Shock! David Osterberg doesn’t like the 4.5% flat Iowa Income tax proposal! State Tax Notes tracked down former Senate Candidate and Cornell College Econ Prof* David Osterberg for his views on the proposal to create a flat 4.5% income tax in Iowa alongside the current income tax. Not surprisingly, he doesn’t like it ($link):
The founder and executive director of the Iowa Policy Project said a Republican-sponsored House bill to create a flat personal income tax option would shift more of the tax burden to low-income residents.
But David Osterberg said he is not too concerned because he doesn’t think the proposal has a shot at passing the Senate, where Democrats hold a majority…The proposal is “part of this ideology that says we somehow have to take care of the top 1 percent and things will be good,” Osterberg said. “I don’t think low-income people believe that — we sure don’t.”
State Tax Notes also tracked down Tax Foundation Economist Elizabeth Malm:
“Iowa’s current income tax system has nine brackets, with rates ranging from 0.36 percent of income to 8.98 percent of income,” Malm said in an e-mail to Tax Analysts. “In 2012, this made Iowa the fifth highest top income tax rate in the country, among those states that levy PITs.”
Without additional information, Malm declined to say whether the plan is regressive. She did say, however, that the proposal would fail to simplify the tax code because it keeps the current system intact.
“I’m guessing the rationale behind allowing taxpayers to choose between the two systems is to ease concerns that the flat 4.5 rate would hit low-income individuals harder,” Malm said.
Wrong guess. The rationale is almost surely to avoid provoking the powerful lobby group Iowans for Tax Relief, which holds sacred the current Iowa individual deduction for federal taxes paid. Proposing the flat tax as an alternative, rather than a replacement, finesses that problem — but at the cost of adding more complexity. In this form, the flat tax is what I call an “Alternative Maximum Tax.”
*Disclosure: I once borrowed his shotgun at Cornell. It had dust bunnies in the tubes.
David Brunori, Who Pays? Who Cares? You Should (Tax.com):
No matter your views on government, there is no justification for asking the poor to pay more than the rich. I do not favor dramatically increasing the tax burdens on the wealthy, particularly income tax burdens. But there are a lot of policies that can be enacted that could even the playing field. Broader base consumption taxes, less reliance on excise taxes, and larger income exemptions for low wage taxpayers would go a long way.
None of these are incompatible with lower top tax rates.
Tracy Gordon, The Downside of States as Laboratories for Tax Reform (TaxVox)
Needed, but impossible. Tax Notes has a sad-but-true headline that brilliantly summarizes the state of our national tax policy: Urban Institute Panelists Agree Tax Reform Necessary but Unlikely. ($link)
We have seen considerable evidence of tax return preparers who do not understand the tax laws or who intentionally misapply them (in the home office deduction, etc.). It is imperative that those who assist others in preparing tax returns demonstrate minimal competency in the tax law as demonstrated by the qualifying exam.
The “qualifying exam” is open book — really more of a literacy test. The IRS can make preparers show they can read. They can’t make them competent. When you consider the Big 4 tax shelter scandals, and the hopeless complexity of the tax law, it’s funny to say that the problem is really “people who do not understand the tax laws.”
Tough tax return choice for 2012: Pay more now to save later? My new post at IowaBiz.com, the Des Moines Business Record Blog for Entrepreneurs, discussing whether maximizing 2012 deductions is really a good idea.
Jason Dinesen, Taxpayer Identity Theft — Part 12 . More Kafkaesque obstacles to resolving an identity theft for his client.
William Perez, IRS Provides Further Disaster Relief for Hurricane Sandy
Kay Bell, Tax Carnival #112: Super Bowl of Taxes
Missouri Tax Guy: Missouri does not mail Form 1099-G. You have to get it online. One more little blow to tax compliance for small taxpayers.
Trish McIntire, Low Cost Tax Preparation Options
TaxGrrrl, U.S. Postal Service To Eliminate Saturday Delivery: Will It Save Tax Dollars? Next they’ll shut down the Pony Express.
Patrick Temple-West, Waiting on the phone for the IRS, and more (Tax Break)
Ellen Kant, William McBride, Super Bowl Tax Bill (Tax Policy Blog)
Russ Fox, Will the Third Time be the Charm for Appeals? A case where the “independent” IRS appeals function failed twice.
Howard Gleckman, Can the Income Tax Fund the Government We Want? (TaxVox). I can’t speak for “we,” but it could easily cover all of the government I want.
The Critical Question: Et Tu, Sarkozy? (David Goulder, Tax.com)
If they can spell their address, tax cheating should be easy for them: Massapequa Restaurant Owners Sentenced for Tax Fraud (Massapequa Patch).
Isn’t that conspiracy? Tax fraud: We have a plan, authorities say (Myfoxtampabay.com)
Screwed either way. Taxpayer Sues IRS, Claims Agent Coerced Him Into Having Sex to Avoid Adverse Audit (TaxProf).
But not hotirsagent.com? I guess there really are stupid easy ways to earn internet money. A Kansan found one, but then got in trouble by not paying his taxes. KFDI.com reports:
Dallen Harris, 39, pleaded guilty to one count of tax evasion. He reported a taxable income of a little more than $164,000 in 2010, when it was actually more than $1 million.
Harris’ income came from Internet domain names, according to court ecords from a related civil forfeiture case in federal court. The government is seeking to forfeit Harris’ houses, cars and bank accounts in that case. The domain names included celebritysextape.tv, adultkingdom.net, Porntesters.com, hardcorefilms.tv, celebritynakedpic.com and sextape.com.
No, I won’t link to any of those. It doesn’t sound like they need any help generating traffic anyway.
Tags: alternative maximum tax, David Brunori, David Goulder, David Osterberg, Elizabeth Malm, Ellen Kant, Howard Gleckman, iowa tax policy, iowabiz.com, Iowans for Tax Relief, Jason Dinesen, Kay Bell, Linda Beale, maule, Missouri Tax Guy, Patrick Temple-West, Russ Fox, TaxGrrrl, TaxProf, The Critical Question, Tracy Gordon, Trish McIntire, William McBride, William Perez