Personal finance from around the Web Tuesday:

• The Federal Reserve is proposing new rules to protect gift card consumers from exorbitant fees and and expiration dates.  While the exact date these new rules will go into effect remains unknown, it most likely won't be until next summer — after the upcoming gift-card season. [Federal Reserve, Bucks]

• Online microlending has been all the rave in recent years. One of the most popular is Kiva, which allows you to make loans to low-income entrepreneurs in developing countries. But it is no longer practical for it to be true "person-to-person lending." [My Money Blog]

• With the passing of the health care reform bill comes the passing of a 5.4 % surtax aimed at high-income tax returns. The Tax Foundation has created a map that shows the top tax rates in different states under the new plan. [Tax Policy Blog]

• The number of people taking the standardized Law School Admission Test has skyrocketed. In late September, 60,000  people took the test — a worrisome number, since law jobs are shrinking. [Most Strongly Supported]

• Wondering what has happened to the transportation stimulus package? The California Transportation Department reports it has been allocated $2 billion into federal highway funds. But only 2.5 % of that money has been spent yet.  California is not alone, but sometimes slow and steady wins the race. [Freakonomics]

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The lobbyists for the National Association of Realtors sure earned their fee this go-round. Not only did Congress agree to extend through April, 2010 the existing $8,000 tax credit for first-time home buyers scheduled to expire at the end of this month, but now we’re going to all pay for existing homeowners to have a similar tax break.  In the new bill President Obama was slated to sign today — the housing credit legislation was  tacked onto legislation extending unemployment benefits — existing homeowners will be able to claim a $6,500 tax credit if they buy a new home they intend to use as their primary residence.

Congress also decided to swing the door wide open for more Americans to get in on both tax breaks More

There's a lot of speculation about what will happen to the federal estate tax (or the "death tax," if you oppose it) next year. A handful of bills have been introduced in Congress recently, many of which would raise the current exemption from $3.5 million to $5 million and keep the tax rate at 45%. (Under current law, the estate tax disappears in 2010 but is reinstated in 2011 at 55% on estates larger than $1 million.)

Whether the exemption jumps from $3.5 million to $5 million — or disappears altogether — you may assume that you don't have an estate tax issue. Few of us leave behind that much wealth. But here's where many people go wrong: While you may not owe federal taxes you could be on the hook to your state. More

With the November  30 expiration of the First-Time Home Buyer Tax Credit fast approaching, the wrangling in Washington over whether to extend the program is getting mighty interesting.

In early September, Senator Johnny Isakson, the patron saint of the National Association of Realtors (and a guy who made his fortune selling real estate) teamed up with Senator Christopher Dodd to back a plan that would increase the current $8,000 credit to $15,000, make it available to all homeowners (not just first timers), and double the income-eligibility rules. More

Here's part two of my extended interview with renegade supply-side economist Bruce Bartlett, including some thoughts on Medicare that might just scare the pants off you. See here for part one, and here for the less-wonky version that's running in Money's November issue.

David Futrelle: As one of the original supply-siders, you worry that supply side economics had been reduced to little more than a religion of tax cuts, tax cuts, and more tax cuts.

Bruce Bartlett: That's right. A lot of what's wrong with conservative economists today is that they still act as if we're living in 1980 — as if we're facing inflation and massively high tax rates — and they're advocating policies that were perfectly appropriate for 1980 in an environment in which they make no sense. More

The White House says President Obama will donate the $1.4 million in cash that comes with his Nobel Peace prize. Which made us wonder: What are the tax implications of this?

Over at Politico, Josh Gerstein reports on some of the possible legal complications of accepting the monetary award, even if the President immediately gives it away. His source suggests that Obama could, among other things, end up owing some tax.

Maybe only if he has a terrible accountant. As the Politico item notes at the end, there's an exception. Kail Padgett at the Tax Foundation's blog points us to the relevant section of the IRS tax instructions. One surprise: It actually mentions the Nobel. More

If you held on to your fund portfolio through the market downturn, you have plenty of reason to smile this year. The average large-cap stock fund has rebounded some 23% so far this year.  And some have done far better — small growth funds are ahead 30%, while Latin America stock funds have zoomed nearly 50%.

And best of all, you will probably pay little or no taxes on those gains.

That’s the assessment of Tom Roseen, a senior research analyst at Lipper, who tracks mutual fund taxes. More

It's not shocking that the National Association of Realtors is working hard to have the $8,000 first-time home buyer tax credit extended past its current December 1st expiration. But what is surprising is how little public discussion there is of the downside of this extension.

