Posts Tagged ‘Quick and Dirty Tax Reform Plan’

Tax Roundup, 3/10/14: Sioux City $afety Edition. And: rogue dentistry!

Monday, March 10th, 2014 by Joe Kristan

Sioux City Revenue Camera Windfall.  The Des Moines Register today lists the winners from revenue cameras around the state.  Public safety isn’t up there:

Tickets from automatic traffic cameras totaled $19.7 million for nine Iowa cities during the last fiscal year, but more than 34 percent of that money went to out-of-state vendors.

The summary:

20140310-1

Sioux City benefitted richly from Iowa’s status as the only state allowing revenue cameras on interstate highways:

Iowa is the only state in the country that allows speed cameras to be permanently placed on highways and interstates. The data collected by the DOT shows those cameras are the most lucrative: The two placed in a construction zone on Interstate Highway 29 in Sioux City brought in more than $4.5 million for the fiscal year ending in June.

gatsoThe evident failure of the cameras to stop construction zone speeding tells you how much they help public safety.  If they stopped speeding, there wouldn’t be so much revenue.  Of course, Sioux City also has a big incentive to generously define “construction zones” and leave them in place after construction is completed.  I drove through the I-29 zone on a Sunday night (no ticket for me!);  with no no workers around at the time, the only point of the construction zone speed limits when I drove through was camera revenue.

Some good news from the piece: “The number of red-light cameras nationally is dropping, according to a study by the Reason Foundation, a libertarian-leaning think tank.”  That’s because they’re a crock, a corrupt bargain between the operators and the municipalities, and people hate that.

 

William Perez, Need Extra Time to Finish up Your 2013 Tax Return?:

The IRS will grant a person an additional six months to file their tax return. To request this extra time, file an extension with the IRS on or before the deadline.

Filing an extension provides several benefits. Besides extra time to file the tax return, an extension also provides extra time to fund a self-employed retirement plan and to recharacterize IRA contributions.

And, contrary to myth, it doesn’t increase your chances of getting audited.  In contrast, filing an erroneous return to beat the deadline or get a quicker refund definitely increases your audit risk.

TaxGrrrl, Taxes From A To Z (2014): D Is For DRIP   

Kay Bell, Daylight Saving Time + gas taxes = boon for tax collectors, but some money-saving options for added daylight drivers 

Janet Novack, Pensions Create Yet Another Tax Trap For U.S. Expatriates

Russ Fox, False Checks, Trusts, and Ignoring Taxes Lead to Real Prison.  Indeed they do.

 

 Joseph Henchman, State Tax Reforms Are More Than Just Revenue Changes (Tax Policy Blog):

But more to the point, we consider 2013 one of the most successful years for tax reform we’ve seen in a while. We saw North Carolina cut its taxes but, more importantly, massively restructure them to become flatter, simpler, and more competitive. The real improvement in North Carolina wasn’t just the amount of taxes (though they did cut taxes, as noted above), but the structure of the tax code.

Beyond North Carolina’s landmark reform, Indiana under Governor Mike Pence (R) also moved to cut its personal income taxes and abolish its death tax. Wisconsin also made significant income tax cuts accompanied by positive structural changes authored by Representative Dale Kooyenga. Even in states that couldn’t achieve such sweeping reforms, valuable progress was made. Arizona implemented an important simplification of its sales tax code. Governor Martinez of New Mexico worked with her legislature to cut her state’s corporate tax. Texas made some positive reforms to its damaging gross receipts tax, the margin tax.

Notice one state missing there?  Anyone?  Iowa?  The Tax Update’s Quick and Dirty Iowa Tax Reform Plan is ready to go!  How about a 4% top individual rate, repeal of the Iowa corporation tax, and massive simplification — or do you like massive complexity, special favors for special friends, and the nation’s highest stated corporate rate?

