PETER: GOOD MORNING AND WELCOME TO ETHICAL PERSPECTIVES ON THE NEWS.  MY NAME IS PETER WELCH AND I’M THE MODERATOR FOR THIS MORNINGS PROGRAM.  THIS MORNING WE’RE GOING TO DISCUSS THE TOPIC OF WHERE THE PROPOSED TAX CUTS THAT HAVE BEEN MADE AND DISCUSSED IN THE POLITICAL ARENA COULD OR SHOULD BE CONSIDERED AS PRO JOBS OR CONSIDERED AS PRO RICH PROGRAMS.  WITH US THIS MORNING FIRST IS MR DICK GEORGE WHO’S AN ACCOUNTANT WITH MCGLADRY AND POLLEN HERE IN CEDAR RAPIDS AND DICK IS ALSO AN ATTORNEY AND HOLDS A LAW DEGREE.  ALSO WITH US NEXT IS MS BARBARA POOLEY WHO’S THE VICE PRESIDENT OF FINANCE AT MT MERCY COLLEGE HERE IN CEDAR RAPIDS.  ROUNDING OUT OUR PANEL THIS MORNING IS MR MARK BOWDEN WHO’S THE EDITOR OF THE CEDAR RAPIDS GAZETTE.  GOOD MORNING.  FIRST OF ALL AND WHEN WE’RE TALKING TAXES, WHAT KIND OF TAXES ARE THE POLITICIANS TALKING ABOUT CUTTING OR RAISING OR POSSIBLY EFFECTING TO EFFECT THESE CHANGES IN EITHER JOBS OR RICH.  WOULD YOU START US OUT DICK?

 

DICK: SURE.  I THINK IT’S FAIR TO SAY THAT OVER THE LAST 20 YEARS OR SO THE MAIN FOCUS THAT POLITICIANS IN WASHINGTON HAVE HAD IS ON INDIVIDUAL INCOME TAX CHANGES, NOT MUCH IN THE WAY OF CHANGES IN PAYROLL TAX, NOT MUCH IN THE WAY OF CHANGES IN CORPORATE INCOME TAX.  I THINK PEOPLE IN WASHINGTON HAVE FOCUSED MAINLY ON CHANGES IN INDIVIDUAL INCOME TAX RATES AND DIFFERENT DEDUCTIONS AND EXCLUSIONS FROM INCOME FOR INDIVIDUALS.

 

PETER: AND I THINK THE LEVEL OF POLITICIANS IS THAT THERE ARE STATE TAXES AND THEN THERE ARE FEDERAL TAXES WITH GROUPS OF POLITICIANS ON BOTH GROUPS WITH THE TAXES BEING A FUNDING SOURCE, WOULD THAT BE A FAIR?

 

DICK: YEAH, THAT’S TRUE. 

 

PETER: OK AND BARB, HAVE YOU HAD IN THE PAST OR YOU’VE OBSERVED POLITICIANS MAKING PROMISES IS PART OF WHAT’S GOING ON IS THEY’VE GOT TO GET THEIR FUNDING FOR THEIR PROGRAMS, BE IT NATIONAL OR STATE?

 

BARB: OH ABSOLUTELY.  I THINK IN ALMOST EVERY TAX PACKAGE THERE’S ALL KINDS OF LITTLE SPECIAL INTEREST TYPES OF LEGISLATION THAT ARE PUT IN THERE BY DIFFERENT CONGRESS PEOPLE OR SENATORS TO BENEFIT THEIR PARTICULAR DISTRICT SO THAT’S CERTAINLY, BUT THAT HAPPENS WITH EVERY KIND OF LEGISLATION REALLY SO THAT’S, DOES HAPPEN THOUGH.

 

PETER: MARK, WOULD IT BE FAIR TO SAY THAT THE POLITICIANS ARE RESPONDING TO SPECIAL INTERESTS?

 

MARK: WELL SHOW ME A POLITICAL CAMPAIGN THAT DOESN’T TALK ABOUT TAXES AND I’LL SHOW YOU A COUNTRY THAT DOESN’T HAVE TAXES.  THERE SEEMS TO BE A LOT OF SPECIAL INTERESTS CERTAINLY THAT ARE TALKING ABOUT TAXES IN A CAMPAIGN BUT LITERALLY YOU’VE GOT PEOPLE WHO ARE EITHER PROMISING TO STIMULATE THE ECONOMY WITH TAX CUTS OR IN SOME RESPECT ASKING FOR TAXES TO HELP PROVIDE GOVERNMENT SERVICES THAT SEEM TO BE LACKING IN CERTAIN AREAS.  I THINK WE’RE HEARING A LOT ABOUT THAT IN STATE AND LOCAL CAMPAIGNS, WE HEAR ABOUT THAT IN THE FEDERAL ELECTION CENTER, ** IN 2008. 

 

PETER: SO FOR OUR VIEWERS IT COULD BE, TAXES COULD START ON A CITY LEVEL OR A STATE LEVEL OR FEDERAL AND THIS IS A LARGE FUNDING SOURCE FOR THESE PROGRAMS.  DICK, CAN YOU GIVE US AN HISTORICAL PERSPECTIVE ON POSSIBLY THE RATES OVER THE LAST 30 YEARS?

