Iowa’s winning the wrong race. An opinion piece in today’s Des Moines Register by Beuna Vista College economics professor Jeremy Horpedahl:
This year, Iowa came in first place. Unfortunately, it wasn’t a bowl championship for the Hawkeyes but rather unmatched, high corporate tax rates — not an area in which anyone wants to beat out rivals.
The United States’ combined federal and state corporate income tax is the highest in the world at nearly 40 percent, and Iowa’s 12 percent corporate income tax rate is much higher than that of any other state. To make matters worse, Iowa’s corporate tax rate is significantly higher than those of its neighboring states. South Dakota doesn’t even have a corporate income tax.
It’s worse than that. Iowa’s corporation income tax is very complicated and so full of special favors that it nets only a small portion of state revenues. That makes it both destructive and useless. There is a better way.
Economic illiteracy and fact checkers. The Cedar Rapids Gazette has ventured into the shady “fact checker” business, with unfortunate results. They attempt to say whether the claimed number of jobs “created” by wind energy tax credit subsidies are correct:
While the figures cited by the wind energy industry and politicians are inexact and fluid, they’re the best available information. The U.S. Bureau of Labor also relies primarily on the industry’s information. We found no evidence that these figures are misleading, but keep in mind these are estimates.
We rate the jobs claims mostly true.
There are two key words missing from the analysis: opportunity costs. The money spent on wind subsidies wouldn’t just disappear if the tax credit went away. It would be used to buy or invest in other things. This is explained wonderfully in Bastiat’s broken window parable, which (slightly updated) goes something like this:
A vandal breaks a shop window, and the shopkeeper pays a glazier to replace it. The glazier says that the vandal did good by creating a job for him. The local fact-checker rates the claim “mostly true” because he considers the glazier “the best available information.” But because the shopkeeper spent the money fixing the broken window, he loses the opportunity to hire an assistant to keep the store open longer, to develop a new line of merchandise, or to buy something from another business down the street. But that “opportunity cost” is unseen by the fact-checker and ignored.
The Gazette’s “fact-check” ignores the jobs squandered by funneling resources to an economically inefficient technology, because they are “unseen,” especially by the industry that benefits from the subsidies.
Speaking of opportunity costs: Compliance with ObamaCare Estimated at 80 Million Man-hours (William McBride, Tax Policy Blog)
Former Corporate Raider Bilzerian rebuffed by Tax Court. You can’t be a corporate raider without taking some risks, and sometimes those risks lead you to bankruptcy court, like they did for Paul Bilzerian. He yesterday lost some more when the Tax Court ruled that he could not relitigate tax liabilities determined by a bankruptcy court. Tax Court Judge Wells ruled against the former raider on the grounds that he had agreed to be bound by the bankruptcy ruling.
Getting what you pay for? TIGTA: Tax Returns Prepared Through IRS’s Volunteer Assistance Program had 51% Error Rate (TaxProf) To be fair to the volunteers, though, I doubt they do much worse than IRS phone helpers, and certainly paid preparers don’t always get our ridiculously complex taxes right.
They always can. “Just when I think that our politicians can’t act any more irresponsibly, they up the ante” (Christopher Bergin)
Would you jump off a cliff just because your friends all deducted it? Never Do Something Just Because It’s Tax Deductable (Jason Dinesen)
Paul Neiffer, Express Saver Costs a Taxpayer Thousands
TaxGrrrl, Amazon Sees Silver Lining With Sales Tax Collections. She also interviews an obviously astute Minnesota tax pro, as his answer to her final question shows.
Tags: iowa tax policy, TaxProf, Christopher Bergin, TaxGrrrl, opportunity costs, Quick and Dirty Iowa Tax Reform Plan, William McBride, Jason Dinesen, Jeremy Horpedahl, broken windows, fact-checkers, Paul Bilzerian, Bastiat, VITA