 

Eric Todor, Tax Reform’s Quiet Protectionism (TaxVox): “In effect, income from the sale in the United States of goods manufactured overseas by controlled foreign subsidiaries (CFCs) of U.S.-resident multinational companies would be taxed at a higher U.S. rate than other income from the same factory”

 

William Gale, Alan Auerbach, Forgotten but Not Gone: The Long-Term Fiscal Imbalance (TaxVox):

First, ignoring projections for the future, the current debt-GDP ratio is far higher than at any time in U.S. history except for a brief period around World War II. While there is little mystery why the debt-GDP ratio grew substantially over the last six years – largely the recession and, to a smaller extent, countercyclical measures – today’s higher debt-GDP ratio leaves less “fiscal space” for future policy.

Second, while we clearly face no imminent budget crisis, our new projections suggest the 10-year budget outlook remains tenuous and is worse than it was last year, primarily due to changes in economic projections.

And the rich guy can’t pick up the tab.

 

Lois Lerner, ex-IRS, ex-FEC

Lois Lerner, ex-IRS, ex-FEC

George Will, The IRS’s behavior taxes credulity:

Obama breezily says there was nothing more sinister than “boneheaded decisions” by wayward and anonymous IRS underlings. Certainly boneheadedness explains much about this administration. Still, does he consider it interesting that the consequences of IRS boneheadedness were not randomly distributed but thwarted conservatives?

The rules that Obama says befuddled the IRS boneheads — to his benefit — read today exactly as they have read since 1959. For half a century they did not prevent the IRS from processing applications for tax-exempt status in less than three months. Some conservative group should offer $10,000 to anyone who can identify a liberal group that had the experience scores of conservative groups have had — an application delayed more than three years and receipt of an IRS questionnaire containing at least 60 questions.

Believing that there isn’t a “smidgen of corruption” is about as much of an intellectual leap as, say, believing dinosaurs and humans co-existed.

Via Instapundit

TaxProf, The IRS Scandal, Day 305

 

Jack Townsend has a List of 14 Swiss Banks Under Criminal Investigation

Quotable: 

Many smart people think preparers should be regulated. I just don’t agree. There is no market failure. If you don’t like your preparer, find another one. Or better yet, write your representative and ask for a tax system that doesn’t require low-income people to pay preparers.

David Brunori, State Tax Notes ($link)

 

I suspect he won’t need a preparer for awhile now.  From Going Concern:

Xzavier allegedly beat up a tax preparer when he found out the woman he was with wouldn’t be getting her refund in cash. After a security guard intervened, he is accused of whipping out his heat and shooting both the guard and two women. A fourth person was grazed by a bullet but not shot.

I’m sure that really helped her get that refund sooner.

 

Crazy news from Canada: Rogue dentist fined $33,000 for unpaid tax; Tung Sheng Wu practised dentistry illegally in the tri-cities and Burnaby

I’m pretty sure I’ve never seen the phrase “rogue dentist” before.

 

Share

Tax Roundup, 3/7/14: Expanded Iowa 10-and-10 capital gain break advances. And: more rave reviews for Camp plan!

Friday, March 7th, 2014 by Joe Kristan

20130117-1Expansion of Iowa 10-and-10 gain exclusion advances.  The bill to expand the availability of Iowa’s super-long-term capital gain break cleared its first legislative hurdle this week, as a House Ways and Means subcommittee approved H.F. 2129.

Iowa allows an exclusion from state taxable income of certain capital gains when the taxpayer meets both a 10-year material participation test and a ten-year holding period test.  This exclusion is available for liquidating asset sales and the individual tax on corporate liquidations, but is not available if the taxpayer is selling partnership assets or corporation stock to a third party, or for sales of less than “substantially all” of a business.

H.F. 2129 expands the exclusion “to include the sale of all or substantially all of a stock or equity interest in the business, whether the business is held as  a sole proprietorship, corporation, partnership, joint venture, trust, limited liability company, or other business entity.”

This would be a big change for Iowa entrepreneurs.  Consider how the current law affects a business started by two partners, with one older than the other.  The older partner retires more than ten years and pays full Iowa capital gain tax when he is redeemed out.  A few years later, the younger partner sells the business and retires himself.  The younger guy gets out with no Iowa capital gain tax under current law.  Under H.F. 2129, in contrast the 10-and-10 exemption would be available in both cases.

