Tax Update Blog: March 2007 Archives
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JENKENS AND GILCHRIST FUN FACTS
March 31, 2007
Amount paid by the fatally-wounded Jenkens and Gilchrist law firm as a penalty to the government for its tax shelter activities: $76 million.
Compensation reportedly ($link) paid from 1999 to 2003 to Paul Daugerdas, head of the Jenkens and Gilchrist tax shelter practice: $93 million.
More on the fall of Jenkens here.
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TAX TIP: FREE THE STUDENTS
March 31, 2007
If you have kids, it's wise to have your returns prepared together. With the "kiddie tax" now applying to 17-year olds, you often can't do the kids returns without having done the parents.
Once the kids are off to college, the tax law's "education credits" make it worthwhile to coordinate parent and student returns.
The "Hope Credit" offers up to $1,650 in tax reduction if you have qualifed higher eductation costs. The "Lifetime Learning Credit" offers up to $2,000 of tax savings. Both of these credits start to phase out when adjusted gross income hits $90,000 on a joint return, or $45,000 otherwise.
If parent income exceeds the phase-out amount, they might save money by foregoing the dependency exemption for the student. If they do, the student can claim the education credits. If the student has income from a summer job or school job, she might be able to use the credit when Mom and Dad can't.
You claim these credits on Form 8863.
This is another installment in our series of 2007 filing season tips. Look for a new one each day through April 17.
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CARNIVAL LAGGARD
March 30, 2007
I'm tardy at this, but I should note this week's blog carnivals. The Carnival of the Capitalists is at Political Calculations this week, while the Cavalcade of Risk is at The Sentinel Effect. Don't miss the Capitalist post "Sick Time Blues" from the Insureblog.
We're late, but the carnivals are still going strong.
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DON'T LOSE YOUR LOSSES
March 30, 2007
There are a lot of ways the tax law can keep you from deducting losses. Individuals can only deduct capital losses to the extent of their capital gains, plus $3,000. If you have losses from a business activity in which you are a passive investor - say, a partnership or an S corporation - you can't deduct net "passive" losses. Other rules limit losses based on your "basis" or your "at-risk" investment in a business.
The silver lining is that these losses aren't gone forever. They carry forward. Capital losses disallowed last year can offset capital gains this year. Disallowed passive losses carry forward to offset future "passive" income. Losses disallowed for lack of basis or "at-risk" investment offset future income from the same business.
When you have these losses, be sure to keep track of the carryforwards and use them in future years. Capital loss carryforwards are tracked on your Schedule D. Passive loss carryforwards are tracked on the worksheets for Form 8582. At-risk losses carry forward on Form 6198. There is no formal worksheet for carrying forward losses from basis limitations on partnerships and S corporations, so you need to track them separately.
When you do your return for this year, make sure you look at last years returns. These carryforwards could make a big difference in how you settle up with Uncle Sam April 17.
This is another installment in our 2007 Filing Season Tips series. Collect them all!
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SENATE BACKS CREDIT GIVEAWAY, 48-0
March 30, 2007
When both parties agree, it often means they're ganging up on us. That seems to be the case with SF 566, a bill that passed the Iowa Senate yesterday without dissent.
The bill increases the annual cap on Iowa building rehab credits to $20 million, from the long-oversubscribed $4 million. That's pretty straightforward.
What's sneaky is the way the bill also increases the value of tax credits that have already been issued for work already done or committed to. These credits are "refundable" if they exceed your Iowa tax without the credits; the state writes you a check. Up to now the refund has been discounted based on a formula in the Iowa code. This bill eliminates the discount, making credits already issued worth that much more.
Economic development credits may or may not be wise (I tend to think not), but even proponents of such credits don't support increasing them for work already committed. The credit was so oversubscribed under the old formula that they quintupled the amount allowed, so you wouldn't think it needed to be sweetened at all. But the Iowa Senate does, 48-0.
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I SPEAK FOR THE TEMPORARY TREES!
March 30, 2007
A bill introduced in the Iowa Legislature yesterday, HSB 299, would repeal the property tax exemption for "forests." This provision has become notorious as a tool for developers who buy land for future development and fill it with saplings, claiming a tax exemption until the time comes to bring in the bulldozers.
The bill comes in late in the session, so it probably won't pass, but at least somebody is on to this one.
Follow all 2007 Iowa tax legislation at our 20078 Iowa Tax Legislation page.
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TAX SHELTER PENALTIES BRING DOWN JENKENS AND GILCHRIST
March 29, 2007
Jenkens and Gilchrist rode the 1990s tax shelter boom to great wealth. Today they rode it back to earth.
The firm today agreed to pay $76 million in penalties to the IRS for its tax shelter activities - penalties that doom the firm. From a Department of Justice press release:
The firm has acknowledged not only that its tax shelter practice was fraudulent and caused serious harm to the United States Treasury, but also that the practice caused such harm to the firm’s reputation and revenues that it cannot survive as a going concern. The demise of Jenkens & Gilchrist demonstrates that a lucrative but fraudulent tax shelter practice may provide short-term financial rewards, but at a great long-term cost."
Wow. What a way to go out. While this will put a lot of Jenkens and Gilchrist attorneys on the street, the recriminations promise employment to other lawyers for years to come.
Paul Daugerdas, pictured above, was one of the Jenkens attorneys in the tax shelter practice; we blogged about one of his shelters earlier today. He probably isn't the most popular guy around the office right now.
The TaxProf has coverage and a full set of links.
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TAX TIP: SUPPORT YOUR NEIGHBORHOOD CHARITABLE DEDUCTION
March 29, 2007
The tax law allows you to get a deduction for donations of property to charities. Congress has tightened up on these deductions in recent years, so you need to make sure your paperwork is in order if you want to take a charitable deduction.
If you deduct a non-cash gift other than publicly-traded securities, and the gift is $5,000 or more, you need to have a signed valuation from a"qualified appraiser" before you can take any charitable deduction. A "qualifed appraiser" is an independent party who regularly performs appraisals for pay who is not related to the buyer or the seller. The appraiser has to give you a signed Form 8323 to attach to your return. Otherwise, no deduction.