It's a full-court press from the NAR: The powerful trade association has its lobbyists pushing the case on the Hill, and it's asking its members to get the message out too. In a video featuring member Realtors talking up the virtues of the credit, the NAR includes a message superimposed on a wave of stars evoking the U.S. flag: Congress: Don’t Let America’s Real Estate Recovery Expire.
More

The 2010 fiscal year for most states began July 1. Facing severe budget shortfalls, some states have used the new year to introduce higher income tax rates. In Delaware, for example, the highest tax rate went from 5.95% to 6.95% on earnings over $60,000. In Hawaii, the maximum tax rate jumps from 8.25% to 11% for earnings above $200,000. And in New Jersey, the tax on earnings above $500,000 jumps to 10.25%, up from 8.97%; for a new bracket above $1 million, the rate is 10.75%.

As you can see, most of the tax increases are limited to high earners, the same tactic President Obama has proposed to help pay for expanded health-care coverage and other government spending measures.

But as Mark Robyn points out in his post for Tax Policy, a blog for the non-partisan Tax Foundation, raising taxes on the wealthy doesn't always have the desired effect. As some states have discovered, high earners have the means to move. The well-off also can afford to hire smart accountants to lower their tax bill.

That's not to say that wealthy folks shouldn't be taxed at a higher marginal rate. But the strategy seems like a shortsighted way for the federal government to raise the funding needed to fix health care. Howard Gleckman makes the point in his post for the non-partisan Tax Policy Center's blog, TaxVox.

What's the alternative? Len Burman, director of TPC, offers one option in this May editorial in The Washington Times. In the meantime, Obama can witness firsthand just how well targeted tax hikes work: While higher state tax rates were introduced this month, the rates are retroactive to January 1, 2009.

How many calls do you think accountants are getting right now?

Last week  Senator Johnny Isakson introduced legislation that would extend a $15,000 tax credit to any and all home buyers. And I do mean any and all. The current maximum tax credit for home buyers is limited to $8,000 for first-timers with adjusted gross income below $75,000 ($150,000 for joint filers). The Republican senator from Georgia — who made his fortune as a real estate broker, I should point out — wants to swing Treasury’s doors wide open. His bill nearly doubles the maximum credit, doesn’t have an income cutoff and isn’t limited to making home-buying more affordable for first-timers.

"The first-time home buyer tax credit has made a difference," said Isakson when announcing the bill. "First-time home buyers used it and the market stabilized, but we don't have a recession in first-time home buyers. We have a recession in the move-up market.” Continued the senator, “One of the biggest problems facing the American people today is an illiquid housing market, a decline in their equity, a decline in their net worth and a depression in the housing market that we are obligated to correct if we possibly can."

There’s just one big catch.  If this legislation passed it would be at an estimated cost of more than $35 billion for taxpayers.  Maybe that’s just a rounding error in a world of trillion-dollar deficits and $700-billion-plus stimulus deals, but geez, it’s still $35 billion of taxpayer money. And it’s not about helping folks facing foreclosure or exploding mortgage rates. If this ever became law it would be a boon to the well-off that can already afford to trade up. The only way you can make a move today is if you are sitting on a wad of home equity or a nice stash of cash: You need something to come up with a down payment to satisfy  tighter lending standards. You can’t use a credit for a down payment (HUD backed away from that notion a few weeks ago.) So the big winners under Isakson’s bill would be folks who are already in good enough shape to be able to trade up anyway.

A similar provision spearheaded by Isakson made it through a Senate vote back in February, but it was one of the casualties left on the cutting room floor when Congress had to trim the stimulus package to its final $787 billion price tag. Given the steep cost of Isakson's bill it is unlikely to be fast-tracked anytime soon, but you have to give the former real estate broker chutzpah points for trying it again.

Gas Tax Map (click to enlarge)

President Obama’s recent announcement that auto fuel efficiency standards are being sped up to require an average per-fleet fuel economy of 35.5 mpg for cars by 2016 (the previous goal was 35 mpg by 2020) has its environmental and geopolitical merits. Less green house gas emissions, less dependency on foreign oil producers is a very big win-win.

But it is potentially lousy news for the roads we drive. A primary funding mechanism for road and bridge construction and repairs is through the imposition of pay-at-the-pump gas taxes. The federal government collects 18.4 cents on each gallon of gas sold, and every state (except Alaska) tacks on its own levies, ranging from 20 cents to 40 cents per gallon. By pushing us into more efficient cars, the federal and state governments are going to take in less gas tax revenue. And it’s not as if they are exactly running big surpluses to make that palatable.

Consider that the 2010 Toyota Prius clocks in at an estimated 51 miles per gallon. Assuming 15,000 miles driven a year, the Prius owner pays just $54 in federal tax. The same mileage on the 2009 Hyundai Genesis–voted North American Car of the Year–generates a minimum of  $102 in federal tax. (I gave the Genesis the benefit of the doubt and used its highway average of 27 mpg rather than its less-efficient 18 mpg for city driving.) If both cars happen to be driven in California (40 cents/gallon in taxes) the Prius driver pays an additional $118 into state coffers, while the Genesis owner owes $222.

