Posts Tagged ‘state tax policy’

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Tax Roundup, 1/30/2013: Bah. Humbug. And where states get their cash.

Wednesday, January 30th, 2013 by Joe Kristan

20130130-4Why so grumpy?  Because it’s the first “official” day of tax season as the IRS begins processing returns.   But only some of them.  The last-minute Fiscal Cliff tax law is delaying the processing of many forms, delaying most business filings until “late February or into March.”  They also have delayed processing of returns with education credits until sometime next month.

Oh, and the streets are a mess.

Kay Bell,  Tax filing on hold for taxpayers who need 31 federal forms

TaxGrrrl, IRS Opens For Business Today, Many Taxpayers Qualify To File For Free

 

Taking your money to give to the well connected.  From Taxing the Rich to Pay for Big Business Tax Credits by Veronique de Rugy:

 

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Taking from the small businesses, giving to the big business with pull.

 

Brian Gongol on the decision of Senator Harkin to not seek an umpteenth U.S. Senate term:

Wouldn’t it be wonderful if we could start with a blank slate and ask ourselves (as Iowans): Who is the smartest, most dependable, most thoughtful person we could send to an august body of decision-makers who are challenged with bringing wisdom and sobriety to the decision-making process of government?

Like somebody like that would stand a chance.

 

Why bother with a state corporate income tax?  While state income taxes are a reliable source of work for people like me, they do surprisingly little for the states, according to a new report released by the Tax Foundation yesterday.  Nationwide state corporate income taxes accounted for only 3% of 2010 state revenues.  In Iowa, it’s even lower.  Here are the revenue sources from Iowa and some nearby states:

Source: Tax Foundation

Source: Tax Foundation

 

The corporation income tax raises little revenue, is expensive to administer, is exploited by the well-connected and well lobbied, and is almost certainly a job-killer.  Why not go for a low-rate, low-loophole system like The Tax Update’s Quick and Dirty Iowa Tax Reform Plan?

TaxProf,  A Distributional Analysis of the Tax Systems in All 50 States, passing on a report from the Center on Budget and Policy Priorities says state tax systems are regressive.  Keep this in mind:

Source: Heritage Foundation/

Source: Heritage Foundation/

If you only look at the distribution of taxes paid and ignore the value of services and cash payments received, you miss a lot.

 

Janet Novack,  IRS Tips Won’t Protect You From Identity Theft Tax Fraud.

Jack Townsend,  Article on Importance of Jury Instructions in White Collar, including Tax, Crime Cases

Jason Dinesen, An Obligatory 1099-K Post for 2013

Trish McIntire,  Before You Sign.  A timely reminder that you are responsible for what’s on your return, even when you use a paid preparer.

Patrick Temple-West,  Mickelson and the sports star migration, and more (Tax Break)

William McBride, CRS: Tax Rates Do Matter for Profit Shifting (Tax Policy Blog)

Joseph Thorndike, The Income Tax Is Inquisitorial — Get Over It.  (Tax.com) May he have a good National Research Project exam in his future.

Robert Goulder, French Budget Minister Caught In Tax Probe (Tax.com)

That wouldn’t take much.  Payroll Tax Cuts May Boost the Economy More than You Think (Howard Gleckman, TaxVox)

 

Bad news, good news:  The Twinkie is Dead! Long Live the Twinkie! (Megan McArdle).

News you can use.  Tax Law Warning: Don’t Cut Mom a Rent Break (Jim Maule)

 

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Tax Roundup, 10/24/2012: Despite the Yankees, New York is #1!

Wednesday, October 24th, 2012 by Joe Kristan

A deserved number 1 rating for New York.  The Yankees may have left the postseason meekly, but their state still gets a richly deserved number 1 rating:  State and Local Tax Burdens Highest in New York (Tax Foundation):

 

It certainly is a better measure of New York’s tax system (bad) than the strange rating we reported on yesterday, ranking New York as the best system in terms of “Progressivity, adequacy and efficiency.”

Related: Russ Fox,  Tax Foundation Releases State & Local Tax Burdens

 

Jason Dinesen has an excellent analysis of how “targeted” tax breaks fail:  Small Business Health Insurance Credit — Nice in Theory But Not in Execution: 

There are many, many problems with this credit. One,  it’s quite possible that a business might be better off NOT taking the credit and instead just taking a deduction for the premiums paid. In other words, some businesses might owe more tax by claiming the credit! (I have run the numbers on this, and it’s true.)