 

DICK: SURE.  I THINK I CAN DO THAT.  THAT’S ABOUT HOW LONG I’VE BEEN PRACTICING HERE IN CEDAR RAPIDS.  IN THE LATE 70'S, AND QUITE A WHILE BEFORE THAT ON THE FEDERAL SIDE THE MAXIMUM FEDERAL RATE WAS UP TO 70% AND AT THAT TIME THERE WAS A SPECIAL RULE THAT IF YOU HAD EARNED INCOME THAT COULDN’T BE TAXED AT MORE THAN 50%.  WHEN RONALD REGAN WAS ELECTED PRESIDENT THEN THERE WAS A CHANGE AND THE MAXIMUM RATE WHEN DOWN FROM 70% DOWN TO 50% AND THEN THERE WAS AN EVEN BIGGER CHANGE IN 1986, A MAJOR TAX REFORM ON THE FEDERAL LEVEL THAT BROUGHT THE TOP RATE DOWN FROM 50% TO 28% AND SINCE THAT TIME IT’S CREPT BACK UP A LITTLE BIT, IT WENT UP TO AS HIGH AS 39 ½% I THINK IN THE EARLY 90'S AND THEN IN 2001 ONE OF THE FIRST THINGS THAT PRESIDENT BUSH AND THE REPUBLICAN CONGRESS WANTED TO DO WAS HAVE AN OVERALL DROP IN THE RATES AND SO THE RATES CAME BACK DOWN TO WHERE THEY’RE NOW AT 35% TOP RATE.  THEN THERE WAS ONE OTHER SIGNIFICANT CHANGE THAT TOOK PLACE IN 2003 AND THAT WAS ALL ALONG THIS TIME THERE HAVE BEEN IN AND OUT DIFFERENTIALS ON TAXATION OF CAPITAL GAINS.  SOMETIMES IT GETS A BENEFIT SOMETIMES IT DOESN’T AND IN 2003 THERE WAS A REDUCTION IN THE TAX RATE ON CAPITAL GAIN AND DIVIDEND INCOME DOWN TO 15%, A 15% TOP RATE.  IN A NUTSHELL THAT’S ABOUT AS GOOD AS I CAN DO OVER THE LAST 30 YEARS.

 

BARB: BUT I THINK AN IMPORTANT POINT OF THAT TOO IS THAT WE’RE NOT ALWAYS COMPARING APPLES AND APPLES WHEN YOU TALK ABOUT THE DIFFERENT BRACKETS BECAUSE IN ADDITION TO MAYBE LOWERING THE TAX RATE DOWN TO 28% WE STARTED LOSING SOME OF THE DEDUCTIONS LIKE THEY INCREASED THEY THRESHOLD FOR DEDUCTING MEDICAL EXPENSES AND TOOK AWAY SOME ITEMIZED DEDUCTIONS IF YOU HAVE INCOME OVER A CERTAIN LIMIT SO THERE WERE TRADEOFFS THERE SO I DON’T KNOW HOW YOU WOULD COMPARE APPLES AND APPLES BUT THERE WERE SOME OTHER THINGS THAT WENT ON AS THEY CHANGED THOSE TAX RATES.

 

DICK: ABSOLUTELY. 

 

PETER: AND ONE OF THE THINGS THAT THE PEOPLE HAVE TALKED ABOUT IS HOW THE REDUCTION OF TAXES IN THE EARLY REGAN YEARS ENDED UP SPURRING THE COLLECTION AND THIS IS WHERE THE JOBS ARGUMENT COMES FROM. 

 

MARK: IT’S INTERESTING, I MEAN THEORETICALLY WHEN TAXES ARE CUT IT’S SUPPOSED TO MEAN MORE MONEY IN OUR POCKETS WHICH MEANS THAT WE WILL SPEND MORE MONEY AND BUY MORE GOODS AND SERVICES WHICH MEANS THAT THERE WILL BE A GREATER DEMAND AND THAT WILL CREATE JOBS AND SO FORTH AND I THINK SOME OF THE CLASS WARS THAT COME OUT ON THE TAX CUTS ARE THEY’LL SAY WELL THIS WILL BENEFIT, YOU KNOW WEALTHY PEOPLE MAY NOT SPEND ANY MORE MONEY OR ANY LESS MONEY WHEN TAXES ARE CUT.  THEY MAY BENEFIT FROM IT BUT THEY BUY ALL THEY HAVE AND ALL THEY NEED THEORETICALLY SO WHEN TAXES ARE CUT YOU KNOW YOU’VE GOT THIS SHORT TERM GAIN FOR SOME PEOPLE BUT THE FOLKS WHO HAVE THE MOST MAY NOT BE SPENDING ANY MORE MONEY SO IT’S VIEWED AS AN INCENTIVE FOR WEALTHY PEOPLE. 