The hit to gas-tax revenue has not gone unnoticed by the folks collecting the revenue.  Oregon road-tested a program that would replace the gas tax with a mileage tax, and other states are also considering similar pay-as-you-go taxes levied on your actual miles driven. (For the privacy-possessive out there, yes, GPS is how the data is collected.)

And the National Surface Transportation Infrastructure Financing Commission (translation:  a bipartisan panel of government and industry folks concerned about roads and bridges) recently backed switching from a gas tax to a mileage tax as a long-term solution for road and bridge funding. The commission estimates that to meets its base case for maintenance and improvements, the tax would be roughly 2.3 cents per mile.

Yet when Transportation Secretary Ray LaHood floated the mileage levy as an idea worth pursuing in an April interview with the Associated Press, the White House quickly went out of its way to say LaHood was wrong. That may be the politically expedient response in a recession, but eventually something’s gotta give.
The commission pointed out that the shortfall for federal highway and transit projects is expected to run $400 billion from 2010 through 2015. In the meantime, the commission’s proposal to cover shortfalls is to raise the federal gas tax by 10% (it hasn’t budged since 1993); it’s not hard to imagine cash-strapped states will be looking for near-term solutions to the growing shortfall too.

–Carla Fried

A spoonful of sugar might help it go down

Nothing angered the commenters more than the notion that other people were paying less taxes than them. A number of them noted with some outrage that, as reported in a piece by my colleague Jeanne Sahadi, 43% of Americans pay no income tax.

Well, actually, that's not quite what she reported. Like everything related to taxes, it's complicated. It's 43 percent of "tax units," actually — that is, households. What percentage of people is this? It's not clear. I called up Bob Williams at the Tax Policy Center, which provided Sahadi with the data, to get a fuller explanation of what's going on.

So who exactly are these happy folks who pay no income taxes? Well, Williams says, they basically break into three large groups.

Some are elderly living largely off of Social Security, many of them living in or near poverty; some are workers who are just starting out at (or are otherwise stuck at) lower paying jobs; the rest are people earning modest middle-class incomes who have kids and other factors that allow them to take a deductions and tax credits that reduce their taxable income to nothing.

And yet, as Sahadi pointed out as well, the vast majority of those who pay no income taxes are paying payroll taxes (like Social Security and Medicare). Only about 12% of tax units — not 43% — escape paying both income and payroll taxes.

Why can so many escape the income tax? As Williams notes, it's because in this country we tend to deliver social services through the tax code. This isn't a notion invented by liberals or "socialists." Indeed, it was conservative free-market economist Milton Friedman who was the most famous American proponent of the "Negative Income Tax" — the idea that the lowest income Americans should not only pay no taxes but should actually get payments from the government. Some of these ideas have indeed made it into the tax code in the form of the Earned Income Tax Credit.

So does the current system put an intolerable burden on the rest of us? As Sahadi also pointed out, once you add in all the deductions and tax credits we have available to us, only about one in 10 filers pays more than 15% of their income in federal income tax, according to Center for Tax Policy figures.

That, while hardly trivial, is less than what people pay in all other developed nations, and seems to me like a reasonable amount to pay for a more-or-less-functioning government. You don't want to pay for a functioning government? You could always move to Somalia.

Yeah, the rich pay more in taxes than the rest of us. That's because, well, they've got more money. As one famous radical once put it: "taxes should be proportioned to what may be annually spared by the individual."

Who said that? Karl Marx? Hugo Chavez? Nancy Pelosi? Nope. Thomas Jefferson.

–David Futrelle

Those watching a certain cable news channel yesterday (hint: it rhymes with "pox") might have gotten the impression that the entire nation had risen up as one to slay the dragons of fat taxes and big government. Actually, as Gallup reported earlier this week, more than half of Americans think the amount they pay in taxes is "about right" or even too low. Sure, that leaves 46 percent saying taxes are "too high," but as Gallup notes, this is "one of the most positive assessments [of taxes] Gallup has measured since 1956."

We all complain about taxes. As George Washington once put it "no taxes can be devised which are not more or less inconvenient and unpleasant." But they're a necessary evil, like taking out the garbage or cleaning up after your cat vomits in your shoe. And as Robert Reich points out in a pointed blog post, we here in the US actually have the lowest taxes of all the developed nations. So I'm a little puzzled by the protests.

Hoping to quell this confusion, I spent a little while last night looking through pictures of the various Tea Parties to see just what exactly has gotten the protesters so angry. And I'm still confused. Here are a few of the signs that caught my eye:

Here's one that compared Obama to a pirate (and it's not Jack Sparrow).

This person suggested a slight alteration to the title of a famous fat novel by Ayn Rand.

This woman raised the specter of communism. Sorry, Obamunism.

