The Affordable Care Act’s tax subsidies are legal in all 50 states. The US Supreme Court issued its ruling yesterday against the plaintiff in King v. Burwell, the case that questioned whether tax subsidies for low- and moderate-income ACA enrollees could be offered in states without their own health exchanges. The High Court decided that the Obama Administration was correct in its interpretation of the law, and can provide subsidies to eligible enrollees in states with federal or federal-state hybrid exchanges. Had the Court rejected the subsidies, more than 6 million Americans in 36 states could have lost their insurance coverage.
You need to learn everything about taxing carbon. And now you can. Check out a new report from TPC’s Donald Marron, Eric Toder, and Lydia Austin. It examines the “what, why, and how” of a carbon tax. Marron shares highlights of the report, concluding that while the tax is imperfect, if done well, “it could efficiently reduce the emissions that cause climate change and encourage innovation in cleaner technologies….Resulting revenue could finance tax reductions, spending priorities, or deficit reduction…”
How unfair is the Roth IRA? Urban Institute’s Gene Steuerle explains how you don’t have to be a hedge fund manager or another savvy investor—such as those benefitting from Renaissance Technologies investment of lucrative Medallion Fund shares into Roth IRAs—to shield millions in income from taxes. That’s a problem: He concludes that Roths violate “the notion that those who either make more money or consume more can afford to pay more tax.”
Speaking of progressivity… Bernie Sanders, the Independent from Vermont and Democratic presidential hopeful, introduced the Responsible Estate Tax Act yesterday. Forbes explains that it would lower the amount an individual can shield from the estate tax, and raise estate tax rates from a flat 40 percent to 45 percent for estates valued between $3.5 million and $10 million; 50 percent on estates worth between $10 million and $50 million; and 55 percent on estates worth more than $50 million. Billionaires would face a surtax of 10 percent, bringing their rate to 65 percent.
Strange bedfellows? Ben Cardin and Rand Paul back a VAT. The Maryland Democrat and Kentucky Republican are both pushing versions of a value-added tax. But the devil is in the differences. As Bloomberg explains, Paul calls his 14.5 percent tax a “business-activity tax” that would replace the corporate income tax, the payroll tax, the estate tax, the gift tax and all tariffs. Revenue from Cardin’s 10 percent “progressive consumption tax” would be used to reduce the corporate income tax rate from 35 percent to 17 percent, and the top individual income tax rate from 39.6 percent to 28 percent. If revenues exceed 10 percent of the economy: Automatic rebates. There is little chance Congress will approve either version any time soon.
Rand Paul has another plan: Sue the IRS. The presidential hopeful doesn’t think the Obama Administration has any business getting financial information on Americans abroad from foreign banks. That’s the goal of the Foreign Account Tax Compliance Act, or FATCA. He questions the legality of the administration negotiating data sharing agreements with other countries without Senate approval of a formal treaty.
Interested in subscribing to the Daily Deduction, the Urban-Brookings Tax Policy Center summary of the day’s tax news? Sign-up here to get the Daily Deduction delivered to your inbox every morning. If you’d like to tell us about a new research paper or have any comments about our feature, write us at [email protected].
Posts and comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.
- © Urban Institute, Brookings Institution, and individual authors, 2022.