Posts Tagged ‘State Business Tax Climate Index’

Tax Roundup, 4/3/14: Iowa Tax Burden ranks 29th. And: Koskinen doesn’t seem to get it.

Thursday, April 3rd, 2014 by Joe Kristan

The Tax Foundation yesterday released its annual ranking of “State-Local Tax Burdens.”  Iowa came in at 29th highest.

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The Tax Foundation explains:

For each state, we compute this measure of tax burden by totaling the amount of state and local taxes paid by state residents to both their own and other governments and then divide these totals by each state’s total income. We not only make this calculation for the most recent year, but also for earlier years due to the fact that income and tax revenue data are periodically revised by government agencies.

In this annual study, our goal is to move the focus from the tax collector (how much revenue is collected) to the taxpayer (how much income is foregone). 

This ranking differs from the Tax Foundation’s State Business Climate Index, where Iowa ranks a dismal 40th in business tax congeniality.  While the two sets of rankings have different purposes, together they tell us that Iowa’s tax system is very poorly designed.  It collects a middling amount of revenue with a system of very high rates, a boatload of preferences for the well-connected, and baroque complexity.  You could collect the same revenue with a much simpler system with lower rates, and without the inherent corruption of special breaks for special friends of the politicians.  That’s the approach of The Tax Update’s Quick and Dirty Iowa Tax Reform Plan.

 

Corporate welfare watch:

Senator fumes at idea to cancel tax credit (Des Moines Register)

IOWA SPEEDWAY: Governor Signs NASCAR Tax Break Bill (WHOtv.com)

 

This Koskinen isn't the IRS commissioner

This Koskinen isn’t the IRS commissioner

Koskinen bemoans IRS funding, but doesn’t commit to taking the obvious step to restore it.  IRS Commissioner John Koskinen gave a little speech yesterday at the National Press Club.  He pointed out how the IRS is being given massive new responsibilities for running Obamacare and implementing FATCA, but faces funding cuts.  What he didn’t point out was that the GOP-controlled house isn’t likely to change that as long as it thinks the IRS is acting as an arm of the other party.  He defended the plodding IRS response to Congressional investigators in the Tea Party matter, and he offered what looks to me like a defense of the new Section 501(c)(4) rules proposed by the prior Commisioner:

While I was not involved in the issuance of this draft proposal, because it happened before I was confirmed as Commissioner, I believe it is extremely important to make this area of regulation as clear as possible. Not only does that help the IRS properly enforce the law, but clearer regulations will also give a better roadmap to applicants, and will help those that already have 501(c)(4) status properly administer their organizations without unnecessary fears of losing their tax-exempt status.

That’s too cute.  The provisions of the proposal mirror the rules overturned by the Supreme Court in Citizens United, including a rule preventing any political activity in the run-up to an election.  These items show that the current rules are an attempt to get around the Supreme Court to restrict political speech.   That’s why they are poison to the Tea Party set.

Either he doesn’t get it, or he pretends not to.  If the Commissioner wants to restore trust, the minimum he needs to do is to withdraw the proposed rules and start over, and to stop slow walking the investigation.  Until he does, it’s futile to expect the GOP-controlled House to give him more funding.  He’s quickly running out of time to do so.

Update: Washington Post gives Koskinen 3 Pinoccios: IRS chief: No ‘targeting’ of tea party groups, just ‘inappropriate criteria’     (Via Instapundit)

 

20140321-3TaxGrrrl, Taxes From A To Z (2014): S Is For Student Loans 

Kay Bell, 7 tax tasks to take care of by April 15

Annette Nellen, Filing season and rental activities

William Perez, Tax Reform Act of 2014, Part 3, Deductions

Stephen Olsen, Summary Opinions for 03/28/14, a roundup of tax procedure news, with a much-appreciated mention of the Tax Update post on the recent case on trusts and material participation.

