Labor’s proposal was triggered by the need to correct wage disparities between waiters and other restaurant staff. Enforcement of the rule was officially halted by the current administration in July.

According to federal law, employers are not allowed to pool tips if they pay the tipped minimum wage. The amount is lower than the standard minimum wage, which stands at $7.25 per hour. The Obama-era rule also prevented the practice for employers paying their staff the higher minimum wage.

Opponents of the proposal argue that the latest move by the Trump administration is aimed at targeting workers. The Labor Department’s actions in July were aimed at blocking extended mandatory overtime wages to over 4 million employees. It proceeded to counteract a rule, which was designed to compel businesses to submit detailed employee wage data. The information was supposed to be broken down by race and gender.

Vulnerability

According to Saru Jayaraman, president of the union-backed ROCU, tipped workers are vulnerable to manipulation. She is concerned that the rollback of the Obama-era laws would make the situation worse for the workers. This would lead to increased vulnerability, poverty and financial instability for a workforce that is dominated by females. The possibility of harassment may rise exponentially.

On the other hand, the Labor Department stated that it carried out a qualitative analysis. It also urged stakeholders to provide feedback regarding the economic effects of the proposal.

A growing number of industry groups are opposed to the proposal because they believe tip pooling is good for the workers. They argue that the practice addresses the compensation gap between untipped workers and waiters. The servers typically earn more as the prices of food increase. Many commentators warn that the Trump administration risks facing considerable legal challenges from rights groups representing workers.

Christine Owens of the National Employment Law Project said the department’s proposal omitted vital details relating to the amount of money that tipped workers could lose in the event that the repeal goes ahead. Meanwhile, the Supreme Court is reportedly reviewing a challenge lodged by the National Restaurant Association in association with other industry groups. The proposal was published in the first week of December on the Federal Register.

Impact

Heidi Shierholz of the Economic Policy Institute (EPI) is currently researching how much money employees would lose to their employers by analyzing information from the Bureau of Labor Statistics and data from the Internal Revenue Service. She asserts that this form of theft amounts to more than $15 billion annually. A significant number of employers are willing to pocket the tips when the law is on their

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How GOP Tax Reform May Impact California Housing Market

The two chambers of Congress have already passed new tax bills but the final legislation is yet to be made. Homeowners are still hoping that it would turn out to be in their favor. There are three key areas of the tax overhaul bills:

Versions: House vs. Senate

The two versions of the bill from the House and the Senate are quite different, specifically on the deduction on the mortgage amounts. For the House bill, the mortgage interest deduction is restricted to a maximum of $500,000. On the other hand, the Senate bill preserves the current deduction, which is $1,000,000.

It should be noted that many of the expensive homes do not even have mortgage interest that goes over $500,000, although there are some states where homes are high-priced. An example is Hawaii where more than 60% of the homes have mortgages over $500,000. Only 13% of homes exceed the $1,000,000 threshold for the mortgages.

Clearly, more people will be affected by the tax code presented by the House.

Property Tax Deductions

The House bill also restricts the property tax deductions at only $10,000. Meanwhile, the Senate bill proposed that there should not be any tax deductions on properties. The initial proposal was amended and the deductions are maintained at $10,000.

If the Senate did not change the original bill they introduced, it would have affected almost 98% of the homeowners who pay their property taxes. This means that a good part of the population would have been compelled to pay additional tax, specifically the itemize deductions and not the standard deductions.

People with large mortgages, as well as those who give to charitable institutions, would not have the capacity to deduct property tax. With the $10,000 limit, the number of affected homeowners is fewer. However, some states with people who exceed the property tax limit will definitely feel the financial pain.

Capital Gains Exclusion Taxes

Assessing this next part of the tax code is difficult. The required eight-year residency in a home was reduced to five years for the capital gains exclusion taxes. It can be problematic for people who want to move whenever they want as the federal government would collect a tax revenue amount.

