Budget Revenues: The Growth, The Rates, and The Giving
The revenue side of the President’s 2015 Budget: Treasury Secretary Jack Lew continues his 2015 budget tour with testimony before the House Ways & Means Committee, home of Chairman Dave Camp’s tax reform plan.
As for the economy under Camp’s tax reform plan: Will it grow? Tough to say for sure, but the Joint Committee on Taxation makes an excellent attempt to find out, in spite of inherent difficulties. TPC’s Bill Gale and Donald Marron unpack the JCT’s macroeconomic analysis of Camp’s proposal. The JCT concludes that such a “base-broadening, rate-reducing, distributionally and revenue-neutral tax reform can increase the size of our economy,” they write.
Well, they’re building there in Allentown. Outside the beltway, existing tax policy may be helping one local economy. A Neighborhood Improvement Zone is using tenants’ taxes to pay for new office space construction in Allentown, Pennsylvania, a city known (historically and musically) for its decline in the 1980s. Those taxes would otherwise have gone to state or local general funds, but instead, are allowing developers to offer more attractive rents to businesses who bring in new employees… who have money to spend. But the evidence is mixed at best about whether these kinds of tax-subsidized investment zones provide any long-term boost to the economy.
As for those multinationals… Though it adopts a very different framework for international tax reform, Obama’s budget is similar in part to Camp’s corporate tax reform plan. Obama would raise taxes on corporations including “pharmaceutical companies looking to relocate to Ireland, technology companies selling cloud-based services outside the US, and non-US-based companies borrowing money in the country,” reports Bloomberg. The idea is to close international tax loopholes and use the revenue to help lower the US corporate tax rate from 35 percent to 25 percent. Ireland’s, for what it’s worth (which is a lot if you’re a multinational), is 12.5 percent.
What would become of charities? The President’s Budget seeks (again) to cap charitable deductions at 28 percent for filers in higher tax brackets, sounding alarm bells in the nation’s philanthropic sector. Recall TPC’s Howard Gleckman’s take on how to cap the deduction without reducing giving: be careful, and be specific.
What will become of Congress? The House Oversight and Government Reform Committee’s hearing on the IRS handling of applications by political groups for 501(c)(4) status turned into exactly the fiasco many expected. Chairman Darrell Issa asked former IRS staffer Lois Lerner about the program. Lerner refused to answer, which is exactly what her lawyer said would happen. Issa adjourned the hearing. Ranking Democrat Elijah Cummings was outraged, and everyone (except Lerner) went home with exactly the headline they wanted.
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