A “Fiscal Note” prepared by the Legislative Services Agency on the bill provides some statewide numbers:

Using State and federal tax returns of Iowa taxpayers, the Department of Revenue identified 369 tax returns reporting a capital gain for tax year 2012 where the taxpayer had participated in the business for a minimum of 10 years.

The total capital gain identified on those 369 returns that would be eligible under the capital gains exclusion expansion proposed in HF 2129 is $28.0 million.

Is this a good thing?  I think all capital gains should be tax-free, because they represent either a double-tax on the capital invested in them or, worse, a tax on inflation.  Anything that relieves this is arguably a good thing.  Still, it’s a complex carve-out for a limited class of taxpayers, one that creates a lot of errors by taxpayers who take the deduction erroneously or fail to use it when they are eligible; that sort of thing is almost a definition of bad tax policy. The Tax Update’s Quick and Dirty Iowa Tax Reform Plan would provide a much better approach.

 

O. Kay Henderson, Two tax cuts passed in 2013 showing up in February’s state tax report (Radio Iowa).  The increase in the Iowa Earned Income Tax Credit is properly understood as an increase in a welfare program and a poverty trap,  not a tax cut.

 

20140307-1Jason Dinesen, Glossary of Tax Terms: Passive Activity/Passive Activity Losses   

William Perez, Need to File a 2010 Tax Return? Deadlines and Resources.  Why 2010?  The statute of limitations for 2010 refunds expires April 15, 2014.

TaxGrrrl, Taxes From A To Z (2014): C Is For Clothing And Costumes.  Good stuff.    Related: Dress for success, but don’t look to the IRS for any fashion help.

Russ Fox, Your Check Might Not be in the Mail:

I used to live in Orange County, California. Earlier this week a US Postal Service caught fire as it was heading toward an airport after leaving the Santa Ana mail sorting center. So if you mailed something on Monday, March 3rd from ZIP Codes starting with 926, 927, 928, 906, 917 and 918, it might have been burnt to a crisp. All the mail the truck was carrying was destroyed (an estimated 120,000 pieces).

Another argument for electronic filing and payment.

Kay Bell, IRS criminal investigators are putting more tax crooks in jail.  If you are cheating on taxes big-time, you are a lot more likely to get caught than you might think.

 

taxanalystslogoThat means it must be a weekday.  More Arrogance and Secrecy From the IRS  (Christopher Bergin, Tax Analysts Blog):

I don’t know if these apparent political decisions were made by Lerner or others either inside or outside the IRS, because trying to get information out of that agency is like trying to get sweat out of a rock. Over the years, it has fought the silliest things. I’m only half kidding when I say that if you asked the IRS to see the kind of staplers it’s using, it would tell you it doesn’t have staplers.

The IRS will go to great lengths not to be scrutinized. And that breeds an atmosphere of no accountability — which leads to arrogance. We have seen that arrogance consistently throughout the congressional investigations of several IRS officials. And where will it lead us? Not to a good place, especially for those of us getting ready to file our yearly income tax returns. A tax collector that treats its “customers” as guilty until proven innocent is a tax collector out of control. That is precisely what the national taxpayer advocate has been warning about. If IRS officials don’t believe they are accountable to Congress, the rest of us don’t stand a chance.

This is part of an excellent and thoughtful post, written more in sorrow than anger by a long-time observer of the agency; you really should read the whole thing.  I’ll add that all of these seemingly endemic problems in IRS should warn us off the Taxpayer Advocate’s awful idea of giving IRS more control over the tax preparers who help taxpayers deal with the out-of-control agency.

 

Jack Townsend, Fifth Amendment and Immunity in Congressional Hearings.  Good discussion of the law, in spite of his calling the Issa investigations a “witch hunt.”  It’s the job of Congress to oversee federal agencies, especially an agency that has already admitted gross misbehavior here.

TaxProf, The IRS Scandal, Day 302

 

20130113-3More rave reviews for the Camp “Tax Reform” plan:

William McBride, Camp and Obama Gang up on Savers

Kyle Pomerleau, Are Capital Gains and Dividend Income Tax Rates Really Lower Under the Camp Tax Reform Plan?  “If you take into account all the phase-outs of deductions and benefits in the Camp plan, marginal tax rates on capital gains and dividends are higher than current law at certain income levels.”