Even if you have a smaller gift - say, you gave some clothes to Salvation Army - you still should have your paperwork in order. A Tax Court case handed down yesterday illustrates this. Minneapolatans James and Joan Soholt, like many taxpayers, gave household items to local charities. They carefully avoided round numbers by claiming a deduction for $3,492. They were less than careful in documenting their gift (emphasis added):
We next turn to petitioners' contributions of property. Petitioners introduced receipts indicating they donated clothing and other miscellaneous goods eight times in 2003. These receipts do not list the specific items contributed and simply note that petitioners donated a certain number of bags. Petitioners also introduced a worksheet they prepared when preparing their tax return that purports to list and value more specifically the items petitioners contributed. Mr. Soholt testified that petitioners estimated the value of the clothing they donated at one-half the original cost but also admitted he did not think used clothing was worth half as much as it was worth new. Petitioners did not introduce any evidence supporting their estimated value or regarding the quality of the donated items that would permit us to estimate its value.
While we are convinced that petitioners donated property to charity in 2003, petitioners have failed to provide any reliable evidence of the items they donated or their values. Petitioners are therefore not entitled to deduct any additional amount for charitable contributions of property other than the $89 respondent allowed.
So if you are taking a deduction for bringing bags of clothes to the charity thrift store, make sure you have better documentation than a list saying "5 bags of stuff."
Go here for our complete collection of 2007 filing season tips.
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IRS WINS CASE IN HEAVILY-MARKETED TAX SHELTER
March 29, 2007
The IRS won a "summary judgment" ruling on a version of the "BLIPS" tax shelter in a Chicago Federal courtroom yesterday. A district court judge ruled that the shelter, which involved inflating the basis of a partnership through a purchase of offsetting foreign currency contracts, didn't work. The judge discussed the procedural defense of the shelter ("Cemco") with a statement that could apply to many of the big-firm tax shelters of the late '90s:
As detailed below, Cemco’s theory consists of several nuanced procedural steps. Ultimately, however, the argument amounts to little more than a house of cards, for if any of the steps fail (and several do), Cemco’s entire position collapses.
The case has additional resonance because a version of this shelter is involved in the KPMG criminal litigation. This complete defeat for the shelter (including valuation penalties) may help support the prosecution's view of the shelters. This particular shelter, though, was the progeny of Paul Daugerdas, a Jenkens and Gilchrist tax attorney pictured here in happier times with Howie Mandel:
Jenkins and Gilchrist attorney with Howie Mandel at a charity ball. No deal, says the judge.
.
Cite: Cemco Investors, LLC v. United States, DC-Ill Case No. C 8211 (link courtesy of the TaxProf).
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DOUBLE-CHUMPING IN THE LEGISLATURE
March 29, 2007
Two bills were introduced that seem designed to make the good Iowans who save to pay for their kids' education and who pay their taxes on time feel like chumps.
Iowa City's Senator Bolkcom, the chief Senate taxwriter, introduced SSB 1334 to allow employers a credit for amounts used to pay their employees student loans. This is supposed to help get kids to stay in Iowa after school. So your kid worked summer jobs, studied hard, and even won a scholarship, while you saved and covered the rest of the tuition so you wouldn't have student loans? Chumps!
Meanwhile, Governor Culver's tax amnesty bill, HSB 298, was introduced in the House Ways and Means Committee. You got behind on your taxes, but you worked hard, lived frugally, and paid off your tax debts and penalties? Chump! says the Governor.
Follow all of the 2007 Iowa tax bills at our 2007 Iowa Tax Legislation page.
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TAX TIP: PROM TICKET CREDIT FOR IOWA
March 28, 2007
Today's filing season tip is Iowa-only. If you are lucky enough to have a teenager, you may qualify for one of the few prom-ticket tax credits known in the wild.
Iowa offers a "Tuition and Textbook Credit" of 25% of the first $1,000 paid per dependent for tuition and textbooks. These are defined loosely:
The cost of the following items are eligible for the credit:
* Books: books and other instructional materials used in teaching subjects legally and commonly taught in Iowa’s public elementary and secondary schools, including those needed for extracurricular activities
* Clothing: “non-street” costumes for a play or special clothing for a concert
* Driver’s Education: only if paid to the school
* Dues, Fees and Admissions: includes those paid for extracurricular activities such as activity fees; booster club dues; fees for track and cross-country; activity ticket or admission for high school athletic events; fees for a physical education event in school such as roller skating
* Materials: includes materials for extracurricular activities, such as sporting events, speech activities, musical or dramatic events, awards banquets, homecoming, prom, and other school-related social events
* Music: rental of musical instruments for school or band; music/instrument lessons at a school; sheet music used in a school; valve oil; cork grease; music books and reeds used in school bands or orchestras
* Shop class and mechanics class: cost of required basic materials
* Shoes: football, soccer and golf shoes; cleats for football shoes; track spike shoes
* Travel: non-travel fees for field trips if the trip is during school hours
* Tuition: the school must be accredited; amounts paid are not allowed if they relate to teaching of religious tenets or doctrines of worship
* Uniforms: band, hockey and football uniforms
You may be too old to go to the prom, but at least you can enjoy the tax credit for it. Take the credit on line 49 of the Iowa long form.
We are posting a tax tip each day for the rest of filing season. Collect them all here.
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WALTER ANDERSON GETS NINE YEARS
March 28, 2007
Walter Anderson, the telecom entrepreneur who pleaded guilty in the largest individual U.S. tax evasion case to date, received a nine-year prison sentence yesterday.
Mr. Anderson pleaded guilty to moving $450 million offshore to avoid taxes. Oddly, the sentencing judge declined to order restitution of the unpaid taxes, blaming a poorly-worded plea agreement. This requires the IRS to go through the civil court system in separate collection proceedings.
Given the size of the tax loss, Mr. Anderson could have gotten the maximum 10-year sentence requested by the government. He would have been eligible for a much longer sentence if he had been convicted of all charges in the initial indictment.
Links:
Washington Post
Bloomberg
TaxProf Blog
Complete Tax Update Walter Anderson Coverage
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'DESTINY' DESTINED FOR JULY VOTE
March 28, 2007
Project Destiny, the effort to give Central Iowa one of the highest sales taxes in the nation, will go up for vote July 10. Just to give voters more reason to trust our local officials with more tax money, the Des Moines Register reports that there may be additional indictments in the CIETC scandal:
A federal prosecutor expects more criminal charges that will target at least one new defendant in a central Iowa job-training pay scandal that already has produced charges against five people.
Assistant U.S. Attorney William Purdy estimates a 60 percent chance of new charges as early as May in the Central Iowa Employment and Training Consortium scandal, court records show. His prediction, made last week in a scheduling meeting with defense lawyers, is contained in a transcript obtained by The Des Moines Register.
CIETC was an agency operated by a group of local governments - just like the proposed Project Destiny board. The top three officials pulled $300,000+ compensation payments under the not-so-watchful eyes of board members including County Supervisor John Mauro and City Councilman Tom "Rubber Stamp" Vlassis. It's always good to be reminded how well our local officials are handling the money they have when they want more.