In addition, the credit has unfriendly phaseouts: as soon as your employee count gets above 10 or average wages tick above $25,000, the credit starts to phase out. Plus, the calculation of full-time employees, and the calculation of the credit in general, is cumbersome.

With these things in mind, it’s no wonder that most businesses aren’t taking the credit.

The tax law is a big clumsy hammer.  When you try to use it as a scalpel, nothing good happens.

 

A parting gift to preparers from Doug Shulman:  IRS Sells Confidential Information of 850,000 Tax Preparers for $35 (TaxProf)

Jim Maule thinks its fine for the government to track your auto use: Defending the Mileage-Based Road Fee.  He trusts the government much more than it deserves.

Robert D. Flach posts his Wednesday Buzz roundup of tax posts.

 

Brutal Assault on Reason Watch: 

Kay Bell,  Tax talk sneaks into foreign policy debate

Patrick Temple-West,  Essential reading: Checking tax facts from the presidential debate, and more (Tax Break)

Howard Gleckman,  The Ten Biggest Differences between the Romney and Obama Tax Plans (TaxVox)

Philistines.  NY’s Highest Court Rules 4-3: Lap Dances Are Not ‘Art’ and Thus Not Exempt From Sales Tax  (TaxProf).  More from Peter Reilly and Anthony Nitti. Lest you think this is of interest only to the boy bloggers, Adrienne Gonzalez posts Majority of New York Court Rules Lap Dances Taxable; Questions the Artistic Integrity of Strippers Everywhere.

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Tax Roundup, 6/19/2012

Tuesday, June 19th, 2012 by Joe Kristan

20071101-5.jpgIowa cracks down on marshmallow scofflaws.  Radio Iowa reports:

Victoria Daniels, at the Iowa Department of Revenue, briefed a state legislative committee. “It’s very important that the department maintains its compliance pretty much to the letter and what this rule has to do with is the definition of candy,” Daniels says.

Under the revised guidelines, candy-coated fruit, candy-coated popcorn and marshmallows will now be called candy and taxed accordingly. One lawmaker asked about a snack he was munching on.

“That’s candy,” she says, laughing. “Chocolate-covered peanuts, that’s candy.” States can choose whether to tax groceries. Iowa does not. Retailers will also be advised that energy bars may need to be taxed if they don’t contain flour.

The distinction between candy with flour and candy without is a critical part of Iowa tax law, without which the whole edifice would collapse.  If Milky Way (with flour) and Milky Way Midnight (flour-free) were taxed the same, next it will be dogs and cats living together.

But government spending has been cut to the bone!  Tax Policy Blog releases an eye-opening map of the real increases in state spending from 2000 to 2010, inflation-adjusted, per capital.  Shockingly, Alaska’s real increase in state spending over that period was 17%.  More shocking:  That was the smallest increase in real spending by any state.  Iowa was #31, at a 34% increase in real state spending.  Oklahoma lapped the field with a real spending increase of 74%.

Map via Tax Policy Blog

Robert D. Flach interviews Enrolled Agent Trish McIntire.  Robert is also interviewing a lawyer and a CPA as he tours the universe of tax preparation. Trish has this useful observation:

There is no real hierarchy in the designations for a taxpayer when it comes to tax preparation. The ability and interest to do a type of return depends on the preparer and their practice. 

Robert will represent “unenrolled” preparers himself.

Trish talks about the Office in Home Deduction at her own blog.

Janet Novack: Target Date Funds And Do-It-Yourselfers Both Beat Brokers’ Advice In 401(k). 

Kay Bell: Do you know how much you pay in federal, state and local taxes?

 

But it already is! “Professor Todd Henderson supports the Buffett Rule but says it should be voluntary” (Peter Pappas). Nothing is stopping Warren from writing a big check to the Bureau of the Public Debt right now.

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Tax Roundup, 5/24/2012: Vikings pillage taxpayers, Giant, Eagle choose not to help, and why it’s harder to do taxes than to eat right.

Thursday, May 24th, 2012 by Joe Kristan

Like the Vikings of Old: Pillaging Minnesota’s Budget (Tax Policy Blog):

This week in Minnesota politics has been instructive in what kinds of projects warrant state money and attention.  Governor Dayton signed a bill approving the construction of a new stadium for the Minnesota Vikings which he boasted would create thousands of jobs and would not use “a single dollar of General Fund tax revenues“. The state agreed to pay $498 million of the $975 million price tag for the new stadium, with $150 million of their contribution coming from the revenues of Minneapolis’s “hospitality tax” (a sales tax surcharge) and $348 million from electronic pull tabs.