Jim Maule, Tax Court and Eleventh Circuit Disagree on Interpretation of Section 36 Language.  I think the couple got a raw deal, but I’m sure glad the first-time homebuyer credit has gone away.

 

taxanalystslogoCara Griffith, Proceeding Cautiously With a Taxpayer Bill of Rights (Tax Analysts Blog):

The IRS is already struggling with administering our tax system. Perhaps issues of funding and employee training should be addressed before delving into a taxpayer bill of rights.

I disagree.  Rights come before enforcement.  We can start by a sauce-for-the-gander rule that requires the IRS to pay penalties it asserts to taxpayers if the taxpayers win on the contested issue.

 

Renu Zaretsky, Expirations, Compliance and Corporations.  The TaxVox headline roundup talks about Commissioner Koskinen’s speech and the status of the expiring provisions.

 

Russ Fox, Bozo Tax Tip #8: Nevada Corporations.  ”Now, if you’re planning on moving to Nevada incorporating in the Silver State can be a very good idea (as I know). But thinking you’re going to avoid California taxes just because you’re a Nevada corporation is, well, bozo.”

News from the Profession.  Sweatshop Saturdays: Rethinking Where We Work (Going Concern)

 

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Tax Roundup, 10/16/2013: Extension season is over, now what? And the joy of infinite marginal tax rates.

Wednesday, October 16th, 2013 by Joe Kristan

20111040logoI hope you don’t have to.  Filing Tax Returns after the October 15th Deadline (William Perez):

You’ll need to mail in your return to the IRS, whether you prepare the return yourself or hire an accountant. That’s because the IRS’s electronic filing servers start going offline after October 15th to prepare for the next filing season.

If you are filing after October 15 this year, my first advice is to file quickly, as you are likely to never file if you don’t get it done now.  My next advice is to make sure it doesn’t happen next year.

Most people who file late make it harder than it needs to be.  90% of the stuff that could possibly go on their returns comes from third parties — things like W-2s, 1099s, mortgage interest and property tax statements, and thank-you notes from charities.  People who can’t seem to file on time should get a big envelope.  They should put these items in the envelope as they come in starting in early January.  They should seal the envelope on February 28 and give it to their preparer.  For most taxpayers, that is all you need to get a reasonably accurate return.

The procrastinators want to go through their checkbooks and find every last $10 charitable gift, and then they never get around to it.  When they finally do, it’s almost certainly a poor use of their time, and when it causes them to file late, it costs them a lot more than that last $10 deduction will save.

Related:  2012 Tax Season Officially Bites the Dust (Paul Neiffer)

 

 

Implicit marginal ratesAlan Cole, Obamacare Puts Infinite Marginal Tax Rates in Action (Tax Policy Blog):

The moment your modified AGI reaches 400% of the poverty line, you instantly lose a subsidy that could easily be worth $15,000. This is a discontinuity in public policy with respect to income. It is a place where an infinitesimal change can result in disastrous consequence for a taxpayer. At 400% of the poverty line, the marginal tax rate is infinite.

It’s an extreme example of the way means-tested welfare benefits can impose high hidden tax rates on poor and middle class taxpayers — punishment ignored by advocates of higher benefits in the name of “compassion.”  More from Arnold Kling.

 

Tony Nitti,  A Quick Look At Expiring 2013 Tax Provisions: What To Do Before Year-End

TaxProf, The IRS Scandal, Day 160

 

Kyle Pomerleau, What is the Debt Ceiling and Why Does it Matter? (Tax Policy Blog) ’

Howard Gleckman, The U.S.May Not Default on Friday But Washington Is Still Playing A Dangerous Game

Joseph Thorndike, Debt Limit Fights Are All the Same – Except for This One (Tax Analysts Blog)

But in fact, the nation’s fiscal shortfall can’t be permanently finessed with any sort of measures, be they ordinary, extraordinary, or even superhuman. Default will happen — the only question is when.

Have a nice day.

