Daily Deduction

from the Tax Policy Center

House GOP Tax Plan Hits This Week; IRS Getting Worked Over But It's Still Working

By :: February 25th, 2014

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The House GOP offers its opening gambit in tax reform. The plan, due to be released on Wednesday by House Ways & Means Committee Chair Dave Camp, would cut the top individual tax rate to 25 percent. However, it would also impose a 10 percent surtax on high-income households, The Washington Post reports.

The IRS is taking its lumps. the House Oversight Committee has scheduled a hearing Thursday on proposed new IRS guidelines on political activity by 501(c)(4) non-profits. At the same time, Camp has warned the IRS that his panel might subpoena agency documents on its past handling of nonprofits’ tax-exempt status applications. Meanwhile, the IRS soldiers on, reporting that it has issued more income tax refunds so far this year than last. And yesterday it released a report on Criminal Investigation that highlights increased enforcement against tax criminals and more convictions for identify theft.

Today the Senate Budget Committee holds a hearing on the “Economic and Budget Outlook for Individuals, Families, and Communities” following CBO’s budget outlook released earlier this month. As you consider the budget, it’s worth remembering that individual income taxes may generate half of all federal tax revenue within a decade, comprising nearly all the projected rise in revenues.

New Jersey may see a huge battle over taxes and state employee pensions this year.  Governor Chris Christie is about to release a budget that may include broad tax cuts and reductions in public pensions. What do these retirement changes mean for a state’s ability to attract and keep good workers? Rich Johnson, Gene Steuerle, and Caleb Quakenbush explore that issue with New Jersey as a case study in this Urban Institute paper.

Speaking of pension reforms, what if citizens could see’ the financial health of public pensions? A new Blue Ribbon Panel report from the Society of Actuaries recommends more transparency. Its proposed liability measurement “would provide new insight into the market risks for pension plans and the shortfall that might have to be made up by local taxpayers if investment returns did not measure up to expectations.”

1Comment

  1. Michael Bindner  ::  2:51 am on February 26th, 2014:

    Camp’s plan is still about 10% short on the tax the rich part of the spectrum, unless he is capping the mortgage interest deductions, and other deductions taken by the rich, even lower. For the record, my surtax on the rich goes from 7% to 28%, although I might stop at 24%.

    The House Oversight Committee has no useful purpose, so another oversight hearing on a settled issue is not surprising. Someone needs to give Issa something real to do.

    The Senate is following regular order, at least kind of, as the budget document itself is a bit late. Until we have a consumption tax of some sort, income taxes will be the chief revenue source – and even then any VAT would leave at least some of an income surtax intact.

    On New Jersey, I suspect that good workers are finding something else as quickly as possible – at least on the political side. Unless someone prominent falls on their sword for Christy, he may not be in office next year (let along a presidential candidate).

    The Society of Actuaries has too many members who are paid by the same folks who sell mutual funds. I believe little of what they say on public or private pensions, especially for cities who should always be backstopped by state government. Indeed, the idea of local pension funds is outrageous. They should all be state managed and merged with Social Security. Leaving them out is the real cause of the actuarial problem.