Dayton championed the deal despite the growing body of research that, as academics have observed, “contains no evidence supporting the idea that sports facilities are important engines of economic growth.” That is in part because, as analysts at UBS note, the economic analyses used to support sports stadiums tend to over-estimate the benefit of stadiums by ignoring the substitution effect; individuals who would travel to spend money on live music and restaurants in the downtown area instead spend them on the professional sports team. 

It’s similar to the way Iowa’s economic development officials say they create jobs with tax credits, ignoring the jobs lost by the unsubsidized competitors of the corporate welfare recipients, and the economic activity that would have occurred had the state not taxed the money from us to give away in the first place.

$452 billion tax hike in 2013: Taxmageddon by the numbers (Tax Break):

The expiration of tax breaks like the 2001/2003/2009 tax cuts, as well as the payroll tax cut, estate tax breaks, the R&D tax credit for businesses, combined with the cost of the Patient Protection and Affordable Care Act (“Obamacare”), and other sundry items, will add up to the overall tax increase in 2013 of $451.8 billion.

Repeal of Tennessee Gift and Inheritance Tax Official (Tennessee Tax Guy).  “Without a true income tax, and now without gift and inheritance taxes, Tennessee will likely be viewed as one of the most taxpayer-friendly states of the nation.”  Are you listening, Iowa?  (No.).

Former Dwarf, Crow believed to be in compliance. Former Giant, Eagle Fails to File Tax Returns (TaxDood)

 TaxVox: A Path Forward on Tax Reform.  We’ll go down that path when there are no others left. 

Peter Pappas:  I Am Aaron Worthing (or My Contribution to “Everybody Post about Brett Kimberlin Day”). Is a convicted deomestic terrorist using a 501(c)(3) and celebrity money to threaten and silence political opponents?  More here.

Brian Strahle: Teeter-Totters, Musical Chairs and Tug of Wars: The World of Multistate Income Taxes

Anthony Nitti: Doctor Done In By Tax Court’s “Too Good To Be True” Logic.  The Tax Court says that there was no reasonable cause to file returns based on the word of a promoter of a Sec. 419 tax benefit scheme.

Kay Bell: Beware unsolicited — and questionable — property tax payment plans

More Americans are very confused: More Americans Believe It’s Easier To Understand Tax Than How To Eat Healthy (TaxGrrrl)

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Yes, state taxes matter

Thursday, March 15th, 2012 by Joe Kristan

At least they do to Russ Fox, whose business was one of 254 that fled California last year. He explains:

Well, as one of those 254 businesses that fled the Bronze Golden State, I can say that Nevada has been a wonderful change. California may have a far better meteorological climate but from a business standpoint Nevada is far, far better.
What does California need to do to improve its business climate? Cut regulations, cut taxes, cut the pervasiveness of government. What are Governor Jerry Brown and the Democrats in Sacramento proposing? More taxes, more regulations, more of the same.
I

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It’s futile and wasteful. Why do they do it? To show they care.

Thursday, January 12th, 2012 by Joe Kristan

State corporation income taxes don’t work. Iowa’s corporation income tax has the highest rate in the country, but it contributes only about $366 million to the state’s $6 billion in tax revenues.
State tax expert David Brunori wonders why the states bother:

It’s not the fault of departments of revenue. Their staffs do Herculean work against well financed adversaries. But no amount of enforcement dollars will change the fact that the state corporate tax laws do not work. And truth be told, they never will.
The tax does not raise a lot of revenue, a mere $36 billion (out of $1 trillion of state revenue) in 2010. But it consumes an inordinate amount of resources. So we cannot say we impose the tax to raise revenue. There are better ways to do that. The corporate tax laws reward companies for building and investing in the state. That may be a good thing. But it belies the argument that the corporate tax is designed to make companies pay for government services. And we are not ever sure who pays the tax. There is an increasingly influential school of thought that says the tax is borne by labor in the form of lower wages. If that is true, the tax can hardly be said to increase progressivity.

I think it’s for show. Politicians want to say they are sticking it to the big bad corporations, to assure the people who are really paying the bills with their sales taxes and property taxes that they are also going after the fat cats. Never mind that it’s futile and inefficient; it’s the show that counts. It’s like airport security that way.
In Iowa the contingent liability for tax credits — things like economic development subsidies, research credits and historic building credits — was $362.7 million for 2012. That’s almost the same amount as the net take from corporate taxes. Getting rid of both would do more for Iowa’s economy — and the “bottom 99% — than the tax credits and corporate tax ever will. But the usual caring suspects will bulldoze an Occupy encampment before they will let those evil corporations stop paying income taxes.
Related: This doesn’t look like the year they’ll fix Iowa’s income tax

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Iowa: bodies move in, income moves out.

