Daily Deduction

from the Tax Policy Center

Expanding a Credit, Simplifying a Break, and Cutting Off a Nose to Spite a Face

By :: June 26th, 2014

The House Ways and Means Committee approved an expansion of the child tax credit. A party-line vote approved changes to the Child Tax Credit. The proposal would index the credit to inflation and increase the phaseout range for joint filers to $150,000, twice the range for single filers. The effort would cost $114.9 billion over 10 years and is not paid for with budget offsets.

Ways & Means also approved higher education tax breaks. The Committee voted along party lines for an expansion and simplification of higher education tax breaks. Available to married couples with annual income under $180,000, it provides a higher education tax credit of $2,500, with up to $1,500 refundable. The proposal would add $96.5 billion over 10 years to the deficit. 

Speaking of debt: A Brookings Institution study released this week notes that typical student loan borrowers aren’t any worse off than those in their parents’ generation. About 25 percent of the increase in student debt since 1989 comes from Americans pursuing more education, especially graduate degrees. Average lifetime incomes of college graduates have more than kept pace with increases in student debt load. And student loan borrowers’ monthly payment burden has stayed about the same over the past two decades.

Surprise: Less money and more work weakens IRS service and enforcement. The Center on Budget and Policy Priorities confirms that as a result of budget cuts, the IRS has reduced its workforce, investments in employee training, and upgrades to information technology systems. But, it’s also taken on additional responsibilities under the Affordable Care Act and the Foreign Account Tax Compliance Act. Doing more with less is an IRS reality, but it’s hard to imagine that it’s a sustainable one.

On the Anniversary of DOMA’s Repeal: The Tax Institute at H&R Block offers a map of the patchwork of state income tax requirements since the repeal of the Defense of Marriage Act. TPC’s Bob Williams explored same-sex couples' IRS filing complexities here. The US Supreme Court declared one year ago today that same-sex couples married in states where it is legal must receive the same federal health, tax, Social Security and other benefits that heterosexual couples receive.

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  1. 2014 TAX FREE DAY  ::  1:19 pm on June 26th, 2014:

    […] TaxVox » Blog Archive Expanding a Credit, Simplifying a Break, and … […]

  2. Michael Bindner  ::  2:07 pm on June 26th, 2014:

    I would end phase outs to the child tax credit altogether – there are not that many taxpayers who wold be too rich to get it and the complications in filing for everyone else are not worth the savings. As for paying for it, I would end the mortgage interest and child care deductions and the child care exemption (whiich is worth much more than the credit for the top) – and of course, I would make the credit $1000 per child per month with pay – half federal and half state.

    I would end education credits as an individual thing and have states pay for junior college (and the last two years of high school) as a unit, with employers paying the last two plus grad school and pay students a full salary (not an intern stipend) to go. The underlying loan provision would only come into play if the employment situation after graduation did not work out.

    Student loans are not so much of a problem for non-lawyers and non-MDs (again, my proposal would handle it). The issue is those of us who started a graduate degree – or even an associates degree – and did not finish it. Those debts should be written down. What is also killing people is capitalized deferrments and forebearances.

    Sadly, the IRS report shows that you get what you pay for. I suspect that many citizens wrongly believe (especially in the Tea Party) that they take a bit off the top – which is nonsense.

    The DOMA repeal anniversary was a great victory but there is unfinished business. Because the plaintiff resided in a marriage equality state, there were no issues regarding that part of the law that allow states to ignore out of state marriages – for all legal recognition (at least they can no longer go after them for sex charges because of Webster). Many states are doing the right thing anyway and the decision is clear on the underlying rights – however no order can be made to espand it until the right case comes up. That is not about Justices shopping for cases, but the willingness of plaintiffs to stand up for themselves and for the process to work. Of course, with a different Congress, change could come rather quickly provided the majority in the Senate was not only Democratic, but progressive. That also applies to a lot of tax issues – although even then compromise is usually required. On the child tax credit that I propose, conservatives who are pro-life might actually help if their feet were held to the fire by certain members of the coalition (the Bishops) who to date have not insisted.

  3. News Round-Up: June 27, 2014 | Tax Credits for Working Families  ::  12:21 pm on June 27th, 2014:

    […] The House Ways and Means Committee marked up a controversial bill to permanently increase the federal Child Tax Credit for higher earners while doing nothing to stop the credit from expiring completely for lower-income families in 2017 and sent it to the full House for a vote. (Tax Credits For Working Families, Center on Budget and Policy Priorities, Bloomberg News, Tax Policy Center) […]

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