Daily Deduction

from the Tax Policy Center

Off-shore or On-shore, There Are Taxes to Be Paid.

By :: March 25th, 2014

Dave Camp’s plans for tax extenders. The House Ways & Means Committee chair says he’ll soon start reviewing dozens of expired business tax breaks on their merits. He implies that he may try to make some permanent and kill others, but also hints he may not bother to find offsetting revenues for those he wants to preserve.     

FATCA goes into effect July 1… Then what? The Foreign Account Tax Compliance Act, which will make tax evasion through off-shore accounts more difficult for US citizens, will have a slow start, as foreign banks struggle to set up  up new systems to provide necessary data, Bloomberg reports. “We will be understanding of these problems as long as these intermediaries are making reasonable, good faith efforts to comply,” IRS Commissioner John Koskinen acknowledged yesterday. The IRS just has to figure out how to be understanding of banks who try to comply while not giving a free pass to banks that do nothing.

Mortgage interest deductions help the wealthy in big cities. They appear tied to an increase in the size of homes purchased among wealthier buyers, rather than an increase in home ownership overall, according to a new study of ten metropolitan areas. House Ways & Means Chairman Camp’s tax reform plan seeks to limit the interest deduction to mortgages of $500,000, down from $1,000,000. A similar idea was outlined in “Options to Reform the Deduction for Home Mortgage Interest” by TPC’s Amanda Eng, Harvey Galper, Georgia Ivsin and Eric Toder.

Deductions or not, mortgages are unnecessary for some in the Los Angeles housing market. There’s a housing boom of sorts in LA, thanks to the purchasing power of Chinese homebuyers, reports the Los Angeles Times. “Chinese buyers bought 12% of all U.S. homes purchased by foreign citizens last year… More than half their home purchases were in California. And more than two-thirds of them paid cash…” Of course, nobody can avoid the hefty property taxes in California, which are nonexistent in China.

Got time for some light reading? The IRS has released its quarterly Statistics of Income Bulletin, as well as its Fiscal Year 2013 databook. And for a not-at-all-dry read, TPC’s Len Burman offers an ode to IRS heroes, especially  the late Randolph Thrower, IRS Commissioner from 1969-1971 who resisted White House efforts to target political enemies.

 

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6Comments

  1. Ralph H  ::  10:38 am on March 25th, 2014:

    It irks me how you view the mortgage deduction – it disproportionately benefits wealthy folks. My view is that it reduces the tax rate of the portion of the taxpayers who overwhelmingly support the government by paying a disproportionate share of taxes. This enables all the goodies to be given to the rest of us. The deduction is available to all of us; just study hard, get into a well paying profession and buy a home.

  2. Michael Bindner  ::  3:14 am on March 26th, 2014:

    Reviewing tax extenders on the merits is Congresspeak for taking checks. FATCA is another band-aid. If rich people want to hide money, someone will always help them. Home mortgages help the rich – and the only way to stop it is to shift that deduction (and its companion property tax deduction) to a bigger child tax credit – which will still help real estate – just not the high end variety. I don’t think someone who wants a mansion and can afford it will cut back on housing because of tax law. Only the Realtors Association thinks that. The Chinese investor class would disagree. They show what others do as well – that absent a deduction the rich pay cash. IRS data is out, which is valuable. I once used these tables in a study to show on a state by state basis the impact of federal income taxes vs. a population based tax as expressed in national debt owed. Come again? Debt can be owed per capita or by a percentage of income tax paid. Actually, only the latter is the true case under current law. Still, it is interesting to see which states are winners and losers under various scenarios (hint: Alabama, where Ranking Member Sessions is from, does not do so well under per capita rules).

  3. new providence  ::  8:22 am on March 27th, 2014:

    FATCA is not going to scare off those that have good tax advice and are compliant like Mitt Romney or Bain Capital or Goldman Trust (Cayman), etc., etc.,

    Bain Capital ($70 B AUM) have 138 PFIC funds in the Cayman Islands to avoid Capital Gains taxes.

    http://tomazz1.wordpress.com/2014/03/08/tax-planning-for-pfics-and-cfcs-and-fatca/

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