April 5, 2012
Host: Ted Simons
Filing Your Taxes
- Bill Brunson of the IRS and Anthony Forschino of the Arizona Department of Revenue have the latest information about filing your taxes and what they’re doing to combat tax fraud.
- Bill Brunson - IRS
- Anthony Forschino - Arizona Department of Revenue
| Keywords: taxes
Ted Simons: The tax-filing deadline for this year is April 17th, which makes for a couple of extra days to get the job done. I recently spoke with Bill Brunson of the IRS and Anthony Forschino of the State Revenue Department about other news that may be helpful in filing your taxes.
Ted Simons: Gentlemen, good to have you here. Thank you so much for joining us. Bill, what do we need to know about tax filing this go-around?
Bill Brunson: Well there hasn’t been a lot of major changes but people need to know that they can still prefile, which is a part of IRS.gov and choose to electronically file their tax return for free, for all Arizonans no matter how much you make or how complex the tax return is. They can go there and electronically file their tax return for free. If your income is around $57,000 or less, your traditional free file where you can choose among 20 different software providers and that software will lead you the hand. If you're fortunate enough to have income in excess of that, then you would be using fillable forms. It's an interactive type of return and you electronically submit it. All Arizonans can electronically file and that's very important in the sense that it's so fast and accurate and secure and you only have a couple more weeks.
Ted Simons: Indeed. As far as the state is concerned, anything different this go-around?
Anthony Forschino: There's not a lot of differences some. The only big thing is a use tax line. Used tax is the tax that is -- it's similar to the sales tax but it's for those purchases you make from out of state companies online, mail order and that company doesn't charge the tax. The customer is still responsible for that tax.
Ted Simons: So I buy $100 worth of books or clothes or something along these lines, got to declare it myself. And this has --
Anthony Forschino: The tax has been since 1955. And it's always been in our booklets, even to say here's where you will send the money in. This is the first year it's a line on the tax form.
Ted Simons: So basically, if the state hasn't paid or they haven't paid the state, you've got to pay the state. And is the state ready to enforce this? This is huge.
Anthony Forschino: It's going to be a very tough situation to just enforce that particular line. They think what it is is just like a regular audit if you're auditing someone, we will look for that but I don't know how much we're going to do about that.
Ted Simons: What is fresh start?
Bill Brunson: It is an initiative to help people who owe money. Last year, we brought it out and this year, we've enhanced it so that if your liability, the amount that you owe the federal government is $50,000 or less, we can streamline you into a payment arrangement with little or no paperwork. If you've been out of work for 30 days or more and your income is $200,000 or less, then we can waiver a late payment penalty for you for six months or if you're self-employed and your income has seen a reduction of a quarter, 25% or more, due to the 2011 economy, then we can also waiver that late filing penalty for you. So you've got penalty waiver, you've got paperwork reduction, and on that $50,000 or less, the payment period is extended from 60 months to 72 months so you have a little bit more time to pay back the money to the federal government.
Ted Simons: Is this relatively new?
Bill Brunson: Fresh start in this essence, probably as of the 1st of March. So those enhancements are new for the individual who does owe.
Ted Simons: What about extensions for folks who for whatever reason need to extend? Still there?
Bill Brunson: Easy, just go to IRS.gov, click on that free file icon. You can do it electronically, just before midnight April 17, Tuesday. Don't wait until that time.
Anthony Forschino: For purposes of Arizona, if you don't owe, you can just use the federal extension. You don't have to do a separate one for Arizona.
Ted Simons: Arizona is tagged onto the federal one with the idea of being a symbiotic relationship. How do things change between the state and the feds?
Anthony Forschino: I guess the difference is it all depends on -- we start with the federal adjusted gross income but what changes along the way is if there's any additional additions or subtractions and that would mean in some cases if the federal government charges -- if there's a tax on the Social Security income because somebody makes a certain amount, and then there's a tax, that would be added back. Municipal interest would be added back. We don't tax part of the -- I think it's the first $2,500 of federal and state retirement. So those types of things are the differences, and then the added additions if there's any additions and then, of course, there's those credits that we have that the federal doesn't have.
