Daily Deduction

from the Tax Policy Center

Corporations, Local Revenues, Tough Love, and Carbon

By :: May 28th, 2014

The House Ways and Means Committee marks up a bill restoring more expired tax breaks tomorrow. On the table: a measure making bonus depreciation for business investment permanent and reforming the tax treatment of some charitable giving.  Bloomberg reports that the tax panel will consider whether to permanently allow corporations to write off capital investments more quickly. The proposal would cost about $287 billion over the next decade, according to the Joint Committee on Taxation.

Corporations are moving ahead with inversions. Congressional Democrats have no support across the aisle in their effort to stop inversions (changing a mailing address in order to reduce a corporate tax bill). Bloomberg reports that “Corporate executives, frustrated at Congress’s slow pace in revamping the U.S. tax code, say the interest of shareholders requires them to consider ways to lower their taxes—including inversions.”

But the Joint Tax Committee scores two versions of a curb. Permanent restrictions on the practice would generate about $19.5 billion over 10 years. A temporary, two-year limit would produce only about $800 million over a decade.

SCOTUS will decide how much a state can tax income earned in another state.  Maryland collects income taxes for itself and its counties, which charge a so-called piggyback tax. Maryland residents can take a credit for income tax paid to other states—but only against  their Maryland tax, not the levy the state collects for local governments. The Maryland Court of Appeals ruled last year that this practice violates the U.S. Constitution’s commerce clause. Montgomery County—where the case originated—could owe up to $150 million in refunds and $25 million annually going forward, if the US Supreme Court upholds the state court’s ruling, and tax laws—and local revenues—could change across the country. The Obama Administration asked the High Court to hear the case, which will be on its fall docket.

The City of Brotherly Love is showing delinquent taxpayers some tough love. Philadelphia has taken a more aggressive approach to collecting delinquent property taxes, securing $45 million in the first four months of 2014. A share of that revenue funds the city’s public schools. Philadelphia property taxes, to be paid annually and in advance, are due March 31. The city sent bills for past-due 2014 property taxes, placed a lien on any account with a 2013 balance, and sent the account to a collection agency.

How might a carbon tax be put into practice? TPC’s Howard Gleckman considers the logistics and a possible model in his review of two new papers. TPC’s Donald Marron and Eric Toder examine the design issues facing a carbon tax: Setting the right rate, collecting the revenue effectively, and using the revenue wisely. Adele Morris of the Brookings Institution and Aparna Mathur of the American Enterprise Institute describe how one carbon tax model might work.

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