Churches should not be allowed to advocate for or against candidates

I agree with The Des Moines Register editorial that the law that bans churches from endorsing specific candidates, (the Johnson Amendment), should not be repealed.  (See link below.)

Once again though, you did not make clear the difference between all tax-exempt organizations and special 501c3 organizations.  Virtually all political parties, candidate campaign committees, and special interest organizations are tax exempt – they don’t pay income taxes.  But, people who donate money to these various political organizations do not get to deduct their contributions as a “charitable” deduction on their income taxes.
On the other hand, charities, churches and educational organizations are tax exempt under a special tax code section: 501c3.  People who donate money to 501c3 organizations get a charitable tax deduction for the amount of their contribution when computing their income taxes .
Churches, and church officials can advocate all they want about issues without violating the rules for 501c3 organizations.  What they cannot do is advocate for or against any specific candidate.  If they do advocate for or against specific candidates then they should be treated just like any other political organization: their donors should not get a charitable tax deduction for their contributions.  That is what the Johnson Amendment is all about, and it should not be repealed.

Link: http://www.desmoinesregister.com/story/opinion/editorials/2017/02/10/editorial-dont-eliminate-ban-politically-active-churches/97750512/

 

Corporate tax inversion is not cheating

The Register, today 11/27/2015, called corporations “tax cheats” when they try to avoid taxes by changing their “tax home” to a different country with lower rates.
These companies are not cheating. They are playing by the rules. This is what happens when the U.S. has the highest corporate tax rates in the world. We (the U.S.) don’t only tax U.S. based corporations on income earned in the U.S., we also tax them on income earned outside the U.S. – minus a credit for foreign taxes paid.  (That way, we make sure they pay the full U.S. rate on all income.)
This competition among countries to keep corporate income tax rates low is very much like competition among states to keep individual income taxes low. How many Iowans, who earned their wealth while living in Iowa, now live more than half of the year in Florida, South Dakota, or Texas, etc., because those states have no individual income tax? These people are not cheaters. They are following the laws. Tax competition among both states and countries is a good thing – it helps keep a check against ever increasing taxes and spending by governments.

 

Link to Register article:

http://www.desmoinesregister.com/story/opinion/editorials/2015/11/26/editorial-stop-rewarding-tax-cheats-taxpayer-funded-services/76341606/

Don’t demonize Walgreens.

Don’t demonize Walgreens for taking action to legally lower its U.S. federal income taxes.  The Des Moines Register and President Obama are wrong when they say that taking advantage of this legal tax break is unpatriotic.  As the Register reported, Walgreens can save $4 billion in federal taxes over the next 5 years by changing its corporate headquarters to Switzerland.  (See Register article: “Walgreens turns back on taxpayers” 8/3/2014)

The Register asked: “How much profit does a company need?”  “How much is enough?”  They went on to list all of the benefits that Walgreens receives by operating in the U.S. They tried to shame Walgreens for their proposed action, and effectively called for a boycott of Walgreens in protest.

The Register gave lip service to the fact that the U.S. has very high corporate tax rates compared to most other modern countries, and that tax reform is needed to close loopholes and bring down rates.  That should have been the primary message of the editorial, that we need to close loopholes and lower rates, not that Walgreens might take advantage of one.

Many companies and other taxpayers pay substantially lower their taxes by taking advantage of loopholes:  Oil and other natural resource extraction industries have their depletion allowance; hedge fund managers have their “carried interest” bonuses payments.  There are many many types of tax credits and deductions that benefit only politically favored businesses.  Many unfair loopholes go to very wealthy and profitable companies and individuals.  How does Warren Buffet pay less than 20% in federal income taxes?  Loopholes.  Why do some of the largest, wealthiest, most profitable research based companies in Iowa pay no income tax?  Loopholes.  Are all of these people and companies unpatriotic because they don’t pay more taxes than required by law?

In this case, the problem is not Walgreens or the specific loophole.  It is the high corporate income tax rates in the U.S.  The U.S. needs to significantly lower its corporate income tax rates.  Otherwise, over time, companies will actually move their headquarters to lower tax countries.  Given the inherent unfairness of special interest loopholes, and given the unconscionably high U.S. federal debt, it seems obvious that we should close as many of these loopholes as possible, and lower tax rates at the same time in a revenue neutral way.

