Tax Archives - Page 10 of 16 - Progressive Policy Institute

National Journal: An Old Idea, Tolling Federal Highways

Posted on March 18, 2014 by The Progressive Policy Institute

Fawn Johnson, writing for National Journal, quoted former Pennsylvania Governor Ed Rendell on the need for further investment in national infrastructure. Johnson was the moderator for PPI’s Investing in Jobs and Infrastructure: Twin Keys for Metro Growth event last week and her quote comes from Rendells opening remarks at that event. In explaining the need for infrastructure invesement, Rendell said:

The argument against tolling on federal highways has been, ‘We paid for it once.’ OK, we paid for it once. …It’s like buying the $45,000 car of your dreams and for the next four or five years not putting a penny into it. It’s silly.

To read the rest of the article, visit National Journal’s website here.

Encouraging Investment in America

Posted on January 24, 2014September 18, 2024 by The Progressive Policy Institute

In an ideal world, Congress would take up tax reform comprehensively, as part of a high-growth strategy. In fact, PPI is currently working on a tax framework for progressives, for how to modernize the entire tax system for individuals and corporations.

Unfortunately, the reality is that wholesale reform is not currently a politically viable option. Therefore, we must consider discrete pieces of tax legislation, with the idea that as long as we are promoting innovation and growth, small measures are better than nothing. One such tax measure currently up for Congressional debate is an extension of the so-called “bonus depreciation” deduction, first enacted in 2008. The intention of the deduction is to encourage U.S. companies to invest domestically, by allowing them to deduct 50 percent of their capital expenditure costs upfront instead of over time. In other words, it makes it more financially attractive for U.S. companies to invest in America – be it to increase factory production, purchase new transportation equipment, or deploy broadband networks.

PPI has done extensive research on the importance of encouraging domestic investment as part of a high-growth strategy. Our annual “U.S. Investment Heroes: Companies Betting on America’s Future” report highlights the top 25 U.S. companies investing in America’s productive capacity, through their domestic investment in plants, properties, and equipment. In our 2013 report, we found that “several companies on our list highlighted this measure [bonus depreciation deduction] in their discussion of 2012 capital investments” as a key reason for their strong U.S. investment.

Investment is the building block for job creation and gains in wages and standard of living. That means we must do everything we can to promote economic growth through investment, including the extension of the bonus depreciation deduction.

Tax Reform – Make It Simple, Use Common Sense

Posted on August 22, 2013 by The Progressive Policy Institute

Our tax code is broken. It’s a simple fact, yet year after year our government leaders fail to address it. Meanwhile, the consequences of the overly complex and poorly designed system are felt by middle-class families and entrepreneurs alike. They benefit little from the existing array of incentives and loopholes, which are mainly targeted to special interests and the wealthy.

This week, House Ways and Means Chairman Dave Camp, R-Mich., and Senate Finance Committee Chairman Max Baucus, D-Mont., are visiting San Francisco and Santa Clara to hear directly from the California high-tech community about the inefficiencies of the system, and the potential effects of several of the proposed reforms.

One thing everyone agrees with is the need for simplification, especially simplifying everyday provisions that would make tax reform real for most taxpayers. Not only would a simpler code reduce red tape, it would also create a better economic environment for businesses of all sizes, raise revenues for deficit reduction and incentivize urgent investments in our nation’s future.

Simplification, however, should never abandon the principle of progressive taxation. One example of a misguided reform is what’s called the “flat tax.” It sounds simple, but in order to keep tax revenue stable the rate would be considerably higher than the 15 percent rate most taxpayers pay today. That means the majority of Americans would pay higher taxes in the name of simplification.

Also in the mix are political gimmicks such as “return-free filing,” in which the IRS would calculate your taxes for you. Such a system would only hide the inefficiencies and dysfunction of the system from many Americans, reducing support for desperately needed reform. In addition, there is an inherent conflict of interest in having the tax man do your taxes: If there’s any question about how to apply the tax code, the IRS is likely to choose the interpretation that brings in more taxes.

If Congress and the Obama administration are serious about simplifying the tax code, any plan must:

Promote economic efficiency and growth to help speed economic recovery, bring down unemployment and shrink the national debt.