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I WOULDN'T BE BRAGGING EITHER
March 28, 2007
For some reason the daily emails from the Iowa House and Senate, listing bills introduced and noting their progress, have stopped. Now all we get are messy text files that make it much harder to identify bills of interest.
I hope the emails resume, but I can see why they wouldn't want people to know what they are doing.
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TAX TIP: REVIEW THE IRS BLUNDER LIST
March 27, 2007
The IRS yesterday issued a list of the most common tax filing errors. The Top Five are (courtesy of the Tax Prof):
1. Choosing the wrong filing status
2. Failing to include or using incorrect Social Security numbers
3. Failing to use the correct forms and schedules
4. Failing to sign and date the return
5. Claiming ineligible dependents
It's a good idea to give this list a quick review before dropping that return in the mail or down the e-file hole.
Link: Our series of 2007 tax season tips.
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DOWN MEMORY LANE WITH THE DEPARTMENT OF JUSTICE
March 27, 2007
The feds have been tying up loose ends on three old tax scams in recent weeks. These are all good midwestern scams, showing that tax fraud isn't just confined to the financial Gomorrahs on the coasts.
For starters, a Mitchell, South Dakota man, Kerwin Millear, pleaded guilty to tax charges involving the "Aegis" scheme to use trusts and management fees to illegally hide taxable income offshore.
Meanwhile, a principal of the Topeka-based "Renaissance - The Tax People" multilevel marketing tax scheme pleaded guilty to defrauding gullible customers of $70 million and causing a tax loss of $20 million. Todd Strand's plea resulted from his role as "national marketing director" for a "service" that sold through a multi-level marketing plan that told people they could deduct personal expenses. Given that size of tax loss, Mr. Strand could be going away for the full 10-year maximum sentence. Taxable Talk has more.
Finally, James Auffenberg, an Illinois car dealer, was indicted on charges of evading taxes through use of a Virgin Islands tax credit scheme. Several promoters of the deal were also charged. From the Department of Justice Press Release:
The indictment alleges that Mr. Auffenberg joined a partnership, Kapok Management, L.P., which was created and promoted by Ferguson and Fagan in the U.S. Virgin Islands. As part of the scheme, Kapok Management fraudulently used a Virgin Islands economic development program (EDP), designed to promote the development and diversification of the local economy and establish employment opportunities for island residents. Businesses which participated in the EDP, like Kapok Management, received a "beneficiary certificate" which granted them a 90% tax credit on federal and 100 percent exemption on local taxes. In order to claim the tax credit, the certificate holder had to earn income "effectively connected" with the conduct of a trade or a business in the Virgin Islands and be a bona fide resident of the U.S. Virgin Islands.
Ferguson, Fagan and Jackson allegedly promoted the scheme to wealthy individuals, who would join Kapok Management as limited partners. As part of that scheme, the limited partner formed single- member limited liability companies (LLC) in the United States and the U.S. Virgin Islands, respectively. The U.S. LLC entered into a management agreement with Kapok to purportedly manage the partner's stateside business and paid purported "management fees" to Kapok. Within approximately 3-5 days, the monies were returned to the limited partner as "partnership distributions" which were paid to the limited partner's Virgin Islands LLC, less a fee of 5 percent kept by Kapok Management.
According to the indictment, no management services were provided by Kapok Management to the mainland businesses. In addition, the amounts paid as purported "management fees" were determined by each limited partner, not Kapok Management, and the promoters encouraged them to "recycle" the same funds in and out of Kapok Management's bank account, as many times as the limited partner wished, to fraudulently maximize the EDP tax credit.
The common themes running through these deals are that they were promoted by salesmen, not by tax pros. Two of these deals also involved offshore management fees, a common tax scam tool. No matter how much your golfing buddy insists that the offshore tax plan sold by his buddy's brother-in-law is foolproof, always have your tax pro look under the hood before you jump in. It's well worth a few hours of your tax pro's time to avoid 36 months at Club Fed.
UPDATE: More from the St. Louis Post Dispatch on Mr. Auffenberg.
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READ YOUR K-1 CAREFULLY
March 26, 2007
The IRS last year did a major redesign of the K-1 forms for partnerships and S corporations. These "pass through" entities don't pay taxes. They instead report their income and expenses to their owners on their K-1 forms, and the owners in turn report the K-1 information on their 1040s.
The new K-1s make some of the information harder to find. Many K-1s will have "charitable deductions" buried under "other deductions," usually as code "A" on box 12 of the S corporation K-1 or Box 13 of the partnership K-1. If your K-1 comes from a farm or a manufacturing company, also look for a code "O" deduction for the so-called "Section 199 deduction."
The K-1s should come with an attachment that tells you what the items in the different boxes are. If you don't have a copy, you can find them here (second page):
Don't lose a deduction just because it looks like some sort of footnote!
This is the fourth in a series of daily filing season tax tips we are running through April 17. Find them all here.
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WHO GIVES, WHO GETS
March 26, 2007
The Tax Foundation has issued a new study that combines spending and tax stats to see both who pays for government and who benefits. This chart is interesting:
While the federal tax burden is progressive - higher rates on higher-income taxpayers - the state and local burden is much less so. Just another thing to keep in mind when they ask you to vote for a higher sales tax.
While the tax collections skew in a "progressive" way, the spending skews even more so:
The TaxProf has more, including a heated debate in his commments section on what it all means.
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THE LESS MONEY YOU HAVE, THE BETTER YOUR QUALITY OF LIFE
March 26, 2007
I've never tried to tell a client that the big check he's writing to the IRS will improve his quality of life. Maybe that's part of why I still have clients. Most people think that their quality of life will be better if they spend their money than if the government does.
Yet that's Project Destiny for you. By taking our money and giving it to a 15-member unelected committee of political insiders, backers say our quality of life will be improved with - bike trails! The Des Moines Register has the details today.
A 7% sales tax will make our sales tax as high as the highest statewide rate in the country. We also have the highest corporate income tax rate and the 5th-highest individual income tax rate. With rates like that, we must have an awesome quality of life already.
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BE CAREFUL WITH YOUR DEDUCTIONS FOR TAXES PAID
March 25, 2007
One of the most common errors we see on self-prepared income tax returns is miscomputing the deduction for state and local taxes paid. Iowa allows taxpayer to deduct federal taxes paid in computing state income taxes, and that deduction is also frequently botched.