 

PETER: THE THEORY IS THAT IF THE CUTS WERE ACROSS ALL TAX CATEGORIES, THAT THERE WOULD BE MORE ADDITIONAL MONEY TO SPEND FOR AT LEAST ALL OF THE PEOPLE UP THROUGH THE MIDDLE CLASS AND THEN THAT WOULD GENERATE MORE JOBS.

 

GENERATE MORE JOBS.  I THINK THE BIG DEBATE IN AMERICA TODAY IS THE SUSTAINING OF THAT GROWTH.  IS THAT SOMETHING THAT’S SHORT TERM OR LONG TERM, WILL IT PARLAY INTO ANY KIND OF LONG TERM GROWTH IN THE ECONOMY IN TERMS OF NEW JOBS.  THERE’S GOING TO BE THAT INITIAL IMPACT SO TO SPEAK BUT HOW MANY JOBS WILL BE CREATED, HOW LONG WILL THAT GO AND THERE ARE OTHER THINGS THAT INFLUENCE, I THINK WE WOULD ALL RECOGNIZE, ESPECIALLY IN A COUNTRY WHERE FOR THE PAST 5 YEARS HAS BEEN AT WAR AND CONTINUES TO SPEND A LOT OF MONEY IN A LOT OF DIFFERENT WAYS.  HOW MUCH OF THAT IS PLOWED BACK INTO THE DOMESTIC ECONOMY.  IT’S HARD TO MEASURE.

 

PETER: I KNOW THAT DURING WORLD WAR 2 THERE WERE HUGE CAMPAIGNS FOR SELLING WAR BONDS TO HELP FINANCE THE WAR BUT YET, IN THIS LATEST GLOBAL WAR ON TERROR, I HAVEN’T SEEN ANY BIG CAMPAIGNS TO FINANCE THE SELLING OF E BONDS OR U.S. GOVERNMENT INTEREST.  IT JUST HASN’T BEEN OUT THERE HAS IT, HAVE YOU SEEN ANY?

 

MARK: I DON’T THINK SO.  WE HAVEN’T HAD ANY POLITICIANS WHO HAVE SAID WE WANT TO RAISE TAXES TO FUND THE WAR BUT I THINK THAT THIS IS A PART OF THE DEBATE.  WE’VE HEARD THAT IN THE PAST SEVERAL WEEKS ABOUT HOW OUR OBLIGATION IS TO CONTINUE TO INCREASE FOR FUNDING CERTAIN KINDS OF PROGRAMS AND SO FORTH AND MONEY THAT MIGHT HAVE BEEN PAID INTO DEBT AND INTO THE NATIONS DEBT AND SO FORTH ARE NOW GOING TO SUSTAIN OTHER GOVERNMENT PROGRAMS.

 

PETER: WELL AREN’T YOU ADDRESSING WHAT THEY CALL ENTITLEMENT PROGRAMS?  THE ONES THAT CONGRESS REALLY HAS VERY LITTLE CONTROL OVER, MEDICARE, MEDICAID AND SOCIAL SECURITY?  AREN’T THOSE THE ONES THAT LARGELY MAKE UP THE GOVERNMENT BUDGET?

 

MARK:  CERTAINLY THERE’S THAT BUT IF WE GO BACK TO THE SENSE, THE ESSENCE OF THE TAX CUTS AND IS IT PRO RICH OR IS IT JOB, CERTAINLY THERE’S REPEATED EXAMPLE OF WAYS TAX CUTS HAVE STIMULATED ECONOMIES, CAUSED INVESTMENT, CAUSED GROWTH AND SO FORTH BUT I THINK TODAY YOU’VE GOT A BIGGER ISSUE ABOUT JUST ARE WE COLLECTING ENOUGH TO SUPPORT THE GOVERNMENT OBLIGATIONS AND SOME OF THESE PROGRAMS THAT YOU CITE ARE ONES THAT ARE TAKING INCREASING MEASURES OF PUBLIC MONEY TO SUPPORT.

 

PETER: WELL I THINK IT’S, PEOPLE HAVE SAID THAT SOCIAL SECURITY IS GOING TO GO BROKE AT SOME POINT IN THE FUTURE AND OUR CHILDREN OR GRANDCHILDREN MAY NOT HAVE ANYTHING.

 

DICK:  I WAS AT A PROGRAM JUST RECENTLY SPONSORED BY OUR FIRM WHERE WE HAD A GROUP OF PEOPLE, ONE FROM THE CONCORD COALITION WHICH IS VERY CONCERNED ABOUT THE FUTURE, THE DEBT THAT’S INCREASING IN THE UNITED STATES, ONE FROM KIND OF A CONSERVATIVE THINK TANK, ONE FROM A LIBERAL THINK TANK AND THEN ONE FROM SOMEBODY WHO ACTUALLY WORKS IN THE GOVERNMENT ACCOUNTING OFFICE I BELIEVE AND THEY WERE TALKING ABOUT WHAT’S GOING TO HAPPEN IN THE FUTURE IF WE DON’T MAKE ANY CHANGES AND IT’S KIND OF SCARY STUFF AND IN FACT SOCIAL SECURITY IS PROBABLY THE SMALLER ISSUE IN THOSE FUTURE ENTITLEMENTS.  THE BIG ONE IS MEDICARE BECAUSE YOU’VE GOT SO MANY MORE PEOPLE THAT ARE GOING TO BE ON MEDICARE WITH THE BABY BOOMERS REACHING 65 WHERE THEY’RE ELIGIBLE FOR MEDICARE AND THE COST OF MEDICAL CARE IN THE UNITED STATES GOING UP PROBABLY HIGHER THAN THE RATE OF INFLATION.  THEY VIEW SOCIAL SECURITY AS SOMETHING THAT WAS PROBABLY FIXABLE BUT I THINK MEDICARE WAS THEIR BIGGER CONCERN.