 

 Jason Dinesen,  If EAs are Liechtenstein and CPAs are the U.S., What are the Unenrolled?   That’s not fair to CPAs; I don’t know any who’ve been shut down for the last two weeks.

 

Leslie Book, Potential Storm Over Removal Power of Tax Court Judges (Procedurally Taxing):

Kuretski is like one of the many thousands of CDP cases where the parties disagree on some aspect of a collection determination, but also has one very big wrinkle: the taxpayers are using the case as a vehicle challenging the constitutionality of the President’s powers to remove Tax Court judges under Section 7443(f).

I didn’t know the President could do that.

 

2014 State Business Tax Climate IndexTax Justice Blog, State News Quick Hits: Criticism of “Business Climate” Rankings Grows, and More.  Most of the criticism comes from politicians in states with poor business tax climates, and their allies, for some reason.

 

Brian Mahany, High Intrigue in Florida FBAR Trial!

Lush Caribbean islands, secret unreported Swiss accounts, tens of millions of dollars and a husband who disappears into the night. Is this the plot of a new best seller suspense novel? No! It’s some of the events unfolding in a Ft. Myers federal court room where prosecutors say that Patricia Hough conspired to defraud the IRS and filed false tax returns.

I prefer a boring life, at least compared to something like this.

 

Kay Bell, Supreme Court says ‘no’ to NY strip club’s tax relief plea.

The Critical Question: Do Women in Accounting Really Have More Opportunities Than They Did Ten Years Ago? (Going Concern)

 

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Tax Roundup, 10/10/13: Climate change edition. And great moments in web design!

Thursday, October 10th, 2013 by Joe Kristan

Iowa has moved out of the bottom 10 in the Tax Foundation’s State Business Tax Climate Index for 2014.  That’s the good news.  The bad news is that it’s not the result of Iowa’s tax climate improving, but because Connecticut’s got worse.

 

2014 State Business Tax Climate Index

Iowa’s 49th-place rating for Corporation taxes accounts for much of Iowa’s poor showing.  Iowa has the highest stated corporate tax rate, at 12%.  It has a state corporation alternative minimum tax and is full of complexity — yet is so full of loopholes and carve-outs that it generated only around $425 million of Iowa’s $7.8 billion in 2012 tax revenues.  By comparison, Iowa’s (also complex and loophole-ridden) individual income tax generated over $3 billion of that revenue.

If Iowa's income tax were a car, it would look like this.

If Iowa’s income tax were a car, it would look like this.

Iowa’s Association of Business and Industry has made improving Iowa’s business tax climate its legislative priority for the upcoming session.  Here’s what I think we need:

- Repeal of the futile Iowa corporation income tax.

- Repeal of every last economic development credit, including the refundable research credit and especially including enterprise zone and similar credits.  No company is so important that it should be receiving cash subsidies in excess of taxes paid to Iowa.

-  Drastic simplification of the Iowa individual tax, including repeal the deduction for federal taxes and of as many special breaks and credits as possible, in exchange for rates of 4% or lower.

In other words, the Tax Update’s Quick and Dirty Iowa Tax Reform Plan.  We can do a lot worse — in fact, we do now.

Related:

Russ FoxThe 2014 State Business Tax Climate Index: Bring Me the Usual Suspects.  ”And for those who think that taxes don’t matter, I’m in Nevada as a result of taxes and California’s miserable business climate.”

TaxGrrrl, Go West, Young Man: Best States For Businesses Are In The West

Joseph Hechman and Scott Drenkard, A Response to Matt Yglesias on the 2014 State Business Tax Climate Index (Tax Policy Blog):

There is however a brief blog post by Slate’s Matt Yglesias that went up this morning, which is along the lines of (1) there’s businesses in California and New York, (2) Tax Foundation criticizes California and New York for their tax policy, so therefore (3) taxes don’t affect business and individual location decisions. Center for Budget and Policy Priorities’ affiliates have already started spreading around Yglesias’s post on Twitter, and we imagine it will show up in other places.

