The voices of Tax Policy Center's researchers and staff
“Oh, what a night…” but no shut down. Ted Cruz and a handful of allies succeeded in delaying the Senate vote on the 2015 budget, but they couldn’t stop it. The $1.1 trillion spending bill was approved late Saturday night by a vote of 56-40. And three months into the fiscal year, most of the government is now funded through September 2015.
“Monday, Monday…” But, the Senate still has work to do. Senators Reid and McConnell have yet to determine how to move forward on legislation that would restore through the end of this calendar year a $42 billion package of expired tax breaks. Besides the tax breaks, the Senate must also consider a House-passed bill to reauthorize a federal terrorism insurance program. The Senate could approve it as is, or amend it and make the House reconvene to consider the revised bill. If lawmakers don’t figure all of this out soon, the Senate could be in session though much of the week.
The President’s immigration orders and refundable tax credits: No huge windfall. The immigration fight will continue in the next Congress, but as for tax policy, TPC’s Elaine Maag concludes the executive action won’t be a huge windfall for foreign-born workers and their families. The orders may increase in the number of adults who are eligible for the Earned Income Tax Credit. But many undocumented workers already get the Dependent Care Credit, Child Tax Credit, and Additional Child Tax Credit. While the Treasury Inspector General would like stricter eligibility requirements for those refundable credits, the IRS has insisted for years that undocumented works can claim them as long as they have a federal Individual Taxpayer Identification Number. And remember, Elaine says, these tax benefits help families with children, largely temporarily, and encourage work and reduce poverty.
Me and my shadow: Life insurers don’t need to leave the country to trim their tax bills. Unlike other firms that choose to establish their legal headquarters offshore to reduce their US tax bills, insurance companies have an even better deal. The New York Times reports that several states allow insurers to use reserves against future claims to pay bonuses and shareholder dividends and fund acquisitions without paying federal tax. Usually a drop in reserves is federal taxable income. But if the reserve level looks the same on paper—a maneuver known as “shadow insurance”—there’s nothing to report, and no federal tax to pay. An insurance company’s reserves, by the way, are deductible against federal tax as an ordinary business expense.
Net capital gains: Who gets them and where? A new TPC brief by Ben Harris and Lucie Parker sheds a bright light on the questions using zip-code level data. Capital gains reported on tax returns, totaling over $100 billion in 2012, were unevenly distributed across the country. Taxpayers in just ten percent of zip codes reported nearly 75 percent of the aggregate gains in 2012. Most are reported by white, young, and married taxpayers who live in counties along the coasts and in some midwestern cities such as Chicago.
Check out a new fact sheet on the EITC, Mortgage Interest Deduction, and Capital Gains tax preferences. TPC has summarized the key conclusions from a series of briefs on these tax expenditures. Data constraints had made it difficult to characterize the economic, demographic and geographic characteristics of the taxpayers enjoying these benefits. Not anymore, thanks to zip-code level data analysis.
Interested in subscribing to The Daily Deduction, the Urban-Brookings Tax Policy Center summary of the day’s tax news? Sign-up here for free access. If you’d like to tell us about a new research paper or have any comments about our new feature, write us at firstname.lastname@example.org.
Posts and comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.