Reduce the number of tax incentives to rebuild the nation’s revenue base. Each tax loophole is fiercely guarded by the special interests whom it benefits. Closing tax breaks en masse will not be easy, but it is essential both to lower tax rates for middle-class families today and to whittle down public debts that impose harmful tax burdens on our children tomorrow.

Maintain progressivity. Most tax incentives today make it less progressive, not more. Eliminating many tax incentives and using the savings for lower rates can, in conjunction with maintaining (and maybe even expanding) the Earned Income Tax Credit, maintain or improve progressivity in the tax code.

Reduce errors and avoidance. Tax law complexity often leads to perverse results. There are 14 different incentives for college, 11 types of IRAS, and three major incentives to help defray the cost of raising children. Common-sense simplification would make tax reform meaningful for average working American families.

Better align federal and state tax rules. Simplification will never be maximized unless federal and state governments can work together to reduce paperwork, streamline the filing process and create less opportunity for gaming the tax system.

There is a moment of opportunity in this Congress and this administration to do great good in making our tax system more rational, understandable and effective. We need to seize it.

Find the article at San Francisco Chronicle.

Tax Reform: Make It Simple

Posted on August 7, 2013 by The Progressive Policy Institute

Our tax code is broken. It’s a simple fact that nearly everyone agrees on, yet year after year our government leaders fail to address it. Meanwhile, the consequences of the overly complex and poorly designed system are felt by middle-class families and entrepreneurs. They benefit little from the existing array of incentives and loopholes, which are mainly targeted to special interests and the wealthy.

However, the hard work of tax reform is now underway. House Ways & Means Chairman Dave Camp (R-Mich.) and Senate Finance Committee Chairman Max Baucus (D-Mont.) are barnstorming the country to hear directly from Americans – learning first-hand about the inefficiencies of the current system, and how taxpayers will be impacted by an array of proposed reforms.

Ultimately, the most likely feedback they will hear is the need for simplification of a system that has simply grown too complex for most Americans to understand, with damaging consequences to the nation’s economy. The tax code’s byzantine complexity costs business and individuals hundreds of billions in compliance. The IRS’s National Taxpayer Advocate estimated that individual and business taxpayers spend 6.1 billion hours to complete filings. This is money and time wasted.

Continue reading at The Hill’s Congress Blog.

Simplify, Simplify, Simplify: The First Principle of Tax Reform

Posted on July 29, 2013 by The Progressive Policy Institute

Overhauling the federal tax system is one of the most important steps U.S. political leaders can take to promote economic growth and fairness. It is also that rarest of issues in today’s Washington—one that commands broad support on both sides of the political aisle. For these reasons, the Progressive Policy Institute urges the White House and Congress to give top priority to fixing our broken tax system over the next 12 months.

Everyone knows our tax code is too complicated, too inefficient and too riddled with preferences for special interests. Americans deserve better. PPI believes we need a federal tax system that is simpler and more progressive; that steers investment into productive, job-creating activity; that enables U.S. workers and companies to compete on an even footing in world markets; and, that serves the most basic purpose of any tax system—raising enough revenue to finance the government while ensuring fairness to taxpayers.

Comprehensive tax reform obviously poses daunting political obstacles. Nevertheless, it’s a goal Democrats and Republicans share. The Senate Finance Committee has published 10 papers on various options while the House Ways and Means Committee has organized 11 subgroups to consider different areas of the tax law. Over 1000 comments have been filed. With Sen. Max Baucus retiring this year, and Rep. Dave Camp term-limited as chair of the House Ways and Means Committee, the two most important players on tax policy are strongly motivated to get something done.

This paper will not offer a sweeping blueprint for reform. Instead it focuses on one crucial aspect of reform: Simplification. PPI has long argued that our tax system is too complex and ill-fitted to the needs of middle-class families and small entrepreneurs. They benefit little from the existing array of incentives and loopholes, which are mainly targeted on special interests or people with a level of income and wealth they can only dream about. The code’s byzantine complexity also costs business and individuals hundreds of billions in compliance. In a recently released annual report to Congress, the IRS’s National Taxpayer Advocate, Nina Olson, estimated that individual and business taxpayers spent 6.1 billion hours to complete filings. The bloated federal code contains almost four million words and on average has more than one new provision added to it daily.

