Daily Deduction

from the Tax Policy Center

Tax Relief, Hikes, and Incentives

By :: May 29th, 2014

DC residents will likely see tax cuts—the largest in 15 years. The DC Council voted yesterday to support $165 million in tax cuts, a plan based in part on recommendations made by the DC Tax Revision Commission. Tax burdens for low- and middle-income residents would decrease in January. For four years after, businesses, residents earning up to $1 million annually, and those who inherit multi-million-dollar estates would also enjoy tax relief. Lame-duck mayor Vincent Gray had earlier backed revenue generating aspects of the commission’s plan. Council Chair Phil Mendelson, who brought the plan to a Council vote, offset the tax relief package with funds set aside for street cars. The plan will have its final vote next month and is expected to pass.

There’s a lot of support to cut New England’s highest corporate tax rate. Rhode Island’s Senate Finance Committee is considering a bill to cut the state’s corporate income tax rate from 9 percent to 7 percent and change the way some corporations are taxed. The Committee heard from a broad range of supporters who want to see the state become more competitive with other states and more attractive to corporations.

Tax increases in France, designed to cut the nation’s deficit, aren’t cutting it. French tax receipts in 2013 did grow by 15.6 billion euros since 2012, but they fell short of expectations by 14.6 billion euros. French households may be feeling some pain from the higher tax burden: Consumer spending has dropped .5 percent in the first quarter of 2014 and an additional .3 percent in April.

Big code on campus? The tax code could be changed in a number of ways to make higher education more affordable for middle-class families, according to a new report from the Center for American Progress. The report suggests changes to, among other tax provisions, college savings incentive programs, the American Opportunity Tax Credit, and the student loan interest deduction. Every bit certainly helps, given student debt loads.

How do you solve a problem like greenhouse gases? They’re a non-toxic global pollutant and they come from a variety of sources in a variety of states. But the Environmental Protection Agency is required under the Clean Air Act to set emissions standards for each source, while states are expected to write compliance plans for each. This makes no economic sense, says Adele Morris of the Brookings Institution. In her TaxVox post she considers three better options: 1) a national carbon tax, 2) state carbon taxes in lieu of EPA emissions standards, or 3) an EPA-approved plan for states to use a carbon tax as part of their Clean Air Act compliance plans.

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  1. Michael Bindner  ::  1:37 pm on May 29th, 2014:

    Not sure I like dumping street cars, but they are probably a boondoggle. Cutting taxes on the rich, however, is a fools errand. There was a revenue boom last year because of investors cashing out their capital gains before the rate went up. This boom will not be repeated. Cutting taxes at this point assumes that it will. Bad idea.

    Cutting the tax rate on corporations is not a problem as long a it is converted to a consumption tax on businesses of all ownership types – although because I would use such a tax as the vehicle for distributing social welfae benefits to employed (and unemployed) familes, cutting it may be a bad idea too.

    If the tax increases in France were general rather than targeted, that is another bad idea. Target them on the wealthy who would save or invest the money instead.

    As far as taxes on campus, the biggest thing we can do for families is making the taxpayers pay the first two years and the future employer the remainder – includign graduate school.

    As for a carbon tax, it is the environmental cure that only an economist can love. I don’t. Another bad idea.

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