Daily Deduction

from the Tax Policy Center

IRS Has New Woes in Congress; Taxes in Minnesota Pay Off

By :: June 18th, 2014

House Republicans would slash IRS funding. Their fiscal year 2015 financial services budget includes roughly $11 billion for the IRS. This would cut $341 million from the agency’s current budget, and is $1.5 billion less than the White House request.

They are also outraged over lost IRS emails. House Ways & Means Chairman Dave Camp and Oversight Subcommittee Chairman Charles Boustany, Jr., released a statement yesterday expressing dismay over the IRS' lack of cooperation with House investigations of alleged targeting of political groups. The latest flap: The IRS lost two years of emails belonging to Lois Lerner, who managed the agency’s tax-exempt office, and six other employees.

So the House GOP has subpoenaed IRS Commissioner John Koskinen. He will testify next week about the missing emails before Boustany’s oversight subcommittee.

Meanwhile, Senate Finance Committee Chair Ron Wyden asks why the IRS hasn’t closed a hedge fund tax loophole. By running their funds through insurers located in tax havens such as Bermuda or the Cayman Islands, hedge fund managers can defer and reduce taxes on their investments. Often, the insurance companies themselves are mere shells. “The [Treasury] department and the IRS have been aware of this loophole for over a decade,” and “appear to have made no progress in ending this kind of tax abuse,” Wyden said in a letter to the Treasury and IRS.

At least taxes in Minnesota aren’t paid in vain. A new report from Michigan Future, Inc., finds that compared to other Great Lakes states, Minnesota is flourishing economically thanks in part to its tax policies. Minnesota’s lowest income tax rate is 5.35 percent, corporate income tax is 9.8 percent, sales tax is 6.875 percent, and its gasoline tax is 28.6 cents per gallon. Minnesota’s economy has outpaced Michigan’s economy since 1990.

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    The proposed financial services slash is also a way to gut Dodd Frank. The Democrats will never agree and leadership will drop this bit of ideological drivel from the right (after collecting campaign contribution checks).

    On the IRS e-mails, I suspect what they lost was a tape or other memory device (probably a tape, they are not funded to be the most current). In a data center with thousands of media, losing an email (where there are likely hard copies in various files) is not a big deal – and if the emails are about this affair, executive privilege maintains. Interesting the Camp is backing Issa’s play rather than leaving him hanging out to dry. Calling the director is a waste of time. Call the CFO and Chief Counsel if they want real answers on where the data might have gone and whether it can be transmitted anyway.

    The answer to the Wyden question is obvious – you can deal with a non-existent matter on tax exempt organizations (because free speech should be tax free?) or you can do work. Maybe that explains the above scandal.

    Michigan Future is putting out pure propoganda. It is not tax rates that make Minnesota more prosperous than Michigan, it is the fact that Michigan’s economy is in the toilet that makes Minnesota look comparably better and collect more revenue.

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