Tax Reform Wednesday

April 17, 2013 14:04 pm

by Buzz Brockway · 39 comments

Rather than just talk about the Fair Tax, let’s talk about major tax reform. Here’s an article to kick-start the discussion.

The simplification effort should extend beyond paring tax expenditures from the code or standardizing overlapping provisions that create confusion. Rewriting the tax code also needs to assure that similar kinds of economic activity are treated consistently, eliminating incentives to select differing organizational forms based on tax, rather than economic conditions. Fortunately, the discussion has evolved over the last two years and is no longer dominated by big corporations clamoring for lower statutory rates and repatriation of overseas earnings. The tax writers, particularly Mr. Camp, have recognized that reform needs to encompass both individual and business code provisions in order to achieve fairness and minimize tax avoidance. I would further suggest a thorough examination of what is tax exempt, an issue I don’t see getting any attention. Recent months have seen vocal advocacy of a robust charitable deduction. Fair enough. A far bigger issue is establishing the proper line between what is deemed for profit or not-for-profit under the code. As a leader at one prominent Indiana tax-exempt organization said to me recently, “Not-for-profit is just a tax status, not a way of doing business.” The continuing drift towards tax exemption can only lead to erosion of the revenue base at a time when we need the money.

Discuss

Lawton Sack (GATA Eagles!) April 17, 2013 at 2:38 pm

It would be great to get to a point where we are only taxed once. Either tax at the income level or tax at the purchase level. I pay income tax, property tax, sales tax, tag tax (oops, fee), tax on the tiny interest banks are paying, etc., etc., etc. all on the same dollar that I earned.

Chris Huttman April 17, 2013 at 3:08 pm

Oops, fee is correct. Unlike the ad valorem tax that it replaced, this fee is no longer deductible. Thanks Republicans!

Al Gray April 18, 2013 at 8:12 am

Over here a Republican government got us a storm water fee that is also not deductible.

Property tax exemptions shift inordinately large amounts around. My sense is that eliminating them all would significantly lower the average citizen’s tax bill. The county that I live in has 60% of the land in some sort of exempt category, which means crushing property tax bills for folks with rooftops.

MattMD April 17, 2013 at 3:00 pm

You are still going to have to account for Federal, State and Local entities. The last thing you want is the state doling out revenues to the counties or cities, that is one reason why California is such a Charlie Foxtrot. Property taxes aren’t going away, no matter their incarnation (vehicle, land, etc). I think most of the focus should be on the Federal tax code.

Maybe we need to re-think the tax-exempt status of churches? Plenty of them are engaged in political lobbying anyway.

Lawton Sack (GATA Eagles!) April 17, 2013 at 3:12 pm

The state already doles out sales tax revenues to the local entities.

You ask a blanket statement about churches that would also apply to other non-profit organizations. You want to also start taxing the Red Cross and other non-profit charitable organizations?

Also, can you back up your final statement with some facts? I have served in over a dozen churches over the last couple of years and not a single one of them was engaged in political lobbying.

MattMD April 17, 2013 at 3:24 pm

As far as churches go, no, you’re just going to have to settle for straight-up anecdotal. Of course that’s only if you consider having a preacher ask the congregation to pray for a particular politician to win an election to be ‘political lobbying’. Since you served in churches, what taxes do they have to pay? I know about federal exemptions and LBJ but that’s about it.

Anyway, yes, maybe it is time to look at all non-profits.

I was talking about how property taxes stay within the county and this would be preferable to the state collecting them and then doling them back out.

James April 17, 2013 at 3:44 pm

I’m just curious — why are you serving in a dozen churches?

Lawton Sack (GATA Eagles!) April 17, 2013 at 3:54 pm

I do pulpit supply (fill-in) for churches that do not have a Pastor or the Pastor is away. There are a lot of churches that are struggling financially to keep their doors open and thus they have trouble keeping a Pastor for more than a year or two. I stay busy rotating between churches.

Lawton Sack (GATA Eagles!) April 17, 2013 at 3:51 pm

Churches are on the same footing as other 501(c)(3) organizations when it comes to taxation. In regards to GA property taxes, there are several organizations that are exempt: https://etax.dor.ga.gov/ptd/adm/taxguide/exempt/property.aspx

Churches pay the employer portion of FICA taxes on non-ordained staff. They collect State and Federal taxes on the same.

mpierce April 17, 2013 at 6:39 pm

We should revoke their property tax exemptions

Lawton Sack (GATA Eagles!) April 17, 2013 at 6:42 pm

Of all non-profit organizations or just targeting churches?

mpierce April 17, 2013 at 7:04 pm

Remove religious and 501(c)(3) exemptions.

