Tax Watch Archive
3/21/13 — House Committee approves bills punishing delinquent federal employees and contractors.
On March 20, the House Oversight and Government Reform Committee favorably reported out of Committee two bills—H.R. 249, the Federal Employee Tax Accountability Act of 2013, which would terminate the employment of current tax delinquent federal employees and prohibit the hiring of individuals who already have a serious delinquent tax debt, and H.R. 882, the Contracting and Tax Accountability Act of 2013, which would mandate tax compliance as a prerequisite for receiving federal contracts.
3/21/13 — Senate Finance Committee releases draft of tax simplification options.
On March 21, the Senate Finance Committee released a document titled "Simplifying the Tax System for Families and Businesses." It is the first in a series of papers on tax reform options being considered by the Committee, including options suggested by witnesses at the 30 tax reform hearings that have been held, bipartisan commissions, tax policy experts, and members of Congress. The document emphasized that the list was non-exhaustive and that placement on the list doesn't imply endorsement of any particular option by either Committee Chairman Max Baucus (D-MT) or Ranking Member Orrin Hatch (R-UT).
The reform options included the following:
- Reduce tax fraud and taxpayer identity theft by limiting access to personal identifying information, partnering with third parties to share successful practices to combat identity theft and tax fraud, and improving information sharing with federal, state, and local law enforcement.
- Reduce the tax gap by, among other things, restructuring and simplifying the penalty system to improve voluntary compliance and ease administrative burdens, improving and enhancing third-party information reporting, and enhancing privacy protections in IRS whistleblower programs.
- Improve the taxpayer experience in IRS audit and collection procedures.
- Enable IRS to verify information on taxpayer's returns against third-party information as returns are processed.
- Reduce compliance costs by having IRS fill out simple returns for taxpayers (i.e., by pre-filling returns with third-party information and preliminarily calculating tax liability, similar to California's "Ready Return" program).
- Repeal provisions that require taxpayers to calculate their tax liability multiple times (e.g., the alternative minimum tax).
- Simplify and conform definitions in the Code.
- Improve government transparency by providing taxpayers with a receipt for taxes paid, which would show the taxpayer's average tax rate, marginal tax rate, the value of the tax expenditures they claim, and/or an allocation of their tax payments to the major spending categories in the federal budget.
The Senate Finance Committee's "Simplifying the Tax System for Families and Businesses" can be found on Checkpoint.
3/15/13 — Senate Budget Committee OKs Democrats' FY 2014 budget resolution.
On March 14, the Senate Budget Committee by a vote of 12 to 10, approved its FY 2014 budget resolution. This is the Democrats' FY 2014 budget resolution, calling for an equal mix of spending cuts and targeted tax increases, and an overhaul of the Code.
Senate floor consideration of the measure is expected the week of March 18.
Both the Democrats' and Republicans' FY 2014 budget resolutions can be found on Checkpoint.
3/14/13 — Democrats' FY 2014 budget resolution calls for balanced spending cuts and tax increases.
Late on March 13, Senate Budget Committee Chair Patty Murray (D-WA) unveiled the Democrats' FY 2014 budget resolution, a document that calls for an equal mix of spending cuts and targeted tax increases, and an overhaul of the Code.
The budget would achieve $975 billion in deficit reduction through "responsible spending cuts" made across the federal budget, and find another $975 billion in deficit reduction by "closing loopholes and eliminating wasteful spending in the tax code that benefits the wealthiest Americans and biggest corporations."
The Democrats' budget plan also calls for tax reform that would:
- restore fairness to the Code (in part by making permanent various enhancements to tax credits benefiting taxpayers with low and middle income);
- to the extent not achieved through reconciliation, "eliminate or modify tax breaks that disproportionately benefit the wealthiest Americans, aggressively address the tax gap and offshore tax abuse, and eliminate unfair and inefficient business tax loopholes";
- simplify the Code to make it easier for individuals and businesses to comply and help U.S. enterprises compete in the global marketplace; and
- make "responsible reductions in tax rates," but only if the Senate Budget's "revenue and progressivity goals are achieved or maintained."
The text of the Democrats' Fiscal Year 2014 Senate Budget Resolution can be found on Checkpoint.
3/12/13 — Republicans' FY 2014 budget resolution calls for major tax changes.
On March 12, House Budget Committee Chair Paul Ryan (R-WI) released the Republicans' 2014 budget resolution.
Among other things, Ryan's budget would:.
- consolidate the existing seven individual income tax brackets to two, with a 10% rate for the first bracket and a "goal of achieving a top individual rate of 25%" for the second bracket;
- simplify the Code to make it fairer and less complex;
- reduce the corporate tax rate to 25%;
- repeal the alternative minimum tax; and
- shift from a worldwide tax system to a territorial regime.
RIA observation: The tax section of Ryan's 2014 budget proposal is very similar to the tax changes in the budget proposal he set forth last year.
The text of the Republican's 2014 budget resolution can be found on Checkpoint.
3/12/13 — W&M Chair releases discussion draft of small business tax simplification bill.
On March 12, Ways and Means Committee Chair Dave Camp (R-MI) released a discussion draft aimed at creating a simpler and fairer tax code for small businesses.