 

PETER: BARB WHAT HAVE YOU SEEN IN THE WAY OF TAX CUTS OR CHANGES IN THE LAST FEW YEARS IMPACT ON SCHOOLS OF HIGHER EDUCATION?  HAS IT MADE A SIGNIFICANT DIFFERENCE THERE WITH SOME OF THE HOPE AND THE LIFELONG LEARNING CREDITS?

 

BARB: I THINK THOSE HAVE HELPED BUT I CAN’T SAY THAT THEY’VE HELPED SUBSTANTIALLY.  THE FEDERAL GOVERNMENT HAS ALSO KIND OF AT THE SAME TIME AS PUTTING THOSE CREDITS IN PLACE HAVE TAKEN BACK OR REDUCED A LOT OF THE FEDERAL FINANCIAL AID THAT’S OUT THERE SO THE STUDENTS I DON’T THINK HAVE REALLY BENEFITTED A WHOLE LOT.  MY SENSE AND IT’S JUST A GENERAL SENSE IS THAT STUDENTS ARE STRUGGLING MORE AND MORE TO PAY FOR THEIR COLLEGE EDUCATION THAN THEY HAVE IN THE PAST AND BORROWING A LOT MORE MONEY TO DO IT SO AND THAT’S MAINLY I THINK IMPACTED BY THE REDUCTION IN THE FEDERAL FINANCIAL AID. 

 

PETER: I KNOW THAT IN IOWA DIVORCING PARENTS MANY YEARS AGO USED TO BE TOLD THEY EACH HAD TO PAY ONE HALF O F A CHILDS COLLEGE EDUCATION AND THEN LEGISLATIVELY THAT CHANGED ABOUT 8 OR 9 YEARS AGO WHERE EACH PARENT ONLY DOES ONE THIRD AND THE CHILD HAS TO COME UP WITH A THIRD IN TERMS OF LOANS OR SCHOLARSHIPS AND IT’S AN ATTEMPT TO KIND OF GET THAT CHILD TO BUY INTO SUCCESSIVELY COMPLETING THE EDUCATIONAL EXPERIENCE RATHER THAN HAVING A FOUR YEAR PARTY.  DICK, YOU HAD AN INTERESTING POINT ABOUT THE PERCENTAGE OF TAXES OR COLLECTIONS, THE GDP.

 

DICK: YEAH AND AS I WAS KIND OF GIVING THAT HISTORY, YOU KNOW WE USED TO HAVE A 70% RATE AND THEN IT WENT TO 50 AND THEN 28 AND THEN BACK UP BUT IF YOU LOOK AT THE PERCENTAGE OF GROSS DOMESTIC PRODUCT, THAT INCOME TAX EACH YEAR REPRESENTS, IT’S A FAIRLY STABLE PERCENTAGE EVEN THOUGH THE RATE IS CHANGING DRAMATICALLY FROM ONE YEAR TO THE NEXT.  I’VE GOT A CHART THAT WENT BACK TO 1962 AND I DON’T THINK IT EVER WENT BELOW 7% OF GDP AND IT NEVER WENT ABOVE 10% OF GDP EVEN THOUGH THE RATES WERE FLUCTUATING DRAMATICALLY IN THAT TIME.  THE ACTUAL GROWTH IN REVENUE JUST FROM INDIVIDUAL INCOME TAX NOW, I LOOKED AT IT AND IT WENT UP STEADILY EVERY YEAR UP UNTIL I THINK 2001 AND 2001 WAS THE VERY FIRST YEAR WHERE THE INDIVIDUAL INCOME TAX RECEIPTS ACTUALLY WENT DOWN FROM THE YEAR BEFORE.  THERE HAVE BEEN A COUPLE OF TOUGH YEARS, 2001 2 AND 3, INCOME TAX WISE WE HAVEN’T BEEN COLLECTING AS MUCH AS IN THE PAST AND I THINK YOU KNOW THE DOT COM BUBBLE BURSTING AND 9/11 HAPPENING AND ALL THOSE THINGS I THINK HAD AN IMPACT ON THAT. 

 

PETER: WE KNOW THAT A LOT OF TAX PROGRAMS ARE SPECIAL INTEREST LOBBYING BUT IS THAT NECESSARILY A BAD THING?  CAN WE ALWAYS SAY THAT THAT INFORMATION FUNCTION OF THE LOBBYISTS TO THE POLITICIANS MIGHT AND SOMETIMES HELP DEVELOPING THINGS LIKE HELP STRUGGLING COMPANIES, IS THAT A POSSIBILITY TOO FOR SOME OF THIS LEGISLATION?