The answer to this is easy. Those high-tax states also have other non-tax qualities—and often legacy investments and industries—that overcome the obstacle of a broken mess of a tax system for many businesses and individuals.

Taxes aren’t everything, but they’re definitely something.

 

 

The Tax Foundation has helped draft a new tax reform proposal for Nebraska. Some thoughts from David Brunori in A Solid, Albeit Mild, Tax Reform Proposal:

The primary plan is relatively straightforward. It is revenue neutral, reduces personal and corporate income tax rates, reduces incentives, expands the sales tax to more services, and simplifies administration. Moreover, belying the assertion that conservatives hate poor people, it doubles the earned income tax credit, greatly increases the personal exemption, and indexes the tax rates. In other words, the plan is consistent with virtually every notion of sound tax policy. It would make the Nebraska tax system fairer, simpler, and more conducive to retaining people and firms.

I think increases in the earned income credit are unwise because their high hidden marginal rates as taxpayers improve their incomes serve to punish emergence from poverty.  Still, the plan would be a big improvement for Nebraska — and for Iowa, for that matter.

 


Tony Nitti, Custom Homebuilders Are Subject To Section 263A And A Primer On The UNICAP Rules.  “Today is the day we discuss Section 263A, among the more dry topics in the driest area of law known to man”  I covered the case Tony writes about here.

Jason Dinesen, Basics of the Iowa Pension Exclusion

Kay Bell, Avoid common mistakes on your extended Oct. 15 tax filing

Paul Neiffer, Watch our for FBAR.  As Paul points out, you don’t have to be even trying to hide anything from the IRS to get clobbered.

 

 

Wikipedia image courtesy Tallent Show under Creative Commons license

Wikipedia image courtesy Tallent Show under Creative Commons license

Jack Townsend, IRS Information on Operations During Government Shutdown 

William Perez, IRS Shut Down, Week 2


Peter Reilly,  Blame It On the Lawyers – Creating Basis Out Of Thin Air Not The Taxpayer’s Fault   

 

TaxProf, The IRS Scandal, Day 154

Howard Gleckman,  It is Never Good When the U.S. Treasury Gets Compared to Brazil (TaxVox)

Tax Justice Blog, Stop the Presses: Apple Has Not Been Cleared on Tax Avoidance Charges.  So they should seek out new taxes to pay?

Keith Fogg, Vince Fumo: Local Political Corruption Meets Tax Procedure (Procedurally Taxing)

 

Going Concern, The Definitive Guide to Accounting as a Second Career.  Maybe I should consider that.

 

Janet Novack, Dumbest Identity Thief Ever? ”He contacts police looking for wallet he lost stuffed with debit cards issued in 13 stolen names.”  Yes, he may be dumb, but what does it say about the IRS that he and other dummies are stealing $5 billion of our money through identity theft fraud annually?

Great moments in web design.  From Instapundit: “HEALTHCARE.GOV NOT ONLY THE WORLD’S WORST WEBSITE, it’s also the world’s most expensive, with a price tag of $634,320,919.”  The Tax Update website cost approximately 1/400,000 of that, and we may have enrolled as many folks in Obamacare as Healthcare.gov has so far.

 

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Tax Roundup, 10/10/2012: Happy Spiro Day! Also: Iowa’s business tax climate still frosty.

Wednesday, October 10th, 2012 by Joe Kristan

The Tax Foundation released its 2013 State Business Tax Climate Index.  Iowa dropped one place, to 42nd, switching places with Maryland in the bottom 10.  Iowa’s poor score has much to do with its terrible 49th-place ranking for corporation income tax.

Iowa scores badly on its corporation tax on a number of fronts:

- We have the highest stated corporation tax rate, and the second-highest effective rate taking the deduction allowed for half of the federal corporation income tax.

- Iowa has its own state corporation alternative minimum tax.

