Daily Deduction

from the Tax Policy Center

Games, Spins, Ignorance and Patience

By :: July 11th, 2014

Congress keeps playing with the Highway Trust Fund—but why? The House Ways & Means Committee approved its effort to fund the Highway Trust Fund through May, 2015. To reach a bipartisan deal, the Senate Finance Committee ultimately took a slightly different approach in a $10.8 billion proposal to finance roads and transit. Both convoluted short-term patches punt a big fiscal problem to the next Congress. TPC’s Howard Gleckman concludes that if Congress won’t come up with a permanent, sustainable solution, the Highway Trust Fund game isn’t worth playing. It “makes budgets more opaque and less understandable. This makes people even more cynical about government.”

Corporate “spinversion?” No, it’s not a press release. It’s a way for a very large US conglomerate to make the most of reduced tax rates abroad. Rather than sell off 20 percent of itself through a traditional corporate inversion, some tax experts say a large US business could “spin off” a piece of itself to reincorporate with a foreign company. US shareholders would own between 50 percent and 80 percent of the final “spinversion" entity, taxed at the foreign nation’s lower corporate rate.

With one local tax, ignorance is neither bliss nor a defense. School districts in Philadelphia are benefitting from improved collections of its school income tax. The levy has been in effect since 1969 but some taxpayers didn’t know they were supposed to pay it, perhaps because the city never sent them a bill. Now, collection agencies are calling with a “friendly FYI.” The city picked up around $37 million the past fiscal year, including $7 million from delinquent accounts. The private agencies keep 13 to 15 percent of what they collect.

And with another, patience can be a costly virtue. Faced with a $1.7 billion budget shortfall, New Jersey’s Republican Governor Chris Christie needs another nine months before distributing $395 million in homestead property tax rebates to low-income elderly and disabled homeowners. The average rebate is $516 for elderly and disabled homeowners earning less than $150,000 a year, and $402 for those with incomes under $75,000. Both the Governor and homeowners struggle to manage cash flow.

Australia’s Prime Minister Tony Abbot is remaining patient. The Australian Senate blocked Abbot’s hoped-for repeal of the nation’s carbon tax in a surprise move, described by some in the Senate as “chaos.” Abbott will try to move the repeal through the Australian House next week.

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