This woman celebrated her work ethic. (Presumably she was planning on staying late at the office to make up any hours she missed while attending the protest.)

The guy in the suit here hates taxes, but apparently loves the wolverines!

An assortment of signs from Atlanta, including a memorable one reading "Size Does Matter: Give Me Smaller Government." (At least I assume that last word is "government"; it's sort of hard to read.)

This protester helpfully provided snacks for the crowd.

This guy just creeps me out.

And here's where some of the signs went when it all was done.

–David Futrelle

For me, doing my family's taxes is like solving a crossword puzzle. The process of entering the right answers in the right spots is challenging and sometimes frustrating. But when the forms are all filled out, when all the numbers and data are in the right spot, I get the same feeling of satisfaction that I get from completing an intricately designed brainteaser.

Taxes are like crossword puzzles

Which is why it bugged me so much this year that when I thought I had everything done perfectly, H&R Block's TaxCut–which I've been using for several years–told me I had made a mistake. Each time I ran TaxCut's "Error Check" tool on my New York state filing, I got a message (along with an accusatory red flag) that I hadn't entered a twelve-digit transaction ID code on Schedule F, Line 8E of form NYC-202. (FYI, that's the New York City Unincorporated Business Tax Return, filed for my wife, who is self-employed.)

This didn't make any sense: Not only was there no transaction for which to add a code–Line 8E covered payments accompanying extensions, which she didn't file–but also New York City's tax authorities stopped using these transaction codes two years ago. My outrage was equivalent to what I'd feel if I found a misspelling on 33-down preventing me from completing the Sunday crossword puzzle.

I was so outraged, in fact, that I chose to ignore that it really didn't matter if I got the error message or not; the red flag would be an obstacle to my filing only if I filed my state return electronically, which I was never planning to do. I logged onto TaxCut's online help service, and spent a frustrating half-hour in an instant-message chat with a customer service rep who (a) didn't understand my problem; (b) couldn't help me; and (c) took a painfully long time to figure out (a) and (b). Plus, despite the CSR's promise that someone at H&R Block would soon address my complaint, I never heard back from them. But after registering the same problem a week or so later, I received a phone call from a heroic CSR who was able to track me down even though someone had mis-entered my phone number in H&R Block's records. After maybe a half-hour on the phone, he was able to duplicate the error message under the same circumstances. In other words, there was indeed a problem with the program. The CSR said he'd pass along the issue to the people who could fix it, but because it was so close to April 15, it was unlikely H&R Block would clean it up before the filing deadline.

After I described the whole episode to my wife, she pointedly asked me whether I got anything from H&R Block in return for my work as an unpaid quality control employee. Did I get a refund, she asked, on what I had paid for TaxCut? Anything else of value for the unnecessary time and effort I'd put in? No, I admitted. But I did feel a sense of achievement about finding the error, along with some shock: My wife can't be the only freelancer in New York City using TaxCut; how come no one, apparently, had reported the problem to H&R Block before I did?

But mostly I felt smug satisfaction that I'd apparently gone where no one had before; pardon the pun, but it was like I was an entomologist who'd just discovered a new species of bug. And next year, when presumably no error message will show up on NYC-202, Schedule F, Line 8E, I'll feel good all over again.

How did you feel (or will you feel, if that's the case) upon finishing your taxes? Weigh in and let us know.

Filing day is just one week away.

When it comes to taxes, plenty of people adhere to Ellen DeGeneres' mantra: "Procrastinate now. Don't put it off." Of course some of us are better at that than others–like the folks in San Francisco.

Tax-prep software giant TurboTax released its eighth annual list of top procrastinating cities last week, and the city by the bay snagged the dubious top honor this year, up from fifth place in 2008. Houston, New York, Chicago and San Diego rounded out the top five slacker cities.

There's one week to go, and if you're starting to sweat because the clock is ticking, keep these things in mind:

• You have until April 15 to contribute to an IRA and trim your tax bill.
• You can find get free federal income tax preparation and electronic filing through the IRS' Free File program.
• You can still slash your 2008 tax bill through new credits and breaks, if you've had stock losses, and more. For details, see MONEY's gallery full of tips for 2008 by my colleague, Carolyn Bigda.

For everything else you need to know about taxes this year and beyond, visit our Taxes page at CNNMoney.com.

The rest of the rankings, which are based on the number of tax returns filed online with TurboTax from April 13-April 17, 2008:

1. San Francisco
2. Houston
3. New York
4. Chicago
5. San Diego
6. Phoenix
7. Seattle
8. Los Angeles
9. Dallas
10. Las Vegas
11. Austin, Texas
12. Atlanta
13. Portland
14. Philadelphia
15. Washington, D.C.
16. Orlando
17. Denver
18. Charlotte, N.C.
19. Tampa, Florida
20. Indianapolis