Tax Roundup, 5/21/2013: thief subsidy edition. And why the IRS scandal is so depressing.

May 21st, 2013 by Joe Kristan

20130117-1Iowa’s elected leadership has come up with a deal to bring down Iowa’s high commercial property taxes in exchange for an increase in Iowa’s earned income tax credit.  The Democrats who control the Senate have long been pushing for an increase in the EITC, and this seemed like an obvious compromise from early in the session.  There will be much rejoicing if the deal gets completed, as appears likely; property tax reform has been the Governor’s highest legislative priority.

It’s too bad that the cost of a sensible property tax is a big increase in a program that is a poverty trap for honest taxpayers and a pinata for thieves.  The phase-outs of the EITC result in shockingly-high marginal tax rates on each additional dollar earned by relatively low-income taxpayers.

The EITC  is refundable, which means it is really a welfare program run through tax returns.  About 25% of the EITC is claimed “improperly,” which is a nice way to say it’s stolen.  The annual cost of the Iowa EITC boost is estimated at $35 million, so the price of fixing a broken commercial property tax regime is an $8 million annual thief subsidy.  So while the politicians celebrate their great compromise, Iowa’s petty thieves also have occasion to raise a glass, filled by you.

 

TaxProf,  Supreme Court Unanimously Reverses Third Circuit, Says PPL Can Claim Foreign Tax Credit for U.K. Windfall Tax and Avi-Yonah and Christians on Yesterday’s PPL Decision.

 

Jeremy Scott, Rand Paul’s Claim of “Written Policy” Seems Like GOP Overreach

It is unlikely that Republicans will find Paul’s smoking gun, but the IRS scandal is almost certainly the result of political bias on some level.  It is hard to believe that a group of officials would innocently pick terms like “Tea Party,” “patriot,” and “9/12” to single out organizations for additional scrutiny.  It would be incredible to find such disinterested tone-deafness even in the most politically insulated of civil servants (and the IRS is far from insulated).

I doubt the White House left fingerprints on IRS efforts to harass political opponents (though it didn’t lift a finger to stop it).   That leads to an even more depressing possibility: that the IRS went out its way to beat up on the President’s opponents on its own.  Nobody blew the whistle.  That means IRS management is so corrupt and political that it would go after the administration’s political opponents with only a wink and a nudge.  And anybody who doesn’t think this was politically-motivated is kidding themselves.

James Taranto puts it well:

And the IRS scandal was a subversion of democracy on a massive scale. The most fearsome and coercive arm of the administrative state embarked on a systematic effort to suppress citizen dissent against the party in power. Thomas Friedman is famous for musing that he wishes America could  be China for a day. It turns out we’ve been China for a while.

 

No-longer-Acting IRS Commissioner Steven Miller

No-longer-Acting IRS Commissioner Steven Miller

Megan McArdle, Yes, What Happened at the IRS is a Scandal

Russ Fox, The IRS Scandal Reaches the White House

TaxGrrrl, IRS Hearing Marks End Of Their Worst.Week.Ever But Congress Signals More Hearings Are On The Way

Kay Bell, House and Senate committee hearings on IRS screening of Tea Party tax-exempt applications set for May 21 & 22

ViralRead, Report: Head of IRS Employees Union Met With President Obama the Day Before Tea Party Targeting Began

The Other McCain, Portrait of a Thug: IRS Union Boss

 

Peter Reilly, Bank Cannot Issue 1099-C And Subsequently Try To Collect

Jason Dinesen, Same-Sex Marriage, Community Property, And Multi-State Income — Part 3

Fiduciary Income Tax Blog, Passive Income: Good or Bad?

 

Paul Neiffer,  A Farmland REIT is Now Publicly Traded

Stephanie Fitch, 5 Questions Congress Should Ask Obama Commerce Nominee Penny Pritzker

William Perez,  IRS Offices to be Closed on May 24

Linda Beale, How Apple avoids US taxes with shell games

 

Going Concern,  Last Year Was a Very Unfortunate One to Be Wealthy and French, Even By French Standards.  When marginal rates exceed 100%, you know a country is off the rails.

Robert D. Flach has a new Tuesday Buzz up!

The Critical Question: NFL Linebacker James Harrison Spends More On Massage Than You Did On Your House. But Can He Deduct It?  (Tony Nitti)

 

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