- Iowa no longer allows a corporation net operating loss carryback, distorting the tax on cyclical businesses.

- Iowa’s tax code is distorted by “incentive” tax credits that tend to favor pet industries and the well-lobbied.

Here’s what the full Tax Foundation report says about incentive tax credits (my links and emphasis):

Many states provide tax credits which lower the effective tax rates for certain industries and/or investments, often for large firms from out of state that are considering a move. Policymakers create these deals under the banner of job creation and economic development, but the truth is that if a state needs to offer such packages, it is most likely covering for a bad business tax climate. Economic development and job creation tax credits complicate the tax system, narrow the tax base, drive up tax rates for companies that do not qualify, distort the free market, and often fail to achieve economic growth.

Recently Iowa City policy analyst Peter Fisher wrote an op-ed piece saying that Iowa’s corporation buisness climate is just great, largely on the basis that it doesn’t collect much tax.  A big part of the reason it doesn’t collect much is the special breaks granted to favored businesses by smokestack-chasing politicians.  The Tax Foundation notes that these “economic development incentives” don’t work, citing the work of none other than Peter Fisher. 

The Tax Update’s Quick and Dirty Iowa Tax Reform Plan has a better approach to state business tax policy.  Key points:

- Abolish the state corporation income tax.

- Abolish all economic development tax credits and special deductions.  You name the special break, I’m against it.

- Lower the personal income tax rate to 4% or less with the money saved by eliminating complicated deductions, tax credits and subsidies.

Iowa’s political leaders –  both parties — trip over themselves throwing tax credits and special breaks around.   But does anybody think that “no corporate tax” wouldn’t be a better way to attract and grow industry than “we have dozens of special tax breaks if you know the right people”?

Related:

Tax Roundup, 9/27/2012: Misdirected charity edition.  Also: No, Iowa, you don’t have a good tax climate.

TaxProf,  2013 Business Tax Climate: Chilliest in Blue States

Russ Fox,  Why I’m Happy to be in Nevada and Not in California

Roberton Williams,  Marginal Tax Rates Matter More than Average Tax Rates (TaxVox).  This is relevant to Peter Fisher’s argument that Iowa’s highest-in-the-nation corporation taxa rate doesn’t matter because Iowa’s loopholes let so much revenue slip through.  It’s the rate on the next dollar of income that affects decisions.

 

Thirty-nine years ago today, Spiro Agnew resigned the vice-presidency to pursue other interests, but mostly to plead guilty to tax evasion.   The Washington Examiner reports:

He was accused of receiving kickbacks from contractors while he was governor of Maryland. He claimed the charges were “damned lies” and eventually pleaded in federal court in Baltimore to no contest to not paying taxes on $29,500.

As part of his plea deal, Agnew agreed to resign from office. He was sentenced to three years’ probation and fined $10,000. He was disbarred.

Coincidentally (I think), the debate between the two major party Vice-Presidential nominees is tonight.

In other crime news:

Judge rejects Wasendorf’s bid for jail release (KTTC.com).  The confessed embezzler couldn’t convince the judge that a prison term that will keep him behind bars past his 100th birthday might be a reason he might flee.

It’s not just Harleys:  Sturgis surgeon convicted of income tax fraud, faces prison, reports the Mitchell Republic:

A federal jury has convicted a Rapid City surgeon on 13 felony charges related to income tax evasion. 

Edward Picardi, of Sturgis, was accused of sending millions of dollars of income out of the country and filtering the money through offshore accounts to avoid paying taxes on it. His trial lasted three weeks.

Sturgis would seem like a funny place to look for the Tax Fairy.

 

 

Regarding yesterday’s news about the West Des Moines payroll firm that apparently has not been remitting client payroll taxes timely:   Victims in Alleged $3.8 Million Payroll Fraud by West Des Moines Company Coming Forward.  West Des Moines Patch reports that the payroll firm founder:

…is the subject of a first-degree theft and fraud investigation, according to a report on file at the West Des Moines Police Department.