Homeowners would no longer behave like before, mainly because a quarter of home sales would face the tax. The possible outcome for this is that homeowners would stay put for a minimum of five years so that they would not pay the tax.

Weakened Home Prices in California and the Other States

While there are differences in the two bills, both the versions of the Senate and the House would have a negative impact on the home prices. This is a result of the decrease in mortgage interest deduction if ever the House’s plan becomes law. It can be bad for new homeowners, especially those in high-cost markets like San Jose.

Home prices may start decreasing because there is lack of demand. However, when it comes to the more-expensive real estate markets, such

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How Tax Reform Could Impact San Jose

President Trump’s efforts to significantly reform the American tax code took a step forward a few weeks ago, as a bill exited the Senate Finance Committee for public debate.

When compared to the House’s equivalent bill, the Senate bill benefits San Jose homebuyers by eliminating the latter’s proposed reduction in the mortgage interest deduction limit. This limit is $1,000,000 both currently and in the Senate bill, while the House bill decreases it to $500,000.

On the downside, the Senate bill also eliminates State And Local Tax Deductions, or SALT, used by roughly one third of Californians to save an average of $18,000 on their annual tax bill.

Here is a closer look at how everything breaks down for San Jose residents:

Mortgage Interest Deduction Limits

The change in the maximum mortgage interest deduction limit does not affect most Americans, as the new $500,000 cap is still significantly higher than the national median home price of around $200,000. According to CoreLogic, less than three percent of current American homeowners have more than $500,000 in outstanding home loans.

However, this number is significantly higher in the Bay Area. The median price for a Bay Area home is approximately $752,000, much more than the cap proposed by the House but still comfortably beneath the current $1,000,000 cap.

The California Building Industry Association vehemently opposes any alteration to the existing deduction limit, arguing that increasing the tax burden in expensive states such as California could depress the housing market in those areas. In turn, this could trickle down and decrease property values across the entire nation.

The real estate industry concurs with the California Building Industry Association and has lobbyists actively campaigning against the House’s proposed changes.

It is worth noting that no bill has been passed yet, as the House and Senate bills would need to be reconciled before either could be signed into law.

Assuming something is signed into law, current homeowners would not be affected by any of the proposed changes. The new legislation would cover only new mortgage loans, leaving the tax burden faced by existing homeowners completely unaltered.

State and Local Tax Reduction Reform

The Senate bill attempts to compensate for the higher mortgage interest deduction limit by eliminating SALT deductions. This would impact the East Coast more than San Jose residents due to the higher property taxes out east, but some Californians would still feel it.

According to a report in the LA Times, East Coast moderates are attempting to broker a compromise in which homeowners are allowed to deduct up to $10,000 in state and local property taxes and nothing on income taxes. This would be the worst case scenario for San Jose, where income taxes are high but property taxes relatively low.

Senator John Thune, R-South Dakota, was quoted in a recent interview on CBS This Morning arguing that tax breaks for expensive areas such as California and New York have been law for a long time but may not be for the

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San Jose Woman Sentenced in Homeless Tax Fraud Case

Diep Vo, a 71-year old woman living in San Jose, has been sentenced to four and a half years in prison for her role in a tax fraud scheme involving the local homeless population. The crime took place from May 2012 to December 2013.

According to prosecutors, Vo (also known as Nancy Vo) and 57-year old co-conspirator Trong Minh Nguyen (alternatively John Nguyen) conducted the tax fraud by convincing homeless and unemployed individuals that a new government program would provide them with stimulus money. Vo located these individuals by canvassing homeless shelters and halfway houses throughout the San Jose area.

These individuals typically did not file taxes, but were told that they were required to provide their Social Security number and sign a blank income tax return in order to receive their benefits from the government program.

No such program existed. Instead, Vo would obtain the signed tax return form and give it to Nguyen. Nguyen then filled it out with false tax information, claiming an average income of about $7,000 on each one. He then claimed that this money was subject to fraudulent tax withholding, ultimately raking in a total of $3.4 million, stemming from 1,743 fraudulent tax refunds.