Ted Simons: Something that doesn't change between state and fed I’m sure is tax fraud, especially at the federal level. What's the latest scam, what do we get to watch out for these days?
Bill Brunson: The Internal Revenue Service takes this very seriously. The latest scam on the street deals with the American opportunity credit, which is an allowable credit for people that go to college in their first four years and it's worth $2,500. But the tax scammer is saying to you the individual I can get your refund with no documentation and I know that you're elderly, I know that you've gone to school 25 years ago or so, I can use this American opportunity credit and tie it to you going to school, 25 or 30 years ago and get your refund. Or those groceries you buy every week at the store, that tax that you pay, I can get that back to you through the American opportunity credit but all I want from you is a few dollars to prepare the return, and then I'll get your refund. So what happens is the taxpayer buys into this scam, submits the return, the tax scammer has your money in their pocket. They're down the road, and then you get a letter from the IRS asking why you filed a frivolous return. So it literally is one of those -- if it sounds too good to be true, you don't want to buy into it. There are other scams out there that people fall victim to and it's unfortunate.
Ted Simons: Identity theft I would imagine would be huge along the lines of the bill that’s mentioned but in other ways, as well. How big a factor is this?
Anthony Forschino: It is a big problem for Arizona for purposes of the fact that a lot of people are filing two ways. They're either filing someone else's Social Security before you get to it so somebody's filed for you before you even had a chance to or they're creating Social Security numbers by using dead people or Social Security numbers that they're creating for children or whatever, and then filing under those and hitting them as much as they can as fast as they can and trying to get a refund.
Ted Simons: Bottom line, safer to file electronically?
Bill Brunson: You bet. Your electronically filed tax return is completely accurate. Less than one half of one percent of an error rate. It will do all the math, it will make sure that you have all the attachments and forms. If you have a refund coming and you provide a direct deposit information for your checking or savings account, 21 days or less, it will be in your savings or checking account and it can't get lost or stolen. Savings to the federal government, 17 cents to process, an electronically filed tax return, $3.66 for a paper return. The error rate is 15% on a paper return. So there's a lot of benefits there to electronically filing your tax return and everybody can go to free file at IRS.gov and submit their return electronically.
Ted Simnons: And if you are getting a refund, it's a good thing to go ahead and get the money because some folks still haven't done that.
Bill Brunson: 2008 tax return you bet. We're looking for 29,000 Arizonans who have about $25 million that they're going to leave on the table if they don't file before midnight April 17th. The median amount is about $558. The Internal Revenue Service by seeing third-party information submitted to it, Social Security information on the w-2s, they have a refund coming if they file a tax return and we're not certain why they're not doing that. If they don't, they're going to forgo the ability to claim that refund.
Ted Simons: Thanks for joining us. We appreciate it. And that is it for now. I'm Ted Simons. Thank you so much for joining us. You have a great evening.
Government Employee Compensation
- A debate over how compensation for government employees compares to the private sector with Nick Dranias of the Goldwater Institute and ASU political science professor Dave Wells.
