carapace – Not your father's america

List of Expiring Federal Tax Provisions, 2011-2022. Joint Committee on Taxation.

"For purposes of compiling this list, the staff of the Joint Committee on Taxation considers a provision to be expiring if, at a statutorily specified date, the provision expires completely or reverts to the law in effect before the present-law version of the provision. Certain provisions terminate on dates that refer to a taxpayer’s taxable year and not a calendar year. For these provisions, the expiration dates listed in this document apply with respect to calendar year taxpayers. The expiration dates of such provisions may differ, however, with respect to fiscal year taxpayers or taxpayers with short taxable years. Years in which there are no expiring provisions are not listed in the document."

Politicians of all stripes are clamoring for simplifying the tax code, but when every provision has its advocates, progress is difficult at best …

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Volume XVII No. 4: January 27, 2012

In the State of the Union, the President called for comprehensive tax reform: "So tonight, I’m asking Democrats and Republicans to simplify the system. Get rid of the loopholes. Level the playing field. And use the savings to lower the corporate tax rate for the first time in 25 years…" He continued, "In fact, the best thing we could do on taxes for all Americans is to simplify the individual tax code. This will be a tough job, but members of both parties have expressed an interest in doing this, and I am prepared to join them."

That was so 2011.

A lot must have changed in a year, because the 2012 State of the Union was about anything but tax simplification. Quite the opposite in fact. The President called for new tax expenditures (breaks) for companies to move operations back from overseas. And a new tax on multinationals that would offset a tax break for domestic companies. Also, if those domestic companies are manufacturers, they would get an even bigger break. But wait, there’s more: that break would double if it was a high tech company making stuff here.

Phew. The President directed Congress to send him the tax reforms, and he would "sign them right away." Maybe they will–after taking a few Excedrin to deal with a headache caused by trying to write legislation articulating the difference between high tech manufacturing and regular manufacturing.

And that’s not all. The President also proposed extending the tuition tax credit and expanding small business tax relief. Wait, here’s something we’re behind: After "a century…It’s time to end the taxpayer giveaways to [the oil industry] that’s rarely been more profitable…" But he wants to turn around and "double down…[with] clean energy tax credits." Oh, well there goes that revenue.

The problem is not that all of the policy goals are wrongheaded. No one in Congress is campaigning to make education more expensive or to reduce domestic manufacturing jobs. The problem is that too often policymakers find it more politically palatable to give up cash owed to the treasury to avoid writing checks. Whether it’s forgone revenue or increased spending, the impact on the deficit is pretty much the same. Ignoring this reality is the same kind of logic that would lead to you thinking that skipping the gym for a month would have a different impact on your waistline than eating a dozen donuts. In fact, in some ways new tax breaks are worse because they add complexity to the code, create perceived imbalances, are rarely reviewed, and are very hard to measure for effectiveness. And it is one of the most politically connected industries and a popular cause that is the most likely to get and maintain tax breaks.

It is painfully clear that to deal with our enormous budget deficits and tackle the $15 trillion debt that is saddling our nation; we need an all-of-the-above strategy. Yes, spending has to be tackled. Entitlements like Social Security and Medicare have to be reformed to be made more sustainable in the long-term. But we cannot ignore revenue. Slathering on new tax breaks, preferences, and loopholes with one hand, while trying to prune the breaks elsewhere and increase some rates is never going to work.

The last time a tax code thicket was cleaned out with a good burn was 1986. More than 25 years later we need a fire to sweep through the code and eliminate the underbrush of tax expenditures, breaks, and loopholes.

The Simpson-Bowles and Domenic-Rivlin commissions, the Senate Gang of Six, and a litany of legislators from both parties have all called for eliminating various tax breaks while reducing the rates and consolidating brackets to create a simpler, flatter, and fairer tax system. It is an election year, but instead of both sides pandering to the electorate with a plethora of tax breaks, they should be working for fundamental reform.

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Notable Quote

"I see just a big fight…You can’t even dismiss the little, itty-bitty ones. Every single one of those things, there’s a group of people, it’s their whole life’s work tied up in this and they are going to lobby like heck."

- George Yin, Former Join Committee on Taxation Chief of Staff (2003-2005), on the challenge of reforming the federal tax code and exclusions.

