Paying people to do what they would do anyway. Rhode Island is proposing a new credit for “job creators,” reports David Brunori:
It would work the same way other bad tax incentive programs work: A company that creates new jobs in the state would receive a reduction in its income tax. The proposal mirrors a bill introduced earlier this year. Basically, the bill, if signed into law, would reduce the tax rate for companies that hire full-time employees in Rhode Island who work at least 30 hours per week and receive a salary that is at least 250 percent of the prevailing hourly minimum wage in the state. Large companies would be eligible for a 0.25 percent tax incentive off their net income tax rate for every 50 new hires. Smaller companies would be eligible for a 0.25 percent incentive off their personal income tax for every 10 new hires. The rate reduction would be limited to a maximum of 6 percentage points for the applicable income tax rate and to no more than 3 percentage points for the applicable personal income tax rate. Complicated? You bet. But that’s why law firms like the incentive business.
Statewide employment is expected to grow in Rhode Island in the next several years without the political gimmicks of tax incentives. So this bill is unnecessary (no one thinks the incentives will lead to growth greater than what’s expected). In other words, there is no incentive being provided; the state is just making a welfare payment.
This is true of all “job creation” credits. As David points out: “No sane business owner will hire someone for $40,000 simply to save $4,000 on her tax bill. This bill will not create one new job in Rhode Island.”
An Illinois representative has proposed a “Patriot Employer Tax Credit Act,” (Tax Analysts, $link) with a tax credit of up to $1,500 for employers who:
-Invest in American Jobs: Does not move its headquarters overseas or reduce the number or percentage of U.S.-based workers in comparison to workers overseas.
-Pay Fair Wages: Pay 90% or more of U.S. workers an hourly wage of at least $15 per hour.
-Provide Quality Health Insurance: Offer ACA-compliant healthcare to employees.
-Prepare Workers for Retirement: Provide 90% of non-highly compensated U.S. employees a defined benefit plan OR a defined contribution plan and contribute at least 5% of worker compensation.
-Support Our Troops and Veterans: Pay the difference between regular salary and military compensation for all National Guard and Reserve employees called for active duty and have a plan in place to recruit veterans.
-Create a Diverse Workforce: Have a plan in place to recruit employees with disabilities.
By claiming the word “patriot,” it wraps bad economics in the flag. Because nothing says “I love my country” like tax credits.
Jana Luttenegger Weiler, Health Savings Accounts: Beneficiaries and Taxes (Davis Brown Tax Law Blog). “As HSAs become more common, it is important to consider the HSA in various capacities, including in premarital agreements, death, and divorce.”
Tony Nitti, Tax Court: In Order To Convert A Home To A Rental, You Should Probably Rent It
Jason Dinesen, Glossary of Tax Terms: AMT.
TaxGrrrl, Taxpayer’s Call To IRS Accidentally Broadcast On Howard Stern’s Radio Show. I’m just amazed the caller reached an actual IRS agent.
Peter Reilly, Tax Girl Challenges Homeownership And You Should Really Listen To Her. “To many of us homeownership is a necessary step in becoming a full-fledged adult and a house that is rented can never be a home. This book might help you rethink that attitude.”
Jim Maule, The Dependency Exemption Parental Tie-Breaker Rule. “Under the parental tie breaker rule in section 152(c)(4)(B), if the parents claiming a dependency exemption deduction for a qualifying child do not file a joint return, the child is treated as the qualifying child of the parent with whom the child resided for the longest period of time during the taxable year, or if the child resides with both parents for the same amount of time during the taxable year, the child is treated as the qualifying child of the parent with the highest adjusted gross income.”
Paul Neiffer, April 18 (or 19), 2016 is Due Date for 2015 tax returns
Jack Townsend, Remaining Swiss Bank Criminal Investigations Likely to Go Into 2016
Robert Wood, Appalling $187 Million Cancer Charity Fraud Case Settles — When 97% Of Money Isn’t For Charity
Keith Fogg, Argument Over Furlough of National Taxpayer Advocate Set for June 2 Before the Federal Circuit (Procedurally Taxing)
Cara Griffith, Tax Reform Laboratories (Tax Analysts Blog). “Federal lawmakers could learn a lot from an examination of what has worked and what hasn’t across the nation.”
Insureblog, Dear HHS, Will You Share My ACA Success Story?:
So how has this Obamacare thingy helped my small company:-We have seen an overall decrease in benefits since 2010.
-From November 2010 to our current plan year premiums have increased 58.7%.
-If we would have been forced to an Obamacare compliant plan the increase would have been 116.7%
Tom Vander Well, Placing customers on hold without diminishing satisfaction (IowaBiz.com). The suggestions do not endorse the IRS practice of “courtesy disconnects.”
Carl Davis, Sweet Sixteen: States Continue to Take On Gas Tax Reform (Tax Justice Blog). To the Tax Justice folks, tax reform = tax increase.
Joseph Thorndike, Republicans Should Embrace the Gas Tax – After All, They Invented It (Tax Analysts Blog). Everyone loves being told what they “should” like.
Kay Bell, Will Congress OK highway money before it hits the road?
Elaine Maag, A Redesigned Earned Income Tax Credit Could Encourage Work by Childless Adults. (TaxVox). Only if they can re-design it so that it doesn’t squander 25% of the cost on improper payments.
Megan McArdle, $15 Minimum Wage Will Hurt Workers. A well-explained post explaining what should be obvious:
When the minimum wage goes up, owners do not en masse shut down their restaurants or lay off their staff. What is more likely to happen is that prices will rise, sales will fall off somewhat, and owner profits will be somewhat reduced. People who were looking at opening a fast food or retail or low-wage manufacturing concern will run the numbers and decide that the potential profits can’t justify the risk of some operations. Some folks who have been in the business for a while will conclude that with reduced profits, it’s no longer worth putting their hours into the business, so they’ll close the business and retire or do something else. Businesses that were not very profitable with the earlier minimum wage will slip into the red, and they will miss their franchise payments or loan installments and be forced out of business. Many owners who stay in business will look to invest in labor saving technology that can reduce their headcount, like touch-screen ordering or soda stations that let you fill your own drinks.
These sorts of decisions take a while to make. They still add up, in the end, to deadweight loss — that is, along with a net transfer of money from owners and customers to employees, there will also simply be fewer employees in some businesses. The workers who are dropped have effectively gone from $9 an hour to $0 an hour.
Most people who insist that minimum wage increases are harmless snicker at those who believe in “intelligent design.” Yet they are themselves trying to impose their own design on an eveolutionary system. At least creationists don’t claim to be designing species.
TaxProf, The IRS Scandal, Day 742
News from the Profession. Accountants Lack Some Skills (Caleb Newquist, Going Concern). “But it’s foolish to expect accounting graduates to have skills for corporate accounting. They don’t have them because they don’t learn them in school and they don’t learn them in public accounting.”