- Nick Dranias - Goldwater Institute
- Dave Wells - ASU political science professor
| Keywords: government
Ted Simons: Good evening and welcome Arizona Horizon. I’m Ted Simons. A tuition freeze for in-state undergraduates at ASU. The board of regents approved the freeze today. It’s the first tuition freeze at ASU in 20-years. There will be a 3% increase, though, for graduate and out-of-state students. The board of regents did not hike tuition at the University of Arizona, but a rebate expires next year, which effectively increases tuition at the U. of A. by 8%. Incoming freshmen at Northern Arizona University will see a 9% tuition hike. An independent attorney has been hired to help consult Pinal County Sheriff Paul Babeu, who’s facing three separate investigations. Pinal County Attorney James Walsh and Babeu came to an agreement to hire the attorney so that Walsh’s office can avoid any appearances of a conflict of interest. The attorney will be paid out of the sheriff’s budget. A new report says that Arizona government workers are paid 6% below workers in the private sector. The Grand Canyon Institute released the report as the legislature continues to consider bills that would make it easier to fire government workers. The Goldwater Institute supports those bills and claims that government employees are paid half a billion dollars above market rates. Here to discuss the issue of government worker pay is Arizona State University Political Science Professor Dave Wells. He represents the Grand Canyon Institute. Also here is Nick Dranias of the Goldwater Institute. Good to have you both here. Thanks for joining us. Let's start with the idea that public worker compensation is a real problem in Arizona. Valid?
Dave Wells: No it's not valid. What we took as an example of 10,000 workers, Arizona workers, and when we estimate how much they're paid, we find that private-sector workers are paid 6% above public-sector workers and that's adjusting for the total compensation that they get, including retirement benefits as well as their hours' worked. So we felt this was a much stronger estimate than what the Goldwater had done.
Ted Simons: You found that 44% higher? Talk to us about what the bureau of labor statistics found from those numbers.
Nick Dranias: First thing. I think it was Mark Twain that said there's lies, damn lies, and then there's statistics. The problem with the Grand Canyon Institute’s estimates is that they relied on the methodology of an author named Keith whose methodology was already called out by the bureau of labor statistics. His model omits paid leave and that skews the estimate in favor of finding what they found, after all. And this is a problem with statistical models as demonstrated by Keith’s methodology. You can keep adding what they call controls until you get the result you want and it's exactly what Keith did. He did in two other ways, as well. We also assumed that every higher degree is worth as much in the job market. An education degree and an engineering degree should be treated same way as a control. That's absurd. He assumed the larger a governmental organization is, the more valuable the worker is which explains supposedly why they get more benefits. Another absurd assumption. When you take a statistical model and you build into it one absurd assumption after another until you get the result that you want, that's not a reliable model.
Dave Wells: It's funny to have the Goldstone Institute say something's absurd. As an apples to apples comparison, you want somebody with the same level of education. If you're looking at a white male who has a certain level of experience and education, you want to compare them in the public and private sector the same. When the Goldstone Institute did their model, they don't do anything like that. 98% of the data in the Goldwater model comes from outside Arizona. They're using U.S.-wide aggregate numbers, they combined part-time and full-time workers. We limit ourselves to full-time workers and we're controlling for all these different variables so that the only difference is if they're in the private or public sector and it's a far more accurate way to do it than what the Goldwater Institute did.
Nick Dranias: First of all, they don't even address what our model is. We're two ships passing in the night. We have actually made the case that what drives government compensation is collective bargaining laws to a very substantial extent. We didn't set out to determine what the difference really was between private sector employment and government sector employment. Instead, we relied on academic journals that have already established that and the bureau of labor statistics' own figures. They have said that an hourly basis, government workers in state and local government make 44% more than the average private-sector numbers. That's not our numbers, that's the government's numbers.
Dave Wells: Those are numbers for the whole United States and that’s the problem. They continue to use the entire United States. When you look at just Arizona, one of the comparisons, if you were to compare public to private, one of the things you want to control for is difference in education. 43% of the workers in the public sector in Arizona have at least a college degree. Only 27% do in the private sector. And Goldwater doesn't make that correction. And with high school degrees, 12% have less than that in the private sector only 4% in the public sector. When you make those adjustments in Arizona, not only what's most ironic of all is despite the educational differences, public sector workers, their compensation is actually 2% less than the private sector workers.
