Daily Deduction

from the Tax Policy Center

Robbing Peter to Pay Paul

By :: May 22nd, 2015

Congress will be in recess next week. The Daily Deduction will post on Tuesday, May 26, 2015, after Memorial Day, and will return to its regular schedule on Monday, June 1.

Wisconsin’s GOP: Tax bikes to pay for bike paths, use tax dollars to expand private schools. Presidential hopeful Governor Scott Walker’s colleagues proposed this week to repeal the state’s Complete Streets program, which includes bike and pedestrian lanes in transportation projects. Wisconsin’s Legislative Fiscal Bureau says repeal would save $190,500 a year, and that the GOP’s replacement, a proposed $25 bike registration fee, would generate $7.2 million over two years and pay for bike path construction. The GOP also wants to expand the state’s school voucher program by allowing tax money to follow a student out of a public district and into a private voucher school. The LFB says this could cost school districts about $48 million over two years.

District of Columbia residents are okay with a sales tax hike to close a deficit. A DC Fiscal Policy Institute’s  poll finds 70 percent of residents support a sales tax increase from 5.75 percent to 6 percent. The extra money would help cover a $200 million budget shortfall and support Mayor Muriel Bowser’s plan to end homelessness in the city.

Still no Kansas tax hike. The Kansas Senate left open for debate a bill to increase the state's sales, cigarette, and gasoline taxes to help close next year’s projected $406 million deficit. The bill would suspend for two years an income tax exemption for more than 330,000 business owners and farmers but provide a tax credit against businesses’ payrolls. It’s not an easy sell, and Senate GOP leaders concede that even if the bill is rewritten, it would fail. Sound familiar?

But a tax cut passed in Texas. The state will not reduce its sales tax rate. But legislators agreed to cut the franchise tax, also known as the business tax, by 25 percent across the board, saving firms an average of about $10,000 annually. Property tax relief could save homeowners an average of $125 a year.

Some tax reading for your holiday weekend. A new working paper by Daniel Cooper of the Federal Reserve Bank of Boston and Byron Lutz and Michael Palumbo of the Federal Reserve Board, finds that over the past 30 years, federal and state taxes have had a significant impact on reducing income inequality overall, but not in all states. TPC’s Lydia Austin and Eric Toder have a new Tax Fact on those expiring tax breaks that seem to be eternal.

Interested in subscribing to the Daily Deduction, the Urban-Brookings Tax Policy Center summary of the day’s tax news? Sign-up here to get the Daily Deduction delivered to your inbox every morning. If you’d like to tell us about a new research paper or have any comments about our feature, write us at dailydeduction@taxpolicycenter.org.


Rewarding Work, Paying by the Mile, a Windfall, and… Tax Magic 


By :: May 21st, 2015

Redesign the EITC to help more low-income workers. TPC’s Elaine Maag thinks that’s the way to go. She explains in her new paper: “A worker credit based on individual earnings, and not contingent on having children at home, could provide substantial benefits to all low-income workers, ease administration for the IRS, and encourage work for childless individuals and secondary […]

Read More

A Redesigned Earned Income Tax Credit Could Encourage Work by Childless Adults

By :: May 20th, 2015

The earned income tax credit (EITC) lifts millions of working families out of poverty, but provides little support to workers without children and some low-wage workers married to other low-wage workers. Congress could fix this flaw by scaling back the EITC and creating a new worker credit that is based on individual earnings and not […]

Read More

A Down Payment, A Giveaway, A New Tax, and A Delay

By :: May 20th, 2015

Better something than nothing? House Ways & Means Chairman Paul Ryan has thrown in the towel on broad-based tax reform—at least for the next two years. He says the best possible deal the GOP can manage while President Obama is in office would be a “down payment” that would address international taxation and a permanent […]

Read More

Are GOP Presidential Candidates Downplaying Tax Cuts Or Hiding The Ball?

By :: May 19th, 2015

Last week, I blogged on the many GOP presidential candidates who are talking about tax reform rather than tax cuts. This week, tax historian Joe Thorndike published a rebuttal on the Tax Analysts blog and on Forbes.com. Joe, who is very much in the watch-what-they-do-not what-they-say (WWTDNWTS) camp, noted that while few GOP presidential hopefuls […]

Read More

The Supreme Court Kills A Maryland Tax

By :: May 19th, 2015

Maryland’s tax on some out-of-state income is unconstitutional. Maryland gives residents only a partial tax credit for income that is earned—and taxed—outside the state. The US Supreme Court said yesterday that this violates the Commerce Clause by discouraging individuals from conducting business across state lines, since their income would be taxed twice. Residents who tried […]

Read More

A Divided Supreme Court Rejects Maryland’s Tax On Out-Of-State Income

By :: May 18th, 2015

In a 5-4 decision, the U.S. Supreme Court ruled today that a Maryland law is unconstitutional because it allows residents only a partial tax credit for out-of-state income that is taxed in other states.  The decision not only invalidates the Maryland law but may also limit similar taxes in New York, Pennsylvania, Indiana, and Ohio. […]

Read More

Runnin’ on Empty

By :: May 18th, 2015

Long-term federal highway funding: Still stuck in the breakdown lane. House Transportation and Infrastructure Committee Chair Bill Shuster and Ways & Means Chair Paul Ryan need more time to “reach a bipartisan agreement” on financing the Highway Trust Fund so they introduced a bill to extend the program for two months. The Senate seems ready […]

Read More

Steady On toward Tax Reform

By :: May 15th, 2015

The Senate Finance Committee’s working groups on tax reform have narrowed their focus. Chair Orrin Hatch sounds like he’s given up on broad-based reform for now, but Tax Analysts reports (paywall) that the groups have focused on four areas where they still may make progress: Education, charity, and homeownership incentives, and tax administration. The group […]

Read More

The Scary New World of Tax Fraud

By :: May 14th, 2015

Back in the day—say 2011–tax fraud was pretty straightforward. Taxpayers deliberately understated income or overstated deductions to cheat the system for their own benefit. Not anymore. Now, a growing share of such fraud is about crooks using the identities of innocent taxpayers to steal money. If you have a home phone or an email account, these […]

Read More