Full disclosure:  I am a Walgreens stockholder.

Link to Register editorial:  http://www.desmoinesregister.com/story/opinion/editorials/2014/08/03/editorial-walgreens-turns-back-taxpayers/13531911/

The new welfare dependent class – businesses

If seems as if all businesses now require some type of welfare program.  The definition of economic development is grants or loans or special tax breaks given by our government to businesses.  Banks get their welfare indirectly – from loan guarantees from many government programs.  Of course our farmers must be protected from losses by government – through crop insurance subsidies that not only cover natural disasters, but actually protect against price declines.  All types of energy companies receive special tax credits or tax breaks.  The biggest manufacturers in Iowa receive large tax credits for research.  Now, Mediacom and John Deere want a grant of $800,000 from the federal government to help bring high speed internet to farmers who buy high-tech, internet connected tractors that cost hundreds of thousands of dollars.  We should say no!  We need to reverse the trend of expecting taxpayers to fund all types of economic development.  Just as with with individuals and families, welfare for businesses create dependency.  Our economy will continue to grow sluggishly as long as we look to government to manage our economic development.

Means test veterans tax benefit

A bill is quickly moving through the Iowa Legislature that would exempt veterans pension benefits from Iowa Income Tax.  I appreciate the service and sacrifice that veterans have given to our country, but such a benefit should only be given to those veterans who are in need.  Some veterans are millionaires.  We don’t need to exempt their income from Iowa Income tax.  The current bill should be amended to exempt pension payments received only for those veterans whose Adjusted Gross Income is less than $50,000 for individuals and $75,000 for married couples.  Those with incomes above those levels can afford and should help to pay for services provided to Iowans by the State of Iowa..

Income inequality is not the problem.

Income inequality is not a problem in and of itself.  As long a people earn their income through honest, peaceful and voluntary exchange, then there is no moral reason for our government to redistribute that wealth.  What is a problem is when government places its thumb on the scale and unfairly helps the rich to get richer, or hurts the poor and makes them poorer.  To the extent that a person gains wealth by unequal preferential treatment by government, it is morally correct for government to use its force to take away that wealth.

One good example of the many unfair government policies that wrongly favor the rich is the special low income tax rate on “carried interest” income earned by hedge fund managers.  They call it carried interest, but it is nothing more than a bonus based on performance.   In any other situation, this type of income is taxed at regular income tax rates. Somehow, hedge fund managers have sold politicians on the idea that carried interest is a special kind of income that should be taxed at lower rates.  Another example is the Oil Depletion Allowance for oil companies.  Another is farm subsidies for rich farmers.  We do not need to raise tax rates on ordinary income, we do need to do away with the unfair preferences, tax breaks, and subsidies that go mostly to the wealthy.

A good example of government policy that hurts poor people is that of keeping interest rates low in order to prop up housing prices.  If housing prices had been allowed to fall to their free market levels, housing would be much more affordable for poor people.  Instead, our government tries to fix the problem that it helped to create (unaffordable housing) by giving rent subsidies to the poor – creating more dependency on government, but not fixing the underlying causes of the problem.

To misquote Walter Scott, “Oh what a tangled web we weave when first we practice to use our government to achieve social goals.”  The solution to many of our economic problems today is to reduce the size and scope of our government.  Many unfair crony capitalist subsidies and tax breaks exist because our government has expanded far beyond its Constitutionally limited powers.  The primary just powers of government are to protect our lives, liberty and property; and to resolve disputes.  The scope and powers of our current federal government are clearly way beyond the limited government that our founding fathers created.  Lets start by closing unfair tax breaks and lowering spending to match.

IRS wrong to delay tax exempt status.

The IRS should quickly and easily approve the income tax exempt status of most political organizations.  An organization should pay income taxes only if it actually earns a profit.  If people want to pool their money together for any purpose other than to make a profit, the the act of contributing money to the pool should not be taxed.  The following are examples of organizations that are properly exempt from income taxes: churches, charities, non-profit educational institutions, private social clubs, political organizations.  Exemptions from other types of taxes, such as sales and property taxes, are made at the state level.  Just because an organization does not make a profit and is exempt from income taxes should not automatically make it exempt from other types of taxes.