MattMD April 17, 2013 at 7:05 pm

Agree entirely.

Lawton Sack (GATA Eagles!) April 17, 2013 at 8:23 pm

I am part of an organization that is moving forward with building a homeless shelter in Bulloch County with 40 or so beds. We are a 501(c)(3). The property we have purchased would have both city and county property taxes under this scenario. I believe that we are providing much more benefit to the community (and relief from tax expenditures) than we could ever offer in property taxes.

mpierce April 17, 2013 at 11:28 pm

That should be for county and city to decide.

John Konop April 18, 2013 at 6:35 am

Lawton,

I agree what you are doing is a noble cause…..Yet, I think the tax issue exemption issue is out of control. Why not just have everything on an even playing field?

That is why as you know I have been for hybrid even on a federal level using a lower income tax with no write offs and a vat or national sales tax to replace pay roll taxes and Medicare tax.

I am old school simple is usually better…..the more exceptions to rules controlled by a few is ripe for abuse……

Lawton Sack (GATA Eagles!) April 18, 2013 at 11:43 am

John, you know I respect you and your opinions. However, I think you are taking too narrow of a view on this subject and are missing the impact that most of these non-profit organizations have on our communities. I believe that these non-profit organizations are accomplishing more with a lot less resources than a governmental agency could ever think of operating off of. I deal with non-profit organizations on a daily basis, as a volunteer leader with zero pay, and I can tell you that this country would be much more largely impacted by taxing a non-profit than the little gain by taxing them. Further, most non-profit organizations operate off of charitable contributions and it is tough enough to meet meager budgets in this tough economic time. To top it off, most of the non-profit organizations are being run by volunteers.

Scenario:
Let’s say they have a used book sale that raises $2500 for the local library. $175 would go to sales taxes, $349 would go to corporate taxes, which would leave $1,976. (Of course, this is ignoring other taxes). The government gets $524 that would have gone directly to the Library to purchase books. OH, by the way, our local library gets more from fines for overdue materials than the State of Georgia gives them to purchase books. Do you really think that this $524 after funneling through the GA Department of Revenue and the IRS that the library is going to ultimately receive $524 back from them.

If you give a $1 to the local Friends of the Library group, then you are really only giving 65-85 cents, as the corporate tax rate is 15-35%. Tell the American Cancer Society, St. Baldrick’s, etc. that though they are doing important work to change people’s lives, they are going to have to cut even further back.

John Konop April 18, 2013 at 6:41 pm

Lawton,

You know I respect you as well! If all organization were run by guys like you I would have no issue. I am just not sold, that many of the people have your integrity level.

MattMD April 17, 2013 at 7:04 pm

Large churches should not be exempt from property taxes. You have poor counties like Bibb with these monster churches who pay no property tax in the nicest areas of the county? That’s ridiculous.

I have sympathy with small churches but not these factories.

Joshua Morris April 18, 2013 at 9:30 am

Let’s slow down a minute. A church–in its proper role–is not a business. It is merely an organization in which people gather with a common purpose. There is no need for profit, because there is no purpose for such. The members of a church, whose income has already been taxed, merely donate to the organization so that it can maintain a gathering place, can share its core beliefs locally and abroad, and can minister to the needs of its community. As long as this is the extent of a particular church’s economic activity, there is no reason to tax a group of members further than they have been taxed individually already.

Property taxes are meant to pay for local schooling and infrastructure, which is already covered in each individual member’s personal property taxes for his own dwelling (which is Marxist, but this is a discussion for another thread). The value of property owned and used by a church should have no bearing on whether it should be taxed.

When a church moves into renting property or selling items in its community for profit, I believe the paradigm changes, since it is then using the community for the benefit of its members. Otherwise, it should be left alone by government revenue hounds.

MattMD April 18, 2013 at 5:02 pm

Shouldn’t it pay SOME property tax? After all, it benefits from the existing infrastructure, right?

mpierce April 18, 2013 at 5:40 pm

Not a business?

My income has already been taxed. I’m not a business. My child is not in the public schools. I don’t use more infrastructure than a church. I suppose I shouldn’t have to pay property taxes either?