The code is so complex that nearly 60 percent of taxpayers hire paid preparers and another 30 percent rely on commercial software to prepare their returns.

In fact, according to PricewaterhouseCoopers, only four nations have more pages of “primary tax legislation” than does the United States. And the World Bank’s www.doingbusiness.org ranks 61 nations as having tax systems friendlier to business than does the United States, while the World Economic Forum puts the U.S. tax system in 107th place in a ranking of the efficiency of 117 national tax regimes.

Congress perennially fiddles with the code, and it takes a full-time army of lobbyists to keep track of all the changes: the Treasury Department reports that there have been more than 14,400 revisions since 1986. It is imperative, then, that any comprehensive overhaul of the federal tax system not make the code even bigger and more complicated. Tax reform without dramatic simplification should not be considered genuine reform.

Download the policy brief.

Senate Finance Committee Will Adopt Approach of “Zero Plan”

Posted on June 28, 2013September 18, 2024 by The Progressive Policy Institute

According to an article in Politico, Senate Finance Committee Chairman Max Baucus (D-MT) and Ranking Member Orrin Hatch (R-UT) are releasing a letter to their colleagues to inform them that the Committee will adopt the approach of the Simpson-Bowles Commission’s “Zero Plan”. Under the “Zero Plan,” lawmakers eliminate all individual and corporate tax expenditures and reduce rates accordingly to meet a revenue target. Then, lawmakers must justify which tax preferences, if any, to add back in, keeping in mind that tax rates would have to rise in order to offset any costs. Thus, the Zero Plan provides a “clean slate” from which the creation of a new U.S. tax code begins.

In a 2011 PPI paper entitled “Less is More: The Modified Zero Plan for Tax Reform”, Marc Goldwein and I , former advisers to the Simpson-Bowles Commission, laid out how a Zero Plan approach can simplify the tax code, reduce marginal tax rates, maintain progressivity, and reduce the deficit.

While the Zero Plan has something for everyone to dislike, it also is the only tax reform approach that can appeal to Republicans – who like the rate cuts and the reduced number of brackets –, and Democrats – who want to increase revenues and close loopholes that help wealthier taxpayers game the system. Senators Baucus and Hatch should be commended for recognizing this and using the Zero Plan as the basis for broad tax reform legislation.

Don’t blame Apple; blame the tax code

Posted on May 23, 2013 by The Progressive Policy Institute

The Capitol Hill hearing on the IRS scandal this week upstaged another Senate investigation into how U.S. technology companies shelter earnings from domestic taxes. That was just as well, since the real culprit here isn’t tax-dodging corporations; it’s America’s absurd corporate tax code.

The Senate Permanent Subcommittee on Investigations had hoped to make a media splash by landing a big fish rarely seen in Washington: Apple CEO Tim Cook. It released a 40-page report on the eve of the hearing, excoriating Apple’s use of “gimmicks” to avoid paying U.S. taxes on $44 billion in offshore income between 2009 and 2012.

Chaired by Sen. Carl Levin, D-Michigan, the subcommittee has been investigating the tax avoidance strategies of major U.S. tech firms. Last year, Microsoft and Hewlett-Packard were in the dock; Tuesday, it was Apple’s turn.

Continue reading at CNN.com.

Return-free filing proposal is not tax reform

Posted on April 11, 2013 by The Progressive Policy Institute

It’s that time of year again – tax time – when Americans are reminded of everything that’s wrong with the federal tax system. It is fiendishly complicated. It is riddled with regressive breaks and loopholes and doesn’t actually raise enough revenue to finance the government. It distorts economic decisions and puts U.S. firms at a disadvantage against foreign competitors who pay lower rates.

What it needs is a comprehensive overhaul. Radically streamlining the tax code is the right way to make our government more user-friendly and to reduce the time and money citizens spend on filing their taxes

Yet every April, like some kind of hardy perennial, a supposed panacea crops up: A return-free filing system. Under this proposal, the same government responsible for creating the byzantine mess that is our tax code will undertake to calculate your taxes for you. No fuss, no muss: you just sit back and let the bureaucrats do all the heavy lifting.

