Retro tax changes unacceptable
Published April 13, 2015
Editorial by Winston-Salem Journal, April 12, 2015.
Some North Carolina taxpayers were blindsided on retroactive tax changes because of a complex combination of factors from Washington and Raleigh. Legislators should not let this happen again. Catching taxpayers by surprise with the retroactive removal of deductions is never a good idea.
As the Journal’s Richard Craver reported, Some North Carolina taxpayers will have to amend their 2014 state tax return or scramble to make last-minute adjustments because of changes to the state’s tax code that were signed March 31 and went into effect April 2.
When Congress in late December decided to extend certain tax-cut deductions, the North Carolina legislature responded, starting in January, by moving to eliminate those deductions for taxpayers here. At the same time, state GOP leaders continued efforts they began in 2011 to simplify the state tax code by eliminating other deductions.
A bill signed into law by Gov. Pat McCrory, known primarily as fuel-tax legislation, included adjustments for removing taxpayer eligibility for a federal tax deduction on three income categories. Taxpayers now are required to declare as state income their deduction for qualified tuition and related expenses, monetary debt relief from a federal foreclosure prevention program, and their deduction for a qualified charitable distribution from an individual retirement plan. Also affected is bonus depreciation for small-business owners.
A limited number of taxpayers is affected. But many of them are, quite understandably, upset, in large part because the adjustments were made retroactive to the 2014 state tax season. Now, some of the affected taxpayers are scrambling to amend their returns by tax day, Wednesday. Some may have to return their refunds. Others may have to pay more in state taxes.
Hanging over their heads will be the potential of interest charged by the state or late-payment penalties for any additional state taxes not paid by Wednesday.
State tax officials say they alerted taxpayers, mainly through cyberspace means, including on its web page at www.dor.state.nc.us/taxes/impactofcodeupdate040115.pdf. But many taxpayers, especially older ones and ones of modest means, are not plugged in. And the fact that the legislation wasn’t signed until March 31 added to the problem.
Ryan Dobson of Liberty Tax Service told the Journal that it is “very rare” for a state legislature to make a retroactive tax change this late in the tax season.
The push for a simplified tax code includes allowing the historic preservation and film production tax credits to expire, as well as eliminating the ability to deduct medical expenses.
The effort to simplify the code has often been problematic, with the retro-tax deductions being the latest example. “You can do simple and you can do fair when it comes to tax code reform, but there’s an absolute trade-off when you favor simple over fairness,” Dobson said.
Simplicity might have its virtues. But it’s never a good idea to anger taxpaying voters with retroactive tax changes.
April 13, 2015 at 10:20 am
Norm Kelly says:
Retroactive tax increase or elimination of deductions should be illegal. I wonder, though, how lib media types responded when demons did it.
Making the tax code simpler, eliminating some deductions is a worthy goal. I wish central planners would catch on.
'Hanging over their heads will be the potential of interest charged by the state or late-payment penalties for any additional state taxes not paid by Wednesday'. It would be a cold, freezing day in Hades before I'd pay any penalty or late fee that was caused by some pol who didn't care how their last minute changes affected me. I would refuse to pay, and I'd make darn sure there was no money hanging around anywhere that they'd be able to confiscate. They'd have to leverage my paycheck to get any additional money out of me! If I owed extra taxes because of their last minute game playing, I would grudgingly pay it, but there is no way I'd pay either a penalty or late fee.
Any pol or tax collector who is considering collecting a late fee or penalty should automatically be fired. Any tax collector or pol who insists on collecting either late fee or penalty should not just be fired, but should also forfeit ANY and ALL benefits, retirement, health insurance, or any other benefit normally given to any government employee. Retroactive tax changes are bad enough. Attempting to force anyone to pay a fee or penalty because of such idiotic last minute games should be grounds for serious and immediate action. Tax payers MUST stand up for this! Or against this, as the case may be.
Our elected pols MUST pass a bill immediately that prevents penalty or late fee charges for anyone that tried to do the right thing but got caught by THEIR games, obviously not someone who was trying to game the system! It would be an interesting court case if someone were charged a penalty/late fee and decided to sue the state instead of paying.
April 13, 2015 at 11:26 am
Richard L Bunce says:
There should be no retroactive tax code changes and the tax code should be as simple as possible so that there is no room to make retroactive changes. It is not like the NC Legislature is the first legislative body to make retroactive tax code changes however...
