The voices of Tax Policy Center's researchers and staff
Congress is in recess through the mid-term elections. The Daily Deduction will post each Monday until then.
What’s a multinational to do? Where is it to go? Senator Dick Durbin and Senate Finance Committee Chair Ron Wyden seem pleased that Chicago-based AbbVie’s decided to drop its deal with Dublin-based Shire. But other inversion deals continue to advance regardless of the Treasury’s rules to curb them, including Mylan, Chiquita, Applied Materials, and C&J Energy Services.
But heading abroad might be slightly less attractive. Ireland has closed a tax loophole at the behest of the European Union and US: The “Double Irish” tax maneuver allowed US tech giants like Google to pass income through Irish-based subsidiaries to reduce tax bills at home. Meanwhile the EU’s finance ministers promised last week (paywall) to match the EU’s data sharing standards with those of the Organization for Economic Cooperation and Development by 2017 in an effort to crack down on tax evasion.
Of course there are benefits to having no fixed address. If you’re a member of the sharing economy, that is. The New York attorney general sees a cost, counting more than 70 percent of Airbnb’s listings in New York City as illegal. At the same time, Eric Schneiderman’s report contends, the city is also losing millions in tax revenue that could be generated by the 14.7% hotel occupancy tax, a tax rarely collected by Airbnb.
Super-sized IRAs: They belong to a teeny, tiny group of people. A new Government Accountability Office report found that in 2011, about 9,000 people had IRAs of $5 million or more, and only about 1,100 of them had accounts valued at $10 million or more. Of note: 315 people had over $25 million in their retirement accounts, totaling about $80 billion. TPC’s Howard Gleckman considers the evolution of these large, tax-preferred accounts. “If lawmakers ever do tax reform, these mega-accounts are likely to be prime targets.”
We’re seeing “normal-sized” taxes and spending… for now. The latest Treasury report on budget results for fiscal year 2014 is out. The deficit fell—but is a drop to $483 billion, or 2.8 percent of GDP, a good thing or a case of “who cares?” Howard Gleckman reviews the numbers: The economy is better, and a growing share of income went to the rich, who pay higher tax rates. Bush-era tax cuts for the wealthy expired, too, as did the payroll tax cut of 2011-2012. Spending declined to 20.3 percent of GDP, just under the 40-year average of 20.5 percent. But, as Howard notes, “We are by no means out of the long-term woods.” Tough fiscal decisions must be made, but Congress continues to excel at procrastination.
And the state of the states’ economies is… mostly positive, according to the latest State Economic Monitor from the State and Local Finance Initiative. Unemployment rates are below 6 percent in half the states. Every state but Alaska added jobs within the past year. But inflation-adjusted average weekly wages were flat or fell in 26 states. The monitor documents state trends in employment, government finances, and housing conditions, and features a special section on state minimum wages. TPC’s Richard Auxier gives the data a closer look and considers what role state economies may play in mid-term elections.
Interested in subscribing to The Daily Deduction, the Tax Policy Center summary of the day’s tax news? Sign-up here for free access. If you’d like to tell us about a new research paper or have any comments about our new feature, write us at email@example.com.
Posts and Comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.