Tax Justice Blog, House Ways and Means Committee Chairman Dave Camp Proposes Tax Overhaul that Fails to Raise Revenue, Enhance Fairness, or End Offshore Tax Shelters

 

Roberton Williams, A Web Tool to Calculate ACA Tax Penalties  (TaxVox).  ”It is often said the tax is $95, but for many people it will be much more.”

News from the Profession.  Some CPA Exam Candidates Skeptical the Illinois Board of Examiners Can Tell Time (Going Concern)

 

Peter Reilly, Could You Make Tax Protester Theories Work For You?:

If you are willing to entirely discount the quite remote chance of criminal prosecution, it may well be a decent percentage play particularly if you are just about maximizing your current lifestyle rather than accumulating net worth and entirely amoral when it comes to meeting tax obligations…

I still think it is a really terrible idea to enact Hendrickson’s strategy, but that’s just me.

No, it’s not just you, Peter.  And unless your income is generally not subject to third-party reporting like W-2s or 1099s, you will be caught, and then clobbered by back taxes, penalties and interest.

 

 

Share

Tax Roundup, 12/26/2012: legislator wants a $310 million train set for Christmas.

Wednesday, December 26th, 2012 by Joe Kristan

Iowa’s legislators get $800 million to play with for Christmas. Naturally, many of them think they can spend it better than those of us who gave it to them, based on a Des Moines Register report today quoting a bunch of prominent state politicians.

For example, Joe Bolkcom, Iowa City Democrat and Chair of the Senate Ways and Means Committee:

“We have a silent crisis in the number of kids and the number of our children living in poverty in our state,” Bolkcom said. “One of my top priorities will be addressing that crisis as a matter of tax policy. We need to use some of this tax surplus to make a substantial boost in the earned income tax credit.”

Bolkcom also favors appropriating $20 million as a state match to help  secure an $87 million Federal Railroad Administration grant to establish passenger train service between the Quad Cities and Iowa City, a move he says would create hundreds of jobs.

That’s two awful ideas.  As we have pointed out, increasing Iowa’s earned income credit would impose a brutal combined effective income tax rate of over 50% on low income workers — rewarding dependency and punishing taxpayers for emerging from poverty.

20121226-1And for the passenger rail plan — that’s ten kinds of crazy.  With the Megabus making three daily runs between Chicago and Iowa City for no more than $39.50 — and for as little as $1.50 — it’s hard to imagine a less urgent priority than pouring $20 million into a $310 million federal-state boondoggle to establish rail service that will lose millions annually selling $42 tickets for slower service.

Unfortunately, none of the politicians quoted by the Register proposes using the surplus to overhaul Iowa’s dysfunctional and business-hostile income tax. There is a better way:  Lower the rates, simplify the system, repeal the job-killing corporation income tax, and eliminate the corporate welfare deductions and tax credits.  In other words, The Quick and Dirty Iowa Tax Reform Plan.

Related:  You’d better waste your $20 million, or we won’t waste our $80 million!

 

Fiscal Cliff Notes

Kay Bell,  With the Mayan end of world threat over, it’s time to focus on the fiscal cliff

Can I return it?  AMT, the Gift You Don’t Have to Wrap!  (Trish McIntire)

 

Paul Neiffer,  One Week to Go Checklist

Missouri Tax Guy, Can an LLC be Taxed as an S Corp

Jason Dinesen,  Dinesen Tax Greatest Hits – The 5 Most Popular Blog Posts of 2012

Scott Hodge,  Taxing Guns to Pay for Cops in Classrooms? A bad idea to fund another bad idea.

That’s the way to bet, anyway.  Sometimes the Cynics Are Right  (Russ Fox)

Loss carryforwards?  Why Santa Won’t Owe Any Income Taxes This Year (TaxGrrrl)

Robert D. Flach won’t let the post-holiday letdown kill his Buzz!

Because I want to finish reading the phone book first?  Why Not Read the Entire Sales Tax Statute? (Jim Maule)

Share

Tax Roundup, 12/13/2012: Tax preparer deadline looms. Also: why some companies are happy with a bad tax law.