Got a quote or article about wasteful spending you think should be featured in the wastebasket? Send us your ideas and comments

From: Weekly Wastebasket www.taxpayer.net

Brief summary:

1. The wealthy will pay less in taxes; 
2. The working class will pay more in taxes; and 
3. Overall tax revenue will be significantly reduced.

Note: Summary added by poster

In his campaign for the Republican presidential nomination, Mitt Romney has proposed permanently extending the 2001-03 tax cuts, eliminating taxation of investment income of most individual taxpayers, reducing the corporate income tax, eliminating the estate tax, and repealing the taxes enacted in 2010’s health reform legislation. The Tax Policy Center (TPC) has completed a preliminary analysis of the Romney plan, based on information posted on the campaign website and email exchanges with campaign policy advisors.¹

View this page as a PDF Summary tables are available here

Description of Plan

Governor Romney would permanently extend all the 2001 and 2003 tax cuts now scheduled to expire in 2013 and continue to “patch” the alternative minimum tax, but would allow some recently enacted provisions to expire and would repeal certain tax provisions in the 2010 health reform legislation. Tax provisions in the 2009 stimulus act and subsequently extended through 2012 would expire. These include the American Opportunity tax credit for higher education, the expanded refundability of the child credit, and the expansion of the earned income tax credit (EITC). The plan would also eliminate tax on long-term capital gains, dividends, and interest income for married couples filing jointly with income under $200,000 ($100,000 for single filers and $150,000 for heads of household) and repeal the federal estate tax, while continuing the gift tax with a maximum tax rate of 35 percent.²
At the corporate level, the Romney plan would make two major changes: 1) reduce the corporate income tax rate from 35 to 25 percent and 2) make the research and experimentation credit permanent and extend for one year the full expensing of capital expenditures. It would also allow a “tax holiday” for the repatriation of corporate profits held overseas but does not specify whether repatriated earnings would face any tax (and, if so, at what rate). In the longer run, Gov. Romney would reduce the corporate rate further in conjunction with base broadening and simplification and would move the corporate tax to a territorial system.

Gov. Romney would also permanently repeal the 0.9 percent tax on wages and the 3.8 percent tax on investment income of high-income individual taxpayers that were imposed by the 2010 health reform legislation and are scheduled to take effect in 2013.

TPC’s analysis measures the change in tax liabilities against two alternative baselines: current law, which assumes that the 2001-10 tax cuts all expire in 2013 as scheduled, and current policy, which assumes that the 2011 law is permanent (except for the one-year payroll tax cut and temporary investment incentives). Compared with the current law baseline, the Romney plan would cut taxes for about three-fourths of taxpayers by an average of more than $4,700. In contrast, compared with current policy, about 13 percent of tax units would see their 2015 taxes go up an average of more than $900 while 42 percent would get tax cuts averaging nearly $2,900.

Some people would see their taxes rise relative to the current policy baseline because of the expiration of the American Opportunity Tax Credit and expiration of the expansion of the earned income credit and the child credit enacted in 2009.

The Romney plan would reduce federal tax revenues substantially. TPC estimates that on a static basis, the Romney plan would lower federal tax liability by $600 billion in calendar year 2015 compared with current law, roughly a 16 percent cut in total projected revenue. Relative to a current policy baseline, the reduction in liability would be roughly $180 billion in calendar year 2015.

The Romney plan would change the distribution of the federal tax burden, as shown in these tables.³

Sources

Official description of Romney plan

Appendix: Detailed List of Assumptions Underlying Analysis

Based on the campaign’s summary and Gov. Romney’s statements, TPC assumes that the 2001-03 tax cuts and AMT relief become permanent but that temporary tax cuts enacted in 2009 and 2010 are allowed to expire. Provisions that are permanently extended include the annual patches to the AMT, the lower marginal rates and marriage penalty relief, the 0 and15 percent tax rates on long-term capital gains and qualified dividends, and the higher amounts and increased refundability of the earned income tax credit and child tax credit. The American Opportunity tax credit would expire and be replaced by the permanent Hope tax credit for higher education. The temporary reduction in the phase-in threshold for refundability of the child credit and the increase in the EITC for larger families enacted in 2009 would also expire in 2013 as scheduled.

