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.
Throughout the week we have been breaking down the new report from the Brookings Institution's Hamilton Project, "15 Ways to Rethink the Federal Budget." Proposals have included reforms to the military, tax expenditures, Medicare,
The Hill is reporting that the House Ways and Means Committee will take the next step in creating a broad tax reform plan by announcing 11 separate working groups on different components of reform. The working groups would be composed of members of both parties and will be used to lay the groundwork in these different areas, not necessarily making recommendations.
The 11 working groups would cover the following topics:
Yesterday, House Ways and Means Committee Chairman Dave Camp (R-MI) released a Discussion Draft on reforming the tax treatment of financial products. This is the latest in the Committee’s efforts to seek input and feedback on elements of comprehensive tax reform legislation which they have been working on over the last few years.
Yesterday, CBO issued a report on refundable tax credits, examining many issues involved with the credits. The first refundable credit, the Earned Income Tax Credit, was created in 1975 to offset the payroll tax for low-income people. The number of refundable credits has increased to a high of 11 different credits in 2010, and 5 currently. The cost of these tax expenditures has also risen, reaching a high of $238 billion (in 2013 dollars) in 2008 due to many economic stimulus measures before falling to $150 billion this year.
Yesterday, Rep. Dennis A. Ross (R-FL) introduced H.R. 243, otherwise cited as the Bowles-Simpson Plan of Lowering America's Debt (BOLD) Act, a bill that contains some policies found in the Simpson-Bowles plan. The BOLD Act includes some spending cuts -- such as reducing Congressional and White House expenditures by 15%, prohibiting earmarks, reducing federal travel, and imposing an additional 3-year pay freeze on federal workers and DOD civilians -- that could be undertaken to reduce the debt.