Daily Deduction

from the Tax Policy Center

The Dead, the Devices, and the Errors

By :: May 14th, 2014

Dead Men Ruling, future governing paralyzed. Will 21st century America be able to govern itself, given lawmakers’ effective abdication of the future? In TPC’s Gene Steuerle’s new book, Dead Men Ruling, the prospects are dim. Automatic spending and untouchable tax subsidies have limited government’s flexibility to adjust to changing times and circumstances. Short-term and  politically expedient subsides aimed at increasing today’s consumption  are funded  by debt to be paid off by future taxpayers. As TPC’s Howard Gleckman’s review of the book shares, the future is being written by those who will be “long dead when our grandchildren come of age.”

Speaking of the dead… Republicans are trying to repeal the excise tax on medical devices, no doubt pleasing corporations like Medtronic and Boston Scientific. Last year 79 senators voted to repeal the excise tax—but the vote was non-binding. The repeal effort is part of the broader tax bill that senators debate on the floor this week which would revive more than 50 tax breaks that died five months ago. The new breaks would live through through 2015, and their reanimation would add over $84 billion to the deficit.

More money, more problems. Improper Earned Income Tax Credit payments still plague the IRS. The Treasury Inspector General for Tax Administration reports that 22 percent to 26 percent of EITC payments were made in error in 2013, amounting to an estimated $13 billion to $16 billion. The error rate is up from an estimated 21 to 25 percent in 2012 and includes underpayments as well as overpayments. The problems in administering the EITC are complex. In a statement the IRS noted that there are several legislative proposals that would give the agency authority to correct certain filing errors and reduce the improper payments. Congress to the rescue! Right?

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3Comments

  1. AMT buff  ::  10:16 am on May 14th, 2014:

    Given that the President has arrogated the power to modify the law by announcing a policy not to enforce selected provisions, surely he could suspend the medical device tax if he wanted. Just as a future President could suspend enforcement of any other portion of the law.

    The only check on executive overreach is impeachment, which requires a 2/3 vote in the Senate. Therefore any President can bend or break any law as long as public opinion is not overwhelmingly opposed. President Obama is the first President to fully appreciate this flexibility and utilize it. This expansion of executive power, not health insurance, may be his most enduring legacy. It’s very third world, but Americans seem to be OK with that.

  2. Michael Bindner  ::  2:28 am on May 15th, 2014:

    The dead men ruling is an interesting concept, more due to the fact that there are AF pilots flying the B-52s their grandfathers flew in Viet Nam. The big problem is still net interest and the solution is not cutting programs, its raising taxes.

    While the Senate repealing the medical device tax may yet have the votes, I am not sure how this is an offset to other extenders, unless they are thinking about adding a Value Added Tax generally, making the MDET a dead issue, as well as most extender language.

    Congress may indeed give IRS certain adjustment powers if it meant attacking the poor. The problem with the EITC being complex to administer comes from the complexity of the filing procedures and the auhtorizing legislation. Better to put a floor in on the Social Security Employee Contribution and increase the minimum wage and the Child Tax Credit to make family support easier (and refundable with pay on an employer filed consumption tax, rather than a tax filing issue).

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