 

I’LL JUST TALK ABOUT IT FIRST.  IF YOU THINK ABOUT SOME OF THE BIG TAX BREAKS THAT ARE OUT THERE AND HAVE BEEN THERE FOR SOME TIME LIKE NO TAX ON THE BUILD UP ON MONEY INSIDE A LIFE INSURANCE POLICY, CERTAINLY THAT HAS A MAJOR IMPACT ON THE STATE OF IOWA IN TERMS OF THE NUMBER OF INSURANCE COMPANIES THAT ARE HERE AND HOW MUCH MONEY IS INVESTED IN INSURANCE PRODUCTS.  THAT’S A BREAK THAT’S BEEN THERE FOR A LONG TIME.  THERE ARE MAJOR BREAKS LIKE THAT I DON’T THINK ANYBODY EVEN QUESTIONS ANYMORE FRANKLY.  THEY’RE JUST THERE AND THAT’S THE WAY IT’S GOING TO BE.

 

PETER: AREN’T THERE OTHER SACRED COWS LIKE THE DEDUCTIBILITY OF A HOME OWNERS MORTGAGE?

 

ALTHOUGH THERE ARE LIMITATIONS ON THAT NOW TO SOME EXTENT.

 

BARB: I THINK ANOTHER SACRED COW IS PROBABLY MUNICIPAL BOND INTEREST THAT ISN’T SUBJECT TO TAX.  ORIGINALLY THAT INCOME WASN’T TAXED WHEN THE FIRST TAX CODE WAS ENACTED IN 1912 I BELIEVE IT WAS BECAUSE THEY FELT LIKE IT WAS UNCONSTITUTIONAL FOR THE FEDERAL GOVERNMENT TO TAX STATE GOVERNMENT REVENUES.  I THINK THAT CONSTITUTIONAL ISSUE PROBABLY IS NOT AS CLEAR CUT NOW BUT I DON’T THINK YOU’D EVER SEE CONGRESS TRYING TO TAX INTEREST ON MUNICIPAL BONDS.  I THINK THAT’S A SACRED COW.  I CAN’T SEE THAT EVER CHANGING.

 

DICK:  YES AND NO.  YOU CAN HAVE SITUATIONS NOW WHERE THAT DOES GET TAXED A LITTLE BIT.

 

BARB: WELL THAT’S TRUE.

 

DICK: SO THAT THE FOOT IS KIND OF IN THE DOOR THERE I SUPPOSE SO TO SPEAK.

 

BARB: ARE YOU TALKING ABOUT FOR SOCIAL SECURITY?

 

DICK: FOR SOCIAL SECURITY, SOMETIMES FOR ALTERNATIVE MINIMUM TAX.  IT’S HARD TO MAKE A BLANKET STATEMENT ABOUT TAXING. 

 

PETER: WELL IOWA HAS CERTAINLY HAD A TAX ENVIRONMENT WHERE A LOT OF OUR WEALTHIER PEOPLE END UP GOING TO FRIENDLIER STATE ENVIRONMENTS AND TAKING UP RESIDENCY.  I THINK EVERYBODY WOULD KNOW PEOPLE THAT HAVE MOVED TO FLORIDA OR MOVED TO TEXAS WHERE THERE’S NO STATE INCOME TAX AND THE PEOPLE FEEL THAT THEY’RE SAVING SOMETHING BY THAT BUT YET THAT STATE’S GOT TO GET INCOME FROM SOMEWHERE ELSE AND SUPPORT ITS STATE INFRASTRUCTURE IN A SIMILAR WAY. 

 

DICK: LET ME MAKE ONE COMMENT ON THAT PETE.  I’VE SEEN A LOT OF PEOPLE THAT MOVE OUT OF IOWA FOR A PERIOD OF YEARS BUT THEN AS THEY GET QUITE A BIT OLDER, MOVE BACK TO IOWA ALSO.  IT DOESN’T ALWAYS TAKE I GUESS IS WHAT I WOULD SAY THERE.

 

PETER: I GET THE SENSE THERE DICK THAT THEY MIGHT WANT TO COME BACK HERE FOR THE HEALTH CARE OR BECAUSE THEY KNOW THEY’RE GOING TO BE BURIED HERE.

 

DICK: OR THEIR FAMILY IS HERE OR WHATEVER BUT IT’S NOT INFREQUENT THAT THAT HAPPENS, THAT PEOPLE WILL GO AWAY FOR A WHILE AND THEN COME BACK.

 

MARK: THE COMPLICATED TAXING STRUCTURE IN IOWA HAS BEEN A TARGET FOR A LOT OF PEOPLE SUGGEST OVERHAULS AND SO FORTH.  THERE ARE COMPANIES THAT ARE BING RECRUITED TO DO BUSINESS IN IOWA AND SO FORTH AND THE STATE ECONOMIC DEVELOPMENT PEOPLE HAVE TO EXPLAIN THESE NUANCES OF FEDERAL DEDUCTIBILITY AND HOW YOU GO THROUGH A WHOLE KIND OF RITUAL KIND OF EXPLANATION AND SOMEHOW THE NET IS COMPETITIVE WITH OTHER STATES AND THERE’S A LOT OF THINGS AT PLAY THERE BUT IT CERTAINLY IS ONE OF THE THINGS THAT COMES UP IN THE LEGISLATIVE SESSION WITH SOME FREQUENCY, THE ISSUE OF FEDERAL DEDUCTIBILITY. 

