There’s No Joy in Inversion-Ville

Corporate inversions: Not exactly a home-run campaign issue. But some Democrats are swinging for the fences anyway, including President Obama: “You shouldn’t get to call yourself an American company only when you want a handout from American taxpayers.” He reiterated a call for “economic patriotism” among corporations and a retroactive, speedy end to corporate inversions. Some key Senate Democrats doubt anything can pass before the August recess or even the mid-term elections in November—including the Democratic bill to “Bring Jobs Home.”

Speaking of the “Bring Jobs Home” Act: It certainly sounds patriotic. But that’s about all there is to it. TPC’s Howard Gleckman explains why. “[T]he measure looks a bit like an employment subsidy, and its title certainly implies that it is. But look closely… It wouldn’t subsidize firms that create US jobs at all. Rather, it would reward  them for merely moving business units to the US.” For what it’s worth, it wouldn’t stop corporate inversions either.

A higher education tax break passes in the House. The House voted on party lines to consolidate four education tax breaks into a single tax credit for higher education. The credit, with a maximum value of $2500 and available to a taxpayer for four years, would reduce revenue by $96.5 billion over a decade. The House plans to combine this measure with the Child Tax Credit Improvement Act of 2104, scheduled for a vote today. The Child Tax Credit bill would index the credit for inflation and extend the credit to higher-income married couples, but would not maintain a $3000 earnings threshold for the credit’s refundability. Neither measure is expected to live long in the Senate.

What will happen when the Child Tax Credit’s “refundability threshold” climbs in 2018? TPC’s Elaine Maag and Lydia Austin explain in their latest Tax Fact. Right now, the $1000-per-child credit is partially refundable for households earning more than $3,000 a year. Current law will cause that earnings threshold to jump to $15,000 in 2018. High-income families earning above that threshold won’t feel the difference. That’s not the case for low-income families. The share of households eligible for a refundable credit will drop by more than a third, while the average refundable credit will drop from $1000 to $400.

Maybe tax revenues will climb in Oregon with legalized marijuana. According to a new study, the state could generate $38.5 million in revenue in the first year with an average tax rate of $28 per ounce of marijuana. The Oregon legislature’s top tax experts are working on their own estimate, noting enormous uncertainty in the state’s marijuana market. Tobacco sales and tax revenues are declining. Whether the legal marijuana market grows over time remains to be seen.

On the Hill next week: The Senate Finance Committee will review tobacco taxes “owed, avoided, and evaded” at its Tuesday morning hearing, while the Senate Budget Committee will review the economic and budgetary consequences of climate change. The House Judiciary Committee will hold a hearing Wednesday on the need for a special counsel to investigate alleged IRS targeting, while the House Ways and Means Subcommittee on Select Revenue Measures will hold a hearing on the dynamic analysis of the Tax Reform Act of 2014 put forward by Ways & Means Chair Dave Camp.

Interested in subscribing to The Daily Deduction, the 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 dailydeduction@taxpolicycenter.org.


The Bring Jobs Home Act Won’t

The Bring Jobs Home Act is a classic message bill. Its Democratic sponsors have no interest in making it law, they merely see it as a way to boost the party’s Senate candidates in part by forcing Republicans to vote against something that sounds like a good idea. After all, who could be against bringing […]


Reducing Income Inequality, Taxing Businesses to “Hire American”

Have Obama’s tax policies reduced income inequality? TPC has some new data, but the answer depends on who you compare him to. Relative to George W. Bush, who pushed major tax cuts for high-income households, Obama has reduced inequality. But compared to Bill Clinton, his policy is pretty standard Democratic fare. The Washington Post has […]


How Progressive is Obama’s Tax Policy?

Has President Obama’s tax policy reduced income inequality? It depends on what you are comparing it to. White House Council of Economic Advisors chief Jason Furman claims that President Obama’s tax policies have sharply reduced inequality. Today’s Washington Post Wonkblog featured some new tables from the Tax Policy Center that show Obama tax policy is […]


ACA Tax Subsidies Face Risk; IRS Enforcement Is Overtaxed

Two appeals courts deliver opposing rulings on Affordable Care Act tax subsidies. The DC Circuit Court ruled yesterday that the tax credits can only go to residents in states that run their own  health exchanges. In Richmond, VA, the 4th Circuit Court said the ACA language isn’t clear, so the tax credits are also available […]


Have We Created a Two-Tiered Tax System—One for the Powerful and One for the Rest of Us?

Unlike the rest of us, many high-income, influential people and organizations have close to a free hand when it comes to their taxes. Already underfunded and understaffed, the IRS seems incapable of stopping many aggressive or even abusive interpretations of the tax laws, often by hedge funds or politically-motivated tax-exempt organizations. Over the past few […]


Abuse of financial products by hedge funds

Today, I testified before the U.S. Senate Permanent Subcommittee on Investigations (the “Subcommittee”) on the abuse of structured financial products by hedge funds, in particular by the Renaissance funds. This is what I told the Subcommittee: Almost a century ago, Congress reduced the tax rate for long-term capital gains. Then, long-term meant holding assets for […]


State Taxes and the April Surprise

In recent months, several governors have complained about the April, 2014, surprise in state tax revenues. They say they were shocked when personal income tax payments fell far below expectations. They shouldn’t have been. What happened? In part, in an effort to beat an upcoming increase in capital gains taxes, investors accelerated realizations into tax […]


Baskets of Billions, Inversions and Revenues

Did banks help a hedge fund avoid $6.8 billion in US taxes? Yes, according to the Senate Homeland Security and Government Affairs panel’s Permanent Subcommittee on Investigations. Its report, released in advance of this morning’s hearing, argues that “basket option structures” were designed to conceal two things: the true ownership of sets of assets; and […]


Summer Blockbuster? Congress’ Week Is Tax-Action Packed

Another big inversion deal heads to closing. Pharmaceutical giant AbbVie agreed to purchase UK drugmaker Shire, making it the largest US company so far to move its address overseas for lower taxes. The deal, now estimated to be worth about $55 billion, will likely close despite any US action to curb inversions. The Senate may […]