The most common mistake involves missing a fourth quarter payment or a prior year balance due. For example, a fourth quarter state estimated tax payment made for 2005 in January 2006 should be deducted on the 2006 federal return, but it is often forgotten.
We use a worksheet to make sure we don't miss these deductions. It looks something like this:
Click worksheet to enlarge.
You need to be careful, especially with the refund part of the worksheet. Often refunds aren't taxable, as when the refunded taxes were paid in a year when alternative minimum tax was paid. You should carefully work through the refund worksheets in the IRS instructions before you put a taxable refund number on your return.
Still, don't shortcut this worksheet, or you might shortcut some of your rightful deductions.
Link: The complete collection of our 2007 Filing Season Tips
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TEACHER, TEACHER
March 24, 2007
The tax law provides a special deduction for educators. An "eligible educator" can deduct above the line (that is, without itemizing on Schedule A) up to $250 paid:
"...in connection with books, supplies (other than nonathletic supplies for courses of instruction in health or physical education), computer equipment (including related software and services) and other equipment, and supplementary materials used by the eligible educator in the classroom."
An "eligible educator" is:
an individual who is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide in a school for at least 900 hours during a school year.
You qualify? Good. Now comes the tricky part - finding the line for "eligible education expenses" on page 1 of the 1040. It's tricky because the line isn't there; Congress enacted the deduction for 2007 after the forms were already printed.
Here's how the IRS wants you report your $250 deduction:
Educators claim the deduction for up to $250 of out-of-pocket classroom expenses on Form 1040, line 23, “Archer MSA Deduction.”Enter "E" on the dotted line to the left of that line entry if claiming educator expenses, or "B" if claiming both an Archer MSA deduction and the deduction for educator expenses on Form 1040. If entering "B," taxpayers must attach a breakdown showing the amounts claimed for each deduction.
Not many folks claim Archer MSA deductions anymore, so "E" is likely to be your correct answer. Then turn in your papers and sit quietly at your desks until your refund arrives.
We will run daily filing season tax tips through the April 17 filing deadline.
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LAKE DISTRICT REAL ESTATE OPPORTUNITY!
March 23, 2007
The IRS once again has a resort-area property up for auction. And at a minimum bid of $1,632, it could be a steal!
Well, maybe it isn't exactly a resort property:
And maybe it isn't right on a lake...
The property known as 94 2nd Ave, Royal IA and further described as The North Sixty (60) feet of Lots Seven (7) and Eight (8) in Block Five (5) in the Town of Royal.
94 2nd Avenue Royal IA.
Royal, Iowa?
Honey, don't you like our new summer place? Dear, where are you going with the car?
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HUNTER GETS CAPTURED BY THE GAME
March 23, 2007
James Hunter was President of Hunter Marine Transport, Inc., a Nashville-based boat dealer. He unwisely decided to augment his fringe benefits package, as explained in a Justice Department press release:
Hunter, President of Hunter Marine Transport, Inc. (HMT), admitted that he paid over $229,600 in personal living expenses with corporate funds from 1999 through 2001. These personal living expenses were deducted on HMT’s corporate tax returns as corporate expenses and were excluded from the income Hunter reported on his personal income tax returns for those years. During this same period of time, Hunter’s net salary was over $943,000.
Using corporation funds for personal expenses and deducting them is a common temptation for closely-held business owners. It's also one that's relatively easy for the IRS to catch as part of their standard audit practice for small businesses. They selectively review invoices with an eye for these things, and the bigger the item you try to hide, the easier it is to find.
Mr. Hunter's plea agreement indicates that he is likely to enjoy the hospitality of the Bureau of Prisons for 10 to 16 months. Not a good result.
Link: Tennesssean.com
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GEE, THANKS, CONGRESSMAN
March 23, 2007
It would be pretty depressing to be in, say, the Polk County Jail. You'd certainly be eager to hear somebody telling you that they could get you out of there. Even so, it's not likely that a transfer to the Warren County Jail would seem like a good solution.
Congressional taxwriters are considering a similar approach to the alternative minimum tax. The AMT is computed with fewer deductions and exemptions than the regular income tax, at a nominally lower rate. It applies when it exceeds the regular tax. As a result of accumulated legislative fudging, the AMT threatens to exceed regular tax for 23 million more taxpayers next year.
Congressman Richard Neal of Massachussets, a Democrat on the Ways and Means committee, has hit on a solution. He proposes raising the regular tax high enough to exceed AMT ($link):
House Ways and Means Select Revenue Measures Subcommittee Chair Richard E. Neal, D-Mass., told reporters March 22 that his efforts to reform the alternative minimum tax will likely involve adjusting tax rates instead of going after preferences in the tax code.
When asked whether an AMT reform proposal would be offset with repeal of tax code preferences or with an adjustment to federal tax rates, Neal replied, "I think that the latter is probably more realistic."
It's reasonably save to assume Congress won't approve this transfer between jails, and if it did, it would almost certainly be vetoed. Congress is instead likely to kick the AMT problem down the road one more year by increasing the AMT exemption temporarily, as they have done for the last several years. Real AMT reform probably requires a 1986-style major tax reform, which doesn't seem to be in the cards.
Related: AMT: THE INCONVENIENT TRUTH
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2007 FILING TIP: SAVERS CREDIT
March 23, 2007
Starting today we will provide a tax tip each day to spotlight an item you might overlook on your federal or state returns. We'll start with the "Savers Credit."
This credit is designed to reward those who put away money for retirement. It provides a credit of from 10% to as much as 50% for each dollar put into an IRA or 401(k). It is available for taxpayers with an AGI as high as $50,000.
Young adults just starting in the work force are excellent candidates for this credit. The power of compound interest makes it a great idea to sock away cash into a 401(k) plan or IRA before you are 30. If the government wants give you back 50% of it as a refund, you'd be crazy to turn them down - especially if you can put the money into a 401(k) with an employer match.
This credit is claimed on Form 8880.
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EAT THE RICH
March 22, 2007
It's a staple of politics to hear people offering tax cuts for "the middle class," usually coupled with calls for "the rich" to pay their "fair share."
The problem is finding a way to define "middle class" in a way that allows for any meaningful tax cuts. Consider who actually pays income taxes:
If "middle class" excludes the top 25% of taxpayers, you exclude about 85% of all income taxes paid from eligibility for tax cuts. The top 5% of taxpayers alone - those with AGI over $159,862 - payover 56% of personal income taxes.
The result? A continuous stream of complicated credits (see Lifetime Learning Credit) that phase out as income levels increase. The code gets more complicated, the tax burden continues to move to the upper end of the income scale, but the politicians continue to party like its 1959.
