Iowa Republicans seek to eliminate the state’s political party tax check-off the first year the Libertarian Party qualifies for it.
At a time when we are adding over a trillion dollars to our national debt every year, the Congressional Joint Select Committee on Deficit Reduction (a body designed to make the hard decisions that Congress itself has been too cowardly to make) is expected to recommend making about that much in spending reductions over ten years. When they’re driving us over a fiscal cliff I guess it’s nice to know that they’re at least thinking about downshifting. This laughable budget-cutting contrasts with the economic plan offered by Congressman and Republican presidential hopeful Dr. Ron Paul.
Dr. Paul’s detailed “Plan to Restore America” would cut $1 trillion from the federal budget during the first year of the Paul presidency and deliver a balanced budget by the third year. Paul’s plan would eliminate five do-nothing federal departments (Energy, HUD, Commerce, Interior, and Education) and reduce the federal workforce by 10%. It would block grant Medicaid and welfare to the states, allowing flexibility and cost-savings.
If you think such cuts are too much and would knock the federal budget back into the 1800’s, no such luck. Nationally syndicated columnist Jacob Sullum points out, “Paul’s plan would not return the country to the 1990s, let alone the 19th century. It calls for total outlays of $2.9 trillion in 2015, which is about as much as the federal government spent as recently as 2003, adjusted for inflation.” They are substantial cuts, but not oppressive.
Ron Paul would extend the Bush tax cuts, lower the corporate tax rate to 15%, and abolish taxes on inheritance, capital gains and personal savings. Paul’s plan would repeal the job-crushing Obamacare, Dodd-Frank, and Sarbanes-Oxley laws and repeal many onerous regulations. It would audit the Federal Reserve and use free market techniques to strengthen the dollar and stabilize inflation. In a symbolic gesture, President Paul would take a salary of $39,336, the median income of the American worker.
You can read the plan in-depth at RonPaul2012.com. At a recent forum, Governor Branstad praised Ron Paul’s plan as “the boldest plan to reduce the federal deficit.” With the country careening ever closer to socio-economic collapse, if now isn’t the time for “bold plans” such as Dr. Paul proposes, when will be? I’ll vote for Ron Paul in the January 3rd Republican caucus.
Thursday I attended my very first tax day tea party in my small town. A local business had hung a Gadsden flag and banner saying to gather there at noon on the 15th. By my count, there were about 20 of us down on Main Street carrying signs. That may not sound like many people, but the population of my town is only 3,600 and most folks were at work. (If I hadn’t taken the day off work, I wouldn’t have been there either.)
There were no major incidents, although one guy driving by did give us a “thumbs-down.” A few cars and trucks honked in support. Mostly people just drove by trying to avoid eye contact though.
There were no “infiltrators” as several news organizations had warned. One guy showed up in a purple SEIU tee shirt and I wondered if he was there to start trouble. To my surprise, he just stood there with his child, holding a sign that read, “I love my country, but fear the gov’t.”
One gal, I’d say in her sixties, tried to give everyone a copy of the U.S. Constitution. She said she had distributed about 600 copies so far (not just on that day). Good for her!
I saw no hatred, malice or racism toward anyone, just concern about excessive taxation and government spending. These are my people.
Next stop: The Second Amendment March in Des Moines on Monday.
There seems to be a little more chatter about eliminating Iowa’s state income tax these days. Ed Failor, Jr., President of Iowans for Tax Relief (ITR), for instance, had a guest column in the Cedar Rapids Gazette advocating such.
In the extended version of Failor’s column on ITR’s website, Failor cites a 2008 study by the Mt. Pleasant-based Public Interest Institute. The study found that South Dakota, which has no income taxes, outpaced neighboring Iowa in the growth of total personal income, per capita personal income, population, and non-farm employment from 1967-2007. Failor points out: “We all know people are not flocking to South Dakota for the warm climate. These jobs and former Iowans are leaving the Tall Corn State and moving just across our western border because there is no income tax in the Mount Rushmore State.”
At least two Republican gubernatorial candidates have expressed support for eliminating Iowa’s income tax. “That would be an ultimate goal, absolutely. Other states have done it and they have seen good growth,” said state Senator and gubernatorial candidate Jerry Behn of Boone. I don’t know whether or not Senator Behn actually worked to repeal the income tax while in the legislature.
Businessman, Corridor Recovery president and GOP candidate Christian Fong also supports getting rid of the state income tax. Fong says that his immigrant father put the issue into perspective for him. “He said, ‘You don’t need all that policy talk,'” Fong explained. “He said, ‘High taxes are wrong because they inhibit personal freedom.’ Done. For an immigrant from China who’s bottom line is about the American Dream, taxation is really a freedom issue.”
Whether or not the Republicans actually believe in any of the principles that they espouse while campaigning and whether they will follow through if elected remains to be seen. Either way, it’s good to see that the idea of eliminating income taxes is at least part of the discourse.
Just about everyone in Iowa knows that the Iowa Film Office (IFO) has been embroiled in scandal lately. The office issues tax credits to filmmakers who film in Iowa. By August, IFO had issued more than $31 million in such credits. Unfortunately, some filmmakers have used their money to buy themselves fancy cars, rather than hire Iowans, and the whole operation is shot through with accounting irregularities and poor record keeping.
