Daily Deduction

from the Tax Policy Center

Funding Tax Breaks, the IRS, and Public Pensions, Safety, and Schools

By :: April 30th, 2014

Six business tax breaks move ahead. The House Ways and Means Committee has approved by a largely party-line vote $310 billion in business tax breaks, overcoming a partisan dispute over how and whether to offset their cost. The measure would permanently restore some of the 50+ provisions that expired last December, including the research & experimentation credit, full first-year depreciation for small business purchases of equipment, and special tax breaks for  multinational corporations. The Senate Finance Committee has voted to extend these and other tax preferences only through 2015. It will probably not get sorted out until after the November elections.

Today on the Hill: The Senate Appropriations Subcommittee on Financial Services and General Government holds a hearing this afternoon on President Obama’s  2015 funding request  for the Treasury and the IRS. Treasury Secretary Jack Lew, IRS Commissioner John Koskinen, and Treasury Inspector General for Tax Administration J. Russell George are scheduled to appear. Headline-grabbing speeches will ensue.

Public pension grading tool launches tomorrow at the Urban Institute. A new interactive report card grades plans on retirement income for public employees, incentives to attract and retain workers, and funds set aside to cover promised benefits. Learn what it takes to earn an “A,” and who is getting an “F.”  Register here for a noontime discussion on the issue featuring Mayor Stephanie Miner of Syracuse, New York, Dan Doonan of AFSCME, and Urban Institute colleagues Richard Johnson and Kim Rueben. Donald Marron of the Urban Institute will moderate.

Public safety: You get what you can pay for. In response to the third straight year of rising homicides, the Indianapolis City-County Council recommends a $29 million tax hike to increase the Indianapolis police force by 300 officers. Out west in Oregon, counties are working to strengthen rural policing, which has been weakened by declining federal payments for lost timber tax revenues. Things could be, and are, worse: With no time to wait for the severely under-funded Detroit police to arrive, some residents are defending themselves while the police department awaits $36.2 million from a $120 million Barclays loan.

What will be the fate of school property taxes in the Keystone State? As a Pennsylvania widow stands to lose her home over $6.30 in interest due on her late payment of school taxes, a school property tax elimination plan will be reviewed by the state’s Senate Finance Committee today. Instead of taxing property to fund schools, it would increase the state’s personal income tax to 4.34 percent from 3.07 percent. It also would raise the state sales tax by 1 percent, to 7 percent, and broaden the base to include more items but not food staples.

Will Congress respond to small online retailers in time for the holidays? The Hill reports that online retailer eBay is bringing 45 small-business owners from across the country to argue against proposals to broaden the authority of states to collect sales taxes from online retailers. They’re not fans of the Marketplace Fairness Act, arguing it would add too much complexity to the tax code and pose an undue burden on small businesses. Many other Main Street and online sellers, including Amazon, support  the measure, which the Senate passed last year. The House response so far has been perhaps less than constructive. Meanwhile, new research suggests that consumers would rather buy from an online seller that does not collect sales taxes than from one that does.

Bitcoin on Campus, Big Tax Bill with Tuition? This fall, undergraduates at the Massachusetts Institute of Technology each will be offered $100 in Bitcoin, potentially transforming the MIT campus into the largest Bitcoin marketplace on the planet. MIT alumni are the main backers of the experiment, including a co-founder of a high frequency trading company. That seems handy, given the tax treatment of Bitcoin.

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  1. Tax Roundup: April 30, 2014: Force of nature edition. And: Extenders move in U.S. House. « Roth & Company, P.C  ::  10:06 am on April 30th, 2014:

    […] Zaretsky, Funding Tax Breaks, the IRS, and Public Pensions, Safety, and Schools.  The TaxVox headline […]

  2. AMTbuff  ::  7:20 pm on April 30th, 2014:

    Grading a pension system on a combination of generosity and security of funding is like grading a company’s health on the sum of its liabilities and assets. It’s passing strange. What reason could there be for these two opposing factors to be listed on the same report card, just begging to be averaged with each other by uninformed reporters and readers?

    A city or state with generous promises and 80% funding is most assuredly not better off than one with modest promises which are 100% funded, except perhaps to the public employee unions and their supporters. As described, the proposed “report card” appears to be an attempt to slant the public discussion toward higher benefits to government employees.

    I would love to be proven wrong about this.

  3. Michael Bindner  ::  3:43 am on May 1st, 2014:

    The timing of the business tax break and extenders issue depends on whether either item can pass on the floor so that we can go to Conference. Waiting until November is dangerous to both sides because the result of the election is uncertain. They will likely do it anyway, but I don’t like it. The appropriations hearings are a waste of time. I wish they would instead go to mark up and get something passed. Its not like we don’t have a budget deal already, so this should be easier. Public pensions are a hard topic and will be as long as the financial industry is hungry for the fees that a shift to defined contributions would bring. A better solution would be to incorporate these plans, at least in part, into Social Security. Urban policing needs a dose of state level money and the courage to follow Colorado’s lead and end the war on Pot (although ending the entire war is probably needed for homicides to decline). It would be nice for PA to shift from property taxes to income taxes for school funding – althought that does not eliminate the idiocy of seizing a house for a few dollars in unpaid taxes. The Tax Office head should have thrown two bucks into the till rather than let this embarrassing story see the light of day. It is a no-brainer to conclude that taxpayers are cheap in shopping online, which is exactly why the Senate bill should be passed. The alternative could be retailers giving each customer and their state revenue agency a statement at the end of the year – forcing the filing of a consumers use tax. Even proposing that as a serious alternative will likely cause people to come to their senses and finish the bill. As for bitcoin, while it is still a novelty I doubt that most people will be filing any capital gains taxes on any appreciation at sale. It will be a nuissance until and unless bitcoins are in enough circulation to be called currency – and suddenly the banking industry and the Federal Reserve will get real interested.

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