The voices of Tax Policy Center's researchers and staff
The Rubio-Lee tax reform plan: Interesting, very expensive, and DOA. The GOP senators offer a framework for a huge tax cut that would add trillions to the debt over the next ten years while moving the revenue code towards a consumption tax. TPC did a preliminary analysis of an early version of the plan last year, and Howard Gleckman examines the updated plan the senators released yesterday. Given the tax treatment of business investment, interests costs (except for mortgages), and capital gains and dividends, the Rubio-Lee plan is certainly worth more discussion. “But in the end,” Gleckman concludes, “they fail to propose a fully-formed plan that confronts the need to eliminate many specific tax preferences… They didn’t even try to design a plan that raised roughly the same amount of money as the current tax code.”
Hill Democrats offer their own plans to expand tax breaks for middle-income households. They are also interesting, expensive, and DOA. House and Senate Ds introduced a package of tax subsidies that they say will help the middle-class. They include expansions of the Earned Income Credit, the Child and Dependent Care Credit, and the American Opportunity Tax Credit, which helps subsidize college tuition.
The IRS has to hold some refunds for a bit. Affordable Care Act subsidy data need to be confirmed before taxpayers get their refunds, according to National Taxpayer Advocate Nina Olson. ACA subsidies are based on estimated income and the IRS needs to reconcile those projections with actual income reported on 1095-A forms from state health exchanges. According to H&R Block, about 90 percent of the subsidy amounts taken last year were incorrect.
Speaking of the ACA… Senator Ted Cruz joins the ranks of those with an Affordable Care Act alternative. He’d kill much of the law, including the requirement that individuals have insurance, the marketplaces, and the tax subsidies that help people buy coverage. At yesterday’s Supreme Court hearing on King v. Burwell, Justice Alito suggested that a ruling against the Obama Administration would not immediately end those tax subsidies. Urban Institute data show that the biggest users of the assistance in the 34 states relying solely on federal health exchanges are white, employed, high school graduates from the south.
Why do states want to make pensions tax-free? To TPC’s Howard Gleckman, it’s a bad idea that won’t die. “Excluding retirement income from state tax gives money that states don’t have to people who don’t need it to discourage them from doing something that, by and large, they are not doing.”
Spain wants to host international film production, badly. The nation’s new fiscal regulations offer a 15 percent tax credit for film and television production in Spain, capped at $2.8 million. Want to make a film in the Canary Islands? You can get a 35 percent credit, or up to $5.3 million. Plus, it won’t snow.
In Puerto Rico, a boycott. Its government plans to replace a 7 percent sales and use tax with a 16 percent value added tax in order to boost economic recovery. Puerto Rico’s Governor Alejandro Garcia Padilla also hopes that the VAT would help reduce tax evasion. But businesses planned to close shops in protest, and opponents organized a “No Consumption Day” boycott of the tax change on March 3.
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Posts and comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.