Thursday, December 13th, 2012 by Joe Kristan

As Year-End Deadline Looms, Independent Tax Preparers Continue Fight Against IRS Power Grab. (Institute for Justice).  IJ has prepared a two-minute video about their suit to stop the inane and futile preparer regulation program.

I wish IJ luck; if you are looking to make a last-minute charitable contribution, IJ is certainly a worthy cause.

 

TaxProf,   Fleischer: Not All Companies Would Welcome a Lower Tax Rate

Reaching an agreement to cut the corporate tax rate should be easy. Major figures from both political parties have expressed interest in reducing the tax from 35%, which is the highest rate among the country’s main trading partners. Corporations would generally benefit from paying less tax and having more cash to reinvest in new projects or pay in dividends to shareholders.

The 35% rate is more of a “sticker price” than a reflection of the average tax burden. Corporations can pay a lower rate by lobbying for special deductions and credits, employing aggressive transfer pricing strategies to shift profits offshore and structuring operations to minimize how much they pay in taxes in the United States.

You can see the same dynamic in Iowa, with its highest-in-the-nation corporation tax rate.  That’s just fine for the lucky and the well-lobbied, some of whom actually make money from the Iowa tax law through refundable tax credits, especially the Research Credit.  For a little guy without connections or lobbyists, it’s a great reason to set up in South Dakota.

Speaking of which:   Key Iowa senator questions tax-incentive programs (Quad City Times):

An influential state senator said lawmakers will have to take a harder look at the state’s tax-credit programs this session, including the economic development credits used to entice companies to build in Iowa.

Sen. Joe Bolkcom, D-Iowa City, who was reappointed to chair the Senate Appropriations Committee on Wednesday, held a Statehouse hearing on tax-credit programs Wednesday. He has been a vocal critic of the how the state uses incentive programs to compete against other states for economic development.

That will be a lot easier if it is accompanied by a drastic lowering of rates — or better yet, a repeal of the Iowa corporation income tax.  Yet there’s always a voice for breaks for those with connections — in this case Tom Sands (R-Wapello), Chairman of the Iowa House Appropriations Committee. From the story:

Sands said the people in Lee County and Woodbury County — for the most part — aren’t complaining about the incentives offered to the companies and are looking forward to the jobs they’ll bring.

That’s why it’s hard to get rid of these things.  Politicians point to the jobs they “create” by bribing companies to do what they would probably do anyway.  They don’t have to call press conferences for all of the anonymous businesses that never come to Iowa, or that never get started to begin with, because of Iowa’s expensive and byzantine tax law.

There is a better way:  The Tax Update’s Quick and Dirty Iowa Tax Reform Plan

 

Fiscal Cliff Notes:

Roberton Williams,  Paying 2013 Dividends in 2012 May Save on Taxes but Not for Everyone:

For instance, that extra dividend income could throw some shareholders onto the alternative minimum tax. Some retirees could see more of their Social Security benefits subject to income tax. Some families with children will pay more tax as their child credits phase out.

While some investors would be hurt by the accelerated dividend payouts, many low- and middle-income taxpayers could benefit.

Christopher Bergin,  More Cliffs (Tax.com)

Cara Griffith,  Despite Revenue Growth, States Must Plan for the Fiscal Cliff (Tax.com)

TaxGrrrl,  Senate Can’t Nail Down Budget, Does Have Time For Fruitcake

Patrick Temple-West,   Corporate taxes on table in cliff talks, and more.  I don’t get a good feeling about these guys trying to rewrite the corporate tax in two weeks.

Paul Neiffer,   How Much Would A Gas Tax Raise?

Anthony Nitti,   While The Fiscal Cliff Keeps You Distracted, The AMT Will Rob You Blind

 

Russ Fox,  Ref Fouls Out:  “As always, it’s far, far easier to just pay the tax you owe…but that thought rarely occurs to the Bozo mind.”

Joseph Henchman,  Study: Toll Collection Cheaper Than Conventionally Thought (Tax Policy Blog).  If electronic tolling is cheap enough to run, it could supplement or replace gas taxes.

