Tax Roundup, 7/30/14: Iowa Illustrated! And: an unhappy take on IRS offshore account enforcement.

July 30th, 2014 by Joe Kristan

iowa-illustrated_Page_01Iowa’s tax system in pictures.  The Tax Foundation yesterday posted “Iowa Illustrated: A Visual Guide to Taxes & the Economy.”  It is a valuable and sobering introduction into Iowa tax policy.  Anybody interested in Iowa’s tax policy mess should start here.

The Tax Foundation summary:

Here are just a few examples of the more than 30 key findings:

  • Iowa relies on federal funding for one-third of its budget
  • Iowa’s sales tax rate has tripled since its creation
  • Iowa’s business taxes rank poorly nationally, and are uncompetitive regionally
  • Iowa has had a net loss of 63,287 people over the last 20 years
  • Effective tax rates in Iowa vary widely across different industries.

By offering a broader perspective of Iowa’s taxes and illustrating some of the lesser-known aspects of Iowa’s business environment, this guide provides the necessary facts for having an honest debate about how to improve the structure of The Hawkeye State’s tax system. 

There’s too much good stuff to summarize, but I will highlight a few items.

This might explain why property tax reform is such a big deal here:

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Raising individual tax rates on “the rich” means taxing employment:

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Despite its highest-in-the-nation corporation tax rate, Iowa’s corporate tax is a sub-par revenue generator:

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While agriculture is important in Iowa, financial services are a bigger industry:

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Iowa has a diverse economy, but our tax system still parties like it’s 1983:

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A lot of the tax receipts go out the back door to the well-connected via tax credits:

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It’s hard to make a case for the current Iowa tax system.  Maybe the legislature will finally be ready to do something about it next session.  The Tax Update’s Quick and Dirty Iowa Tax Reform Plan would be a great place to start.

 

Now to our regular programming:

 

20130419-1Jack TownsendTime for an IRS Ass Kicking? Herein of Lack of Honor and a Dumb Decision in OVDI/P and Streamlined:

So, one could ask, why wouldn’t it be an easy decision for the IRS to let taxpayers in OVDI/P who had not yet signed a Form 906 to proceed fully under Streamlined.  Well, it appears, that the IRS wanted to keep all of the income tax, penalties and interest for closed income tax years and penalties for open years that it was not entitled to, while giving a partial benefit of the Streamlined program (the 5% penalty applied to innocents, many of whom should owe no penalty).  Basically, the IRS wanted something that it was not entitled to. 

Bad faith seems to be a part of the IRS culture in dealing with offshore issues.

 

Peter Reilly, Retailer Can Only Deduct Perks When Redeemed  “I suspect that the accrual is probably not what makes or breaks these programs.”

Jim Maule continued his “Tax Myths” series while I was away.   I like his “The Internal Revenue Code Fills 70,000 Pages” post.

 

David Brunori, Lawyers Whining About Taxes (Tax Analysts Blog):

For the record, I don’t like taxes. But if you’re going to have a government, you should pay for it the right way. Sales tax should be paid by consumers on all their purchases. Business inputs should never be subject to sales tax. Everyone who has ever studied or even thought about consumption taxes knows that. So it makes sense that legal services should be taxed. Lawyers don’t like that because, well, people might use less of their services. That would be a tragedy beyond comprehension.

Not that I’m in a hurry to charge sales taxes to my individual clients, but David is right on the policy.

 

20140730-1Howard Gleckman, Are Tax Inversions Really Unpatriotic? (TaxVox)  “Selling war material to an enemy or financing a terrorist organization is unpatriotic—and illegal. Using legal avoidance strategies to reduce taxes may be distasteful or unseemly, but it is not unpatriotic.”

Kay Bell, Defense Department workers, some with top security clearance, owed $730 million in back federal taxes.  So tell me again about corporate tax “deserters.”

 

Annette Nellen, IRS Voluntary Preparer Regulation System – Worthwhile? Legal?

TaxProf, The IRS Scandal, Day 447

 

Because Hollywood needs more taxpayer money!  29 Members of Congress Ask California to Boost Film Tax Credits (Joseph Henchman, Tax Policy Blog).  In a just world, this would automatically cost all 29 of these critters their seats.

 

Rebecca Wilkins, Stop the Bleeding from Inversions before the Corporate Tax Dies (Tax Justice Blog).  Darn, I’ll have to stroll into town for a Band-aid.

 

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