Posts Tagged ‘Dean Zerbe’

Tax Roundup, 6/4/15: Iowa session-end frenzy: What if a young farmer drives his ATV to the laundromat?

Thursday, June 4th, 2015 by Joe Kristan

IMG_1291Sound tax policy? What’s that? Three minor tax bills advanced in the Iowa General Assembly yesterday in the pre-adjournment frenzy. They are all examples of the pursuit of tax legislation unmoored from consideration of sound tax policy.

ATVs. Iowa farmers don’t have to pay sales tax on equipment used “directly and primarily” in the production of agricultural products. The Iowa Department of Revenue holds that the exemption doesn’t apply to general-purpose all-terrain vehicles used to get around the farm — say, to check on crops or livestock (or, incidentally, to go to the good pheasant-hunting spots). The Iowa Senate passed SF 512 yesterday to exempt ATVs “used primarily in agricultural production” from sales tax.

Too bad this isn’t part of a broader movement to exempt all business inputs from sales tax. To the extent that ATVs are a business input, exempting them from sales tax is good policy. I suspect, though, that everyteenage farm boy will have an ATV used primarily in agriculture.

Young Farmers. HF 624 makes minor changes in the tax credit available for custom farming contracts with beginning farmers. No amount of tax credits will change the fundamental difficulties involved in getting into farming. It’s a capital-intensive business that has been consolidating for over a century into larger and more expensive units. This bill isn’t that big a deal, but “Young Farmer” tax credits have no more policy justification than “Young Factory Owner” credits or “Young Cold Storage Warehouse Operator” credits.

20140611-2To the cleaners. Probably the worst tax policy to advance yesterday was HF 603, which excludes the use “self-pay” washing machines from sales tax. While business inputs should not be subject to sales tax, all final consumer expenditures should be. A broader base enables lower rates for everyone. O. Kay Henderson reports on this break:

Representative Josh Byrnes, a Republican from Osage, has met with a couple from St. Ansgar who sold their laundromats in Iowa and opened coin-operated laundromats in Minnesota, which does not charge the sales tax.

“The other part of this is just economic development in general,” Byrnes says. “We have a company that manufactures self-pay units in Fairfield, Iowa, called Dexter and actually they’re looking at some expansion and growth of their company I believe that this will help them get over that hump and help to further their business as well.”

You can make the same “economic development” argument for pretty much anything manufactured in Iowa, including the home laundry machines historically made by Iowa manufacturers Maytag and Amana. It takes a leap of faith to think this will sell even one additional washing machine.





Joseph Henchman, Illinois Governor Suspends New Film Tax Credits, Makes Other Spending Cuts (Tax Policy Blog):

With the two sides at a stalemate, Rauner announced that he is issuing administrative orders to cut $400 million in spending wherever he can. Including:

  • Immediate suspension of all future incentive offers to companies for business attraction and retention, including EDGE credits and the film tax credit program. Commitments already made will be honored.

Unilateral disarmament in the incentive wars is actually doing a big favor for Illinois taxpayers. Those credits enable the well-connected to pick the pockets of the rest of the taxpayers. It is excellent public policy. I hope Iowa decides it needs to ditch its crony tax credits to compete with Illinois.


Jason Dinesen, Are HRAs Always Appropriate for Sole Proprietors? Part 2. “HRAs are often — but not always — a good strategy for sole proprietors. Here are some numbers that lay it out.”

Robert Wood, Another Tax-Exempt Marijuana Church—Green Faith Ministry

Kay Bell, IRS working with tax industry, states to upgrade security


Dean Zerbe, Tax Court Decision – Good News For Whistleblowers (Procedurally Taxing). “This decision and the actions of the IRS in this case are not going to make administration of the IRS whistleblower program easier – and could have easily been prevented by the IRS.”

Jack Townsend, Whistleblower Case Apparently Involving Wegelin. “Perhaps most interesting for many readers of this blog is that the underlying criminal prosecution and guilty plea appears to involve Wegelin Bank, the Swiss Bank that met its demise for its U.S. tax cheat enabler activities.”



Renu Zaretsky, There’s Always Room for Improvement. Today’s TaxVox headline roundup covers the IRS data breach, climate-change tax promises, and charitable tax deduction policy, among other things.