Tax Trials:  Tax Question May Determine Supreme Court’s Position on Same-Sex Marriage

Missouri Tax Guy,   Some Easy & Effective Ways to manage Personal Finance

Trish McIntire,  Saving Electronic Records:

Download and save your electronic pay statement to your computer every payday. Save a copy of the invoice anytime you order online. The same goes for all credit card and bank statements that aren’t paper. Once you have a system started, you can start duplicating the paper documents. A home scanner can be inexpensive and a lifesaver.

Once you’ve created a tax documentation system that works for you, don’t forget to back it up and to safely get rid of the paper documents.

If it’s worth backing up, it’s worth backing up twice.

Jack Townsend,   Reasonable Doubt – Explaining It to a Jury.  Best not to have to.

Kay Bell,   French actor Gerard Depardieu moves to Belgian tax haven.  Belgium has a top income tax rate of 50%.  When that becomes a “tax haven,” that tells you how bad France is.

Ungentlemanly:  Fourth Circuit Upholds Conviction of Gentlemen’s Club Owner (Peter Reilly)

Russ Fox,  Ref Fouls Out.  A group of rec-league refs set up an identity theft-based tax fraud scheme.  It worked great, until suddenly it didn’t.    Russ wisely points out:

All told, the four individuals involved in the scheme must make restitution totaling $200,000.  As always, it’s far, far easier to just pay the tax you owe…but that thought rarely occurs to the Bozo mind.

These guys ran their scheme for 12 years before it blew up.  The longer you do something like this, the closer your chance of getting caught approaches 100%.

 

Share

Yes, state taxes do matter

Thursday, February 10th, 2011 by Joe Kristan

The Iowa Fiscal Partnership, the big-government think tank joint venture of David Osterberg’s Iowa Policy Project and the Child and Family Policy Family Center, has a new Peter Fisher report saying Iowa’s business taxes are just hunky-dory.
It concludes:

Business tax breaks are an expensive and inefficient way to attempt to stimulate a state economy. Because of the small effect of tax breaks on business costs, and the much larger importance of other production costs and location considerations, tax breaks will have little if any positive effect on private sector employment.

I would agree with that conclusion if “business tax breaks” meant special interest “incentives” like the Iowa Film Credit program or the “green jobs” tax rebates proposed yesterday by Democrats in the Iowa legislature. Where the Fisher report goes off the rails is the way it treats reductions in Iowa’s highest-in-the-nation corporation tax rate as just another “tax break.”
Details matter, and marginal rates matter more than most. Marginal rates are the ones that affect the start-up, the new business that is getting off the ground and can’t afford expensive tax help or fancy lobbyists to qualify it for tax credit pork. It’s not coincidental that Iowa has a poor record at creating and sustaining start-ups. Growing economies grow from the ground, not by stealing businesses from neighboring states. With a 12% rate kicking in at only $250,000 of taxable income — and 8% at only $25,000 — Iowa is not a good place for a struggling corporation.
If rates don’t matter, why doesn’t Peter Fisher just propose a 100% rate? They obviously do matter, and the only question is how much. If they matter at all, it’s not good to have the highest one.
Yes, get rid of “tax breaks” directed at politically-favored industries and companies. But use the savings to lower the tax rates for everyone. Let the little guy benefit from a simple and inexpensive to comply with tax system. Stop taxing businesses that are already here to lure and subsidize their competitors. Impossible? I say not. Keep reading to see how we can have both low rates and a simple system that doesn’t favor the powerful and well-connected.
Other coverage: Think tank report says Iowa businesses taxed lightly

(more…)

Share

Branstad: shift tax from corporations to slots players

Friday, January 28th, 2011 by Joe Kristan

20110128-1.jpgNew Iowa Governor Terry Branstad proposed to increase Iowa’s gambling tax while cutting the top corporation income tax rate in half. The Des Moines Register reports on his budget proposals released yesterday:

The proposal would increase casino taxes from 22 percent or 24 percent to 36 percent. The increase would raise an estimated $200 million and set the rate at one even level for all casinos and at a rate the Legislature originally intended, Branstad said.??The extra money collected from casinos would allow the state to lower its sliding-scale corporate income tax, now ranging from 6 percent for companies making $25 million or less in net income to 12 percent for companies that make $250 million or more.*
Branstad, who said all Iowans must take part in budget sacrifice, proposed lowering the corporate tax rate to a flat 6 percent.