Nick Dranias: Ok there’s two problems. Number one, all the adjustment that the Grand Canyon Institute has made are subjective, completely seat of the pants, cook your way to the results you want type adjustments. For example, as I said from the beginning, they didn't include paid leave among their measures of compensation. And this is already being criticized by the bureau of labor statistics economists in a published academic journal. There is no good localized model out there because of the subjective judgment calls that have to be made up saying this occupation is the same as that occupation. A better model takes an objective measure, which just happens to be the statewide numbers.
Ted Simons: I guess some would argue that point, but my question to both of you is how do you compare a teacher, which is a public worker, to a private school teacher? How do you make that -- a cop and a firefighter. What kind of comparisons can be made to the private market?
Nick Dranias: I don't believe that a legitimate model has yet been created that compares things at that sort of grassroots level. All job markets are interrelated at the biggest and most aggregate level. They're competing for the same pool of potential applicants. They're driven by the same supply and demand, which is why we believe that aggregate numbers at the state wide and national level are a better thing to do than to try to concoct a model that doesn't take into things and makes subjective judgment calls like the Grand Canyon Institute.
Ave Wells: They’re not subjective. It's called human capital theory, and education and experience are the primary drivers of people's earnings. It's left out of the Goldstone Institute model and you always want to use individual workers and Arizona workers. And Goldwater Institute did not do any of those things. The Grand Canyon Institute did the best model estimate to come up with their things and we find that when we control for things like hourly compensation, we're including all the compensation, the issue about not including paid leave is a question about the -- when you ask workers about their wage and salaries, what they include in that. And Professor Keith who I worked with finds that when workers report those things, they're thinking about things they get paid for as part of their wages and salaries. It's not double counting it. It's not the criticism that Nick is alleging.
Ted Simons: It would seem like you would include paid leave as a benefit. You're saying that's a double account?
Dave Wells: In some areas. We do include -- we talk about entirely about non-wage benefits, including all the stuff about pensions and so forth and we do a very careful analysis to look at all those aspects of that aspect of compensation to try to get at the total compensation piece because public sector workers do get a larger amount of non-wage benefits in their total compensation.
Nick Dranias: Let's be clear about what the Grand Canyon Institute really did. They shopped out their report to a guy who the bureau of labor statistics has called out in a published academic journal as quote not including paid leave in compensation before calculating his markups. So the bottom line here is we didn't create any numbers. We relied on the bureau of labor statistics' own numbers, we applied those numbers established by the government as a basis for determining what is driving government compensation. We found that collective bargaining laws are a substantial driving force to the tune of $550 million a year in Arizona. Nothing in their report in any way even addresses that finding.
Dave Wells: First of all, you did use the bureau of labor statistics numbers, you used numbers from the national -- gdp numbers. That's why you can't break them down to individual workers. You used the wrong numbers to start with. We looked at some of the issues as related to unions. Arizona's a weakly organized union state. It’s a right to work state. There's no mandatory bargaining here. Workers are not required to join a union and when we looked at the economic reports by the Princeton University that they had cited, when you categorize it by states, there's a union premium but it's much lower in states where there's weaker union rights. And we found the premiums between 0% and 7%.
Nick Dranias: So much of what is just said is false that it's laughable. Arizona does have collective bargaining laws. They’re mandatory. They exist at the local level. It's a major myth that we've been working hard to dismantle. The reality is that Arizona has collective bargaining.
Ted Simons: Are you saying Arizona is a strong union state?
Nick Dranias: It is not a strong union state but it does have collective bargaining laws for the government sector and they give leverage to government employees to extract $550 million a year from the taxpayer that they would not otherwise be able to extract based on pure market forces. Nothing in their report even addresses that argument. They are instead challenging our reliance on bureau of labor statistics numbers that are government vetted with the numbers of a paid consultant whose methodology has already been exploded for not counting paid leave.
Ted Simons: It sounds like you're also being criticized for not focusing on Arizona as opposed to using a national model.
Nick Dranias: It would make sense to focus on Arizona if there was a good methodology, better methodology than when we used. For our purposes, the best methodology is to look at overall compensation in the state because that is an objective measure. If you try to control for all these mysterious factors that their paid consultant controlled for, that is pure subjective judgement.
