Posts Tagged ‘Jeremy Horpedahl’

Tax Roundup, 9/24/14: The $3,000+ price tag of Iowa’s special tax breaks. And: Tea Parties in the strangest places.

Wednesday, September 24th, 2014 by Joe Kristan

20120906-1Do special favors for special friends in the Iowa income tax cost Iowa families $3,000? A Buena Vista University professor seems to think so.  Paul Brennan reports that Jeremy Horpedahl, an economist at BV, has determined that removing all “tax privileges” in Nebraska would save the average Nebraska family that much, and that it might be more in Iowa:

Although he hasn’t yet done a thorough analysis Iowa’s tax codes, Horpedahl said eliminating tax privileges would result in at least as great as savings.

“Actually, it would probably be a little higher, because Iowa has more privileges built into its tax code,” Horpedahl said.

Sadly, Mr. Horpedahl said he studied Nebraska’s system because they are actually considering serious tax reform, unlike Iowa.  What does he mean by “privileges?”

“I define a tax privilege as a tax break or exemption that benefits a specific type of industry or an individual taking a certain type of action,” Horpedahl explained.

“The standard deduction on income tax isn’t a privilege, because that’s available to everyone. But a tax break that benefits just the construction industry is. For an individual, that certain goods or services they buy are exempt from sales tax is a privilege,” he said.

Mr. Horpedahl sounds a theme familiar to Tax Update readers:

Horpedahl pointed out that Iowa’s businesses would  also benefit from the elimination of tax privileges.

“Iowa has a very high corporate tax rate — 12 percent — so to be attractive to businesses, the state has to offer them a way of avoiding it,” Horpedahl said.

“But not every business can avoid it. So what we end up doing is rewarding lobbying. Those who are successful in lobbying for privileges get lower taxes. And that implicitly punishes those who don’t lobby, because they end up paying higher rates.”

Also:

“Politicians love to hand out these privileges,” Horpedahl said. “It allows them to say, ‘‘I’m doing something, I’m bringing businesses to the state, I’m creating jobs.’”

“They never mention that the tax rate has to be kept high to pay for all these privileges. And most people don’t realize that research has shown that these sweetheart deals very rarely pass the cost-benefit analysis test, so there’s very little push back.”

Precisely. They take your money to lure and subsidize your competitors, and then they tell you that it is good for you. There is a solution out there, waiting for a bold politician to run with it: The Tax Update’s Quick and Dirty Iowa Tax Reform Plan.

Related:

IF TRUTH IN ADVERTISING APPLIED TO ECONOMIC DEVELOPMENT AGENCIES

Taking your wife’s purse to buy drinks for the girls

 

 

20140521-1More dangerous and inflammatory anti-tax rhetoric. A political group of Americans abroad surveyed its members and discovered that they think the FATCA crackdown on offshore financial activity is making life tough for innocent non-billionaire expats, reports Laura Saunders of the Wall Street Journal:

The survey… found that nearly one in six respondents had had a financial account closed by a bank or brokerage house. More than two-thirds of the checking accounts that were closed had a balance of less than $10,000. Nearly 60% of the closed investment accounts had a value of less than $50,000. Other people were unable to open accounts.

Respondents also reported Fatca-related difficulties with non-U.S. spouses and partners. More than one-fifth said they have separated or are considering separating financial accounts held jointly with their partner.

Added one person, “Fatca has caused enormous friction in my marriage. My non-U.S.spouse is refusing to let the U.S. government know about his salary/earnings/savings… and moving to separate bank accounts would leave me very vulnerable as I’m an unemployed, stay-at-home mother.”

Well, of course you’d expect this sort of anti-tax rhetoric from some Tea Party outfit. I wonder if Democrats Abroad, who ran the survey, will have its tax exemption questioned now. But if they expect Democrats in Congress to ease their plight, good luck.

 

William Perez, How Do You Report Alimony on Your Tax Return?

Peter Reilly, For Joint Filing Status You Have To File.  “You’re not supposed to do that if you are actually married though.”

TaxGrrrl, Back To School 2014: Internships. ” If there’s no income to report, that makes the income piece easy.”

Robert D. Flach, IRS ANNOUNCES NEW PER DIEM RATES FOR BUSINESS TRAVEL

Keith Fogg, Extracting Yourself from a Tax Court Case (Procedurally Taxing)

 

 

TaxProf, The IRS Scandal, Day 503,  The day 503 of the so-called “so-called scandal” includes a link to this from Jason Keisling and Emily Elkins: Lois Lerner Claims the IRS Did Nothing Wrong. The Data Say Otherwise, with this fine chart:

targetingstatschart

 


Alan Cole, Reducing Compliance Costs for Small Businesses (Tax Policy Blog):

A good principle in tax policy – as well as policy in general – is to let the little things go. This principle has taken form in a legal maxim, de minimis non curat lex, Latin for “the law does not concern itself with trifles.” Currently, any business expected to owe at least $1,000 in tax for the year must file quarterly. $1,000 is a trifling amount to the IRS, one that need not be split into installment payments.

