The voices of Tax Policy Center's researchers and staff
Jack Lew on corporate inversions: “Action is going to be taken.” Treasury Secretary Jack Lew says that ”any company considering an inversion is now on notice that there is action that is going to be taken.” Administrative curbs would limit the economic benefits of inversions but only congressional action could solve the inversion problem entirely, he noted. GOP lawmakers have argued that limits on inversions should only be part of comprehensive corporate tax reform.
Representative Ryan on tax reform: “We’ll see what we can get” and how we’ll score it. At the Financial Services Roundtable, Ryan predicted that tax reform could happen at some point in the next three years and suggested its chances would be enhanced by two major initiatives by a GOP Congress. He said if the GOP controls both the House and Senate, it would score legislation in a way that reflects changes in the overall economy, known as “dynamic scoring.” Icing on the cake: A GOP Congress also would assume that now-expired business tax breaks are made permanent, thus reducing the amount of money that would have to be raised by a revenue-neutral tax reform. These changes could set off a firestorm among congressional budgeteers.
Well, at least nobody shut down the government. The House adjourned yesterday and will not return till after the mid-terms. Congress’s only must-pass legislation was a continuing resolution to fund the government through mid-December. It won House approval on Wednesday and passed the Senate yesterday, opening the door for the Senate to leave town too. During the lame duck session, Congress will have to approve another probably-temporary budget bill and is likely to renew its fight over expired tax breaks. Not much else for the House while the Senate is expected to take up the bipartisan Marketplace Fairness Act to allow states to collect taxes from online retailers. The real tale of the lame duck session will be determined by the outcome of the congressional elections in November.
Meanwhile, can you be “too legit to audit?” A new GAO report finds that large partnerships, like hedge funds and private equity firms, are so complex that the IRS cannot audit them effectively. The GAO found that “multi-tiered and interlocking partnerships” are especially hard to deconstruct and review, especially given recent IRS budget cuts. In fiscal year 2012, the IRS audited about the same share of large partnerships as it did individual taxpayers: 0.8 percent. The audit rate for large corporations is 27.1 percent.
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