Daily Deduction

from the Tax Policy Center

Tax Credits Help; Tax Cuts Need to Be Paid For

By :: June 19th, 2014

Tax credits are making health care under the Affordable Care Act… affordable. The US Department of Health and Human Services reports that tax subsidies have reduced the cost of the average federal health insurance exchange premium from $346 to $82. About 3.2 million people are paying less than $100 per month and of those, 1.4 million people are paying less than $50 a month.

Tax cuts in DC will only be affordable if revenues beat projections. The District of Columbia’s Chief Financial Officer Jeffrey DeWitt is concerned that the $160 million tax cut package passed by the DC Council in May could throw the District’s budget off balance and exceed the District’s debt cap. One solution: “Planned cuts in income taxes, business franchise taxes and estate taxes will be… dependent on the District’s continued economic growth.”

There’ll be tax cuts and a tax hike in the Ocean State. The Rhode Island Senate passed the fiscal year 2015 state budget approved  by the House earlier this week. Democratic Governor Lincoln Chafee is expected to sign the $8.7 billion package. The budget cuts the state's corporate income tax rate to 7 percent, increases the estate tax threshold to $1.5 million, and creates an infrastructure fund supported by a gasoline tax increase.

Maybe there’ll be a federal gas tax increase, too? Democratic Senator Chris Murphy, and Republican Senator Bob Corker would raise the 18.4 cents per gallon gasoline tax and the 24.4 cents per gallon diesel tax each by 12 cents over the next two years. Their proposed increases would fill the running-on-fumes Highway Trust Fund. The fund has dried up in large part because the taxes have not been raised in 20 years.

Could there be federal tax reform by the end of next summer? Senate Finance Committee Chair Ron Wyden sees a 15-month window to reform the federal tax code. That window opened with the latest and largest corporate inversion effort by Medtronic. Wyden would like to see tax reform by August 2015, before presidential election-campaign politics steal lawmakers’ attention. This assumes such a theft has not already occurred.

The IRS wants more US taxpayers to ‘fess up. The IRS’ voluntary disclosure program for US taxpayers with offshore accounts is now available to more US taxpayers, for the first time including some living on US soil. They need to move quickly: FATCA goes into effect July 1 and foreign banks will be required to disclose their US clients’ accounts.

And the Ways & Means Committee wants to see IRS Commissioner John Koskinen sooner. House Ways and Means Chair Dave Camp moved up the hearing on lost IRS emails, in part to preempt Oversight Committee Chair Darrell Issa, who wanted first crack at Koskinen. What had been scheduled for next week is now set for tomorrow morning. Gotta watch those sharp elbows.

Interested in subscribing to The Daily Deduction, the Tax Policy Center summary of the day’s tax news? Sign-up here for free access. If you’d like to tell us about a new research paper or have any comments about our new feature, write us at dailydeduction@taxpolicycenter.org

4Comments

  1. Michael Bindner  ::  5:18 pm on June 19th, 2014:

    I am not getting any subsidy benefits as my wife has employer sponsored benefits which I am not on (too expensive) but our combined income means no subsidy. I imagine that there are others like me that fall through the cracks. We might have gotten something in the system for the same price that covers us all, but then she would have to abandon insurance.

    DC is not the first place you think of for economic growth. Sadly, the Council overreached – most likely at the behest of Jack Evans, who is ecomnomically a Republican.

    Rhode Island should know better. They strive to be more centrist, so it could be worse – but it is not good unless you drive there.

    A federal tax increase is necessary but not likely. Since it must come out of a House Bill (I am sure niceties have been dealt with or will) or at least come with House participation, I have only doom to offer lest they find some tax cut to balance it that is more revenue negative than assumed.

    Wyden wants tax reform along the traditional lines (lower rates, broaden base) but I am not sure that aside from think tank tax reformers this proposal makes sense. Throw billions the way of families with children (taking it from rich mortgage and property tax deductors), create a consumption tax (so most don’t file) and really fix Social Security and I might be interested – but then the GOP would not.

    Amnesties sometimes work – however the timing hardly leaves enough time to consult your tax attorney to see if this is a good idea and hear back from him.

    It is good that Camp is pre-empting Issa, who long ago became a piece of bad political theater. I wonder if Camp is looking at Cantor’s job?

  2. 2014 TAX FREE DAYS  ::  4:20 pm on June 21st, 2014:

    […] Tax Credits Help; Tax Cuts Need to Be Paid For – TaxVox […]

  3. IdealDS  ::  8:55 am on July 7th, 2014:

    The above mentioned subsidy and rebates points are informative but sometimes I found that still there are some tax related queries unanswered. I would appreciate if you come up with more informative articles of the tax related questions. At last, I am really thankful to Renu for this impressively written article.

  4. daidaihua  ::  12:57 pm on August 24th, 2014:

    Lousy in your case. Not reccomended. My mother applied it and i am not kidding, she appeared anorexic. Cease trying to use speedy fixes. Indeed it could perform for any short time, but you will be proper back again in which you started out after you quit. Alter your way of living, not simply your daidaihua.