Of particular importance are details of applying the exemption of investment income (long-term capital gains, dividends, and interest income) for most taxpayers with income less than threshold amounts ($200,000 for married couples, $100,000 for single returns and $150,000 for heads of households). We assume that all other income is counted first in determining whether investment income is subject to tax. Therefore, for any married couple with income from other sources above $200,000, all capital gains, dividends, and interest would continue to be subject to current tax rules.

For taxpayers with other income below the relevant threshold, the maximum exemption for investment equals the threshold minus other income. For example, a married couple with $150,000 of income from sources other than long-term gains, dividends, and interest would pay no tax on the first $50,000 of investment income and statutory tax rates on any investment income in excess of $50,000. This income would face current statutory rates—0 percent or 15 percent for long-term gains and qualified dividends and as high as 35 percent on other dividends and interest income.

Because non-qualified dividends and interest income would face higher statutory rates than long-term gains or qualified dividends, we assume that the former would be exempt ahead of the latter. Thus, a couple with $150,000 in other income, $40,000 in interest income, and $30,000 in qualified dividends would pay no tax on the interest income and $10,000 of the dividends but would pay tax on the remaining $20,000 of qualified dividend income.

The plan would allow businesses to continue to claim the research and experimentation credit, which is scheduled to expire under current law (but is assumed to be extended in the current policy baseline).
View this page as a PDF Summary tables are available here

1 Gov. Romney’s tax plan is contained in “Believe in America: Mitt Romney’s Plan for Jobs and Economic Growth." TPC obtained additional information about details of the plan
from campaign policy advisors.

2 Gift tax provisions would follow 2010 law: $1 million lifetime exemption and a 35 percent top rate.

3 TPC assumes that the full burden of corporate income taxes falls on owners of capital in proportion to their income from capital. Under alternative assumptions that allocate some of the burden to workers, tax changes from the Romney plan would be distributed differently. Tax units with the highest income would receive smaller tax cuts on average and low- and middle-income tax units would receive slightly smaller average tax increases or slightly larger average tax cuts than the distribution tables show. The results shown in the distribution tables would be little changed for the bottom 99 percent of tax units and the overall pattern of tax changes would be qualitatively the same—the largest tax cuts as a share of after-tax income would go to the highest income taxpayers.

© Urban Institute, Brookings Institution, and individual authors, 2010. Site Map | Privacy Policy | Support TPC | Contact Us

Article here: http://taxpolicycenter.org/taxtopics/romney-plan.cfm

Quarterly Summary of State and Local Government Tax Revenue

http://www2.census.gov/govs/qtax/2011/qtax-q3-2011.pdf

Third quarter 2011 tax revenues for state and local governments, as compared with third quarter 2010, were up 4.1%, marking the eighth consecutive quarter of positive year over year growth. Tax revenue for the quarter totaled $292.0 billion, as compared with the $280.5 billion reported for the third quarter of 2010. Of the largest tax categories, property, general sales tax, and individual income tax showed positive growth over the same quarter in 2010. Corporate income tax declined for the first quarterly decline since the third quarter of 2010.

"A comprehensive new study that profiles 265 consistently profitable Fortune 500 companies finds that 68 of them paid no state corporate income tax in at least one of the last three years and 20 of them averaged a tax rate of zero or less during the 2008-2010 period. These are among the findings in Corporate Tax Dodging in the Fifty States, 2008-2010 http://www.ctj.org/ … released today by the Institute on Taxation and Economic Policy (ITEP) and Citizens for Tax Justice (CTJ). “Our report shows these corporations raked in a combined $1.33 trillion in profits in the last three years, and far too many have managed to shelter half or more of their profits from state taxes,” said Matthew Gardner, Executive Director at the Institute on Taxation and Economic Policy and the report’s co-author. “They’re so busy avoiding taxes, it’s no wonder they’re not creating any new jobs.” Among the 20 corporations who paid zero or less in state corporate income taxes over the three year period are: Utility provider Pepco Holdings (DC); pharmaceutical giant Baxter International (IL); chemical maker DuPont (DE); fast food behemoth Yum Brands (KY); high tech manufacturer Intel (CA). All 265 corporations, headquartered in 36 states, are listed in the report."