The Iowa General Assembly nears the end of its annual rampage. While it finally did something to improve a bad commercial property tax system, it managed to make an already awful income tax a little worse.
The Iowa Senate cleared a property tax plan (SF 295) yesterday to reduce commercial property assessments by 10%, with additional property tax credits for smaller businesses. Unfortunately, the price was to more than double Iowa’s version of the fraud-plagued Earned Income Tax Credit and, it appears, to clutter up the 1040 with additional petty tax credits — those these provisions are apparently part of a separate bill.
As if that weren’t enough abuse to the income tax, the Senate also increased Iowa’s tax credit corporate welfare budget by $50 million (HF 620) by increasing the amount of tax credits that the economic development bureacracy can hand out. They sweetened the corporate welfare pot by enabling the diversion of employee withholding to local
crony capitalist slush funds economic development funds.
Another bill, HF 625, increased the popular school tuition credit, a poor substitute for true school choice.
While the politicians will pat themselves vigorously on the back, the net result isn’t very exciting. Yes, lower rates for commercial property are needed. But now Iowa’s dysfunctional income tax is larded with even more corrupt special interest favors, which will make it that much harder to ever enact a system that makes sense for taxpayers without lobbyists and connections.
David Brunori, Soviets Run Mississippi, Planned Economies and All (Tax Analysts Bl0g)
TaxProf, The IRS Scandal, Day 14
Going Concern, Lois Lerner Knows What You People Are Thinking
Andrew Lundeen, Apple’s Appearance before the Senate Clarifies the Need for Comprehensive Tax Reform (Tax Policy Blog):
Our average combined rate of 39.1 percent is the highest in the industrialized world. In an increasingly globalized world, this matters more today than it did the last time we reformed the code in 1986. Today the U.S. has to compete with countries around the globe who are constantly improving their tax codes. When the U.S. fails to do so itself, American consumers, workers, and shareholders lose out.
Kyle Pomerleau, Another Perspective on the Apple Hearing (Tax Policy Blog):
Politicians created the current corporate tax system and the current system is broken. If you are going to set out a menu of options for corporations to reduce their tax burden, don’t be surprised or upset that corporations take advantage of them.
Robert D. Flach, A KIND OF CATCH-22 On the compliance burden of the fraud-ridden Earned Income Tax Credit.
Cara Griffith, A Missed Opportunity in Texas (Tax Analysts Blog) An attempt to enact an independent tax court in Texas fails:
“The importance of an independent tax tribunal is well documented in the pages of tax journals and even mainstream media outlets.”
Iowa has nothing like an independent tax appeals process.
Me, Playing with fire: Using an IRA to finance your business. My new post at IowaBiz.com, the Des Moines Business Record blog for entrepreneurs.