The discussion draft contains proposals to:
- Make permanent the option to expense investments and property under Code Sec. 179. The expensing limit would be $250,000, with the deduction phasing out for investments exceeding $800,000 (both amounts indexed for inflation);
- Expand the use of the simpler cash accounting method to all businesses with gross receipts of $10 million or less;
- Provide relief for start-up and organizational costs by establishing a unified deduction for these expenses; and
- Make tax compliance easier for partners and S corporation shareholders by reordering and simplifying the due dates of tax returns for partners and S corporations.
Camp's discussion draft also outlines and seeks feedback on two separate options for passthrough reform. The first option would revise and modernize current tax rules affecting S corporations and partnerships. The second would simplify the tax treatment of non-publicly traded companies by repealing existing tax rules governing partnerships and S corporations and replacing those rules with a new unified pass-through regime.
A summary of the text of Ways and Means Committee Chair Dave Camp's discussion draft proposal, "Strengthening the Economy and Increasing Wages by Making the Tax Code Simpler and Fairer for America's Small Businesses" can be found on Checkpoint.
3/7/13 — House-passed continuing resolution would prevent government shutdown.
On March 6, the House of Representatives by a vote of 267-151, passed H.R. 993, which carries a Continuing Resolution (CR) to prevent a government shutdown and continue U.S. government operations (including Treasury and IRS) through the end of the fiscal year on Sept. 30, 2013.
According to a House Appropriations Committee press release, the legislation includes full-year Defense, and Military Construction and Veterans Affairs Appropriations bills, which passed the House last year and have been negotiated with the Senate. The bill would continue the remainder of federal discretionary spending at current rates, making limited exceptions where necessary, and to ensure good governance of taxpayer dollars. Nearly all of this funding would be subject to the President's sequestration order, bringing the total topline discretionary spending within the bill to approximately $984 billion.
The Senate is slated to take up a CR bill next week.
A CR bill must make it through Congress before March 27 to prevent a government shutdown.
2/28/13 — Democratic and Republican sequester bills fail in Senate.
On February 28, the Senate voted 51 to 49 against cloture on the motion to proceed to S. 388, the "American Family Economic Protection Act of 2013," the Senate Democratic sequester bill. On the same day, the Senate also voted 38 to 62 against cloture on the motion to proceed to S. 16, the Senate Republican sequester alternative bill. These votes effectively kill both bills. It's unclear whether any new measure will be introduced to find a solution to the sequester problem.
2/28/13 — Wall Street trading tax bill introduced in Senate.
On February 28, Senator Tom Harkin (D-IA) and Congressman Peter DeFazio (D-OR) introduced S. 410, the "Wall Street Trading and Speculators Tax Act," legislation that would place a tax on certain trading activities undertaken by banking and financial firms.
According to a press release describing the bill, it would place a tax of three basis points (three cents on $100 in value) on most non-consumer financial trading including stocks, bonds and other debts, except for their initial issuance. For example, if a company receives a loan from a financial company, that transaction would not be taxed. But, if the financial institution traded the debt, the trade would be subject to the tax. The tax would also cover all derivative contracts, options, puts, forward contracts, swaps and other complex instruments at their actual cost. The measure excludes debt that has an original term of less than 100 days. The tax would apply to transactions after Dec. 31, 2013.
The bill's sponsors claim that the measure would not likely impact the decision to engage in productive economic activity, or harm ordinary middle-class investors or long-term investing. It would, however, reduce certain speculative activities like high-speed computer arbitrage trading. According to the sponsors, in the last Congress, the Congressional Joint Tax Committee scored a similar proposal as raising $352 billion over 10 years.
The text of S. 410, the "Wall Street Trading and Speculators Tax Act," as well as the text of a February 28 press release describing S. 410, the "Wall Street Trading and Speculators Tax Act," can be found on Checkpoint.
2/27/13 — Reid introduces Democrats' alternative to looming sequester.
With just days to go before the controversial sequester goes into effect, Senate Majority Leader Harry Reid (D-NV) introduced S. 388, the "American Family Economic Protection Act of 2013." This Democratic alternative to the sequester would slap a surtax on high-income taxpayers (those with adjusted gross income over $1 million), deny deductions for outsourcing expenses, and modify the excise taxes on petroleum.
The Senate is scheduled to vote on Thursday, February 28, on the motion to proceed to S. 388. Reid told reporters that an agreement was reached that would allow for a vote on a Republican alternative bill. When asked if he would allow for votes on multiple Republican alternative bills, Reid replied, "The agreement was they will have a bill, we will have a bill. That's fair enough."
The text of S. 388, the "American Family Economic Protection Act of 2013," as introduced on Feb. 26 can be found on Checkpoint.
2/27/13 — Camp says Ways and Means' first priority will be tax reform.
On February 26, House Ways and Means Committee Chair Dave Camp (R-MI) told reporters that his Committee's number one priority in 2013 would be to strengthen the economy through tax reform. He said he wanted to make the tax code simpler, so that the average person can prepare his or her own tax returns. "I'm not naïve about how difficult this is and how complicated this is, but it's something that's going to be important to do if we want to grow the economy and create jobs," Camp said. He also said that he was not interested in closing one or two loopholes, but, rather, wanted to pass comprehensive tax reform for individuals, pass-throughs and corporations in order to help to grow jobs.