The church uses public infrastructure and services (police, fire, etc…).

mpierce April 18, 2013 at 5:42 pm
Harry April 19, 2013 at 6:28 pm

A church may not be a business, but some (most?) of the preachers who run them as their fiefdoms are making serious money.

mpierce April 19, 2013 at 6:43 pm

A church is a business.

joe April 17, 2013 at 8:34 pm

We need to scrap everything, and start over with NO exemptions ever allowed. If it is right to tax one person for something, it is right to tax everybody for it at the same rate.

Lawton Sack (GATA Eagles!) April 17, 2013 at 8:43 pm

You do realize that this will have consequences on contributions to non-profits, right? In return, this will place more burdens for expenditures onto the government.

mpierce April 18, 2013 at 10:02 am

Yeah, Occupy Wall Street saved us a lot of money?

Chris Huttman April 17, 2013 at 3:11 pm

One tactic I’d like to see employed is incrementalism, for lack of a better word. If we have some sort of “grand bargain” in mind, obviously there are going to be winners and losers, ie people who will benefit from lower net taxes and those who will pay more in taxes due to elimination of loopholes and higher rates.

Well, if the grand bargain is better than the status quo, wouldn’t 5% or 10% towards the end result each year for 10 or 20 years be better than doing nothing, if not as good as doing it all at once? Seems to me there’d be some value in taking it slow – afterall if you just made a giant purchase or business decision based on the current tax code, you’re going to be upset if that particular provision is changed or eliminated, but if you’re only seeing 5% of your provision erode each year, you’ve got a lot more time to get used to it.

Just my thoughts.

George Chidi April 17, 2013 at 4:00 pm

Sensible tax reform would be a beautiful thing.

Harry April 17, 2013 at 6:36 pm

I venture to predict that no tax reform, using your or my definition of “sensible”, will happen in our lifetimes.

Baker April 18, 2013 at 9:25 am

Wow, no mention of the great Republican effort here in Georgia of tax reform? They just did tax reform here. It was amazing…they moved the date of the car tax fee off of your birthday. What spectacular reform, Great job guys!

Chris Huttman April 18, 2013 at 10:46 am

Of course, if you “hated” paying a relatively small fee once a year, you’ll “hate” paying a fee 4 to 7 times that once. Personally, I can’t complain as I’ve bought both a used and new car from a dealer since Jan 2012 so I came out ok in the deal.

MattMD April 18, 2013 at 4:59 pm

It was a giveaway to the car dealerships in the state.

I never heard anybody complain of a “birthday tax”. Ever. This whole issues was filled with as many phantoms as the justification for that stupid “super speeder” law.

Lawton Sack (GATA Eagles!) April 18, 2013 at 5:13 pm

I complained as did several other people. Though, we would rather see property taxes removed period. Tax once and leave it alone.

saltycracker April 19, 2013 at 5:32 pm

+1 to infinity

saltycracker April 18, 2013 at 3:42 pm

This week alone gave us many personal examples where our legislators are doing a fantastic job of keeping taxes low for small business persons, rich friends, poor friends, loopholed, exempted, granted, rebated friends……W-2′s & 1099′s are a working man’s nightmare – my favorite was a business that tore up a check to his business for a few grand and required the check be made out to him….there are also plenty of legit loopholes in everyday sales taxes from local install to internet…….now the topic is how much money can be raised for politicians and lobbyists and activists to keep the American dream alive ?

God help us all if they simplified the code and went after 10% of all income over $1,000, no exemptions, no deductions, no rebates…….or taxed all monetized transactions…….or got a grip on illegals, or began to enforce the laws on the books or ended all payouts to persons and corporations beyond taxes paid in……

Lea Thrace April 18, 2013 at 4:01 pm

“God help us all if they simplified the code and went after 10% of all income over $1,000, no exemptions, no deductions, no rebates…….or taxed all monetized transactions…….or got a grip on illegals, or began to enforce the laws on the books or ended all payouts to persons and corporations beyond taxes paid in……”

I was in this world that you speak of once. It was glorious. Then I woke up from the anaesthesia and realized that it was all but a dream.

saltycracker April 18, 2013 at 4:07 pm

+1 but you (with a good lawyer & Doc) then qualified for SS disability….and child tax credits…..

Comments on this entry are closed.