 

PETER: AND IN FACT THE GAZETTE WOULD GO AS A FUNCTION AS HOW DYNAMIC THE CEDAR RAPIDS AND METRO COMMUNITY IS, THE MORE PEOPLE YOU GET HERE THE MORE PEOPLE BUY NEWSPAPERS, THE MORE PEOPLE GROCERIES, EVERYTHING AND THE MORE READERS YOU’RE GOING TO HAVE SO IT ONE DRIVES THE OTHER.

 

MARK: WE CERTAINLY WANT GROWTH IN OUR COMMUNITIES, OUR COMMUNITIES WANT GROWTH IN IOWA AND IT’S INTERESTING BECAUSE IOWANS ARE AS MUCH AS WE JOKE OVER TAXES AT TIMES, WE CERTAINLY ARE WILLING TO PAY THEM AND WE SEE THAT IN ALL LEVELS.  THE CEDAR RAPIDS IOWA CITY COMMUNITY EARLIER THIS YEAR APPROVED A LOCAL OPTION SALES TAX TO POUR LITERALLY MILLIONS AND MILLIONS OF DOLLARS INTO SCHOOL INFRASTRUCTURE.  WE HAVE PUT ON OURSELVES TAXES TO HELP WITH ALL KINDS OF STATE AND COUNTY KIND OF PROJECTS AND THE CITIES AND SO FORTH BUT I THINK WE’RE ALL LOOKING FOR A LITTLE MORE SIMPLE SYSTEM, SOMETHING THAT GIVES US SOME SENSE OF WHAT WE’RE BEING TAXED FOR, IS IT FAIR, IS IT EQUITABLE.  AT THE SAME TIME, KNOWING THAT THESE KINDS OF THINGS CAN HELP SPUR AN ECONOMY, IT’S NOT JUST ABOUT SENDING MONEY TO THE GOVERNMENT OR NOT SENDING AS MUCH GOVERNMENT, SENDING AS MUCH MONEY TO THE GOVERNMENT, WE’RE DOING SOMETHING THAT CAUSES OUR BUSINESS AND INDUSTRIES TO INVEST TO GROW, FOR PEOPLE TO FEEL GOOD ABOUT THE ECONOMIC STIMULUS.

 

PETER: AND I THINK THAT COALITION HAS ANNOUNCED A NUMBER OF DEVELOPMENTS WITHIN THE LAST FEW MONTHS HAVEN’T THEY?  THE GERMAN COMPANY COMING IN DOWN AT AMANA AND SOME OTHERS?

 

GOOD ANNOUNCEMENTS IN THE CEDAR RAPIDS IOWA CITY AREA.  I THINK THAT THEY WERE FORTUNATE THAT WE GOT THE RIGHT KIND OF MIX HERE BUT I KNOW THAT THE FOLKS WHO, THE BEAN COUNTERS WHO HAVE TO DECIDE IS IT GOING TO BE ECONOMICALLY VIABLE, THEY’RE LOOKING AT TAX RATES AND WE CAN HAVE SOME GREAT COMMUNITIES AND GREAT EDUCATIONAL SYSTEMS AND ALL KINDS OF THINGS BUT IT’S ALSO ABOUT MAKING MONEY AND SOME OF THAT MONEY THAT’S MADE IS THE MONEY THAT YOU DON’T HAVE TO SEND TO THE GOVERNMENT.

 

PETER: ISN’T ONE OF THE ISSUES INVOLVED THAT A LOT OF LOCAL GOVERNMENTS WILL GIVE PROPERTY TAX CREDITS TO NEW COMPANIES AND THE EXISTING COMPANIES THAT HAVE BEEN AROUND FOR A NUMBER OF YEARS ARE SITTING THERE SAYING WELL WAIT A MINUTE, WHY ARE YOU FORGETTING ABOUT ME AND WHY DON’T I GET A PIECE OF THE PIE TOO.  THAT CREATES SOME FRICTION.

 

MARK:  WELL I’M SURE IT DOES TO SOME DEGREE BUT I ALSO WOULD SAY THAT GOVERNMENT HAS PROBABLY EXTENDED SOME PRETTY GOOD INCENTIVES TO ALL FOLKS AS THEY COME ALONG AND AT THE SAME TIME THERE IS SOME OBLIGATIONS ON THOSE COMPANIES TO COME THROUGH I THINK THERE ARE STRINGS ATTACHED.  THE TALK ABOUT JOB CREATION AND SO FORTH AND SORT OF LEVELS OF WAGES AND SO I THINK IT’S A WIN WIN FOR OUR COMMUNITY IF WE CAN WORK THIS.

