“Ultimate Swiss Army Knife” image courtesy redjar under Creative Commons license.
The Iowa income tax as Swiss Army Knife. The Iowa Senate Veterans Affairs Committee yesterday sent to the floor a proposal for up to $1,500 in tax credits for hiring an Iowa resident who is “a member of the national guard, reserve, or regular omponent of the armed forces of the United States” for a job of at least 30 hours a week. The bill would also give an additional $500 tax credit for each year the employee is called to active service for at least 30 days.
SSB 1064 cleared the committee unanimously. After all, who would vote against the “Hire a Hero Tax Credit?” But this is a classic example of a feel-good tax provision that clutters the tax law, is very difficult to enforce, and would not accomplish enough to be worth the trouble.
Nobody will hire an employee just to get a $1,500 tax credit. You hire somebody because you have work to do. Because it’s so hard to find and keep good employees, you hire the person you think is most likely to work out; the cost of a hiring mistake can be a lot more than $1,500. It will be hard to enforce — especially the provision saying the credit is unavailable if the new employee replaces another “eligible employee.” Will the state really examine that? Like many credits, it won’t change behavior; it will just be harvested by taxpayers who would have hired the same military people anyway.
Still, why not make a nice gesture to show our voters how much we care? Because every feel-good tax break has a cost. It costs money to comply with and enforce. It also creates a new anti-tax reform interest group; any attempt to clear away expensive and ineffective tax breaks to make a better tax system for everyone will be fought by those few that collect it. It makes a good tax system for everyone just a little bit harder.
The primary purpose of the tax law is to finance government operations. When it become a Swiss Army Knife of public policy, it becomes a little less effective at its real job every time you add a new gadget.
Swiss Bank corpse fined $58 million for tax cheating. The Wegelin Bank, which is closing as a result of its legal troubles, was sentenced yesterday to pay a $58 million tax evasion fine for helping clients evade U.S. taxes. Robert W. Wood has more.
Patrick Temple-West, Wegelin withers under U.S. tax scrutiny, and more (Tax Break)
While whistleblower Bradley Birkenfeld had a big role in bringing down the Swiss bank tax evasion industry, the IRS continues to resist paying out whistleblower awards. While Mr. Birkenfeld scored $104 million for his snitching, Lynnley Browning reports that the IRS remains loath to pay for information:
In January, Sen. Charles Grassley, the 79-year-old Iowa Republican, chastised acting IRS commissioner Steven Miller over his recent proposal to restrict the agency’s whistleblower program, already an object of criticism since its creation in 2006. The proposed curbs, Grassley wrote in a letter to Miller, showed one thing: that the IRS and its boss, the Treasury Department, “view whistleblowers with hostility.”
What exactly is at issue? The current whistleblower rules say a tipster can collect a reward of 15%-30% of proceeds brought in as a direct result of a tip. The dirt has to involve tax evasion of at least $2 million or tax fraud by an individual making at least $200,000 a year.
Miller’s proposed restrictions will likely shrink payouts. Among the curbs: making it nearly impossible for whistleblowers to share in rewards stemming from a company’s inflation of losses, and excluding from rewards any money brought in from so-called Fbar fines.
Apparently the IRS would rather spend its time making experienced preparers take stupid open book tests for permission to continue what they have been doing for years than to actually pursue tax cheats. Only two whistleblower claims have been paid out, but the IRS feels it has plenty of time and resources to appeal the shutdown of its preparer regulation program.
William McBride, How do Taxes and Spending Affect Economic Growth? (Tax Policy Blog) “The worst option of all, according to a huge preponderance of evidence, is to replace the sequester spending cuts with higher income taxes.”
Russ Fox, IRS Opens for All. We can e-file all the forms.
TaxGrrrl,IRS Now Accepting All Individual Returns
Paul Neiffer, IRS Announces They Are Processing All Remaining Tax Forms
Jeremy Scott, Is the U.S. Tax Gap as Big as Italy’s? (Tax.com). “But numbers from a New York Times article about Italian tax evasion suggest that the United States isn’t doing much better than one of Europe’s most notoriously inefficient tax collectors.”
Linda Beale, Jenkins & Gilchrist attorney sentenced to 8 years for tax shelter work
Yes. Minnesota Tax Reform: Poorly Designed?? (Brian Strahle).
Kay Bell, Tax Carnival #114: March 2013 Tax Lions and Lambs
Good. Pennsylvania Is Trying to Ditch the Attest Hour Requirement for New CPAs (Going Concern). If you want to do tax work for a living, why waste two years doing audit work that you hate?
I don’t condone the behavior, but I bet every bus driver dreams it. From WQAD.com:
Two Iowa bus drivers lost their jobs after being accused of racing school buses filled with students.
According to police the two drivers were returning with students from a Valentine’s Day field trip when one driver turned the ride into a race.
The students were first graders from Iowa Falls. Nobody was hurt.
I might not make a very good bus driver. I’d probably always be racing…
Joe Kristan writes the Tax Update items, and any opinions expressed or implied are not necessarily shared by anyone else at Roth & Company, P.C. Address questions or comments on Tax Updates to