The Peters bill would allow very new businesses, or businesses with less than $1 million in total revenues, to file their taxes only once yearly – an arrangement that seems more reasonable.

Good thinking.

 

Howard Gleckman, Treasury’s New Rules May Slow, But Won’t Stop Corporate Tax Inversions (TaxVox). “Now the dealmakers have the roadmap they need to keep their inversions Kosher. And with that guidance, it is likely that lawyers will attempt to restructure many transactions to satisfy the new rules.”

 

News from the Profession. Why Your Firm Needs a Bring Your Dog to Work Policy (Leona May, Going Concern).  Sounds like animal cruelty to me.

 

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Tax Roundup, 9/13/2012: Winning = losing. Also: Factually-challenged fact-checkers and astute Minnesotans.

Thursday, September 13th, 2012 by Joe Kristan

Iowa’s winning the wrong race.  An opinion piece in today’s Des Moines Register by Beuna Vista College economics professor Jeremy Horpedahl:

This year, Iowa came in first place. Unfortunately, it wasn’t a bowl championship for the Hawkeyes but rather unmatched, high corporate tax rates — not an area in which anyone wants to beat out rivals.

The United States’ combined federal and state corporate income tax is the highest in the world at nearly 40 percent, and Iowa’s 12 percent corporate income tax rate is much higher than that of any other state. To make matters worse, Iowa’s corporate tax rate is significantly higher than those of its neighboring states. South Dakota doesn’t even have a corporate income tax.

It’s worse than that.  Iowa’s corporation income tax is very complicated and so full of special favors that it nets only a small portion of state revenues.  That makes it both destructive and useless.  There is a better way.

 

Flickr image courtesy Retrofresh! under Creative Commons license.

Economic illiteracy and fact checkers.  The Cedar Rapids Gazette has ventured into the shady “fact checker” business, with unfortunate results.  They attempt to say whether the claimed number of jobs “created” by wind energy tax credit subsidies are correct:

While the figures cited by the wind energy industry and politicians are inexact and fluid, they’re the best available information. The U.S. Bureau of Labor also relies primarily on the industry’s information. We found no evidence that these figures are misleading, but keep in mind these are estimates.

We rate the jobs claims mostly true.

There are two key words missing from the analysis: opportunity costs.  The money spent on wind subsidies wouldn’t just disappear if the tax credit went away.  It would be used to buy or invest in other things.  This is explained wonderfully in Bastiat’s broken window parable, which (slightly updated) goes something like this:

A vandal breaks a shop window, and the shopkeeper pays a glazier to replace it.  The glazier says that the vandal did good by creating a job for him.  The local fact-checker rates the claim “mostly true” because he considers the glazier “the best available information.”  But because the shopkeeper spent the money fixing the broken window, he loses the opportunity to hire an assistant to keep the store open longer, to develop a new line of merchandise, or to buy something from another business down the street.  But that “opportunity cost” is unseen by the fact-checker and ignored.

The Gazette’s “fact-check” ignores the jobs squandered by funneling resources to an economically inefficient technology, because they are “unseen,” especially by the industry that benefits from the subsidies.

 

Speaking of opportunity costs:  Compliance with ObamaCare Estimated at 80 Million Man-hours  (William McBride, Tax Policy Blog)

 

Former Corporate Raider Bilzerian rebuffed by Tax Court.  You can’t be a corporate raider without taking some risks, and sometimes those risks lead you to bankruptcy court, like they did for Paul Bilzerian.  He yesterday lost some more when the Tax Court ruled that he could not relitigate tax liabilities determined by a bankruptcy court.  Tax Court Judge Wells ruled against the former raider on the grounds that he had agreed to be bound by the bankruptcy ruling.

 

Getting what you pay for? TIGTA: Tax Returns Prepared Through IRS’s Volunteer Assistance Program had 51% Error Rate   (TaxProf)  To be fair to the volunteers, though, I doubt they do much worse than IRS phone helpers, and certainly paid preparers don’t always get our ridiculously complex taxes right.

They always can.  “Just when I think that our politicians can’t act any more irresponsibly, they up the ante”  (Christopher Bergin)

Anthony Nitti,  Tax Court Applies Garnett Decision to Liberalize Real Estate Professional Test

Would you jump off a cliff just because your friends all deducted it?  Never Do Something Just Because It’s Tax Deductable (Jason Dinesen)

Kay Bell,  Share and share alike: your taxes in a community property state

Paul Neiffer,  Express Saver Costs a Taxpayer Thousands

TaxGrrrl,  Amazon Sees Silver Lining With Sales Tax Collections.  She also interviews an obviously astute Minnesota tax pro, as his answer to her final question shows.

 
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