Congress is adjourned. The Daily Deduction will appear Mondays until it reconvenes.
What might the White House tax reform plan look like? We may find out soon. President Obama says he will soon present some “pretty specific proposals” to revamp the US tax code in the new Congress. His plan will build on “what we’ve already put forward,” he says. Still, Republicans and Democrats don’t agree on which tax breaks would be eliminated or how much money a new code should raise. The White House and Treasury have already tried to curb corporate inversions, but Republicans haven’t been terribly interested in that issue.
Tax reform is on Senator Hatch’s agenda, too, but will it grow any teeth? TPC’s Howard Gleckman considers the principles articulated by the incoming chair of the Senate Finance Committee. In Hatch’s vision, tax reform would not raise taxes but would cut rates for individuals and businesses, reduce tax expenditures, lower compliance costs, achieve horizontal equity, eliminate temporary tax provisions, and promote savings and investment. The Finance Committee’s Republican staff has produced a detailed description of what’s wrong with the current tax code, but Howard reports that unlike the Camp tax reform plan, it “does not follow up the diagnosis with a proposed treatment.”
Tax reform is no place for rose-colored glasses. While George Will seems to like his pair, TPC’s Bill Gale views tax reform without any filter. For example, while everyone favors economic growth, Gale finds little evidence that tax reform has ever generated much, despite Will’s hope. Similarly, Will proposes to cover the cost of a payroll tax cut for lower-income earners by ending a tax break on carried interest earned by hedge fund managers. But Gale figures ending carried interest would finance a tax cut of about 80 cents-a-week for the lowest 35 million earners. “We should still be interested in improving the tax system, but we should be clear-eyed about the costs and benefits of reform,” Gale concludes.
Michigan lawmakers agreed on a partial road funding solution, but left an additional tax hike up to voters. The state’s lame duck legislature could not come to a complete legislative solution to cover a revenue shortfall for road repairs. Instead, it passed an 11-bill package that dedicates $1.2 billion more annually to road repairs. It raises the motor fuels tax by about 3 cents but eliminates sales taxes on fuel, protects funds for schools and local governments, and restores the Michigan Earned Income Tax Credit to 20 percent of the federal EITC level. Public education funds would grow $300 million annually. A separate bill would require online sellers to collect Michigan sales tax, which is expected to raise $50 million. But, in May, voters will still need to decide on a sales tax increase from 6 percent to 7 percent. Michigan voters last faced such a ballot question in 1994, when they approved a sales tax hike of 2 percentage points, changing Michigan’s property tax and school financing systems.
The IRS’ Statistics of Income public use file has a new, improved design. The TPC describes it here. The PUF is a critical data source for tax policy analysis, and in 2012, an SOI working group performed an in-depth review of its disclosure procedures and the analytical usefulness of the PUF.
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