Daily Deduction

from the Tax Policy Center

On Losses, Savings… and a Whole Lotta Smokin’

By :: June 12th, 2014

With a surprise loss, a short-term highway fix seems more likely. The House Republican leadership is in turmoil following the surprising primary defeat of GOP leader Eric Cantor, making it even less likely that Congress will agree on a long-term solution for the dwindling Highway Trust Fund. Lawmakers must find an additional $100 billion in addition to the current gas tax to pay for a six-year transportation bill, according to the CBO. The most likely solution: a temporary fix to keep the road graders running through the election. Meanwhile, Representative Peter DeFazio wonders whether a per-barrel tax on oil companies might be a better bet.

Wyden won't pay for roads with imaginary money. Senate Finance Committee Chair Ron Wyden is no fan of using a tax repatriation holiday to finance the highway trust fund. Wyden told Bloomberg News, "You do not pay for roads and bridges and transit with imaginary savings. There isn’t any magic money sitting around on the street corner.” TPC’s Howard Gleckman describes other reasons why a repatriation tax holiday is a bad idea, despite growing support in the Senate for one to replenish the Highway Trust Fund. Not only does a holiday add to the deficit in the long run, but corporations may use one to hit Wall Street earnings targets rather than increase shareholder wealth or create jobs in the US.

Cantor’s out, and Ryan won’t take his place. Representative Paul Ryan  has indicated he does not want to run for House Majority Leader when Cantor steps down at the end of July. Ryan is still considered the front-runner for chair of the House Ways and Means Committee when Dave Camp vacates that post next year.

The Buffet Rule is out, too… Senate Republicans blocked Elizabeth Warren’s student loan bill, which would have allowed more than 25 million people to refinance student loans at today’s lower interest rates of less than 4 percent. Her bill would have been funded by a minimum 30-percent income tax payment from those earning $1 million or more.

It only takes one Apple? The European Union expanded its investigation of tax avoidance by corporations, adding Starbucks and Fiat to a list that started with Apple. The EU will review whether decisions made by tax authorities in Ireland, the Netherlands, and Luxembourg breached EU rules on state assistance.

Ever wonder what happens when 34,000 people smoke 66 million cigarettes? You get $16 million in tobacco tax revenues this fiscal year, if you’re in the Canadian territory of Nunavut. The largest, northern-most, and newest territory of Canada also has the nation’s highest smoking rate at 60 percent. It’s so high that the territory’s corporate income tax revenue doesn't hold a candle, or lit match, to them: the revenues are expected to be $12.5 million. Another notable statistic: four in ten Nunavut residents rely on social assistance—the highest rate in Canada.

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  1. Michael Bindner  ::  2:04 pm on June 12th, 2014:

    An oil import barrel tax harkens back to Carter. It still won’t happen. It seems that the only thing that gets this Congress to move is a catastrophic deadline, so it is likely that a short term solution was the only one anyway, with or without Cantor. Indeed, despite what they did to him, he seemed to be the voice of the Tea Party at the big table – so a long term solutio might not be less likely either.

    Wyden is correct about the imaginary money from a repatriation holiday. He has been around long enough to know. (ten points for whomever does his hair). Howard’s piece on repatriation history was interesting. Let me add that it should not occur without an increase to the dividend tax rate (and capital gains to prevent gaming) and that it is CEOs that benefit most from companies using the funds to make their balance sheets look good – since this triggers bonuses.

    Ryan won’t be majority leader and probably won’t be Ways and Means chair (but may take ranking member). Ryan likes ivory tower libertarian proposals – not getting things done – which means compromising his principles – an idea he detests.

    Obama is taking care of student loans by executive order – allowing all borrowers to pay ten percent of income for a maximum of twenty years. As for the Buffett Rule – the big part of it was fixed by the ATRA and ACA. The remaining part involves raising Social Security income caps so that billionaires pay every dollar – but without allowing them to receive higher benefits for doing so. That means either changing bend points or lowering the cap on the employee contribution (so payment can only go so high) while removing it on the employer levy and equalizing the crediting of that contribution so that each worker gets the same amount in their history. Of course, that would be such a revenue boom that the door would be opened for personal accounts – which the Democrats will never do.

    The EU investigation is about to let us all see if the Community is more than the mouse that roared. Who knows where this might lead – maybe a continental tax to fund a continental debt (which would eliminate Germany’s power over the other members and the advantage for world traders of the US Dollar and Treasury Security). Fascinating.

    Nunavut is a new territory that has always been part of Canada. I did not know how much the native population smoked. They have been historically self-sufficient hunter gatherers, but a need for tobacco would require they get subsidies (and national health insurance).

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