The IRS was directed to send the refund checks to private mail boxes owned by Vo and Nguyen. The pair rented private mailboxes throughout the Senter Road area of San Jose to avoid any suspicion from a couple of addresses receiving too much mail from the IRS. The individuals whose names appeared on the fraudulent documentation were required to pay the pair for their trouble, severely mitigating any financial benefit they derived from the scheme.

Vo pleaded guilty to one count of conspiracy to file false tax claims, three counts of aiding and abetting such false claims, two counts of aggravated identity theft, and two counts of mail fraud back in June. The only question for presiding Judge Beth Labson Freeman was what sentence her crimes warranted.

The verdict was determined on Tuesday, November 14, when U.S. District Court Judge Labson ordered Vo to serve 54 months in prison, provide restitution to the IRS in the amount of $701,000, and serve an additional three years of supervised release following her prison sentence. Vo has until January 4, 2018 to self-surrender and begin serving her sentence.

This sentence is light compared to the penalties she could have faced. Each instance of mail fraud in San Jose carries a maximum sentence of 20 years imprisonment, while each count of aiding and abetting fraudulent tax claims carries a maximum sentence of five years. Aggravated identity theft carries a minimum sentence of two years.

Co-defendant Nguyen was sentenced to more than two years in prison for his role in the tax fraud plot. He previously pleaded guilty to submitting and conspiring to submit false tax claims to the IRS in an effort to obtain fraudulent tax refunds in May. The particulars of his sentence came on July 25.

To date, no charges have been

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Gas Tax And The Bay Area

The Gas Tax

In general, democracy means government rule via the majority opinion of the people. California is currently in the middle of an interesting conflict between the decision of state legislators to raise gas taxes and vehicle registrations fees, and a group of organizers who plan on appealing to what is hopefully a majority of voters to overturn this measure.

Despite having what is already one of the highest motor vehicle tax and fee structures in the country, the legislature and governor contend that an additional 5.2 billion dollars is necessary to address deferred maintenance issues on the state’s surface transportation infrastructure and to fund a wish list of additional new mass transit programs. This money is raised via an additional 12 cent a gallon gas tax, an additional 20 cents a gallon on diesel, up to another $175 on each vehicle registration fee, and an additional 4% tax on sales of diesel-fueled vehicles.

Powerless in the face of large Democratic majorities in the legislature, Assemblyman Travis Allen (R- Huntington Beach) has proposed an initiative that would place the matter in the hands of the voters themselves. This would serve as a test as to whether the legislative majorities do in fact comprise a democratic majority in the larger sense of the word, at least on this one issue of the gas tax.

San Francisco

In the San Francisco Bay area, the gas tax as it currently stands offers a mixture of benefits and drawbacks. Fixing bad roads would be a positive. Enduring the frustrations of large amounts of additional road construction delays while they are being repaired would be less welcome.

Raising California’s already-legendary gas prices even higher imposes a particular burden on the Bay Area’s many less-affluent residents who work in the city but must endure long commutes out to the areas where semi-affordable housing is still in vogue. Improving and expanding mass transit options on the increasingly rickety BART system would no doubt be welcomed by its ridership.

The issue therefore comes down to a choice on several different levels. In a large societal sense, voters may have to decide if the overall benefits to the state’s residents outweighs the loss of 5.2 billion dollars that would otherwise be available to spend on other things. An initiative, if it does in fact make the ballot, will also serve as a referendum on the current management of the state’s transportation affairs.

Since, in all honesty, the state government has short-changed its transportation budget in favor of other priorities for many years, voters may or may not render a verdict as to whether they should be favored with additional money after mis-allocation of the funds already available for decades. They may also choose to ratify that decision to prioritize other matters as being more urgent and bite the bullet in this one instance to catch up.

In a narrower sense, the battle lines may be drawn between the various direct winners and losers of the gas tax itself.

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