The Iowa House of Representatives approved an Alternative Maximum Tax yesterday. It won’t get anywhere in the Iowa Senate. But that’s probably not the point.
The 4.5% tax on AGI, with no credits and no deduction for federal income taxes, would be an alternative to the current multi-rate, high-loophole system. Taxpayers could choose which way to file.
Of course, taxpayers would compute their taxes both ways and pay the lower amount — making it an Alternative Maximum Tax. With the Alternative Minimum Tax, taxpayers compute their tax two ways and pay the higher amount. It would add one more complication to an already complex system. And, as I have noted, AGI is a flawed measure of taxable income.
The bill has just about no chance in the Iowa Senate, absent some incriminating photos of Democratic senators falling into Republican hands. Bill opponents made dreary but predictable soak-the-rich arguments against the bill:
Democrats, however, criticized the bill for affecting just a fraction of Iowa taxpayers or for providing far more benefits to high-income earners.
Citing the Department of Revenue data, they noted about 5,000 income earners making more than $500,000 stand to save as much from the flat tax – around $90 million – as the 326,000 earners making less than $90,000 a year.
They aren’t saying that the lower earners don’t benefit. They are just saying that the high earners benefit too much. Of course, it means the high income earners pay a lot more tax than the lower earners right now. It’s a silly argument — even sillier if you consider that state taxes are an awful tool for income redistribution. My analysis indicates the bill would benefit most filers, not just the “rich.”
I don’t believe the Alt Max Tax was seriously intended to become law. I think it was designed to try to keep the cause of income tax reform alive in a year that the Governor has no interest in it. It may also be a trial balloon to see if a proposal that lacks federal tax deductibility would draw fatal fire from the powerful lobbying group Iowans for Tax Relief. So far, no. While the bill (formerly HF 3, now HF 478) is flawed, maybe it advances the debate. Maybe next year, they’ll take up something like The Quick and Dirty Iowa Tax Reform Plan.
IRS extends certification rule, making Work Opportunity Credits available for all of 2012. Congress retroactively extended the Work Opportunity Credit to 2012 at the beginning of 2013. Unfortunately, one of the qualifications for taking the credit is to certify that an employee qualifies for the credit within 28 days of hiring. That made the credit useless for most of 2012.
If they can’t keep their own in line, how well would they do at regulating preparers? Jury convicts former IRS worker of tax fraud (philly.com)
Andrew Lundeen, Deficits Per Person Expected to Fall, Then Rise over Budget Window (Tax Policy Blog). With charts:
Cara Griffith, Will Tax Free Shopping Be a Way of the Past in Oregon? (Tax.com)
TaxGrrrl, Ask the taxgirl: Paying For Kindergarten
Phil Hodgen, Apartment security deposits and Form 8938. Is a security deposit a foreign financial asset?
Patrick Temple-West, Senate Democrats propose new taxes, and more (Tax Break)
Paul Neiffer, When Congress Says “Simplified” Watch Out!. “WARNING – THIS IS MY LONGEST POST EVER”
Daniel Shaviro, Corporate tax reform?
It was the profanity. One of them said “dam.” Judge puts gag order on attorneys in Beavers case (Chicago Tribune)
Going Concern, A CPA’s Guide to a Successful Observance of St. Patrick’s Day. I prefer to observe it from a safe distance.
When you are running a big criminal tax conspiracy, never hit “reply all”. From Bloomberg News:
Everybody knows the danger of sending things inadvertently in an e-mail. Beda Singenberger’s case shows you also have to be pretty careful when you mail things the old-fashioned way.
Over an 11-year period, federal prosecutors charge, Swiss financial adviser Singenberger helped 60 people in the U.S. hide $184 million in secret offshore accounts bearing colorful names like Real Cool Investments Ltd. and Wanderlust Foundation.
Then, according to a prosecutor, Singenberger inadvertently mailed a list of his U.S. clients, including their names and incriminating details, which somehow wound up in the hands of federal authorities.
Via the TaxProf.
Corporate returns are due tomorrow. That means you have to queue up your extension or balance due payments on EFTPS today!
Tags: Andrew Lundeen, Anthony Nitti, Cara Griffith, Daniel Shaviro, Going Concern, HF 478, HF3, iowa tax policy, Jack Townsend, Kay Bell, Patrick Temple-West, Paul Neiffer, Phil Hodgen, Quick and Dirty Iowa Tax Reform Plan, tax crime, TaxGrrrl, TaxProf