Tax reform has many moving pieces to it and many questions that need to be answered. One question is whether the two pieces should be handled together, separately, or whether lawmakers should only do one or the other.
A recent article in The New York Times entitled "The Corporate Tax Game" details the tricky politics of corporate tax reform, especially when it comes to deciding how to pay for a rate reduction. With a variety of interest groups out there, businesses may be divided over the tax preferences that should be on the chopping block.
Recent reports from Capitol Hill show momentum for tax reform is building. Both the House Ways and Means and Senate Finance Committees have been compiling options and draft reports on different aspects of tax reform, demonstrating a commitment from both tax-writing committees to examine the tax code.
For the first time in a few days, Tax Day did actually fall on April 15, so hopefully the tax procrastinators out there were able to get their filing done. Filing your taxes provides a good reminder of how complicated the current code is. With the President's budget coming out, we'll take a look at how it would change the tax code.
It's Tax Day, meaning that those who procrastinated spent their weekends trying to work through our overly-complex tax code. The federal code contains nearly four million words and the IRS's Taxpayer Advocate estimates that businesses and individuals spend nearly 6.1 billion hours a year completing their filings.
Getting Congress to take on tax reform will be difficult, but the two lawmakers in charge of the tax-writing committees seem to be committed to reforming our nation's inefficient and overly-complicated tax code.
It is well known that the corporate tax code is littered with tax provisions that cost the government revenue. Today, the U.S. has the highest top marginal rate in the world, discouraging growth and investment, and a complex corporate code that diverts resources from more productive purposes and creates disincentives. While some tax provisions may be serving a legitimate purpose, there are others that provide spillovers beyond lawmakers' original intent.
Yesterday, House Ways and Means Committee Chairman Dave Camp (R-MI) took a hard look at the deduction for state and local income taxes at a hearing on tax expenditures that affect state and local governments.
Tax expenditures are a frequent subject of this blog, as they are less visible than government spending due to the tax code's great complexity. But these provisions are costly, estimated at $1.3 trillion in forgone revenue in 2013 by the Joint Committee on Taxation, and should be better seen as government spending. However, due to the progressiveness of the tax code, most tax expenditures especially benefit upper income taxpayers.
Tax expenditures have been a hot topic lately as a way to raise additional revenue for a deficit reduction plan that could replace sequestration. Recently, Sen. John McCain (R-AZ) said he would be willing to consider several "revenue closers" (or tax expenditures) in a compromise, and reforming tax expenditures has been proposed by the White House as well.