Daily Deduction

from the Tax Policy Center

Intended or Unintended? Some tax consequences, reviewed.

By :: March 11th, 2014

Made in America” to avoid a higher tax rate? TPC’s Eric Toder reveals that some recent international tax reform plans result in a form of quiet protectionism. The proposals, offered by both House Ways and Means chair Dave Camp and former Senate Finance Committee chair Max Baucus, would impose higher taxes on goods sold in the U.S. by foreign subsidiaries of U.S.-based multinationals than similar sales by domestic affiliates of the same firms. It’s pretty complicated, but an important insight.

Tax subsidies can help you buy a house, save for retirement, start a business, or go to college. But at $384 billion in 2013, are they worth the price? An overview and distributional analysis of these subsidies by TPC’s Ben Harris and Gene Steuerle, and the Urban Institute’s Signe-Mary McKernan, Caleb Quakenbush, and Caroline Radcliffe reveals the tax expenditures aren’t as effective as they could be, and largely benefit high earners.

Does climate change keep you up at night? It did for over two dozen Senate Democrats last night, who made their case on climate change. Meanwhile, Bloomberg reports that Switzerland wants precision worthy of its timepieces when it comes to measuring reductions in greenhouse-gases, even when it’s hard to conclude whether policies like a carbon tax had any impact.

And speaking of carbon taxes… If paired with corporate tax reform, said TPC’s Eric Toder and Donald Marron in their recent paper, carbon taxes might combat climate change and reduce the deficit. However, the carbon tax burden would fall mostly on low-income Americans while corporate tax reform would be a boon for the wealthiest. Still, carbon taxes are a good bet for our environment, concludes TPC’s Bill Gale.

Interested in subscribing to The Daily Deduction, the Tax Policy Center summary of the days tax news? Sign-up here for free access. If youd like to tell us about a new research paper or have any comments about our new feature, write us at dailydeduction@taxpolicycenter.org.

3Comments

  1. Michael Bindner  ::  3:09 am on March 12th, 2014:

    Uncapped tax subsidies do benefit the wealthy more – who would write a check for tuition anyway – or for that beachhouse (or the week in a beach house – since the rich don’t have time to spend summer at the beach – unless they have a lot of rental properties to manage). Since rich people write the checks to get and keep members of Congress and the Senate elected, I really don’t see tax reform of loopholes happening anytime soon.

    The piece on international taxation and protectionism is interesting – although the bigger option for protecting workers is to enact a value added tax, which no one wants to talk about.

    Climate change only keeps me up at night during a bad summer storm – although truth be told – until my family farm in Helelands in the New World – which is Baffin Island – pops up through the ice without permafrost, I am not entirely worried. I am not denying climate change, I am just wondering if it is always bad. While the poor may be hurt – breathing hurts the poor. Migration is a good thing if we are worried about the global poor near the shore.

    Given the position of climate denial funders Charles and David Koch in the Tea Party and the intelligencia of the Right Wing, the only way to kill tax reform really dead (aside from a VAT) is a Carbon Tax. The same comments about the impact of the poor that apply to a carbon tax also apply to the VAT – unless in both cases you have a nice surtax on high incomes and distributions from inheritances. Of course, real tax reform would involve a VAT and that would be death to the Carbon Tax. That would also be the most radical corporate (and other) business income tax reform. Until someone runs for office as more than a fringe candidate (like I did in 2012) and pushes radical reform, it simply will not happen in the near future.

    Going back to Carbon Taxes, I suspect that they were the method Obama wanted to do (along with Health Care) to pay for making the Bush Tax Cuts for all but the top 2% permanent – but he could not pass it and it became too late (and the 2008 Great Recession did not help much either). Luckily, circumstances shifted (or unlucky for those of us seeking federal jobs) and the ATRA passed on January 2, 2013 – which essentially gave Obama everything he really wanted on tax policy. I don’t see anything more passing, which is again why tax reform will require a main stream candidate to advocate it.

  2. TAX FREE DAY MA 2014  ::  1:24 am on March 13th, 2014:

    […] Intended or Unintended? Some tax consequences, reviewed. – TaxVox […]

  3. TAX FREE DAYS 2014 2014  ::  7:19 am on March 13th, 2014:

    […] Intended or Unintended? Some tax consequences, reviewed. – TaxVox […]