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.
Counting devices before they hatch? Should the GOP take the Senate in November, medical device makers may see a renewed push to repeal the 2.3 percent excise tax on their products. The tax is an important financing component of the Affordable Care Act, to the tune of $29 billion over a decade. Republicans have railed against the tax for four years while the White House has opposed its repeal.
Will Congress close these tax loopholes to pay for tax reform? TPC’s Howard Gleckman notes that some of the biggest “tax loopholes” are asset-building tax subsidies. TPC and Urban Institute research shows that the federal government spent nearly $384 billion through the tax code in 2013 to encourage people to invest in higher education, save for retirement, and buy homes. The subsidies are too popular to be zeroed out, but do little to help low- and middle-income taxpayers. “The good news,” Howard concludes, “is that we do such a poor job subsidizing asset building that there is room to both do better and perhaps save some money at the same time.”
Meanwhile, tax reform talk remains cheap. The White House seems optimistic about business tax reform in 2015. Business coalitions are paying attention, but reform still faces hurdles: Retiring House Ways & Means Chair Dave Camp’s comprehensive tax reform plan had few supporters in his own party. A group of tax experts at a Tax Analysts event at Boston College Law School (paywall) just dismissed any apparent consensus on corporate tax reform as superficial.
Remember, “there’s no crying in baseball,” or in JCT scoring. TPC’s Howard Gleckman explains why neither Republican Paul Ryan, who wants to replace Camp, nor Treasury Secretary Jack Lew like the way the Joint Committee on Taxation scores tax reform. Ryan wants scoring to account for macroeconomic changes that are difficult to figure. Lew wants scoring to extend beyond the typical ten-year budget window, a place known to conceal deficits. Until tax reform actually begins, Howard plans to “watch Lew and Ryan kick dirt and toss their caps over the way the umpires will call the game—long before their teams even take the field.”
On the campaign trail, Republicans are strangely silent about taxes. While the White House and congressional Republicans are maneuvering over tax reform, the Wall Street Journal reports (paywall) that three-quarters of tax-related Senate campaign ads are being run by Democrats. While Rs are quiet, Ds are pounding away at tax inversions. One exception: deep blue Maryland, where GOP gubernatorial candidate Larry Hogan has forced Democrat Anthony Brown to take a “no new taxes” pledge.
Colombia might need to address its tax reform scoring. Its government wants to advance a four-year tax reform bill that could raise $26.2 billion, an amount needed due to falling oil revenues and higher social spending. It would extend taxes on wealth and bank withdrawals, and temporarily raise a tax on corporate profits. Critics of the plan call for comprehensive tax reform and question how the government will boost revenue after 2018.
Local pension promises don’t have to be breakable. A recent federal court ruling on the municipal bankruptcy case of Stockton, California, suggests that local pensions could be cut as part of the city’s bankruptcy resolution. What about local governments facing pension trouble before bankruptcy? TPC’s Tracy Gordon suggests an alternative. She recommends a one-time charge reflected on statewide property tax bills—spreading costs beyond residents of financially strapped localities to a state’s population. “I never said it would be easy,” she concludes.
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