Kelly Davis, Kansas Considers Tax Hikes on the Poor to Address Budget Mess (Tax Justice Blog).


TaxProf, The IRS Scandal, Day 756




So tell me again how IRS regulation of preparers will fight fraud? IRS Employee Files Hundreds of Fraudulent Tax Returns:

The former IRS worker, 38-year-old Demetria Michele Brown, stole names, birth dates and social security numbers, and provided false information about wages, deductions, addresses and workplaces in order to obtain the refunds.

The documents were filed from her computer and the money returned by the IRS was sent to bank accounts controlled by Brown, St. Louis newspaper reports.

According to prosecutors, the fraudster carried out the activity from 2008 until 2011 and collected $326,000 / €290,000.

I’m sure it wouldn’t have happened if she had to take an ethics exam.



Tax Roundup, 1/1/2013, New Year’s Day Special: Senate passes fiscal cliff bill in wee hours; House acts today.

Tuesday, January 1st, 2013 by Joe Kristan

While decent people were celebrating a new year, the Senate passed a “Fiscal Cliff” compromise early this morning.  The Wall Street Journal reports20121116-1iabiz:

President Barack Obama and Senate leaders Monday reached a New Year’s budget agreement that would let income-tax rates rise for the first time in nearly 20 years, maintain unemployment benefits for millions of people and blunt the impact of spending cuts that were looming as part of the so-called fiscal cliff.

The long-sought compromise, which will raise taxes on income over $450,000 for couples, was approved by the Senate in the early morning hours Tuesday. The House was expected to consider it later in the day.

The legislation, HR 8,:

  • Raises the top marginal rate to 39.6% for single filers with taxable income over $400,000 and joint filers over $450,000.
  • Raises the capital gain rate to 20% for taxpayers subject to the 39.6% rate, but retains the 15% top rate for other taxpayers.
  • Permanently “patches” the alternative minimum tax retroactive to 2012.
  • Permanently extends the $5 million estate tax extension, including the transfer of the unused exemption of a deceased spouse, but increases the estate tax rate to 40% (from 35%)
  • Re-enacts the phase-outs of personal exemptions and itemized deductions for taxpayers with AGIs exceeding $250,000 (single filers) or $300,000 (joint filers), providing a hidden and dishonest rate increase for taxpayers under the $400,000/$450,000 thresholds.
  • Extends 50% bonus depreciation and the $125,000 $500,000  Section 179 deduction limit through 2013 (retroactive to 2012!)

The bill also miraculously extends most of the “expiring provisions” that technically died a year ago today through at least yesterday.

The one notable expiring provision that was allowed to die: the 2% reduction in employee FICA taxes (see here).  This will reduce take-home pay for everyone starting with the first paycheck of 2013.

While the big-ticket expiring provisions were permanently extended, the Senate ensured continuing work for their friends in the lobbying industry by passing the “expiring provisions” only temporarily.  Some of the notable extensions include

Oh, and the special depreciation break for “qualified motor sports entertainment complexes” was extended another year, so the republic is saved.

While the bill could require a scramble by payroll providers to update withholding tables, it should prevent the disruption of tax season; the AMT patch was the key to that.

Some bad ideas that had been tossed around failed to make the bill, including a cap of $25,000 or $50,000 on itemized deductions and a restriction on the value of itemized deductions to 28%.

The House still needs to pass the bill, so you have something to watch on C-Span today if you don’t care for parades or football.

Other coverage:


Kay Bell, Senate passes fiscal cliff deal

Janet Novack, The U.S. Is Going Over The Fiscal Cliff, But A Tax Deal Might Cushion The Landing.

Business Insider,  5 Things You Won’t Believe That Are In The Fiscal Cliff Bill That The Senate Passed At 2 AM While Most Americans Were Drunk

TaxProf, CBO on Fiscal Cliff Deal: $1 in Spending Cuts for Every $41 in Tax Increases

TaxGrrrl, No, Virginia, There Isn’t A Tax Cut Deal – Yet

Dean Zerbe, Fiscal Cliff Tax Deal: What Does It Mean for Small Business?