Jack Hatch, Candidate for Governor, yesterday introduced legislative text for his tax plan (SF 2164), which would result in a big tax increase for a lot of voters.
First the good points: It would increase the minimum income subject to tax from the current $9,000 level to $20,000 for single taxpayers, and to $24,500 from $13,500 for heads of household and surviving spouses. It reduces the number of tax brackets from nine to four. And it eliminates the deduction for federal taxes. It increases the depended credit to $500, from $40.
Unfortunately, the way he adjusts the brackets will result in a big tax increase for taxpayers at not very high income levels. His 6.2% bracket would kick it at taxable income of $42,091. Under current law, 6.2% is roughly the highest Iowa effective rate when you take the deduction for federal taxes into account. Under current law, that starts at $67,230 for 2014. With a top rate of 8.8%, the Hatch plan means about a 25% increase in the top rate at the highest brackets — and his top rate begins at taxable income of only $88,822.
I did some quick computations on four very simplified taxpayers — single filers with one item of ordinary income. The results are below:
The result is a small tax cut at the lower brackets, but some big increases in higher brackets. Remember that much of the income taxed at higher brackets is pass-through business income. That makes it a big tax increase on employers. It’s hard to see how this will sell.
Megan McArdle, Latest Obamacare Delay Is Probably Illegal:
That doesn’t mean that the courts are going to step in. Courts don’t just swoop down and body-check the executive branch or Congress every time one of them oversteps its constitutional powers. They wait for someone to sue. And in order to sue, you need to have legal standing, which, Adler points out, no one seems to. It’s not enough to say that your taxes will be higher, or your government measurably less constitutional, because of the government’s actions. You need to prove that you have been substantially harmed, and it’s not clear that anyone can.
Unlike Megan, I think a successful lawsuit is a real possibility. There are surely employers just over the 100-employee limit who will be at a disadvantage compared to those who are just under, and who therefore don’t have to comply with the mandate. While I am not a lawyer and far from a specialist in “standing,” that seems like somebody who would have it.
TaxGrrrl, The IRS, The Refund Process and That Pesky 1121 Code. It appears earned income credit refunds are getting held up. Considering the level of fraud and error in the program, it’s hard to fault the IRS here.
Jason Dinesen, Iowa Charitable “Checkoffs”
Something that a lot of taxpayers (and tax preparers — including me) in Iowa often overlook is the “charitable checkoffs” a taxpayer can make on their Iowa tax return. Taxpayers can choose to donate money on their Iowa return to these causes:
Fish and Wildlife: donations made here go towards Iowa’s Wildlife Diversity Program, which monitor’s the state’s “non-game” wildlife.
Iowa State Fair Foundation: donations made here help fund improvements to the Iowa State Fairgrounds.
Firefighters/Veterans Trust Fund: donations made here are split 50/50 between helping volunteer fire departments with training and helping veterans with things such as job training.
I like the wildlife one best.
Paul Neiffer ponders IRS Data by Zip Code and County. It’s full of interesting stuff, and I hope to post about our local zip codes and their 2011 tax data.
Kay Bell, IRS options after losing tax preparer regulation appeal. Um, do their job, and don’t try to revive the failed power grab?
William Perez looks at the Percentage of Tax Returns Claiming Itemized Deductions.
Andrew Lundeen, The Economics of Senator Wyden’s Tax Reform Plan (Tax Policy Blog):
Though the plan does simplify the individual side of the tax code, the most important measure of tax reform plans should be the growth it produces. On that measure, this plan falls short predominately due to its treatment of capital.
It does go the wrong way.
Jack Townsend, Article Analyzes Counter-Intuitive Effects of IRS Offshore Penalty Structure. “As the authors note, ‘the GAO Report indicates [that] taxpayers with little or no criminal or civil fraud exposure were punished proportionately in higher amounts than those who participated and had true criminal tax exposure.’”
Of course. You have to shoot the jaywalkers so you can be nice to the real crooks.
TaxProf, The IRS Scandal, Day 280
Career Corner. If No One Will Hire You, Maybe It’s Because Your Parents Aren’t Offering to Pay Them (Going Concern). Probably not, though.
Bleacher Nation, Chicago Cubs Pitchers and Catchers: REPORT!!! Let’s do this.