Congress Is Back with Much To Do and Consider
On the Hill this week: The House may vote to make bonus depreciation permanent. The Senate Finance Committee may present a transportation funding plan reflecting a compromise with the House Ways and Means Committee. The House Oversight and Government Reform Committee has scheduled a hearing on incorrect Earned Income Tax Credit payments.
There’s a better way for Congress to expand the Child Tax Credit. Representative Lynn Jenkins’ bill to expand the credit would give two-thirds of the credit’s benefits to workers in the top 40 percent of the income distribution. TPC’s Elaine Maag shows how Congress could instead allow the credit for the first dollar earned. The cost would be the same, but it would give two-thirds of the credit’s benefits to the workers in the lowest 20 percent of the income distribution.
Will Congress fix a few tax math errors to recoup $5 billion over the next decade? The Self-Employment Contributions Act, or SECA, passed in 1954 to parallel the FICA payroll tax. But it’s not parallel, thanks to three long-standing math errors that Congress has never gotten around to fix. TPC’s Jim Nunns shows that as a result, some highly paid business owners enjoy a tax bonanza of over $20,000 a year.
Not enough of us are saving for retirement. Better tax policy could help. Few American workers make maximum contributions to their 401(k)-type retirement plans. Worse, most tax subsidies aimed at boosting retirement savings go to high-income workers and only a small share helps low- or middle-income earners. What if the tax benefits of retirement savings were better targeted to those who need it the most? A new TPC report by Barbara Buttrica, Ben Harris, Pamela Perun, and Gene Steuerle offers some solutions.
The President’s Budget would do what the President promised, tax-wise. TPC estimates that low-income households would enjoy a tax cut while those at the top of the income distribution would pay more. Beyond its distributional analysis, TPC’s Elaine Maag, Jim Nunns, Eric Toder, and Bob Williams examined four new tax proposals in the President’s plan that expand the earned income tax and child and dependent care tax credits, conform rules for SECA taxes, and change business taxes to help fund business tax reform.
Abroad, the European Union is sharpening its focus on multinationals’ tax avoidance. The EU may have Luxembourg in its sights, in addition to Ireland. Tax laws in Luxembourg have helped attract more than 40,000 holding companies and thousands of high-paying jobs. The tiny nation has a population of less than 500,000.
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