Wednesday, December 14th, 2011 by Joe Kristan


The Tax Policy Blog has a map showing which states have gained and lost income via moves over the last year. An interactive calculator shows that Iowa lost 411 returns and $83 million in adjusted gross income from 2009 to 2010, while gaining 1,681 exemptions. More kids, fewer earners, in other words. Going back to 1993, Iowa shows a net loss of 79,546 returns and $4.2 billion in AGI.
Hey, Iowa legislators: this is a clue that Iowa’s tax system of high rates and dozens of economic development tax credits doesn’t work. It’s time for simplicity and low rates. It’s time for The Quick and Dirty Iowa Tax Reform.

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A deductible last ride in Virginia?

Wednesday, December 14th, 2011 by Joe Kristan

Few of us think of the tax implications of that last ride in the black Cadillac. The estate tax return allows a deduction for funeral expenses, but most of us aren’t blessed with $5 million estates.
Fortunately, a delegate to the Virginia General Assembly is thinking about it for us. He wants to provide a deduction for launching your mortal remains into space — if you use a Virginia space port, and you die between 2012 and 2020. Howard Gleckman has the scoop at TaxVox:

One firm, Celestis Inc, advertises several memorial spaceflight services. The low-end earth rise service is just $995 but that sounds like little more than a high-tech elevator ride. According to its Website, the trip “affordably launches a symbolic portion of cremated remains to space, and after experiencing the zero gravity environment, returns the individual flight capsules and modules back to Earth.”
I

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Fleeing Paradise

Friday, December 2nd, 2011 by Joe Kristan

Tax blogger and poker player Russ Fox cashes in his chips at Casino California:

My tax bite is roughly 10% to California. For every dollar I make, ten cents goes to Sacramento. (Yes, I get a benefit from that in that state income tax is deductible on federal tax. However, because of the Alternative Minimum Tax even that benefit is capped.) For the past few years I

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Can buying a limited partnership make you taxable in other states?

Thursday, October 6th, 2011 by Joe Kristan

Yes it can. Brian Strahle has the scoop at Leverage/SALT.

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They stay because they can’t afford the gas to leave

Friday, September 2nd, 2011 by Joe Kristan

David Brunori, August 17, 2011: “Income Taxes do Not Lead to Out Migration”
Illinois Policy Institute report, August 19, 2011 (via Russ Fox):

I regularly deal with clients moving from Iowa to Florida, and the idea that taxes don’t affect where people choose to live strikes me as absurd. Of couse taxes aren’t the only reason people move to Florida; I understand that the weather is nicer there in February. But taxes are definitely part of the discussion. The weather is at least as nice in Southern California as in Florida, but clients with a choice (i.e., it’s not a job transfer) always end up in low-tax Florida.
People respond to incentives. Illinois has created an incentive to do business elsewhere. The only surprising thing about the tax increase hurting jobs is that some people are surprised.

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Beer again flows in Minnesota

Monday, July 25th, 2011 by Joe Kristan

The Minnesota State Government was shut down during almost my entire vacation there the last two weeks, until the threat of a beer shortage shocked legislators into action. The dire consequences:
- No fishing licenses were available.

Good thing nobody told the fish.
- The state parks were closed, so the usual weekly permits to visit state parks weren’t available for purchase. That meant visitors to the state parks parked along the roads and went in anyway.
Somehow we all survived. The Tax Policy Blog draws some lessons:

Lessons for other states (and for the federal government, with its debt ceiling deadline)? Depending on exemptions, shutdowns may not create political pressure to end them. The end result may not be satisfactory to anyone, certainly not after the costs of a shutdown showdown. A bigger budget than the last one may still be called a “cut.” Forcing a tiny percentage of people (i.e., high-income earners) to pay for the costs of government services to everyone may be a harder sell politically than it sounds.

Until the beer runs out, anyway.

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Is this the week the legislature will finally go home?

Monday, June 27th, 2011 by Joe Kristan

This article says the Iowa General Assembly may finally end their ridiculously long 2011 session this week. Whether they will allow taxpayers to claim the 2010 tax benefits they enacted at the end of the filing season on 2011 returns — rather than having to amend 2010 — remains up in the air.

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We have to raise taxes, we’ve cut spending to the bone

Monday, June 27th, 2011 by Joe Kristan

Peter Pappas: Ohio Toll Collector Paid $103,150 in 2010.

