So what does it mean for bonus depreciation? Sure, there was a turnover of power in the Senate, but we have tax returns to do here, people. What does the new makeup Congress mean for the upcoming filing season?
Well, technically for now, nothing. The same old congresscritters hold their seats until January. These are the same critters who have failed to to pass a bill extending all of the perpetually-expiring provisions that technically died at the beginning of 2014, including $500,000 Section 179 deductions, 50% bonus depreciation, and the research credit. With the election over, they may finally move these Lazarus provisions. I think they will, considering that failure to do so will make an ugly filing season even worse.
Yet they may not. The Republican House of Representatives has passed a series of bills making some of the extenders permanent. These have been bottled up in the Democrat-controlled Senate. An emboldened GOP may insist on their versions, a stance which at least has fiscal honesty going for it. If so, nothing happens until January. And even then, the President may veto the permanent extenders in the name of “fiscal responsibility,” keeping up the pretense that passing tax breaks every year or two forever is less costly than just passing them once for good.
So we may just all be doomed. But we knew that.
Meanwhile, nothing changes in Iowa. Governor Branstad, avid distributor of economic development tax breaks, cruised to an easy victory over low-income housing credit developer Jack Hatch. The results show that with respect to corporate welfare tax credits, it truly is better to give than to receive.
While the GOP Governor won easily, the Democrats retained their 26-24 margin in the Iowa Senate. That means no comprehensive Iowa tax reform is likely for at least the next two years. Not that it would be anyway, as Governor Branstad seems to have made his peace with high rates and complexity, given the ribbon cuttings he gets to attend when tax credits are awarded. But if he changes his mind, the The Tax Update’s Quick and Dirty Iowa Tax Reform Plan, with its elimination of the corporation income tax and all the credits and its 4% top rate, is ready any time he is.
In other election-related news: The lame smear of an Iowa congressional candidate for “moving his corporation to Delaware to dodge Iowa taxes” failed. Entrepreneur Rod Blum won the race for the seat vacated by Bruce Braley, who lost his bid for Iowa’s open U.S. Senate seat. Really, implying that it is somehow improper for a public company to incorporate in Delaware is right up there with accusing someone of being a notorious extrovert in a relationship with an admitted thespian.
And the attempt to get a local option sales tax passed in the Iowa City area failed.
Meanwhile, we may be headed for a disastrous filing season. Both Commissioner Koskinen and Taxpayer Advocate Nina Olson had grim forecasts for the coming tax season, reports Tax Analysts ($link):
“I think it will rival the 1985 filing season,” Olson said. “Those of you who have been in practice that long remember that time when all the returns disappeared, and Philadelphia melted down, and bags were stuffed in the trash full of returns, and we all got nice little calls from the IRS saying, ‘We know your client filed a return, but would you please file it again because we lost it.’ And it took years to undig ourselves from that.”
Oh goody. Of course, the Commissioner used the occasion to try to jack up his budget:
Both Koskinen and Olson said that there is only so much they can do without increased funding from Congress.
“You really do get what you pay for,” Koskinen said. “And if you’re not paying for it, there’s no way you’re going to get it.”
The IRS will offer no tax return preparation at its walk-in assistance centers and will answer only limited tax law questions over the phone, Olson noted.
Yet with his condescending dismissal of GOP concerns over the Tea Party scandal, and his continuing stonewalling, he has done everything he could to antagonize the folks that set his budget. I’ll believe the IRS needs more money when it stops spending what it has on a “voluntary” preparer regulation regime nobody wants, when it stops using its “scarce” resources to steal cash from small businesses, when it stops giving away millions in cash to ludicrous fraud schemes, and when it stops covering up its harassment of the President’s political opponents. In other words, I’ll believe they are out of money when they don’t have money to spend on dumb things.
Peter Reilly, AICPA Wasted Member Dues On IRS Lawsuit. I don’t think it’s wasteful to fight IRS overreach.
Robert D. Flach, FEAR OF CPAs
Keith Fogg, Rare Suspension of Statute of Limitation Due to Continuous Absence from United States (Procedurally Taxing)
David Brunori, Taxing the Internet Is a Bad Idea – As the Hungarians Learned (Tax Analysts Blog)
Howard Gleckman, Will Consumers Come To Love Longevity Annuities? (TaxVox)
TaxProf, The IRS Scandal, Day 545
RIP, Gordon Tullock. An intellectual giant left the scene this week when Gordon Tullock died Monday in Des Moines, where he moved in the past year. It was sadly appropriate that he died just prior to election day, given his aversion to voting.
Gordon Tullock was a father of the “Public Choice” school of economics. The online “Concise Encyclopedia of Economics” explains:
As James Buchanan artfully defined it, public choice is “politics without romance.” The wishful thinking it displaced presumes that participants in the political sphere aspire to promote the common good. In the conventional “public interest” view, public officials are portrayed as benevolent “public servants” who faithfully carry out the “will of the people.” In tending to the public’s business, voters, politicians, and policymakers are supposed somehow to rise above their own parochial concerns.
A bureaucrat is as human and as selfless, or selfish, as any businessman. This insight helps explain why so many good intentions go awry when they become law.
Dr. Tullock also had important observations on the tendency of powerful interests towards “rent seeking,” whereby the well-connected enrich themselves by to suppressing competitors via regulation and other government intervention.
I met Dr. Tullock once doing tax work for his family, before I understood who he was. He struck me as an absent-minded professor at first, until I realized that he seemed distracted because he was about five steps ahead of me in the discussion. He later sent me an inscribed copy of one of his books, “The Economics of Non-Human Societies.” The inscription said that my profession was described in the chapter beginning on page 47.
The chapter is about termites.
While I often disagreed with him, everything he wrote is worth reading. Start with this excellent compendium. Unlike many “interdisciplinary” economists, Tullock was a genuine polymath; his knowledge of history was especially impressive.