Hat Tip to the TaxProf Blog for the link to the charts.
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ILLINOIS GOVERNOR LASHES OUT AT TAX FOUNDATION
March 22, 2007
The Tax Foundation has criticized the half-baked plan for a gross receipts tax proposed by Illinois Governor Blagojevich. The Tax Foundation has a long history of opposing gross receipts taxes as bad policy.
Governor Blagojevich, of course, responded with a thoughtful and well-supported response, engaging his critics and inviting them to help improve his plan. Just kidding.
Governor Blagojevich responded in the fashion of sleazy populists everywhere, saying through a spokesweasel that "The Tax Foundation is funded by big business and they all sit on its board, so consider the source."
The Blagojevich plan would increase the Illinois tax burden 27%. And if he really thinks that the burden will only fall on "big business," he's not paying attention at all.
Prior Tax Update coverage here.
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NETELLER CUSTOMERS: FILE YOUR CURRENCY REPORTS
March 22, 2007
Taxable Talk brings us the latest on the saga of gambling financial intermediary Neteller. He makes this sobering observation:
If prior to 2006 you had $10,000 at Neteller and you didn't file the TD F 90-22.1, you should consider filing it today, attaching a note that says you weren't aware of the law requiring notification of a foreign bank account. The penalty for not filing the form is $10,000 (minimum), and it's a felony—you can go to prison for this. Do realize you are likely going to have your tax return audited, but if you're choosing between an audit and jail time, I know which one I'd choose.
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MORE ON LIFE INSURANCE TRUSTS
March 21, 2007
Death and Taxes continues with its series on life insurance trusts today. It's all worth reading; here's a highlight:
The biggest mistakes I see with ILITs are:
(a) the failure of the grantor to understand that he or she no longer owns or has any interest in the property;
(b) the failure of the grantor to understand that "irrevocable" means "can't amend or revoke"; and
(c) the failure of the trustee to continue to administer the trust correctly, by preparing income tax returns, by sending notice of each contribution to beneficiaries, and by keeping good, clear records of what has been done.
Irrevocable means "you can't revoke." It's amazing how many people have trouble with that.
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MORE FUN WITH TAX CREDITS
March 21, 2007
While tax credits are sweet, they can always be made sweeter. The legislature is trying to do just that.
The state credit for rehabbing old buildings has always been capped at a maximum of $4 million per year, and it has long been badly oversubscribed. SF 556 would increase the annual ceiling to $20 million. But there's more!
If your Iowa rehab tax credit wipes out your tax liability, you can claim it as a tax refund under current law, but the refund gets trimmed under a discounting formula. SF 556 would get rid of the discounting formula for tax credits "applied for or reserved prior to July 1, 2007."
So, think about this. The credit is already generous enough to be oversubscribed years in advance. But now, even though it's already generous enough to be in great demand, it's made more generous. Such a deal! For somebody.
AND FOR THE ARTS...
SF 556 also has the most generous version yet of the artist subsidy that has appeared in two other bills. This version would give artists a 100% dollar-for-dollar credit on donations of their own artwork, at fair market value, and it doesn't have the $25,000 limit included in the other bills. My dream of setting up the Museum of Deductible Art gets ever nearer.
Tacks Shelter, Vol 2. Artist: J. Kristan. Estimated Fair Market Value: $25,000.
And there's still more! This bill piles on the economic development. It includes subsidies for recreational trails, "workforce training" funds, and money for the "main street program." It will be interesting if throwing money to enough groups will assemble enough votes to slide this through the legislature.
You can follow the progress of HF 556 and the rest of this session's tax legislation at our 2007 Iowa Tax Legislation page.
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$4.6 MILLION IN TAX CREDITS TO EX-CIETC BOARD MEMBER
March 21, 2007
If you want to know who really benefits from targeted tax credits, the Des Moines Register gives you a hint this morning:
Polk County Supervisor John Mauro will receive $4.6 million in tax credits to build a low-income, senior-housing project in Des Moines.
The tax credits were awarded by Mauro's former employer, the Iowa Finance Authority. Mauro worked at the finance authority from December 2000 to January 2003. He was a board member of the Central Iowa Employment and Training Consortium until a payroll scandal erupted last spring.
Mauro is the majority owner of a company called Curly Top LLC. Last week, the Iowa Finance Authority announced that it was awarding Curly Top $4,659,010 in tax credits to build a 40-unit apartment complex for low-income senior citizens to be called Southview Senior Apartments. The building is to be constructed on what is now a 1.4-acre vacant lot located at 1720 S.W. First St. in Des Moines.
State records indicate that Mauro's company intends to buy the land from the city for the appraised value of $99,903.
It sure looks like Mr. Mauro has hit an insider's jackpot. The former CIETC board member who let its executives loot the agency under his watch, and who now sits on the Polk County Board, buys land from the city and gets a $4.6 million subsidy from the state agency he used to run.
But it can't be an inside job; Mr. Mauro says so:
"There's no favoritism that I know of that goes on," he said. "I'm pleased I got it, and I don't think I got any special favors. I'm sure I didn't."
Well, that settles that. Hey, let's increase the sales tax to 7% so Mr. Mauro can supervise more public money for us.
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FOR ME THIS YEAR IT BEGINS ON APRIL 17, AROUND 5:00 PM
March 20, 2007
The TaxProf asks the question, "When Does Life Begin for Tax Purposes?"
For tax professionals, it's an easy answer. We have no life until we finish that last extension on the tax return due date.
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BUT THEN MY SUV, CELL PHONE AND PREMIUM CABLE WOULD BE UNAFFORDABLE
March 20, 2007
On the affordability of health insurance:
In this paper, we investigate the meaning of “affordability” in the context of health insurance. Assessing the relationship between the affordability of coverage and the large number of uninsured in the U.S. is important for understanding the barriers to purchasing coverage and evaluating the role of policy in reducing the number of uninsured. We propose several definitions of affordability and examine the implications of alternative definitions for estimates of the proportion of uninsured who are unable to afford coverage. We find that, depending on the definition, health insurance was affordable to between one-quarter and three-quarters of the uninsured in the United States in 2000.
Via Marginal Revolution. Emphasis mine.
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COULD MIKE TYSON MAKE A CAREER IN THE IRS?