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Taxing the clouds away

Thursday, June 23rd, 2011 by Joe Kristan

How is revenue from “cloud computing” taxed by the states? If you sell “software as a service,” where do you have to pay taxes? Brian Strahle says:

Most states still don’t know how they are going to tax cloud computing. But one thing is certain, they are going to definitely try.

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He has 12 questions to ask if you are trying to figure out your state tax exposure in the cloud.

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Harold Hill pining for the fjords of Nevada

Monday, June 20th, 2011 by Joe Kristan

Tax Policy Blog: Nevada Film Tax Credit Proposal Dead
Why on earth would a state with no income tax be granting tax credits? Maybe they’ve learned something from Iowa’s mistakes.

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The bigger the taxpayers are, the harder the revenue falls

Thursday, June 2nd, 2011 by Joe Kristan

Politicians love to pay for goodies for everybody with money from almost nobody. That’s why taxes on “the rich” and corporations have a powerful allure — the rich guy is usually somebody else, and the corporation doesn’t vote.
Unfortunately, the rich guy is an unreliable source of revenue. If you count on a few wealthy taxpayers for a lot of your income, it will be a lot more volatile than a broader-based tax. States like California are learning this the hard way.
The Tax Policy Blog points a new study linking reliance on individual income taxes and taxes from corporations to state fiscal trouble:

Other factors being equal, a 10 percentage point increase in a state

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Mugging the traveler

Thursday, May 26th, 2011 by Joe Kristan

Some states hit traveling employees with income taxes even if they are working in the state for a single day. Congress is considering a bill to limit the ability to tax brief employee stays. Tax Analysts reports ($link):

H.R. 1864, the Mobile Workforce State Income Tax Simplification Act, would allow a state to impose income taxes on an out-of-state employee’s wages only if the individual spends more than 30 days working in that state during a calendar year. The threshold would not apply to professional athletes, entertainers, and other high-profile individuals.

These rules are a paperwork nightmare for employers and employees, and are widely ignored — but potentially very costly when the states catch non-filers. This sort of bill would be very helpful to business while costing states little. Naturally, state tax collection bureaucrats are appalled.
Speaking at a Congressional Hearing yesterday, a representative of the bureaucrats made their case:

The Federation of Tax Administrators opposed the current bill. Patrick Carter, director of the Delaware Division of Revenue and president of the FTA Board of Trustees, said the bill would create tax avoidance opportunities and unnecessarily intrude on state tax sovereignty.
Carter acknowledged that New York has the most concerns with the bill, with the state set to lose an estimated $80 million to $100 million annually if the proposal becomes law.

The 30-day rule would be a big improvement over current law, but the exception for “professional athletes, entertainers, and other high-profile individuals” is misplaced. They obviously want to pick LeBron James’ pockets every time he shows up to play the Knicks, but there are plenty of athletes and entertainers who aren’t LeBron James. Every traveling musician, seminar provider or minor-league hockey player would have the same reporting liability as LeBron, without the zillion-dollar income to pay compliance costs.
Link: HR 1864
Related: Franken

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Michigan dumps gross receipts tax in favor of corporation income tax

Thursday, May 26th, 2011 by Joe Kristan

Michigan’s Governor has signed into law a bill repealing Michigan’s awful gross receipts tax with a more traditional corporation income tax at a flat 6% rate. The legislation also eliminates a host of targeted tax credits. The Tax Foundation has more details here; Brian Strahle has more.
Getting rid of “incentives” to lower rates is also a great idea for the state with the highest corporation tax rate in the nation. The time is right for the Quick and Dirty Iowa Tax Reform Plan!

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Prove what that kid weighed two years ago!

Tuesday, May 17th, 2011 by Joe Kristan

Some of the same legislators who have made Illinois a model of fiscal flabbiness now propose to do their magic on Illinois’ physical fitness. David Brunori reports:

llinois Rep. Shane Cultra (R) has said publicly that parents of obese children should lose their income tax deductions. He thinks that will spur parents to get their kids to go on diets.

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As diet remedies go, this is somewhere between the Twinkie Diet and the State Fair Diet. Aside from the obnoxious intrusiveness of having such proven idiots tell you what to feed your kids, the practicalities are daunting. How do they plan to prove what your kid weighed during the tax year when audit time comes around? Do they really plan to weigh kids? Would they actually try to enforce this?
On the positive side, the resulting backlash would likely get rid of the existing legislators a lot faster than Illinois’ traditional turnover technique of Federal indictments.

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