Daily Deduction

from the Tax Policy Center

Reducing Income Inequality, Taxing Businesses to “Hire American”

By :: July 24th, 2014

Have Obama’s tax policies reduced income inequality? TPC has some new data, but the answer depends on who you compare him to. Relative to George W. Bush, who pushed major tax cuts for high-income households, Obama has reduced inequality. But compared to Bill Clinton, his policy is pretty standard Democratic fare. The Washington Post has one take. TPC’s Len Burman puts it in perspective.

Senate Democrats want tax legislation to help “bring jobs home.” They’ve advanced a bill that would give companies a 20 percent tax credit on expenses related to bringing jobs into the United States and deny deductions for outsourcing expenses. Republicans are opposed. The Joint Committee on Taxation says the tax credit would reduce revenue by $357 million over ten years, while denying deductions would generate $143 million. The bill is a drop in the bucket: The CBO projects corporate tax revenues of $4.5 trillion over the next decade.

Online sales tax legislation won’t be bundled with a ban on state and local internet access taxes, after all. Instead, Senate Majority Leader Harry Reid says he’ll  move legislation in September to only extend the Internet Tax Freedom Act until early 2015. Finance Committee Chair Ron Wyden expressed relief, telling Roll Call that Reid’s move “reflects a growing awareness that as written, the two bills contradict each other.”

On the Hill today: The Senate may vote today on the House version of the $10.9 billion transportation bill to patch the Highway Trust Fund through May 2015. The Senate Finance Committee holds a hearing, “Social Security: A Fresh Look at Workers’ Disability Insurance.” The House Judiciary Committee will examine balanced budget amendments at its hearing.

Will tax reform help sustain Chile’s economic recovery? This week, the International Monetary Fund projected the country’s Gross Domestic Product will expand by 3.2 percent in 2014 and by 4.1 percent next year. Chilean President Michelle Bachelet’s tax reforms are designed to support education, health care and deficit reduction. Under her plan, the corporate tax rate would gradually rise from 20 to 27 percent by 2017. The IMF welcomed the reforms but noted a need for greater clarity on how the new tax regime will be implemented in order to evaluate any impact on growth and investment.

Will Russia tax its “1 percent” to pay for its annexation of Crimea? Draft legislation from its lower house of parliament would increase income tax for people earning more than more than 12 million roubles a year (or $344,400). If approved, the tax change could generate 300 billion to 500 billion roubles ($8.6 billion to $14.30 billion) a year. Less than two percent of the population—who earn more than one-third of the country’s total personal income—could be affected. Their flat tax rate of 13 percent could shoot up to 30 percent. The lower house majority backs President Vladimir Putin. Wonder if Russia’s oligarchs will support the tax?

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2Comments

  1. Michael Bindner  ::  4:17 am on July 25th, 2014:

    My comments on Len’s post, which are extensive, are on his post. In short, the apt comparison is to Carter.

    The Senate bill is an interesting statement, although I don’t know if it is aimed at the jobless or the “job creators” who have money to spend for the campaign season. I would much rather see a 20% VAT replacing at least some of personal and corporate income taxes than a 20% credit for mutli-nationals bringing jobs to America.

    Harry Reid decided to go with an Internet tax bill. The bad news is that he went with the wrong one. I guess state tax revenue is not important to Nevada (although stopping taxes on Internet gambling certainly is – although I suspect that is illegal, even in Nevada – though maybe not).

    Congress is busy. I got home to late to see how the Highway bill did in the Senate (I hope not well without some amendments knocking out pension smoothing – do you know how they make smoothies?!!!). Disability is one area that needs change but I don’t trust the House side to make it just yet. The House looks like it has some spare time on its hands to do the obligatory balanced budget amendment hearing. If the proposed amendment is anything like the last one considered, it is more aptly called the Republican Minority Party Fiscal Relevance Amendment. No one who thinks that the GOP has good long term prospects would ever vote yes. Whenever I hear Norquist talking about a bright Republican electoral commission I think of this inane attack on majority rule.

    Poor Chile. Usually I support tax increases – but on the rich rather than companies. If the IMF has got their hooks into them, they are more concerned with taxes to fund IMF loans, not money to improve the life of the citizens. Repudiate is such a nice word, but one that will probably not be allowed in our finanical-capitalist world. They should invite the IMF to have a Latin American home base in their country than tax the stuffing out of them and reject any self-professed immunity they have for themselves.

    Taxing oligarchs would be a nice change for Russia, even if it is for the Crimean expansion. They should go a bit larger and raise enough money to buy the entire Russian zone of Ukraine, all the way to the Dnieper.

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