March 20, 2007
Kreig Mitchell notes the case of Patricia Wormley, an IRS agent who lost her job after biting off part of a neighbor's thumb. Mr. Mitchell draws this lesson from the case:
The Wormely case highlights one of the major problems with the IRS; namely, IRS employees are not held to any ethical or moral standard. Three documented instances of “misbehavior” should be sufficient to warrant termination – absent an arrest for assault or confronting an IRS manager (If there were three documented instances of “misbehavior,” one is left wondering how many instances of “misbehavior” were not documented).
I've been lucky; the IRS agents I have dealt with have typically acted professionally. Still, the case highlights just how hard it is to get rid of an IRS agent. The agent had to be belligerent with her manager, attack a neighbor and be convicted of assault. Even then, it took a full rearing of the Merit Systems Protection Board and a hearing by the Court of Appeals for the Federal Circuit to get Ms. Wormley fired.
It's this system that makes me cynical about arguments against outsourcing collection activity to private firms. It strains credibility to think private firms can't be trusted to treat taxpayers fairly when it's so incredibly difficult to hold IRS agents accountable for their misbehavior. If a private employee were to put the collection agency's IRS contract in danger, it wouldn't take a federal court case to send him packing.
The opposition to private tax collection is at base an argument about unions. If the private employees were automatically enrolled in the Treasury Employees Union, the opposition to private collection would dry up.
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HIGH WATER CARNIVAL
March 20, 2007
Melting snow has Iowa's rivers bank full, but you can stay high and dry with this week's blog carnivals.
The Carnival of Personal Finance is at "Lazy Man and Money," where you will want to read the Insureblog's coverage of the importance of the lifetime limit on your health coverage.
The Carnival of the Capitalists is up at Blogblivion, and the Carnival of Taxes is home at Don't Mess with Taxes.
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SATURN AURA QUALIFIES FOR HYBRID CREDIT
March 19, 2007
The IRS announced today that the Saturn Aura qualifies for the Hybrid Car Credit.
Taxpayers buying this vehicle qualify for a $1,300 credit, unless they are alternative minimum tax-payers, who get diddly. Which makes some people grumpy.
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LIFE IN THE SLOW LANE
March 19, 2007
One of the function of prison sentences is educational. The convict, in theory, learns not to do things that land them in prison; the bystander learns of the baleful consequences of breaking the law.
Some are slow learners. Consider a strange letter in yesterday's Concord Monitor Online from one Steven A. Swan:
The corruption of the federal criminal justice system must be experienced to be believed.
From 1996 to 2002, I was a follower and promoter of the teachings of nationally known income tax protester Irwin Schiff. I truly believed Schiff's teachings (that the federal income tax is entirely voluntary). I was so convinced that for six years I did everything I could think of to try to disseminate Schiff's teachings to others.
Then in March 2003, the government indicted me for 18 tax felonies. Seventeen of the 18 counts against me were for filing tax returns for myself or preparing them for others which I knew and believed to be false. However, I did not believe they were false, so I should not have been found guilty.
The U.S. attorney prosecuting me (Colantuono) and my judge (Barbadoro) knew I was not guilty, but they prosecuted me anyway. Unfortunately, I could not overcome "the awesome power of the federal government" and convince my jury that I was not guilty.
In July 2004, Judge Barbadoro sentenced me to six years in federal prison, where I remain.
Hmm. Mr. Swan charged people for preparing bogus returns that claimed improper refunds exceeding $1 million. When that began to backfire...
...the evidence showed that Swan initiated numerous frivolous lawsuits and sought the baseless criminal prosecution of IRS collection employees and banks, title companies, and even a recorder of deeds for complying with lawful IRS liens and levies.
How on earth could such a good guy end up in prison? Well, a Dogpile search reveals a creepy white supremecist website that says it's because Mr. Swan was silenced for revealing the "truth" behind the 9/11 attacks - it was "Israel and high-ranking dual-loyalists to both the United States and Israel within the U.S. Government."
Never mind that Irwin Schiff, Mr. Swan's tax mentor, is serving a 13 year sentence for his tax crimes; the government is just being vindictive because Mr. Swan spoke truth to power. Sure, it was really delusional rantings, but still...
Nobody should be surprised if Mr. Swan emerges from prison as willfully clueless as he went in.
Quatloos has more on Mr. Swan.
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DEATH, TAXES AND LIFE INSURANCE TRUSTS
March 19, 2007
Death and Taxes has part III of its series on Irrevocable Life Insurance Trusts up today. This is a great resource to help understand a key estate planning tool.
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NICOTINE ADDICTION - A FISCAL LIFESTYLE
March 19, 2007
Governor Culver signed the new $1 per pack cigarette tax increase last week. Now the legislature will set to work on spending the new fiscal windfall.
This is the second big step to align the interest of Iowa's government with that of the tobacco industry; the first step was the multistate tobacco lawsuit settlement. Both the tobacco companies and the legislature will enjoy more revenue from more smokers. The Tax Policy Blog has a nice discussion of the issues: "Tax Cigarettes to Save Lives, But Not Too Many Lives."
It's a common occurrence for politicians like Culver to say that we are saving lives by raising cigarette taxes. But we could save lives by passing many different tax hikes. How about taxes on unhealthy cheeseburgers? Sound ridiculous? Just wait - they're coming, and their advocates are using the exact same argument used by Culver.
Well, the Governor may have his own reasons to restrict cheeseburgers...
On the other hand, by the governor's argument, why doesn't he just ban cigarettes? If smoking is so deadly and it's somehow morally right for government to stop people from killing themselves, then why not save 100,000 Iowans instead of 20,000? Oh...that's right --- tax revenue. He wants to make those who continue to smoke pay more to fund programs that, for the most part, have nothing to do with smoking. It's an easy political sell to impose taxes on smokers rather than raise taxes on everyone.
As we've said time and time again, there is absolutely no justification for imposing additional taxes on smokers solely for the purposes of raising additional revenue to fund general programs. If there is a true negative externality from smoking, then the tax should be imposed for that reason only -- no more or no less.
If a private company made so much money off of cigarettes, nobody would trust it to fight smoking. Yet it's taken for granted that the government can have a lucrative stake in cigarette revenues and still lead the war on smoking. Go figure.
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FOR THE ARTS!
March 19, 2007
The noble effort to provide me a lucrative retirement encourage the arts in Iowa by providing artists a "fair market value" deduction for their own work continues its progress through the legislature. Now called HF 812, the bill improves on its predecessor (HF 411) by allowing all artists the deduction, rather than just those living in "cultural and entertainment districts." The first version of this bill passed the House Economic Development Committee; the current version is now at the Ways and Means Committee.
You can follow the progress of all 2007 tax action in the Iowa legislature at our 2007 Iowa Tax Legislation page.
