Don’t extend school infrastructure for 21 years – to 2050!

The Iowa House of Representatives should definitely not pass HF 230 – to extend the school infrastructure sales tax for another 21 years – to 2050!

In 1998, we were told that the 1% local option tax for school infrastructure would be temporary – for 10 years.  In 2008 the temporary tax was changed from a local option to a state-wide sales tax, and was extended for another 22 years – to expire in 2029.  Even though we still have 12 years left of the tax, school districts are pressuring the legislature to extend the tax for an additional 21 years!

Why would they want to do this?  Because years ago, they borrowed against the future taxes and have already spent the taxes that will be collected during the remaining 12 years.  If the tax is extended again, you can bet that some school districts will again quickly borrow against the future taxes and spend the money decades before the taxes are collected.

Do we really need this much money for school infrastructure.  Some school districts might need the money, but it appears that many school districts are flush with money and already have excellent facilities.  We really should wait until 2029, then allow local school districts have their own local option tax if the local taxpayers believe there is still a need.

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editorial that the law that bans churches from endorsing specific candidates, (the Johnson Amendment), should not be repealed.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/

Not all tax exempt organizations are the same.

The Register still has it wrong. (“Churches cross line with political endorsements”, 4/9/2015 – see link below.)  Churches with ministers who advocate for specific candidates should be allowed to be tax exempt.  But donors who contribute to them should not get a charitable tax deduction.

There are two types of tax-exempt organizations. First, there are the Charitable, Religious and Educational organizations, (tax code 501c3 organizations), that pay no income taxes, (and often don’t pay other taxes), plus donors get a charitable tax deduction on their income taxes for the amount of their contribution.  Second, there are all other tax-exempt organizations that pay no income taxes, (and often don’t pay other taxes), but donors do NOT get a charitable deduction. They are properly classified as tax exempt, since they are organized to not make any kind of profit, but their activities are not charitable, so no charitable tax deduction is given.

There are many tax exempt organizations that do not make any profit, but that are not charitable and whose donors don’t get a tax deduction.  They include Rotary clubs, political parties, country clubs, political issue organizations, chambers of commerce, special interest clubs, etc.  None of them try to make any profit, but they are not charitable.

To the extent that any not-for-profit organization advocates for or against specific candidates, that organization is not doing charitable work. It is doing political work. Under the principle of equal treatment under the law, donors to churches that advocate for specific candidates should not get a charitable tax deduction.  If a church wants its donors to receive a charitable tax deduction for contributions made, then the minister should not advocate for candidates from the pulpit, or through any other communication from the church.

Link to Register editorial: http://www.desmoinesregister.com/story/opinion/editorials/caucus/2015/04/08/rgisters-editorial-churches-cross-line-political-endorsements/25500433/

 

Social Security – don’t end the cap on taxable wages.

Recently, more people have called for an end to the cap on wages that are subject to the social security tax.  (For 2015, only the first $118,500 of wages are taxable, no social security tax is paid on wages above that amount.)  I think that would be the wrong way to go.  Social Security was sold to the public as a retirement plan where the amount of benefit received had some relationship to the amount paid in. It was not sold as a welfare program where the rich subsidize the poor. The benefits paid under Social Security are limited.  That is why taxable wages are limited.  Social Security is was intended to cover only a portion of a person’s needs during later years.  People should expect to continue to work throughout their lifetimes unless they save enough for their own retirement.  Unless, of course, we want to change over to a welfare system, where benefits are determined by politics rather than the amount you pay in.

Convention Center Hotel should be private, for-profit

Today, the Des Moines Register reported that the group charged with bringing a hotel to the Iowa Events Center is suggesting that the hotel be managed by a nonprofit organization.  (See link below.)  It appears from the report that the hotel would have a separate private owner.  I don’t get it.  Wouldn’t the owner decide who would manage the hotel?  The project has already been scaled back from 450 room to 300 rooms due to project costs.  The current proposal is relying on, “a number of city, county and state incentives.”  It appear pretty clear that the private sector thinks such a hotel does not make good economic sense.  Given the vitality of the downtown Des Moines area, we need to ask when, if ever, are the taxpayer subsidies going to end for what should be private investments.

Link: http://www.desmoinesregister.com/story/money/business/development/2015/01/16/convention-hotel-update/21862043/

Don’t increase sales tax to fund recreation and conservation.

Contrary to the Des Moines Sunday Register opinion essay on 12/14/2014, Iowans did not vote four years ago to increase the Iowa sales tax by 3/8ths of a percent to fund conservation and recreation. Instead, Iowa voters made the easy choice to show emotional support for recreation and the environment without having to actually pay anything. Iowa is already doing very well on the recreational front without increasing taxes. We also already have substantial subsidies and other incentives to promote conservation and reduce pollution. If we want more funding for recreation, establish user fees. If we need to take further steps to reduce pollution, we should assess fines against the polluters. We do not need to tax ourselves $150 million per year in perpetuity. We made a mistake by amending our Constitution to commit any future sales tax increase to specific, narrowly defined purposes. We will not be able to change how we use the proceeds of any future tax increase without an amendment to our Iowa Constitution. We should not compound our mistake now by increasing our sales tax.

Link to Register opinion essay:  http://www.desmoinesregister.com/story/opinion/editorials/2014/12/13/editorial-pressure-lawmakers-outdoor-fund/20387043/