Ted Simons: You've got 30 seconds.
Dave Wells: I'm amazed what he's pulled out from two sentences in that 30-page report. There's a dispute about those things. I would say the bottom line is you want to use Arizona workers and you want to use -- we used the cps numbers that come out every March, they have very few.
Ted Simons: We have to stop it right there. Good discussion. Good to have you both there. Thanks for joining us. We appreciate it.
The Valley’s Shrinking Housing Inventory
- Experts talk about the declining inventory of homes for sale in the Valley of the Sun.
| Keywords: valley
Ted Simons: The valley’s housing market suffered from a glut of homes in recent years. But the opposite is now true, and that’s making it tougher on home-buyers. Mike Sauceda has more on the story.
Mike Sauceda: Cristal Romney of Arizona wants her own home so she can move out of her sister's place. She's taking a tour of a place in Gilbert, Arizona. It has a good credit rating and a 20% down payment but it's been difficult to find a home.
Cristal Romney: It's very frustrating to buy a home because when I look at the house that I want, I put off a house that has multiple offers, I go way above the listing price and it goes for more than what I offered.
Mike Sauceda: Phoenix-area realtor Eric Nyquist say Romney's experience is not unique.
Eric Nyquist: I am seeing the market tightening up. There are less homes for buyers, which is creating a buying frenzy on properties.
Mike Sauceda: That frenzy is being fed by a shrinking housing inventory in the phoenix area that has fallen from 58,000 homes in 2008, which would be a 19-month supply at average sales rates. However, 8,000 homes are being sold monthly now and 16,000 homes on the market that are not under contract represent just the two-month supply. Demand is high enough for houses priced under $600,000 that they're receiving several offers the day they go on the market. While some areas have yet to see foreclosed houses on the market, that's unlikely to ruin the housing market. According to Michael Orr, the head of the Arizona real estate center and Arizona State University’s W.P. Carey School of Business.
Michael Orr: The idea that the banks own homes that are secret and in a shadow inventory is amusing because the banks cannot get the home without the owner knowing about it. It’s a matter of public record they record the deed at the county.
Mike Sauceda: Although the shrinking housing supply signals a housing recovery, it also depends on the willingness of banks to loan money. Mike Thorell is president of Pinnacle Bank in Scottsdale. A community bank with one branch. Half of its lending is to small businesses. The other half to home buyers.
Mike Thorell: I would harken back to the days when I started in banking. It took a real highly, highly qualified person to get a 5%, 10% down mortgage. We're there and maybe more.
Mike Sauceda: Thorell says there are two factors that may keep mortgage money from flowing into Arizona. First, local and regional lenders are stepping up in the absence of aggressive lending by the mega-banks.
Mike Thorell: It now has been very clearly represented that you've got to be careful and you're seeing a lot of the national lenders not fully embracing coming back into the state to make loans and they're being extremely careful.
Mike Sauceda: Another factor are Arizona laws preventing banks from going after home-owners, or any money owed on a home, after the home has been foreclosed on and sold. Mortgages are not a factor in many housing transactions in the Phoenix area. 40% of homes sold here are being bought with cash, even as median prices have turned higher. Last summer, phoenix median home prices fell to $108,000. In February, that had jumped to $122,000. Orr of Arizona State University points out, rising prices and shrinking inventories will help those underwater on their mortgages come up for a breath.
Michael Orr: That will probably have a beneficial effect on the local economy because people will be more confident that they're not losing value in their homes anymore. If they’re underwater, or not underwater by much. And I think it's going to spur home builders to try to patch up with the shortage and create jobs in the construction industry and everything that goes around that.
Ted Simons: The shrinking housing inventory is starting to show up in phoenix-area home prices as we discussed early this week, phoenix is just one of three markets that saw a year-to-year increase in prices from January 2011 to January of this year.