Iowa has moved out of the bottom 10 in the Tax Foundation’s State Business Tax Climate Index for 2014. That’s the good news. The bad news is that it’s not the result of Iowa’s tax climate improving, but because Connecticut’s got worse.
Iowa’s 49th-place rating for Corporation taxes accounts for much of Iowa’s poor showing. Iowa has the highest stated corporate tax rate, at 12%. It has a state corporation alternative minimum tax and is full of complexity — yet is so full of loopholes and carve-outs that it generated only around $425 million of Iowa’s $7.8 billion in 2012 tax revenues. By comparison, Iowa’s (also complex and loophole-ridden) individual income tax generated over $3 billion of that revenue.
Iowa’s Association of Business and Industry has made improving Iowa’s business tax climate its legislative priority for the upcoming session. Here’s what I think we need:
– Repeal of the futile Iowa corporation income tax.
– Repeal of every last economic development credit, including the refundable research credit and especially including enterprise zone and similar credits. No company is so important that it should be receiving cash subsidies in excess of taxes paid to Iowa.
– Drastic simplification of the Iowa individual tax, including repeal the deduction for federal taxes and of as many special breaks and credits as possible, in exchange for rates of 4% or lower.
In other words, the Tax Update’s Quick and Dirty Iowa Tax Reform Plan. We can do a lot worse — in fact, we do now.
Russ Fox, The 2014 State Business Tax Climate Index: Bring Me the Usual Suspects. “And for those who think that taxes don’t matter, I’m in Nevada as a result of taxes and California’s miserable business climate.”
Joseph Hechman and Scott Drenkard, A Response to Matt Yglesias on the 2014 State Business Tax Climate Index (Tax Policy Blog):
There is however a brief blog post by Slate’s Matt Yglesias that went up this morning, which is along the lines of (1) there’s businesses in California and New York, (2) Tax Foundation criticizes California and New York for their tax policy, so therefore (3) taxes don’t affect business and individual location decisions. Center for Budget and Policy Priorities’ affiliates have already started spreading around Yglesias’s post on Twitter, and we imagine it will show up in other places.
The answer to this is easy. Those high-tax states also have other non-tax qualities—and often legacy investments and industries—that overcome the obstacle of a broken mess of a tax system for many businesses and individuals.
Taxes aren’t everything, but they’re definitely something.
The Tax Foundation has helped draft a new tax reform proposal for Nebraska. Some thoughts from David Brunori in A Solid, Albeit Mild, Tax Reform Proposal:
The primary plan is relatively straightforward. It is revenue neutral, reduces personal and corporate income tax rates, reduces incentives, expands the sales tax to more services, and simplifies administration. Moreover, belying the assertion that conservatives hate poor people, it doubles the earned income tax credit, greatly increases the personal exemption, and indexes the tax rates. In other words, the plan is consistent with virtually every notion of sound tax policy. It would make the Nebraska tax system fairer, simpler, and more conducive to retaining people and firms.
I think increases in the earned income credit are unwise because their high hidden marginal rates as taxpayers improve their incomes serve to punish emergence from poverty. Still, the plan would be a big improvement for Nebraska — and for Iowa, for that matter.
Tony Nitti, Custom Homebuilders Are Subject To Section 263A And A Primer On The UNICAP Rules. “Today is the day we discuss Section 263A, among the more dry topics in the driest area of law known to man” I covered the case Tony writes about here.
Jason Dinesen, Basics of the Iowa Pension Exclusion
Paul Neiffer, Watch our for FBAR. As Paul points out, you don’t have to be even trying to hide anything from the IRS to get clobbered.
Jack Townsend, IRS Information on Operations During Government Shutdown
William Perez, IRS Shut Down, Week 2
TaxProf, The IRS Scandal, Day 154
Howard Gleckman, It is Never Good When the U.S. Treasury Gets Compared to Brazil (TaxVox)
Tax Justice Blog, Stop the Presses: Apple Has Not Been Cleared on Tax Avoidance Charges. So they should seek out new taxes to pay?
Keith Fogg, Vince Fumo: Local Political Corruption Meets Tax Procedure (Procedurally Taxing)
Going Concern, The Definitive Guide to Accounting as a Second Career. Maybe I should consider that.
Janet Novack, Dumbest Identity Thief Ever? “He contacts police looking for wallet he lost stuffed with debit cards issued in 13 stolen names.” Yes, he may be dumb, but what does it say about the IRS that he and other dummies are stealing $5 billion of our money through identity theft fraud annually?
Great moments in web design. From Instapundit: “HEALTHCARE.GOV NOT ONLY THE WORLD’S WORST WEBSITE, it’s also the world’s most expensive, with a price tag of $634,320,919.” The Tax Update website cost approximately 1/400,000 of that, and we may have enrolled as many folks in Obamacare as Healthcare.gov has so far.
Tags: Kay Bell, David Brunori, William Perez, Tax Foundation, Paul Neiffer, Going Concern, Joseph Henchman, Jack Townsend, State Business Tax Climate Index, Quick and Dirty Iowa Tax Reform Plan, Peter Reilly, Jason Dinesen, Anthony Nitti, Scott Drenkard