Prior coverage: THE ART OF SPECIAL INTEREST LEGISLATING
Tacks Shelter, Vol 2. Artist: J. Kristan. Estimated Fair Market Value: $25,000.
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APRIL 2007 APPLICABLE FEDERAL RATES (AFR) ISSUED
March 17, 2007
The IRS has issued (Rev. Rul. 2007-23) the minimum interest rates for loans made in April 2007:
-Short Term (demand loans and loans with terms of up to 3 years): 4.90%
-Mid-Term (loans from 3-9 years): 4.61%
-Long-Term (over 9 years): 4.81%
Historical AFRs are available at the "links" page at www.rothcpa.com.
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IOWA DEPARTMENT OF REVENUE: FOREIGN EXCHANGE POLICE?
March 16, 2007
Just when you think that the Iowa Legislature couldn't possibly find stupider tax legislation to propose, they surprise you. Consider SF 547, introduced yesterday by Dubuque's Senator Michael Connolly. It would add the following to Iowa's tax law:
422.76 TAX HAVENS AND SHELL CORPORATIONS.
In order to assist the department in collecting individual and corporate income taxes and overcome tax avoidance, financial institutions doing business in this state that open an account for a foreign trust or corporation on behalf of a resident of this state or business doing business within this state shall report, on forms approved by the department, the name and taxpayer identification number of any person involved with the account, moneys deposited into the account, and other information deemed necessary by the department.
If the department determines that a foreign trust or corporation was created primarily for the avoidance of taxation within the United States, the department shall treat any moneys deposited into such account as income earned in this state and shall impose the appropriate income tax on such income to the extent the income is not taxable in another state or the trust or corporation establishes beyond a reasonable doubt that the moneys in the account are not income taxable in this state.
There is so much wrong with this bill that it's hard to know where to begin. The bill in effect imposes state-level foreign exchange controls on Iowa businesses and financial institutions - an economic approach usually associated with failing third-world dictatorships.
It would give the Department of Revenue almost unreviewable power ("beyond a reasonable doubt") to impose punitive taxes on offshore investments. Never mind that it's entirely normal to conduct cross-border operations using corporations set up in the country where operations take place. If the sophisticated financial geniuses at the Hoover Building decide you are doing it to avoid taxes, you are out of luck.
Senator Connolly isn't just an obscure legislator, either. He is "assistant majority leader" in the Iowa Senate and he is on the Senate's tax-writing committee, the Ways and Means Committee. That makes this even more astonishing. He really should know better.
Senator Connolly apparently hasn't noticed that multinational financial operations drive a lot of Iowa's economy. Or maybe he just thinks a six-figure job, say, running currency derivative investment operations at Principal Financial Group isn't a real manly job, compared to a union position at an ethanol factory in Dubuque.
A provision like this could kill Iowa's financial services industry dead. But the finance jobs at Principal, Wells Fargo, Nationwide, ING and the other big players in Des Moines aren't union, so they just don't count, apparently. At this rate, the Iowa Legislature might as well just change the motto on Iowa's flag to "Ethanol and union jobs or bust!"
Follow the progress of this bill and all astonishing 2007 Iowa tax legislation at our 2007 Iowa Tax Legislation page.
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40 POISON POSITIONS
March 16, 2007
The IRS issued a passel of guidance yesterday listing 40 common tax protester positions that will be subject to the new $5,000 frivolous return penalty. The penalty was raised from $500 starting this year. A sample of the silly positions:
Nothing in the Internal Revenue Code imposes a requirement to file a return or pay tax, or that a person is not required to file a tax return or pay a tax unless the Internal Revenue Service responds to the person's questions, correspondence, or a request to identify a provision in the Code requiring the filing of a return or the payment of tax.
There is no legal requirement to file a Federal income tax return because the instructions to Forms 1040, 1040A, or 1040EZ or the Treasury regulations associated with the filing of the forms do not display an OMB control number as required by the Paperwork Reduction Act of 1980, 44 U.S.C. § 3501 et seq., or similar arguments described as frivolous in Rev. Rul. 2006-21, 2006-15 I.R.B. 745.
A taxpayer may "untax" himself or herself at any time or revoke the consent to be taxed and thereafter not be subject to internal revenue taxes.
Only persons who have contracted with the government by applying for a governmental privilege or benefit, such as holding a Social Security number, are subject to tax, and those who have contracted with the government may choose to revoke the contract at will.
You'd think people would stop buying this stuff, considering how dismal the results have been over the years for those making these arguments. Yet an article from a local high school newspaper (written by its "editor-in-chief") shows that each generation includes a new cohort of the gullible. The article refers to Ed Brown, a convicted tax evader now holed up in a fortress-like house in New Hampshire:
There's one simple question here. If there really is a law, why is the IRS so afraid to show the law? Ed and many others who have gone through similar trials have said if the law is shown to them, they will pay the taxes. It's as simple as that. The answer is that there is no law.
Hmm. If there is no law, why was Mr. Brown convicted? And why have "many" others gone on trial? Is there maybe... a law? If all of the federal judges, the federal marshals, and the bureau of prisons are convinced that there is, that seems more persuasive than the word of fugitive militiamen and high school editorial writers.
Links:
Notice 2007-30, the list of discredited tax protester positions.
Rev. Rul. 2007-19, on the taxability of wages.
Rev. Rul. 2007-20, on the idea that the tax laws are voluntary.
Rev. Rul. 2007-21, on silly procedural arguments.
Rev. Rul. 2007-22, on citizenship an related arguments.
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TAX CHARGES AGAINST 'GURU OF GANJA' UP IN SMOKE
March 16, 2007
A federal judge threw out criminal charges today against an Oakland man accused of growing medical marijuana, ruling that authorities had vindictively prosecuted him because of remarks he made after he successfully appealed an earlier conviction.
U.S. District Judge Charles Breyer in San Francisco dismissed charges of tax evasion and money laundering against Ed Rosenthal, 62, an author and activist who has been dubbed the "Guru of Ganja."
Breyer declared that the government had improperly refiled the tax-evasion and money-laundering case last fall after Rosenthal successfully appealed his 2003 conviction for marijuana cultivation.
Reports that Mr. Rosenthal offered to share a conciliatory doobie with the prosecutors could not be confirmed.
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ARK STAYS SUNK
March 16, 2007
Anderson's Ark sank awhile ago. Now Wayne S. Anderson's lifeboat is sunk, too.