However beguiling that might sound to some, there are at least three big problems with this idea. First, there’s the inherent conflict of interest in having the taxman do your taxes. Second, government has already implemented free solutions for tax return preparation – IRS Free File – that relies on the private sector without costing taxpayers a dime. Third and most important, return-free filing is a procedural trick that promises to reduce the burden of filing taxes without actually doing the hard, but essential work of tax reform. Indeed, return-free can actually hide tax dysfunctionality and inefficiency by making it invisible to citizens, which would work at cross-purposes to the long-term improvements and reform of the tax system that is long overdue.

Continue reading at The Hill.

Anatomy of a Special Tax Break and The Case for Broad Corporate Tax Reform

Posted on March 21, 2013 by The Progressive Policy Institute

Washington policymakers turn to broad tax reform perhaps once in a generation, and now may be such a time. Today’s focus is on the corporate code, the source of most of the complexity and many of the economic problems associated with the U.S. tax system. There are many views about what aspects of the corporate code require reform and how to do it. Nevertheless, a consensus has formed that the reforms should simplify the corporate code by phasing out many special preferences and using some or all of the revenues to lower the
corporate tax rate.

This consensus reflects a growing recognition by policymakers and business people of how certain features of the corporate tax code impose burdens on American competitiveness. The feature noted most often is our 35 percent marginal tax rate on corporate profits, the highest of any developed country. The impact of this high marginal rate on competitiveness is exacerbated by the worldwide character of the U.S. tax system: We apply that rate to the worldwide profits of U.S.- based companies, while all but five other nations have territorial tax systems that tax businesses only on the profits earned in their domestic markets. Finally, over many decades, policymakers have created scores of special tax deductions, tax credits and tax exemptions for designated business activities, products or industries. These provisions not only entail costly administrative and compliance burdens for the companies that use them. They also interfere with our markets’ ability to allocate capital and other economic resources to their most productive uses, leaving the overall economy less efficient and productive. Phasing out special tax preferences and using all or most of the additional revenues to lower the corporate tax rate is the most reasonable response to these issues.

Here, we offer a case study of these dynamics using one of the larger and most recently-enacted special tax preferences, Section 199 of the corporate tax code. Since 2005, this provision has provided a special deduction for some of the profits arising from certain designated “domestic production activities.” As we will see, the provision, originally designed for domestic manufacturing, now covers an estimated one-third of corporate economic activities. For example, food processing qualifies, but not retail food businesses—unless the food establishment roasts beans used to brew coffee. That exception allowed Starbucks, for example, to cut its effective tax rate by more than 2 percentage points in 2009. At the same time, the complex terms of Section 199 limit its value to most industries and companies. So, while the provision lowers the effective tax rate of those firms that can claim it – and no one faults a company for taking advantage of a badly-crafted policy – it also induces them to channel their investment and other business decisions in the particular ways required to claim the deduction. As a result, Section 199 distorts the allocation of capital and other critical resources, including entrepreneurial activity, both within and across industries, and for the economy as a whole.

Download the policy memo.

Progressive Policy Institute to Host Media Teleconference Featuring Robert Shapiro to Discuss the Case for Broad Corporate Tax Reform

Posted on March 15, 2013 by The Progressive Policy Institute

FOR IMMEDIATE RELEASE

March 15, 2013

PRESS CONTACT: Steven Chlapecka – schlapecka@ppionline.org T: 202.525.3931

Progressive Policy Institute to Host Media Teleconference Featuring Robert Shapiro to Discuss the Case for Broad Corporate Tax Reform

Teleconference to take place in Advance of Release of Shapiro’s Newest Policy Memo: Anatomy of a Special Tax Break and The Case for Broad Corporate Tax Reform

Washington, D.C. – On Wednesday, March 20, 2013 at 11 a.m. EST, join the Progressive Policy Institute and economist Robert Shapiro, chairman of Sonecon LLC and former Under Secretary of Commerce for Economic Affairs. Shapiro will outline findings from his forthcoming PPI policy memo, “Anatomy of a Special Tax Break and The Case for Broad Corporate Tax Reform”. The memo dissects Section 199 as a case study in the way special tax breaks distort economic decisions, add undue complexity and force rates up by leaking revenue.

