The voices of Tax Policy Center's researchers and staff
Together again: The US Supreme Court, the IRS, and the Affordable Care Act. Two years ago, the Court ruled that the ACA health care mandate is a constitutional tax. Now, it has decided to consider whether the IRS has overstepped its authority by providing premium tax credits to enrollees in federally established health insurance exchanges. The Court will consider a Republican-backed appeal out of Virginia: Four residents there seek to block the subsidies in 36 states, arguing that subsidies should only be available to enrollees in state-run exchanges. If the High Court agrees, more than 4 million people will lose their subsidized insurance.
But some states think the IRS did what it was supposed to do. The states of Arkansas, Delaware, Illinois, Iowa, Maine, Mississippi, New Hampshire, New Mexico, North Carolina, Pennsylvania and Virginia have together filed a separate appeal with the U.S. Court of Appeals for the District of Columbia Circuit. They say they “elected to forgo establishing their own exchange under the ACA with the understanding that relying on a federally facilitated exchange would not harm state citizens or interfere with state insurance market.”
In the meantime, repealing the ACA’s medical device tax remains a top priority for lobbyists and many Republicans. The 2.3 percent sales tax plays a relatively small role in Obamacare, but lobbyists have spent millions trying to repeal it. Once the GOP takes over the Senate in January, repeal may be low-hanging fruit. However, the Joint Committee on Taxation estimates that ditching the tax would add $29 billion to the deficit over ten years. If Congress decides to offset the tax cuts with tax hikes or spending reductions, that fruit might be too high to reach.
Speaking of what might be out of reach… Senator Harry Reid would like the lame-duck Congress to extend scores of expired tax breaks through 2015. He expressed his hope on the heels of Friday’s positive jobs report. The House, however, continues to have other, more permanent, tax break goals.
Will dynamic scoring open the door to GOP-style tax reform? Once they take control of Congress in January, congressional Republicans are likely to insist that the Joint Committee on Taxation builds macroeconomic effects into its official estimates of the cost of tax changes. Some GOP lawmakers are convinced that such dynamic scoring will show that tax cuts boost economic growth and thus largely pay for themselves without the need for offsetting curbs in tax preferences. But they may be disappointed. In September, TPC's Bill Gale and Dartmouth's Andrew Samwick found few economic benefits to past individual tax rate cuts. Tax Analysts' Marty Sullivan concludes lawmakers will still have to make tough choices on tax deductions and credits, even with dynamic scoring (paywall).
In Massachusetts: Amnesty pays off. The Massachusetts Department of Revenue collected just over $39 million from about 49,000 taxpayers through its two-month amnesty program for income and sales taxes. Qualifying taxpayers can pay any amount of tax owed and interest during that time and the Department of Revenue will not assess any penalties. The program ended on Halloween, but collections will continue this month for taxpayers who meet the timing criteria for submitting payments. The state already beat its collection estimate by $4 million.
And from the latest State Revenue Report: The Rockefeller Institute of Government at the State University of New York finds that total state tax collections fell by 1.2 percent in the second quarter of 2014, compared to the same quarter in 2013. The Great Lakes region had the largest decline at 6.5 percent, while the Far West showed growth of 1.1 percent. Local property tax revenues grew by 2.7 percent.
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