The voices of Tax Policy Center's researchers and staff
The GOP says it wants a revolution, but who’s going to change the world? Long touted as a way to prove that tax cuts can pay for themselves by the economic growth they generate, “dynamic scoring” of federal legislation is no simple task. Today’s TPC-Hutchins Center on Fiscal and Monetary Policy webcast at Brookings examines why. But the House, in its dynamic scoring rule, didn’t tell the Joint Committee on Taxation or the Congressional Budget Office what models or assumptions to use. Those key decisions are up to the agencies’ leaders. The JCT’s chief of staff, Thomas Barthold, will stay on. But who will lead the CBO if current director Doug Elmendorf isn’t reappointed? We’d all love to see the plan.
You can’t cut a rate without slashing a few breaks. A US corporate tax rate at 25 percent, down from 35: Corporations want it, but how badly? Would they be willing to give up their deduction for business interest expense? How about accelerated depreciation, which allows firms to write off the cost of investments more quickly? They might have to: “Even getting the rate down to 28 or 30 looks really hard without them,” noted TPC’s Bill Gale. “That’s where the money is.” Conservatives argue that ditching the deductions would slow economic growth, but Gale and others figure that dumping certain preferences would boost growth. The Congressional Research Service says the jury is still out.
About that college tax break… President Obama would end the tax exemption of withdrawals from 529 college savings plans. White House Council of Economic Advisers Chair Jason Furman said the subsidy “tilts towards the upper end” of earners and hasn’t prompted people to go to college who would otherwise have not. The GOP says this amounts to a middle class tax hike. The Government Accountability Office found that in 2012, the median income of families with 529-type plans was $142,400. The median income of families without them was $45,100. Obama would boost direct subsidies and expand other tax breaks aimed at students in households with incomes under $180,000.
Some GOP governors want growth, but would raise taxes. Out of 31 Republican governors, eight so far have proposed tax increases. Among them: Michigan’s Rick Snyder wants to raise the sales and gasoline tax; South Carolina’s Nikki Haley would boost the gasoline tax; and Nevada’s Rick Sandoval would hike taxes for education. Doug Ducey of Arizona will keep the state’s income tax, despite a campaign promise to ditch it, in light of his state’s $1billion budget shortfall. What gives? It’s probably basic math: The National Association of State Budget Officers’ latest fiscal survey found that states’ slow revenue growth and rising spending needs could drive budget tradeoffs in fiscal year 2015.
On the Hill this week: Both the Senate Finance Committee and the House Ways and Means Committee will hold hearings on trade policy tomorrow. Also on Tuesday, the Congressional Budget Office will present its budget and economic outlook to the House Budget Committee. It’s expected to present to the Senate Budget Committee on Wednesday.
And in case you missed it, Intuit’s TurboTax is very, very, very sorry. The online tax prep software company emailed millions of its customers over the weekend to apologize for dropping key tax forms from its Deluxe Edition. Intuit is also offering a $25 rebate to those users who had to spend $30 or $40 to upgrade to versions that included all necessary forms. Intuit is sorry that it hurt you and didn’t mean to make you cry. But maybe not that sorry.
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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.