Posts Tagged ‘Gordon Tullock’

Tax Roundup, 11/5/14: Red waves and extenders. And: RIP, Gordon Tullock

Wednesday, November 5th, 2014 by Joe Kristan

20130113-3So 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.

 

20120906-1Meanwhile, nothing changes in IowaGovernor 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 newsThe 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.

 

train-wreckMeanwhile, we may be headed for a disastrous filing seasonBoth 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.

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Kay Bell, Tax reform a big factor for mid-term election voters

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

 

20130110-2RIP, Gordon TullockAn 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.

Other Gordon Tullock coverage from Don Boudreaux, Brian Doherty, Bryan Caplan and Tyler CowenFrom Caplan:

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.

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Tax Roundup, 1/10/2013: Taxpayer Advocate says we need tax reform. No kidding!

Thursday, January 10th, 2013 by Joe Kristan

20130110-1So preparer regulation wasn’t really the solution?  Taxpayer Advocate Nina Olson says tax complexity is the biggest problem for taxpayers in her annual report:

The most serious problem facing taxpayers — and the IRS — is the complexity of the Internal Revenue Code (the “tax code”). Among other things, the tax code:

-Makes compliance difficult, requiring taxpayers to devote excessive time to preparing and filing their returns;

- Requires the significant majority of taxpayers to bear monetary costs to comply, as most taxpayers hire preparers and many other taxpayers purchase tax preparation software;

- Obscures comprehension, leaving many taxpayers unaware how their taxes are computed and what rate of tax they pay;

- Facilitates tax avoidance by enabling sophisticated taxpayers to reduce their tax liabilities and by providing criminals with opportunities to commit tax fraud;

- Undermines trust in the system by creating an impression that many taxpayers are not compliant, thereby reducing the incentives that honest taxpayers feel to comply; and

- Generates tens of millions of telephone calls to the IRS each year, overburdening the agency and compromising its ability to provide high-quality taxpayer service.

What do you suppose clued her in?

The byzantine complexity of the tax law is indeed the biggest problem facing the taxpayer.  She also prominently mentions the identity theft epidemic, preparer fraud and IRS funding.  One item not identified as a serious problem?  Unregistered tax preparers.

Just a few short years ago, Nina Olson had this to say:

 I have recommended the regulation of unenrolled return preparers since my 2002 Annual Report to Congress, and reiterated and supplemented that recommendation in successive reports.  My office was very much involved in  the analysis and discussions resulting in the IRS report, and I applaud Commissioner Shulman’s leadership in undertaking this significant review.

So what has that accomplished?  The IRS has tacitly admitted the program isn’t working by waiving the continuing education requirement.  The population of preparers is poised to crash.  That will raise the cost of tax preparation, forcing many to self-prepare and driving others out of the system entirely.  Meanwhile, one reason IRS resources are unavailable for taxpayer service is that they are directed to mismanaging preparer regulation.

The problem has always been tax complexity, and it continues to get worse.  No preparer regulation will change that.  The Taxpayer Advocate’s previous preparer regulation efforts only served to enrich the national tax prep franchises and distract from the real problem of complexity while damaging the ability of the IRS to serve taxpayers.

More on the Taxpayer Advocate report:

Robert D. Flach, NINA OLSEN ON THE DREADED AMT

Russ Fox, “The IRS Has Failed to Provide Effective and Timely Assistance to Victims of Identity Theft”

Jack Townsend,  TA Report Identifies IRS’ OVDP / OVDI As Problem

 

20130110-2Scott Drenkard, Nobel Laureate James Buchanan Passes Away at 93 (Tax Policy Blog):

Buchanan’s model of government action was based on a theory of “politics  without romance,” which contended that policymakers act in their own self-interest the same way that market actors do. This means that politicians are not enlightened, selfless despots, and respond to the incentives of the political sphere, making policy that will help get them re-elected. Often the best way to do that is by catering to special  interests. The longer I work in this city, the more I see this observation as true to life.

This is (to me) the essence of the “Public Choice” analysis of government, created by Mr. Buchanan and Gordon TullockIt explains why passing a law or creating a regulation rarely solves the problem, and instead enables the well-connected to use the government as a club against their rivals.  The tax preparer regulations, literally authored by a former H&R Block CEO, are a classic example.  James Buchanan’s legacy is a valuable and too-little-heeded caution against increasing the role of government.

More: Alex Tabarrok,  James Buchanan (1919-2013), Appreciations; David Henderson, Further Notes on James Buchanan

 

TaxGrrrl, Leadership Shakeup At Treasury May Signal Change in Obama’s Fiscal Strategy

Courtney Strutt Todd:  Buying a House in 2013? You Could Qualify for a Federal Tax Credit up to $2,000 a Year for the Life of Your Mortgage! (Davis Brown Tax Law Blog)

Paul Neiffer,  IRS Announces When Returns Can Be Filed

Kay Bell, IRS will begin accepting 2012 tax returns on Jan. 30

William Perez, When Can You Begin Filing Your 2012 Federal Tax Return?

Brian Strahle,  Medical Device Excise Tax:  Ready or Not, It’s Here!

Nanette Byrnes, Virginia plan to end gas tax quickly panned (Tax Break)

The Critical Question: What Is It About Hollywood? (Cara Griffith, Tax.com)

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Targeted tax benefits outside the lab

Monday, January 16th, 2012 by Joe Kristan

Tax Analysts in-house economist Martin Sullivan boldy calls for government to pick winners in business ($link). (Update, 1/17/12: free link now available via the TaxProf.)

Tax incentives for venture capital. Firms receiving financing from venture capital funds grow far more quickly and are far more innovative than other small businesses. Positive externalities from innovation are enough to justify preferential tax treatment for venture capital funding. Financial market imperfections provide additional justification. Venture capital funding suffers from a double moral hazard problem. Venture capitalists provide funding and experience to companies they fund. Companies funded by venture capital have imperfect knowledge of the effort venture capitalists will provide. That leads to low levels of venture capital that could be remedied by a reduction in capital gains taxes on venture capital investment. (See Keuschnigg and Nielsen.)
So there is a good economic case for extending tax benefits to venture capital…
…Tax incentives should be targeted to the subset of small businesses that are fast-growing and innovative.

Unfortunately, “targeted” tax benefits don’t work well outside the classroom. Iowa has tax incentives for start-up businesses, and a Cedar Rapids example, via Gongol, is instructive:

When he came to Cedar Rapids last year, Walter

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