 

PETER: OK.  DICK, WHAT WOULD HAPPEN IN WHAT’S GOING TO HAPPEN IN 2010 WITH THE REVERSION ON A STATE AND INHERITANCE TAX TYPES OF THINGS.  WHAT’S THE EXPECTED FALLOUT AFTER THAT?

 

DICK: THAT’S A GOOD QUESTION PETE AND JUST AS A WAY OF A LITTLE BACKGROUND, WHEN THERE WAS THE BIG TAX ACT IN 2001 THAT REDUCED RATES ACROSS THE BOARD, ONE OF THE CHANGES THAT WAS PUT IN PLACE THERE WAS AN INCREASING STATE TAX EXEMPTION AND THEN BECAUSE OF SOME RULES IN CONGRESS, THEY CAN ONLY HAVE LEGISLATION IN PLACE LIKE THAT FOR 10 YEARS UNLESS THEY GET A CERTAIN NUMBER OF VOTES SO IT ISN’T LOCKED IN PERMANENTLY SO THAT IN 2010 ALL OF THE PROVISIONS THAT WERE ENACTED IN 2001 EXPIRE UNLESS CONGRESS ACTS TO REAUTHORIZE THOSE.  IN THE STATE TAX AREA YOU’VE GOT A ESPECIALLY ODD SITUATION BECAUSE YOU’VE GOT AN INCREASING EXEMPTION THROUGH 2009 AND THEN IN 2010, THE WAY THE LAW’S WRITTEN NOW, THERE’S NO ESTATE TAX AND THEN IN 2011 IT COMES BACK THE WAY IT WAS IN THE YEAR 2000.  NOBODY THINKS THAT’S WHAT’S GOING TO HAPPEN.  EVERYBODY THINKS THAT CONGRESS WILL TAKE SOME ACTION BUT PROBABLY NOT UNTIL 2009 AFTER THE NEXT ELECTION TO COME UP WITH SOME KIND OF A PERMANENT FIX OR THE POSSIBILITY I HEARD A LITTLE WHILE AGO FROM SOMEBODY WORKING IN WASHINGTON D.C., THEIR THEORY WAS LATELY CONGRESS HAS BEEN, IF THEY’VE GOT PROVISIONS THAT ARE EXPIRING, VOTING TO RE AUTHORIZE THEM FOR ONE MORE YEAR NEAR THE END OF THE YEAR WHERE THEY’RE ABOUT TO EXPIRE SO THEIR THOUGHT WAS, MAYBE THEY’LL TAKE THE STATE TAX EXEMPTION THAT’S GOING TO BE IN PLACE IN 2009 3 AND ½ MILLION DOLLARS PER PERSON AND MOVE IT INTO 2010 AND THAT WILL BE THEIR TEMPORARY FIX AT LEAST FOR ONE MORE YEAR. 

 

PETER: WELL I KNOW FROM MY YEARS WHEN I WAS ON ACTIVE DUTY IN THE MILITARY AND THEN FROM JUST READING THE NEWSPAPERS, THAT AT THE FEDERAL AND CONGRESSIONAL LEVEL, THEY’VE NEVER BEEN GOOD ABOUT ADDRESSING THEIR END OF THE YEAR BUDGET ISSUES AND YEARS AGO IT USED TO BE THE FEDERAL GOVERNMENT ENDED ITS BUDGET ON JUNE 30^TH AND THEN SOMEBODY GOT THE BRIGHT IDEA OF WHY DON’T WE JUST MAKE THE BUDGET END AT THE END OF SEPTEMBER AND THEN WE WON’T BE LATE ANYMORE.  WELL, A YEAR OR TWO GOES BY AND THEY’RE RUNNING OVER THAT DEADLINE.  THAT’S WHY WE HAD THIS THING ABOUT TEMPORARY FUNDS, THE NEW BUDGET AND EVERYTHING AND SO THE GOVERNMENT IS TRADITIONALLY GOING TO RUN LATE. 

 

BARB: NOW WE’RE GETTING BACK INTO THE POLITICAL PART OF TAX LAW.  IT WAS INTERESTING WITH THE ESTATE TAX HOW THAT REALLY WASN’T ON THE RADAR SCREEN THAT MUCH UNTIL EVERYBODY, THE POLITICIANS STARTED CALLING IT THE DEATH TAX.  ALL OF A SUDDEN YOU HAD EVERYBODY AGAINST IT BECAUSE IT JUST CHANGING THE NAME OF THE TAX HAD A TREMENDOUS IMPACT ON THE AMERICAN PUBLIC, IT WAS QUITE INTERESTING. 

 

DICK: AND IT RAISES VERY LITTLE REVENUE.  THE ESTATE AND GIFT TAX, I MEAN IT’S, I’VE GOT IT HERE IN FRONT OF ME.  IT’S LESS THAN 1% OF GROSS DOMESTIC PRODUCT, PROBABLY LESS THAN 1% OF TAX RECEIPTS, IT’S NOT A VERY BIG NUMBER. 

 

PETER: AND IS ONE OF THE RECENT FACTORS ABOUT TAXES IN THAT EVERYBODY’S GOT A SPECIAL PROGRAM AND THEY’RE TRYING TO PROTECT THEIR RICE BOWL IF YOU WILL?

