Business-only tax reform? Tax Analysts reports ($link) that the chief taxwriter in the GOP-controlled House is exploring tax reform ideas with the Obama administration:
As Republican taxwriters look for a way to advance tax reform in the face of White House ambivalence, House Ways and Means Committee Chair Paul Ryan, R-Wis., said he would explore a business-only compromise with the Obama administration, as long as it includes passthroughs.
“I’d like to think that there is perhaps an area for common ground there,” Ryan said on Fox News January 20 after President Obama’s State of the Union address. “We’re going to try to explore it and see if we can find something.”
Ryan said Obama’s recent tax proposals, which involve increasing capital gains taxes and implementing a tax on financial institutions to pay for new and expanded middle-income tax incentives, as well as new spending programs, show he is disinterested in comprehensive reform.
I think “as long as it includes passthoughs” is absolutely the right approach. I also think it will be fatal to the reform effort. A majority of businesses and business income is taxed on 1040s as a result of the increased popularity of passthrough structures like S corporations and limited liability companies.
Any tax reform effort worthy of the name would bring down rates in exchange for a broader base. As the President seems firmly committed to ever-higher rates on “the rich,” I don’t see how this can happen.
Is Iowa’s business tax climate really that bad? (Me, IowaBiz.com). Is Iowa ready for tax reform? Ready or not, it’s overdue for it:
Even after all of the explaining, the Tax Foundation’s main points remain true. Iowa’s corporation tax rate is the highest in the U.S. (even taking the deduction for federal income taxes into account). In fact, it is the highest in the developed world. Our individual tax rate is high, even considering the federal tax deduction. All of the special breaks make Iowa’s income tax very complex. And while Iowa has many tax credits, they are often narrowly tailored and require consulting and string-pulling to obtain. Many small businesses don’t qualify for the wonderful tax breaks, but they still have to pay their accountants to comply with the resulting complex and confusing tax system.
The post begins an exploration of Iowa tax reform options I will be running at IowaBiz.com, the Des Moines Business Record’s Business Professional’s Blog. While longtime readers know my fondness for massive changes to the Iowa tax system, I will also be exploring changes on the margin that would improve and simplify Iowa’s tax system in its existing structure that might be easier to pass.
David Brunori, Bad State Tax Ideas Abound – Nebraska, Virginia, and Missouri (Tax Analysts Blog):
Special taxes — those on narrow bases — should be imposed sparingly and only for good reason. The best reason is to pay for externalities. But unlike, say, cigarettes, 99 percent of gun purchases produce no externalities. So they should not be subject to special taxes — unless you really hate guns, gun owners, and the guys from Duck Dynasty.
Not every problem is a tax problem.
This week, the Treasury Inspector General for Taxpayer Administration (TIGTA) issued a reminder to taxpayers to beware of scammers making calls claiming to represent the Internal Revenue Service (IRS). The scam, which heated up last year, has continued to plague taxpayers.
If you aren’t expecting a call from the IRS, it’s not the IRS.
William Perez, Understanding Form W-2, the Annual Wage and Tax statement
Robert Wood, 10 Surprising Items IRS Says To Report On Your Taxes. As a listicle, it will probably generate traffic to crush Forbes’ servers.
Tax Trials, Fourth Circuit Affirms the Tax Court on Conservation Easement Donation. “In the end, the Fourth Circuit held that while the conservation purpose of the easement was perpetual, the use restriction on the’ real property is not in perpetuity because the taxpayers could remove land from the defined parcel and replace it with other land.”
Robert D. Flach, ONE WAY RETIREES ARE SCREWED ON THE NJ-1040.
Keith Fogg, How Long Does a CDP Case Toll the Statute of Limitations on Collection? (Procedurally Taxing)
Peter Reilly, Bitter CPA Fight Good For Attorneys And Nobody Else. The U.S. Sixth Circuit picks up the tale of one of the worst accounting firm breakups I’ve come across.
Jack Townsend, USAO SDNY Announces Another Offshore Account Client Plea
Glenn Hubbard, Obama’s Bad Economic Ideas (Via the TaxProf): “Piling up child tax credits and subsidies for health care over narrow household income ranges, as the president proposes, leads to high rates of taxation on earnings from work as assistance is phased out.” In other words, a poverty trap.
The Tax Policy Blog has lots on the Presidents’ doomed tax proposals:
Kyle Pomerleau, Andrew Lundeen, The Basics of President Obama’s State of the Union Tax Plan
Scott A. Hodge, Michael Schuyler, What Dynamic Analysis Tells Us About the President’s Tax Hike on Capital Gains and Dividends
TaxVox is also flooding the SOTU zone:
William Gale, David John, Retirement Security a Priority in the 2015 State of the Union
William Gale, Adjusting the President’s Capital Gains Proposal
TaxProf, The IRS Scandal, Day 623. Today’s installment features an e-mail where scandal figure Lois Lerner shows she’s well aware her unit was under suspicion, and was desparately discouraging further inquiry.
Matt Gardner, Adobe Products’ Acrobatic Tax-Dodging Skills (Tax Justice Blog). I would read that as “skills in meeting their fiduciary duty towards their shareholders.”