The whole mess got so bad that Governor Culver actually had to put down his paddleball, amble over and fire somebody. Of course, Culver’s political rivals in the Republican Party are capitalizing on the scandal. They could run the IFO better, they contend. Other critics say that the IFO needs stricter oversight. But should IFO and other similar incentive programs exist at all?
There are nut-and-bolts reasons that indicate that they shouldn’t. A study by New Mexico State University found that for every dollar that N.M. spent on it’s film program, it got back 14 cents in tax revenue. (The state of N.M. claims it gets $1.50 back.) The Wisconsin Dept. of Commerce found that for every dollar that it invests in it’s film program, it gets back $1.70. For other economic development programs, the return on each dollar invested was said to be $161.
Victor Elias with the nonpartisan Child and Family Policy Center has studied Iowa’s film tax credit. He says that there is little evidence that the program does much of anything. “I couldn’t even figure out how many jobs this creates,” said Elias. “Whether they were full-time jobs or part-time jobs. And a film shoot only lasts for so long, so we’re not talking about permanent jobs.” $31 million is a lot of hard-earned taxpayer dollars to invest on hope alone.
Even if the incentive program was well-run and got a return on the investment, it (and special incentive programs for other industries) don’t really make sense. While it may now be customary for state and local governments to offer special goodies to get targeted businesses to relocate here, it comes at the expense of people and businesses who have already invested their time and money here.
According to Iowa’s Tax Education Foundation, Iowa has the highest corporate and personal income taxes among it’s neighboring states. Some have ranked Iowa as one of the worst states to start a business. Does it make sense to offer monetary incentives to get businesses to locate here, while simultaneously driving established businesses out?
It would make more sense to implement policies making the state attractive to new businesses and existing ones as well. Lowering state taxes and red tape would be conducive to all commerce in Iowa.
The bottom line is that there is no cash incentive that government can offer to new business that it didn’t first take away from the people and industry already here. The state needs to forget the bribes and just get out of the way.
According to the Sioux City Journal, Governor Culver said Tuesday that he “would give ‘serious’ consideration to eliminating federal deductibility as a way to simplify and streamline Iowa’s tax code.” This came just the week after Iowa Senate Democrat leaders announced their support for eliminating federal deductibility. Obviously there is growing support in Des Moines for this idea. What does that mean for Iowa taxpayers?
Federal deductibility simply means that, when figuring your state income taxes, you may deduct from your income the money that you’ve already paid in federal income taxes. For most of us, these federal taxes are withheld from our checks. It is money that we never get to see, touch, deposit or spend, so why on earth should it be counted as income?
For many low and middle-income taxpayers who don’t have mortgage interest or property taxes to deduct from their income, federal deductibility represents a significant savings on their state tax bill.
Federal deductibility is a matter of fairness. To eliminate it would mean allowing the state to charge a tax upon a tax.
Proponents of changing the deduction say that it would simplify the tax code. But one already-existing line on the tax form seems to be a worthwhile complexity to assure fairness. If they really wanted to simplify the tax code, they could eliminate the personal income tax altogether like Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming have already done. Or they could move to a flat rate personal income tax such as Colorado, Illinois, Indiana, Massachusetts, Michigan, Pennsylvania, and Utah have.
Proponents also claim that the deduction forces the state to charge higher taxes in order to compensate for its lost income from federal deductibility. This argument could also be made against any other state deduction. The watchdog group Iowans for Tax Relief is fond of pointing out that, when “simplifying” the tax code, any promised tax cuts are short-lived while the lost deductions are usually gone for good.
While the idea of eliminating federal deductibility might be popular with those who charge taxes, it is unpopular with the Iowans who pay the taxes. A January 2009 poll showed that 72.5% of Iowans support maintaining their right to deduct federal tax payments.
If you are a member of this majority of Iowans, you can look up your state legislators here and ask them to retain federal deductibility on state income taxes.
Further reading: Public Interest Institute Policy Study No. 07-3 “Federal Tax Deductibility in Iowa: Who Benefits and Why It Should Continue”
From the Iowa City Press-Citizen, February 4, 2009:
“A local group has sent boxes of tea to Iowa City councilors to protest the possibility of a local option sales tax.
“The Iowa City Council is considering calling for a referendum on a 1-cent sales tax. Each city in Johnson County could accept or reject the tax.
“Mike Thayer of Coralville said a group of about 30 people met Monday night to discuss the measure. A statement from the group states that the tea ‘kicks off an aggressive campaign of opposition to the tax.’
“In a play on the Boston Tea Party, Thayer said one box of loose-leaf tea was sent to each councilor with a tag including the names and addresses of those opposed to the sales tax.
“‘Local government needs to spend the money they’ve already been given more responsibly,’ he said.
“Thayer said examples of money poorly spent include $50,000 to support The Englert Theatre and $62,000 that was spent in 2007 to fund a downtown study. He said the city shouldn’t be funding a ‘failing theater’ and said the downtown survey didn’t ‘tell us anything we didn’t already know.’
“Thayer said that local government needs to cut back ‘just like Johnson County families are.'”
To learn more about the tax protest, go to http://coralvillecourier.typepad.com/community/2009/02/no-new-taxes.html.
Let’s hope things don’t go all “Concord Bridge” down there.