Mr. Anderson was one of the operators of the Anderson's Ark tax scheme. Participants paid money to the operations offshore accounts and falsely deducted the payments as business expenses. They would then take the funds back, after Anderson's Ark took a fee for its trouble.
The IRS didn't take kindly to this, and Mr. Anderson ended up being sentenced to 15 years behind bars on 82 federal counts.
Mr. Anderson appealed. The way I read it, he told the appeals court that the judge should have realized he was out of his mind, considering the silly arguments he was making. Maybe they included this argument used by his brother in the same trial:
Anderson asserted that he did not recognize the jurisdiction of the court because he is a "human being" rather than a "legal fiction entity."
According to Anderson, the court has jurisdiction only over someone who has accepted a Social Security number and thus has a fictitious identity.
This week the Ninth Circuit Court of Appeals rejected his appeal:
There is no evidence that Anderson was suffering from a mental disease or defect. He may have expressed unusual views regarding taxes, government, and the court's jurisdiction over him, but he did not display irrational behavior at trial. He was polite, followed courtroom rules, and participated in the trial whenever he chose to, cross-examining witnesses effectively.
It looks like Mr. Anderson, who is 65 now, will enjoy the hospitality of the Bureau of Prisons until he is 79.
Cite: United States of America v. Wayne S. Anderson, No. 05-30216
Prior Coverage:
THIS ARK WILL BE GONE FOR MORE THAN 40 DAYS
TWO MORE SENTENCED IN 'ANDERSON'S ARK' CASE
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SOME IOWANS MADE A BLUNDER
March 15, 2007
The IRS has sued to shut a Nevada tax shelter promoter. The lawsuit alleges that James A DiLullo peddled sham trusts to help his customers evade taxes.
While he operated out Nevada, the lawsuit says he had customers in "Washington, Massachussetts, Kansas, Texas, Colorado, Iowa, California, and West Virginia."
Based on the lawsuit, that means somebody in Iowa is going to need a good tax lawyer:
In meetings with prospective customers, DiLullo uses a high-pressure sales technique and a persuasive personality to pitch his scheme. He advises prospective customers that wealthy Americans have protected their assets and avoided taxes for decades using trusts or layers of trusts to obscure assets and income. He falsely assures prospective customers that using his trusts is completely legal, peppering his presentation with citations to IRS publications and purportedly supportive case law. He advises that by using a combination of domestic and foreign trusts, customers can lawfully avoid taxation of income.
But he's good for service after the sale:
When one customer questioned DiLullo in 2002 about the legality of his trust scheme, DiLullo told her that she could stop using the trust as long as she was “not stupid enough” to start paying her income taxes again.
Of course, this stuff never works, and it brings financial ruin to those who fall for it. If somebody tries to sell you "pure trusts" or offshore trusts to avoid taxes, run away.
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TAX GAP VS. LOGIC GAP
March 15, 2007
The Tax Policy Blog has a sensible discussion of how the tax gap is percieved as the fabulous fountain of funds by Congressional taxwriters:
A number of proposals to address the problem have been floated, but no one has any solid estimates as to how much revenue they would recoup. Further, no one is sure what the added burden of stepped up enforcement, administrative reform, or stringent reporting standards would cost the federal government or the vast majority of taxpayers who already comply. Nevertheless, Senate Finance Committee Chairman Max Baucus smells blood in the water.
The IRS Commissioner Mark Everson told the Senate Budget Committee last month that "we will never be able to audit our way out of the tax gap." Still, Baucus wants the IRS to shoot for $30 billion per year. That's no small potatoes, to be sure. But Everson warns, "we will actually have to complicate the tax laws to go after the non-compliant taxpayers."
There is no doubt a "tax gap." There is simply no way that the IRS will ever capture every last penny from every nail salon, restaurant or self-employed tradesman out there. And nobody would want to in a country with the amount of enforcement you you need to do so.
The question is, how much of that gap can reasonably collected? The only remotely practical steps are to increase third-party information reporting requirements. That's why we're likely to see brokers required to report stock basis information to the IRS, and why the eBays, PayPals and credit card companies are likely to have to report remittances to enable the IRS to sniff out non-reporting vendors. Beyond that, only so much additional enforcement is possible before it drives people nuts.
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MARCH MADNESS CARNIVALS
March 15, 2007
If you need a break from a hard day of filling out your NCAA brackets, you may want to visit this week's blog carnivals.
The Cavalcade of Risk is up at the MSSP Nexus Blog. It's worth the visit just for Arnold Kling's case study in "premium medicine," but there's lots more.
The Carnival of the Capitalists and the Carnival of Personal Finance are also up.
And while you're celebrating, raise a toast to the eight mighty women of Drake, who shocked the Missouri Valley by winning four games in four days to take the conference tournament and head to the NCAA Women's basketball tourney. Their reward? The injury-depleted Bulldogs start the tourney against Tennessee. Oy. I mean, go get 'em, Bulldogs!
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FERTILIZING THE ASTROTURF
March 14, 2007
The Des Moines Business Record has an interesting piece on the efforts to increase the central Iowa sales tax rate to 7%. They need to get over 9,000 people to sign up to get it on the ballot. Apparently the grass roots need a little fertilizer:
The Greater Des Moines Partnership last week extended an offer of T-shirts, drawings for concert tickets and even a chance to throw out the first ball at an Iowa Cubs game to encourage its members to gather signatures prior to the March 27 deadline. More than 9,200 signatures from Dallas, Polk and Warren county residents are needed to get the proposed 1 percent local option sales tax on those counties' ballots for a July 10 special election.
While some of the biggest companies in Des Moines are on board for higher sales taxes, it remains to be seen if anybody else is. It didn't seem popular at a Des Moines forum yesterday. A 7% rate would put give us one of the highest sales tax rates in the nation, to go with the highest corporate income tax rate and the fifth-highest personal income tax rate.
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PILING ON THE STUDENT LOAN CREDIT SCHEME
March 14, 2007
When you have an idea so bad that it even has The Des Moines Register agreeing with the Tax Update and State 29, you've really stepped in it. From the Register:
...It would be a misuse of precious public money to pay off student loans for workers who might very well have stayed in the state anyway. For example, about 65 percent of 2005 Iowa State University graduates stayed in Iowa and 70 percent of University of Northern Iowa graduates. Also, there is nothing to stop workers from packing up and heading across the state line after a mere three years.
From State 29:
That sounds like a great idea. The kids, after racking up tens of thousands of dollars worth of debt due to jacked-up tuition rates, can become indentured servants for three or more years while their debt is being paid off.
That doesn't mean it's too stupid to pass, unfortunately. This year, nothing is.
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