*An alert reader points out that the Register’s rate schedule is a bit off. The actual rates:
6% to $25,000;
8%, $25,000-$100,000
10%, $100,000-$250,000
12% over $250,000

A reduction in Iowa’s highest-in-the-nation corporation tax rate is long overdue. So is a comprehensive clean-up of Iowa’s tax law, which is a rats nest of special-interest breaks and corporate welfare tax credits. While the Governor is proposing an improvement over the current system, funding it with a raid on the Polk County Board’s Prairie Meadows pinata passes up an opportunity to combine a corporate rate reduction with a cleanup of the corrupt system of special interest tax breaks. If the legislature is interested, there is another way.
More coverage at Radio Iowa.
Link: Budget Documents from the Governor

Share

Iowa tax cut debate misses the point

Thursday, January 27th, 2011 by Joe Kristan

An Iowa House subcommittee yesterday passed a bill calling for a 20% across-the-board tax cut in income tax rates. Its prospects for passage are uncertain, and the Governor hasn’t yet come out for it. Radio Iowa says the bill would reduce state revenues by $204 million. Meanwhile, a proposal for a repeal of the corporation tax is believed to be circulating.
Reaction divides on predictable lines, according to the Radio Iowa report:

John Gilliland of the Iowa Association of Business and Industry told lawmakers over two-thirds of Iowa businesses are partnerships, limited liability companies or sole proprietorships and therefore pay individual income taxes.

Share

New name, same old stuff

Tuesday, January 25th, 2011 by Joe Kristan

Governor Branstad

Share

Why some corporations don’t want lower tax rates

Monday, January 24th, 2011 by Joe Kristan

Whenever tax reform is proposed — I mean cutting the rates, broadening the base, and simplifying the system — opponents will always find corporations against tax cuts. Howard Gleckman explains this seeming paradox at TaxVox:

Keep in mind the statutory tax rate in the U.S. is 35 percent, but companies can often lower their bill thanks to dozens of deductions and credits. At one end were the winners: Cisco reported an effective income tax rate of 19.8 percent, Johnson & Johnson 22 percent, and GE just 3.6 percent. At the other end: Wal-Mart paid 33.6 percent, and Disney paid 36.5 percent

Share

Yes, Jason, Iowa does have a poor business tax climate.

Thursday, October 28th, 2010 by Joe Kristan

Des Moines Register reporter Jason Clayworth is moved by Iowa’s poor ranking in the current Tax Foundation State Business Tax Climate Index to ask: Does Iowa really have a poor business tax climate? He cites a 2005 report by the leftish think tank Economic Policy Institute that criticizes the Tax Foundation’s approach.
The Tax Foundation is perfectly capable of defending their own methodology; I’ll just point out what I see in doing business returns for Iowa and elsewhere for clients operating in most states.
Compared to most other states, Iowa truly does have high tax rates. Our corporate rate is the highest in the entire country — the second highest when the partial deduction for federal taxes is taken into account — and our individual tax rate, even after federal deductibility, is higher than that of all our neighbors except for Minnesota.
Iowa’s taxes are very complex. You have to compute both regular tax and alternative minimum tax for Iowa, and a third computation can apply for low income individuals. There are many differences between Iowa and IRS tax rules. Iowans have to cope with dozens of narrowly-crafted deductions and loopholes, and some weird addbacks, to compute their tax.
Iowa’s taxes are grossly inefficient. Mr. Clayworth reports:

Iowa has a top corporate income tax rate of 12 percent, the highest in the nation. However, the tax applies only to in-state sales and, along with numerous tax breaks, few companies pay the top rate, said Mike Lipsman of the state revenue department. In the fiscal year that ended June 30, the state collected less than $190 million from the tax, less than 4 percent of the state

Share