Daily Deduction

from the Tax Policy Center

Another FATCA Break, Sales Tax Increases Support Health and Safety, and Slow-Walking the EXPIRE Act

By :: June 5th, 2014

IRS Boss Koskinen hints at more relief for US citizens with cash stashed overseas: Speaking to the OECD’s International Tax Conference in Washington, Koskinen said the service may give a bit more of a break to some who remain out of compliance with FATCA:  “Our goal is to ensure we have struck the right balance between emphasis on aggressive enforcement and focus on the law-abiding instincts of most U.S. citizens who, given the proper chance, will voluntarily come into compliance and willingly remedy past mistakes.”

A half-cent sales tax increase for health care: In Alameda County, California, voters supported by a nearly three-to-one margin “Measure AA,” renewing a .5 percent sales tax increase for 15 years. The increase yields annual revenue of over $100 million for the Alameda Health System and community-based primary care clinics, school health centers, jail mental health services and other programs which care for the county’s indigent, uninsured, children, and seniors. The sales tax follows “Measure A”—a temporary sales tax increase passed by 71 percent of voters in 2004 that was set to expire in 2019. Measure AA will expire in 2034. The county’s sales tax is 9 percent.

A quarter-cent sales tax increase for a fire station: San Pablo, California, voters passed “Measure K,” a .25 percent sales tax increase, bringing the city’s sales tax from 9 to 9.25 percent. The measure will raise $600,000 annually to help support an emergency services squad at Fire Station No. 70, the only county fire station in the city, and is the second-busiest station in Contra Costa County.

Would people be more likely to pay their taxes if they had a say in how taxes are spent? Researchers at the Harvard Business School think so. Their working paper describes an experiment in which tax compliance was 16 percent higher among those who could express non-binding preferences over tax spending priorities. Tax noncompliance in the US estimated to be $385 billion annually.

And will the $85 billion tax break renewal debate have to wait until after the November elections? “I guess the answer is yes,” said Senate Majority Leader Harry Reid (D-NV) this week. The EXPIRE Act contains those 50 or so temporary tax breaks that expired at the end of 2013. Procedural fights in the Senate (also known as partisanship) are a surefire recipe for gridlock, after all.  Sometimes in the Senate, it is darkest before the dawn. Sometimes, it is just dark.

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  1. Michael Bindner  ::  4:59 am on June 6th, 2014:

    The IRS knows full well that we will cash in big time if these funds are brought home and taxes at a now higher capital gains and dividends tax rate. Perhaps if we have a law with amnesty we can get even higher rates – temporarily of course (or not).

    Alameda county did a nice thing. Everyone knows that they are one layoff away from needing public healthcare – or at least the voters there do by a three-to-one margin.

    Measure K in Contra Costa is probably wise, but this kind of thing is usually a property tax item – excpet for Proposition 13 – which was still a bad idea.

    I hope that the HBS researchers also look at not where things are spent but how. Of course, there are some redistributive functions where spending should not be local – education among them.

    Not dealing the the EXPIRE Act until the Lame Duck is true to form but it might be a scare tactic too to get the GOP in line. Any issue which accuses the GOP of slowing down a tax cut would be considered political poison. I am surprised we have not heard from Grover Norquist – although I am sure he hates the concept of backing Harry Reid.

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