Daily Deduction

from the Tax Policy Center

Tax Deals, Tax Love

By :: April 24th, 2015

The GOP may be close to a budget deal. The Hill reports that House and Senate negotiators may be close to a deal on a budget resolution. Congress needs to complete final action on spending bills before October 1 when it faces the return of the sequester and a $1.017 trillion cap on military and domestic discretionary spending.

Could there be A Better Deal for Maine? The state’s Democratic leaders say “yes” and have begun sharing their tax reform plan with Maine voters. While GOP Governor Paul LePage wants to increase the state sales tax from 5.5 percent to 6.5 percent and reduce the income tax rate from 7.95 percent to 5.75 percent, Democrats would leave the sales tax rate unchanged, lower property taxes, and direct income tax relief to the bottom 95 percent of earners.

Pennsylvania could be close to a property tax deal. Democratic Governor Tom Wolf and the state’s House Republicans are working on a deal, but obstacles remain in their continued effort to lower school property taxes. The Governor would raise the sales tax from 6 to 6.6 percent and expand it. Republicans would boost it to 7 percent but keep current exemptions. Both parties would increase the state income tax from 3.07 percent to 3.7 percent. Republicans want the Governor to use new tax revenue only for property tax relief. Both sides want to block school districts from raising taxes after a state tax cut.

Philadelphia shows some brotherly love on higher property taxes. A group of organized labor and civic and other business associations are “prepared to pay more to make our city grow.” They back a plan to change the city's property tax structure. They’d boost the commercial and industrial property tax rate by 15 percent but lower wage taxes and the net-income portion of the business income and receipts tax. Backers estimate that the change could add 50,000 to 100,000 jobs in 10 years and generate $42 million in new revenue for schools over the first five years. State legislators must agree to put the changes on a ballot measure.

And in the worlds largest democracy, the vast majority pays no individual income tax. In India, the average worker earns about $5,000 (80,000 rupees) a year. But the income tax floor is more than three times that amount (250,000 rupees). About a third of the $220 billion India collected in taxes last fiscal year came from corporations. While most Indians pay no income tax, they do pay other levies including sales tax.

Could a carbon tax buy-down corporate tax rates? TPC does the math. The other day, Rep. John Delaney (D-MD) proposed using a carbon tax to pay for corporate tax rate cuts while allocating some of the extra dough to help offset the regressive nature of the energy levy. TPC's Howard Gleckman looks at a paper by colleagues Eric Toder and Donald Marron and finds the numbers could work. But the politics would still be a heavy lift.

On the Hill next week. The Senate Finance Committee holds a rescheduled hearing next Tuesday on audits and appeals issues in Medicare. The Senate Committee on Small Business and Entrepreneurship holds a hearing Wednesday on the Supreme Court’s King v. Burwell case on Affordable Care Act tax subsidies and how Congress could protect small business and employees if the justices overturn the law.

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Could a Carbon Tax Finance Corporate Rate Cuts?

By :: April 23rd, 2015

How about using revenue from a carbon tax to help pay for corporate tax rate cuts? That’s the idea proposed yesterday by Rep. John Delaney (D-MD). His political calculation: Democrats would back the bill as a way to reduce carbon emissions and slow climate change. Republicans would support the plan to cut corporate tax rates […]

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On Some States of Business Taxation and a US Carbon Tax Swap

By :: April 23rd, 2015

In Nevada, the GOP governor’s $1 billion business tax hike wins support. The state senate passed Governor Brian Sandoval’s plan to shift the state’s flat $200 business license fee to a version of a gross receipts tax. According to the measure, which would raise nearly $1 billion over 2 years, the state’s largest firms would […]

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Revenues and Rate Hikes: What’s an Elected Official to Do?

By :: April 22nd, 2015

There’s a revenue surge in California. The state is exceeding its 2013 tax collections and beating 2014 forecasts. The Franchise Tax Board netted $7.6 billion in personal income taxes between April 1 and this past Monday. It collected $6 billion during the same period in 2014. The state’s school funding formula will direct nearly all […]

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Tax Cuts for Low- and Moderate Income Households May Be Much More Powerful Than Cuts for the Rich

By :: April 21st, 2015

It turns out that tax cuts for the job creators…don’t create very many jobs. By contrast, tax cuts for low- and moderate-income households can boost economic growth. Those are the results of an interesting new working paper by Owen Zidar for the National Bureau of Economic Research. Zidar, an assistant economics professor at the University […]

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On Flat Taxes, Tax Relief, and Evidence

By :: April 21st, 2015

Flat tax chatter: Just small talk or a deeper conversation? The Hill examines GOP presidential hopefuls Rand Paul and Ted Cruz and their ideas for an across-the-board tax rate. A flat tax will disproportionately benefit higher earners, and even some in the GOP say that makes it a non-starter. But TPC’s Howard Gleckman noted, “This […]

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How Does One Avoid Tax Increases? Let Us Count Some Ways.

By :: April 20th, 2015

The corporate-only tax reform could raise taxes on many small businesses, unless… TPC’s Eric Toder testified last week to the House Small Business Committee on how  corporate tax reform could hurt small businesses that usually report income on their owner’s individual tax returns. In his latest blog post, he explains his recommendation to soften the […]

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Corporate Tax Reform and Small Business

By :: April 17th, 2015

While there is no chance that Congress will agree to broad-based tax reform before the next president takes office in 2017, lawmakers are making one last effort to enact a more narrow business-based reform. But they face a big challenge:  reforms under consideration could raise taxes paid by many small businesses. To help lawmakers understand […]

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Bipartisan or Partisan: Tax Efforts Abound

By :: April 17th, 2015

There’s a bipartisan House effort to double the federal gas tax. It would raise the 18.4 cents-per-gallon tax to about 30 cents, would be inflation adjusted, and would rise again in three years if Congress does not find another way to pay for federal transportation projects. The bill’s sponsors—mostly back-benchers—say it would raise $27.5 billion. […]

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Rubio Tries to Triangulate Tax Policy

By :: April 16th, 2015

Newly declared GOP presidential hopeful Senator Marco Rubio is trying something truly (Bill) Clintonesque—navigating between the demands of his party’s base and a more centrist, forward-looking political agenda. Nowhere is it more obvious than in tax policy. And nowhere is the road ahead more risky for his presidential ambitions. In March, Rubio and fellow senator […]

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