 

DICK:  YEAH.  I DON’T KNOW, MAYBE I’M NOT INVOLVED WITH LOBBYING OR IN D.C. ENOUGH TO KNOW EXACTLY HOW THAT WORKS.  I DON’T KNOW HOW MUCH OF THAT THERE IS GOING ON RIGHT NOW.  I THINK MAYBE THERE USED TO BE MORE SPECIAL PROVISIONS FOR CERTAIN COMPANIES PUT IN TAX BILLS THAN THERE ARE NOW BUT I DON’T KNOW THAT FOR A FACT.

 

PETER: WOULDN’T YOU SAY MARK THAT THE FARM BILL IS ONE THAT IMPACTS THE STATE THE MOST?

 

MARK: WELL, ONE AND I WOULD JUST SAY THAT THERE CERTAINLY ARE INTEREST GROUPS WHO WANT TO SEE THE I GUESS, THE TAX EXEMPTION IF YOU WILL FOR ETHANOL ON A FEDERAL LEVEL AS AN EXAMPLE.  THERE’S THIS THING ABOUT TAXING AND THEN THERE’S THIS THING ABOUT CROPPING OUT EXEMPTIONS AND I THINK THAT’S MAYBE WHAT YOU’RE TALKING ABOUT, THE PORK BILL OR THE PORK BILL MIGHT BE THE WRONG WORD BUT CERTAINLY THOSE SPECIAL INTEREST THINGS WHERE PEOPLE ARE LOOKING FOR YES, IT’S OK TO COLLECT THAT TAX GENERALLY BUT NOT ON THESE KINDS OF THINGS THAT EFFECT MY STATES ECONOMY OR MY BUSINESS INTEREST AND SO FORTH.   THE FARM BILL IS, I MEAN IT’S CERTAINLY DRIVEN BY TAXES BUT I’M NOT SURE IT’S ABOUT THE TAXING POLICIES PER SE BUT IT CONSUMES AN AWFUL LOT OF TAX REVENUE IN ONE FORM OR ANOTHER. 

 

PETER: OK WE’VE GOT A COUPLE OF MINUTES LEFT.  WOULD EACH OF YOU LIKE TO ADD A FINAL COMMENT, DO YOU HAVE ANYTHING YOU’D LIKE TO ADD DICK?

 

DICK: YOU ASKED ME BEFORE I CAME TO MAYBE LOOK AT HOW THE UNITED STATES COMPARES TO OTHER COUNTRIES AND I TRIED TO DO THAT JUST A LITTLE BIT JUST TO GET SOME PERSPECTIVE AND I THINK THE OVERALL TAX BURDEN IN THE UNITED STATES IS FAIRLY LOW COMPARED TO OTHER COUNTRIES IN THE WORLD.  THAT PROBABLY SHOCKS US IN THE UNITED STATES AND THEN YOU THINK ABOUT IT, THERE ARE A LOT OF COUNTRIES WHERE TAXES COLLECTED PAY FOR HEALTH CARE, THEY HAVE SOME KIND OF UNIVERSAL HEALTH CARE SO THEY COLLECT TAXES TO PAY FOR THAT.  THERE ARE SOME COUNTRIES WHERE TRUCIARY EDUCATION IS PAID FOR BY GOVERNMENT PROGRAMS AND SO THEY COLLECT TAX ON THAT SO EVEN THOUGH IT MAY FEEL LIKE WE’RE OVERTAXED HERE AND THAT WE’RE PAYING TOO MUCH, COMPARED TO THE REST OF THE WORLD WE STACK UP PRETTY WELL IN TERMS OF HOW MUCH WE’RE PAYING IN TAX.

 

PETER: MARK, ANY FINAL COMMENTS?

 

MARK: WELL I THINK IN IOWA WE HAVE A LOT OF GREAT SERVICES THAT ARE DRIVEN BY TAX DOLLARS, OUR PUBLIC EDUCATIONS SYSTEM CERTAINLY AND AS AN EXAMPLE OUR ROAD SYSTEMS OUR PARKS AND ALL OF THAT.  I THINK IT’S FAIR TO ASK ANYTIME WE’RE LOOKING AT TAX INCREASES OR TAX CUTS, WHAT IS THE ECONOMIC EFFECT, WHOSE INTERESTS ARE BEING SERVED THERE, WILL IT PROVIDE THE STIMULUS THAT PEOPLE WANT AND IT’S A GOOD QUESTION TO ASK. 

 

PETER: BARB, REAL QUICK WE JUST GOT ABOUT 30 SECONDS.

BARB: NO, I’M FINE I THINK YOU GUYS HAVE SAID IT QUITE ELOQUENTLY.

 

PETER: WELL I’D LIKE TO THANK EACH OF YOU FOR JOINING US THIS MORNING AND ON BEHALF OF THE INTER RELIGIOUS COUNCIL OF LINN COUNTY THANK YOU ALL FOR JOINING US THIS MORNING AND GO OUT THERE AND MAKE THE WORLD A BETTER PLACE FOR EVERYONE.  THANK YOU.