Sunday bits and pieces: Japanese iPod tax, shoe phone, and work tomorrow

I don't have anything big to write about today, so I think I will take a "bits and pieces" approach when this happens.

• Since 2005, the Japanese government has been pushing for an "iPod tax" - a tax of 1-3% on the price of media players. Recently, this tax proposal was permanently shut down. The idea behind a tax like this is that the government is trying to make up for lost tax revenue due to music and other media piracy. I understand a tax like this, but in terms of simple economics, it doesn't make a whole lot of sense. Either media players become more expensive for consumers and they buy less, or manufacturers are forced to lower the price a bit to compensate for the tax, resulting in reduced profits. Either way, this cuts into both sales tax and corporate income tax revenue that the government receives. Ultimately, I think this really just moves the money from one pocket to the other, doing nothing but angering consumers and/or media player manufacturers.
  

• As a kid, Get Smart was one of my all-time favorite TV shows (I'm young, so I was obviously watching reruns on Nick-at-Nite). The recent movie was funny, but I don't know if it really did the original show justice. The shoe phone seemed like a ridiculous gadget, but apparently it exists (if only in a Berlin museum).

• I'm starting work tomorrow downtown. Time to really see what the world of tax is all about.

Enjoy the rest of your Sunday.

A tale of two cities

Benjamin Franklin once said, "In this world nothing is certain but death and taxes." For most people, this is a pretty morbid reality, but as a tax professional, it offers me job security. As true as that may be, I'd still like hold onto as much money as I can from what I earn.

Recently, I was on vacation in Nevada and spent a little time in Las Vegas. I've always found it interesting how two places (Las Vegas and Chicago) separated only by four states and 1,700 miles could have such drastically different local tax systems. As of November 2008, Chicago (Cook County) will have the nation's highest sales tax rate at 10.25%. It boggles my mind that when I shop in Chicago, I will actually be paying over 10% more than the price listed on a given piece of merchandise. Additionally, Illinois has a flat state income tax of 3%. Therefore, if you're in the 33% federal income tax bracket, you'll find yourself paying out 33% + 3% = 36% of your income in taxes. Then, with your remaining 64% of income, you'll be taxed an additional 10.25% on anything you buy in Chicago. Very exciting stuff - and I'm not even going to go into property taxes and various other taxes that many people face.

Las Vegas paints a very different picture. The sales tax in Vegas (Clark County) is only 7.75% and there is NO state income tax. On the surface, it seems like residents and visitors of Las Vegas get off easy and the local government is barely scraping by. The "tax" that most people forget about is the unofficial one known as gambling revenue. Las Vegas might be one of the only places in the world where tourists pay the residents' taxes as they come from thousands of miles away to empty their pockets on blackjack tables and in slot machines.

What's the bottom line here? If you're a gambling addict from Chicago, you're probably paying for Illinois/Chicago's taxes, and Las Vegas' taxes as well. Good job.