In that report, Des Moines contractor Priority Excavating claimed losses of $850,000 the company paid InFocus Partners’ subsidiary, ILC Staffing Inc., to administer its payroll.

Owner Tobias “Toby” Torstenson told police Detective Tom Boyd that he was contacted by the IRS and informed his company has not paid federal taxes since 2009.

Torstenson paid the money to InFocus, who was supposed to forward it to the IRS but never did, the police report said.

The IRS will still want the taxes from clients that have forwarded them to the payroll provider.  If you outsource your payroll compliance, sign up for EFTPS so you can verify  online that your payroll provider is remitting your payments.

 

Kay Bell,  Mortgage interest, charitable donation deductions are safe, says Romney

Dan Meyer,  Presidential Debates and Changing Accountants

TaxGrrrl,  9 Tax-Related Myths About Selling Your Home

Jack Townsend,  Render Unto Caesar — Another Intersection of Alleged Religion and Tax

Margaret Van Houten, ACTEC Wealth Advisor: A New App For Your iPad (Davis Brown Tax Law Blog)

Jason Dinesen,  Would a Name Change Help Enrolled Agents? Part 2

Robert D. Flach comes through with his Wednesday Buzz.

The Critical Question:  Will Farmers Have More “Repairs” This Year? (Paul Neiffer)

News you can use:  The IRS Is Not Obligated to Pursue Your Whistleblower Claim  (Anthony Nitti)

 

 

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If you grade it on a curve, it’s still an F

Thursday, June 16th, 2011 by Joe Kristan

Iowa’s tax climate gets a failing grade from the Conexus Indiana Manufacturing and Logistics 2011 report card. That makes sense; the Tax Foundation rates Iowa’s busness climate as the 45th best out of 50 states. That fails, even on a curve.
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Source: 2011 Conexus:Indiana Manufacturing & Logistics Report Card
Iowa fares better in other areas, but fares poorly in an area that could be fixed easily.

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Iowa, land of the more free than 37 other states

Monday, June 13th, 2011 by Joe Kristan

The Mercatus Center, a free-market think tank, ranks Iowa the 13th most free state in the union. Mercatus says their new study “comprehensively ranks the American states on their public policies that affect individual freedoms in the economic, social, and personal spheres.”
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Map via Mercatus Center
In other news, the company owning Chicago’s two big futures exchanges is thinking of fleeing Illinois as a result of thier recent tax increases (via Instapundit). With an extensive financial industry, a location in the center of the ag industry, and lots of available space downtown, Des Moines would be a natural home for the commodities exchanges. Iowa’s only drawback? The sixth-worst tax business climate in the 50 states. This is a a great opportunity for the legislature should do something useful in its session-that-won’t-die and enact the Quick and Dirty Iowa Tax Reform Plan right now. Even if it doesn’t seal the deal for the exchanges, it would still do a lot more for Iowa’s prospects than any tax bill they’ve passed in the past 20 years.
Pater Pappas has more coverage of the Mercatus Study.

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Meager evidence for climate change in Iowa

Wednesday, October 27th, 2010 by Joe Kristan

Iowa’s tax climate hasn’t improved since last year. Still, thanks to a major policy blunder in Connecticut, Iowa rose to 45th place in the 2011 Tax Foundation State Business Tax Climate Index, from 46th place last year. Connecticut fell from 38th place to 47th, pushing Iowa up a place, thanks to it’s new “millionaires tax.”
Iowa has the 4th worst corporation tax climate, thanks largely to our highest-in-the-nation 12% corporation tax rate and our complex corporation tax system. We’re ninth-worst in the indivdual income tax climate index, again thanks to our high rates and complex system.
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Iowa would look a lot better on this map using the Tax Update Quick and Dirty Iowa Tax Reform plan.
Additional Coverage:
Tax Policy Blog
TaxProf
Russ Fox

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