Daily Deduction

from the Tax Policy Center

Corporate Tax Reform: No Easy Fixes

By :: January 23rd, 2015

Territorial tax systems abroad may not be good models for corporate reform here. A new TPC paper warns against drawing quick and easy conclusions from the territorial tax systems in other developed countries. While Senate Finance Committee Chairman Orrin Hatch and House Ways and Means Committee Chairman Paul Ryan find the idea attractive, the research found that territorial systems in four countries vary greatly from one another, and may function very differently in the US.

Consider corporate inversions on a webcast today. A conference co-hosted by TPC and the International Tax Policy Forum examines the history, causes, and consequences of corporate inversions, the policy response in the United Kingdom, and what actions the US should take. Finance Committee Chair Hatch will deliver the  keynote address. Participants include TPC’s Bill Gale and Eric Toder, ITPF’s John Samuels,  Mike Williams of the UK Treasury, Jim Hines of the University of Michigan, Mihir Desai and Steve Shay of Harvard, Mike Graetz of Columbia,  Ed Kleinbard of USC, and Michael Devereux of Oxford University.

Obama’s middle-class economics—for child care. TPC’s Elaine Maag reviews the President’s child care tax subsidy proposals. He wants to increase direct subsidies for low-income families and make the Child and Dependent Care Tax Credit more generous for many middle-income families. He’d also eliminate flexible spending accounts for child care, a step that would simplify filing  but may also reduce child care subsidies for some higher income households. It’s comprehensive proposal—but is Congress interested?

“The check is in the mail.” London Mayor Boris Johnson will, after all, pay his US tax bill on the sale of his London home. US citizens must pay taxes on incomes above $97,600, even income earned overseas, and  Johnson earns nearly $600,000- a-year, was born in the US, and holds dual US-UK citizenship. While he insists paying the estimated $44,000 bill is “outrageous,” he is now reportedly eager to settle the bill before visiting the US next month. His next step may be renouncing his US citizenship: He would need to if he’s to become the UK’s next prime minister, a job he’s reportedly anxious to take. No US tax on Number 10 Downing.

The IRS never rings twice—or even once. “If someone calls unexpectedly claiming to be from the IRS with aggressive threats if you don't pay immediately, it's a scam artist,” said IRS Commissioner John Koskinen. “The first IRS contact with taxpayers is usually through the mail. Taxpayers have rights, and this is not how we do business.” The Treasury Inspector General for Tax Administration has received reports of roughly 290,000 calls since October 2013. It reports nearly 3,000 victims who have been scammed out of over $14 million.

Next week.... The Senate Finance Committee will hold a hearing on US trade policy on the morning of January 27. The House Ways and Means Committee will hold its hearing on trade policy that afternoon. The Senate Budget Committee is scheduled to examine the Congressional Budget Office's budget and economic outlook for fiscal years 2015-2025 on Wednesday, January 28. On Monday, the Hutchins Center at Brookings will hold a morning-long program on dynamic scoring. You can register here.

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Obama Would Simplify and Expand Spending and Tax Subsidies for Child Care

By :: January 22nd, 2015

President Obama proposed three important changes to the way the federal government helps families with child care costs – increase direct subsidies for low-income families, increase tax credits for middle- and higher income families, and simplify the tax code (and offset some of the cost of the other changes) by eliminating flexible spending accounts for […]

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A Look at the Territorial Tax Systems in Four Countries Finds No Magic Bullets

By :: January 22nd, 2015

It is an article of faith among many tax reformers that the U.S. should shift from a worldwide tax system to a territorial regime in which U.S.-based multinational corporations pay U.S. tax only on their domestic income.  Such a step would reduce or eliminate tax on the dividends these firms receive from their foreign affiliates. […]

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Tax Policy and Politics: More of the Same

By :: January 22nd, 2015

Wait, are Ds and Rs really on the same page? In remarks yesterday, Treasury Secretary Jack Lew expressed optimism for a business tax overhaul, noting a “great deal of overlap” between the White House framework and recent Republican proposals. House Ways and Means Chairman Paul Ryan agreed that there are areas where Democrats and Republicans […]

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Adjusting the President’s Capital Gains Proposal

By :: January 21st, 2015

President Obama’s new proposal to tax capital gains at death is a welcome change that would close a huge loophole, but it suffers from a serious flaw: For some assets, it would be a record-keeping nightmare. Fortunately, there is an easy fix. The proposal is part of a broader tax plan that Obama released prior […]

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President Obama’s Middle-Class Tax Message in the State of the Union

By :: January 21st, 2015

President Obama’s tax proposals for the middle class were a key element of his State of the Union address. But they represent only relatively modest efforts to create subsidies through the tax code rather than through other departments of government. Looked at broadly, many only tinker around the edges of tax policy and count on […]

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Retirement Security a Priority in the 2015 State of the Union

By :: January 21st, 2015

In the 2015 State of the Union Address, President Obama made retirement security a priority for his Administration by promoting the Automatic IRA, a retirement savings plan that originated at the Retirement Security Project. The proposals would increase the ability of part-time workers to join their employer’s plan and improve tax incentives for businesses that either […]

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Taxing the Rich: It’s a Plan Abroad, Too

By :: January 21st, 2015

The State of the Union: Tax reform depends on where you are sitting. In his State of the Union Address last night, President Obama called on Congress to address wealth inequality through the tax code, largely by increasing the capital gains tax and imposing a bank tax to fund tax relief for middle-income earners. Senate […]

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The Tax Reform Gap Between Obama and the GOP is Widening

By :: January 20th, 2015

In his state of the union address, President Obama laid out his vision for the tax code. Earlier in the day, in a speech to the Chamber of Commerce, Senate Finance Committee chair Orrin Hatch (R-UT) described his. They are not only on different planets. They inhabit different galaxies. Obama wants to raise capital gains […]

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The IRS Should Fix Its Letter Audit Program

By :: January 20th, 2015

The beleaguered IRS has two enormous challenges: It must rebuild its reputation to win congressional support for the funding it needs to do its job. And, because it will never get all the money it needs, it must spend the dollars it does have more wisely. It can start by improving the way it communicates with […]

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