Regulation always favors the big. So do state business incentives. Left-side think tank Good Jobs First demonstrates the big-player bias of state “incentive” tax deals in a new report Shortchanging Small Business: How Big Businesses Dominate State Economic Development Incentives. Maria Koklanaris summarizes the report for State Tax Notes ($link):
Using its own databases and other programs, [Good Jobs First] weeded out awards targeting companies of a specific size, focusing only on those purportedly available regardless of company size. Of those “facially neutral” awards, 90 percent of the dollars went to big businesses, the report said.
“The deals, worth more than $3.2 billion, were granted in recent years by programs that on their faces, are equally accessible to small and large companies,” the report said. “Yet big businesses overall were awarded 90 percent of the dollars from the programs analyzed, indicating a profound bias against small businesses.”
While Iowa’s incentives weren’t among those studied, I am confident the exact same thing is true here. It’s the big and well-connected taxpayers who know how to play the system. They can hire the attorneys and accountants to navigate the system, and the lobbyists to make sure the taxpayer money is steered their way. And it’s the big projects — inherently done by big taxpayers — that attract the politicians. You’ve never heard of a Governor calling a press conference for some little business hiring two people.
A real Iowa tax reform, like the Tax Update’s Quick and Dirty Iowa Tax Reform Plan, would get rid of all of these breaks for insiders and lower the rates and compliance costs for everyone.
New York Times, What Could Raising Taxes on the 1% Do? Surprising Amounts.
Scott Greenberg, No, Raising Taxes on the 1% Will Not Lead to “Surprising Amounts” of Revenue (Tax Policy Blog):
Let’s say, for instance, that Congress decided to raise the effective tax rate of the 1% by increasing the top rate on ordinary income. Currently, the top tax bracket on ordinary income is 39.6%. How high would Congress have to raise this rate, in order to raise the effective tax rate of the 1% to 45 percent?
According to our estimates, Congress would have to raise the top rate on ordinary income to 74 percent, in order to raise the effective rate of the 1% from 33.4 percent to 45 percent. This would be a rate hike of over 34 percentage points, or an 87 percent increase in the top rate.
Oh, I think the amounts of revenue raised would be surprising, to the Times. And disappointing. As I’ve noted many times, the rich guy isn’t picking up the tab, because he can’t.
TaxGrrrl, 11 Things I Wish I Could Tell My Younger Self About Taxes. Plenty of good advice here. It’s all worth reading, but I especially like #7, Planning is important:
Tax planning is important. You should take advantage of tax strategies that can help you lower your tax bill, like seeking out tax credits you might have overlooked or making a contribution to a tax-deferred retirement account. And knowing what’s coming down the pike is also important when it comes to payment: having a good idea of what you might owe and making estimated payments will help you avoid writing a big check at the end (trust me) and possibly being subject to underpayment penalties.
This is true for all taxpayers, but it is especially true for the self-employed, who are much more numerous with the growth of the “gig economy.”
Robert D. Flach is up and running with a fresh and pungent Tuesday Buzz roundup. He covers the recent tax season and the right response to callers claiming to be from the IRS demanding payment, among other things.
Jason Dinesen, Choosing a Business Entity: S-Corporation vs. C-Corporation. “The ‘C’ and ‘S’ refer to how that corporation is taxed, not to its legal standing.”
Russ Fox, The Future of DFS. “If you watch any sports television, you’ve almost certainly seen commercials for the two leading daily fantasy sports (DFS) sites, DraftKings and FanDuel.”
Robert Wood, Chef Jamie Oliver Calls For Sugar Tax, While Mexico Eyes Soda Tax Cut. We actually already have a pretty high sugar tax.
Keith Fogg, Contesting the Merits of the Underlying Tax in a Collection Due Process Case – A Convoluted Fact Pattern Leads to Wrong Decision (Procedurally Taxing).
Peter Reilly, Massachusetts Hits Staples For $10 Million On Sham Interest Deductions. “This case is a beautiful illustration of my fourth law of tax planning – Execution isn’t everything, but it is a lot.”
TaxProf, The IRS Scandal, Day 894. On how the President signals Justice Department investigators to back off.
Brian Doherty, Irwin Schiff, R.I.P. (Reason.com). “He was indeed a jolly warrior for a cause he obviously very sincerely believed in, even when it became completely obvious that the federal government was not going to be daunted by his arguments and indeed was going to keep arresting him for practicing them and advocating them.”
Kay Bell, Infamous tax protester Irwin Schiff has died. “His anti-tax tactics live on, as do penalties for those who insist on using them.”
Howard Gleckman, Presidential Candidates, “Free Stuff,” and Pixie Dust (TaxVox):
Even in its early stages, the 2016 presidential race looks like it will be remembered for two depressing superlatives. The candidates will spend more money than ever before, and they will promise more costly give-aways than any politicians in history.
Once again demonstrating the wisdom of Arnold Kling.