Daily Deduction

from the Tax Policy Center

Tax Shelters, Tax Fights, and One Way to Reform a Zombie

By :: April 28th, 2014

Ways & Means gets to work on tax “extenders.” On Tuesday, the panel is expected to begin marking up a measure to restore dozens of tax breaks that expired last December. On the plate for the first session: the research and experimentation credit and a provision allowing firms to take full first year depreciation for certain equipment under Sec. 179.

Charitable donations are good, when the charities receive them. Taxpayers can take a deduction and enjoy special capital gains tax treatment for assets they deposit in donor advised funds—worth a total of $45 billion in 2012. While these funds are often simple ways for upper middle-income people to create endowments for future gifts to charities, they sometimes reap the tax benefits without making the distributions. House Ways & Means Chair Dave Camp would  require donor advised funds to be distributed within five years or face a 20 percent tax. Will his plan curb abuses or make it harder for people to give to charities? TPC’s Howard Gleckman weighs in, and Gene Steuerle warns the move could mean the end of community foundations.

Not all property tax fights are created equal. Since 1998, if a property owner in Texas wants to challenge the appraised (or taxable) value of a commercial property, he or she only needs a list of comparable buildings with different taxable values. A high appraised value is lowered to the list’s median in order to assure “equal and uniform” taxation. Residential property owners, however, must challenge appraised values with estimates of market value—largely an uphill battle. “In 2013, commercial property owners in Dallas County shaved more than $4.8 billion off preliminary tax appraisals, more than seven times the reduction secured by residential property owners,” reports The Dallas Morning News. 

States’ tax fights continue. Delaware is falling short on revenue to the tune of about $75 million, leaving Democratic Governor Jack Markell and legislature to grapple with proposed tax increases and spending cuts. Missouri’s GOP is preparing to defend tax cuts which Democratic Governor Jay Nixon plans to veto. Illinois’ legislature will vote tomorrow on whether to ask voters to amend the state constitution and change the state’s flat income tax rate to a progressive tax rate.

If tax reform were a zombie apocalypse, you could run, but you shouldn’t hide. In his paper published in the Milken Institute Review, TPC’s Len Burman argues that with strong White House leadership and bipartisan support, Congress could enact a value-added tax to pay for federal health care programs.  It could turn tax reform into a living, breathing, transparent, and cost-containing friend of policymakers… Not a political and policy foe that just won’t die.


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  1. Tax Roundup, 4/28/14: No connection found for Iowa broadband credit. And: it can take a long time to recover from tax season. « Roth & Company, P.C  ::  10:01 am on April 28th, 2014:

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  2. Michael Bindner  ::  12:35 am on April 29th, 2014:

    A hearing on extenders is business as usual – including doing it this late. Last weeks work by Gene and Howard was truly interesting. I reacted to Howard that giving to family foundations would be problematic and getting such income should be taxable as normal income – although ESOP sales should remain tax free. As for Gene’s piece, it struck me that the GOP is always after UDAG grants and that this may be part of it. That the Texas legislature put in something that favoered business over families is never a shock. Seeing low tax Delaware have the chickens come home to roost is always a good thing. Preventing stupidity seems to be happening in Missouri while Illinois may be about to do something good – although this should not be a constitutional issue. As for Len’s paper – it reminds me of something similar in the Virginia Tax Review. Sadly, it did not get much ground then – but it is still a good option.

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