Camp said he had been given the green light from the House Republican leadership to move forward on tax reform, and that H.R. 1 has been set aside by House Speaker John Boehner (R-OH) as the vehicle to move tax reform legislation through the House. Camp's goal is to have his committee pass a revenue-neutral bill by the end of this year. He also said that he expects to release additional discussion drafts before drafting and releasing a full bill.
February 19 — Bowles-Simpson deficit reduction plan calls for budget cuts and tax reform.
On February 19, Erskine Bowles, former chief of staff to President Bill Clinton, and former Republican Senate Whip Alan Simpson, released a few details on their proposal to avoid "the abrupt, mindless, and across-the-board spending cuts of the sequester" and yet make substantial inroads on cutting the nation's deficit.
Bowles and Simpson were co-chairs of the National Commission on Fiscal Responsibility and Reform, set up by President Obama in 2010. The plan they came up with in 2010 failed to get the necessary 14 votes from the National Commission's 18 members to send its final report to Congress for consideration. Bowles and Simpson currently are co-chairs of a project known as the "Moment of Truth." Its motto is "the era of deficit denial is over."
Bowles and Simpson call for an additional $2.4 trillion of deficit reduction over the next ten years. Roughly one quarter of those savings would come from health care reforms and another quarter from tax reform, with the remaining savings from a combination of mandatory spending cuts, stronger discretionary caps, changes such as adopting the chained CPI for inflation-indexed provisions, and lower interest payments. Chained CPI, instead of the measures currently used, would produce smaller cost-of-living increases in areas such as tax brackets and Social security benefits.
The tax reform package envisioned by Bowles and Simpson calls for enactment this year of "comprehensive, pro-growth tax reform that eliminates or scales back most tax expenditures" (i.e., tax breaks), with a portion of the savings from tax expenditures dedicated to deficit reduction and the additional savings used to reduce rates and simplify the tax Code.
The text of the "A Bipartisan Path Forward to Securing America's Future," by Erskine Bowles and Alan Simpson (February 2013). Checkpoint.
2/14/13 — Ways & Means announces 11 tax reform working groups.
On February 13, House Ways & Means Committee Ranking Member Sander Levin (D-MI) and Committee Chairman Dave Camp (R-MI) announced the formation of 11 separate tax reform working groups. The groups will be led by one Republican member and one Democratic member. Each of the 11 groups will review current law in its designated issue area and identify, research, and compile feedback from: (1) stakeholders, (2) academics and think tanks, (3) practitioners, (4) the general public and (5) colleagues in the House of Representatives.
The 11 working groups deal with:
- Charitable/Exempt Organizations;
- Debt, Equity and Capital;
- Education and Family Benefits;
- Financial Services;
- Income and Tax Distribution;
- Pensions etirement;
- Real Estate; and
- Small Business/Pass Throughs.
Once the work of those groups has been completed, the Joint Committee on Taxation will prepare a report for the Full Committee that describes the current law in each area and summarizes the information gathered. The report is due by Apr. 15, 2013.
2/12/13 — Senate bill would repeal looming sequester & close tax loopholes.
In light of the budget sequester scheduled to take effect on Mar. 1, Senator Sheldon Whitehouse (D-RI), with co-sponsors Carl Levin (D-MI), Tom Harkin (D-IA), and Bernie Sanders (I-VT), introduced two bills that would replace the across-the-board spending cuts with tax reform targeting higher-income Americans and large corporations.
One of the bills provides a short-term option that would replace the sequester for 2013 only. According to a fact sheet from Sen. Whitehouse's office, this bill would:
- require taxpayers earning over $2 million to pay at least a 30% effective federate rate, with a minimum tax phasing at a $1 million (the "Buffett rule");
- prevent high-income professionals from using S corporations to avoid payroll taxes;
- repeal the special depreciation rules for private jets;
- close various tax expenditures/loopholes for big oil and gas companies; and
- prohibit deferral for manufacturers that produce goods overseas for sale to U.S. customers.
The other bill provides a nine-year option that would replace the sequester for its entire duration. In addition to the above, it would also:
- provide international tax reform;
- limit the value of itemized tax deductions to 28% for families making over $250,000 and individuals making over $200,000;
- impose a 0.03% financial transactions tax on transfers of securities, with a credit to offset the new tax for transfers within tax-preferred savings accounts;
- end the "last in, first out" (LIFO) method of taxing inventories, as well as the "lower of cost or market" (LCM) method of inventory valuation; and
- prevent corporations from taking tax deductions for executive stock options at amounts greater than the expenses shown on their books.
The bills were both referred to the Senate Finance Committee on Feb. 11.
The following material can also be found on Checkpoint:
- the text of the "Job Preservation and Sequester Replacement Act of 2013" (i.e., the 1-year option); and
- the text of the "Job Preservation and Economic Certainty Act of 2013" (i.e., the 9-year option).