WHO: Dr. Robert Shapiro, Chairman, Sonecon LLC; Senior Policy Fellow, Georgetown University McDonough School of Business

WHEN: 11 a.m. EST, Wednesday, March 20

Media wishing to participate or interested in an advance copy of the report, contact Steven Chlapecka at 202.525.3931 or schlapecka@ppionline.org.

RSVP to: schlapecka@ppionline.org to receive dial-in information.

– END –

State of the Union 2013: Right Direction, Wrong Speed

Posted on February 14, 2013September 18, 2024 by The Progressive Policy Institute

President Obama got off on the right foot in last night’s State of the Union address by putting America’s economic revival at the center of his second-term agenda. That was reassuring, since his second inaugural strangely neglected this crucial subject.

There’s no more urgent national challenge than building new economic foundations for shared prosperity. More than anything else, what happens to the U.S. economy over the next four years will decisively shape history’s judgment of Barack Obama’s presidency.

Last night, the president certainly got the goal right. But it’s fair to ask whether the modest means he proposed are adequate to the task.

On the plus side, the president’s endorsement of corporate tax reform was welcome. Eliminating tax loopholes and subsidies will make for better investment decisions, and bringing down the corporate rate will make doing business in the United States more attractive. We also need to overhaul a worldwide tax system that encourages companies to offshore activities and leaves profits stranded abroad.

Continue reading “State of the Union 2013: Right Direction, Wrong Speed” →

What Americans Didn’t Get from the Fiscal Cliff Tax Deal

Posted on January 4, 2013September 18, 2024 by The Progressive Policy Institute

By all accounts, the recently passed tax deal averting the “fiscal cliff” was a big win for the American people.

Among other things, the agreement preserves the full package of Bush-era tax cuts for the middle class and raises rates only on the wealthiest Americans. It also permanently patches the Alternative Minimum Tax so it wouldn’t affect middle-class households.

Moreover, it extends for five more years an expansion of three major tax benefits for lower-income households: the earned income tax credit for low-income wage-earners, the child tax credit and the “American Opportunity Tax Credit,” aimed at helping families defray college costs.

But Americans may end up losing more than they’ve gained if this agreement is all that passes as “tax reform” this Congress. If so, Americans will have been robbed of an opportunity to rebuild a tax code that’s truly in their favor.

This means a tax code that’s not just less complex but whose benefits, as well as its burdens, are distributed more fairly. In particular, middle-and lower-income Americans deserve far more help than they’re getting to save and invest in their economic security. Continue reading “What Americans Didn’t Get from the Fiscal Cliff Tax Deal” →

Fiscal Cliff Deal Could Show the Way Toward a Grand Bargain

Posted on January 3, 2013 by The Progressive Policy Institute

Writing for the Daily Beast, Will Marshall argues that Obama is in a strong position to challenge the new Congress to pass a fiscal grand bargain early in 2013:

The fiscal cliff deal finally passed by the House Tuesday night isn’t likely to lift the public’s rock-bottom esteem for the nation’s elected leaders. It took too long and delivered too little, and the spectacle of a Congress that can’t conduct the nation’s business except under extreme duress from self-imposed deadlines and penalties is infuriating.

Still the outcome wasn’t terrible—and it shows that a grand fiscal bargain is still in reach, as our deeply polarized political class seems to be relearning the art of compromise.

The deal is best understood as ratifying the 2012 election result. President Obama campaigned and won on explicit promises to raise tax rates on the rich. That mandate, plus the automatic expiration of the Bush tax cuts, left Republicans with no choice but to negotiate with the White House over narrowing the scope of the coming tax hike.

Read the entire piece at the Daily Beast.

How a Wireless Tax Bill Can Spread Holiday Cheer

Posted on December 22, 2012September 18, 2024 by The Progressive Policy Institute

Most of us would be lost without our cell phones, tablets, and other wireless devices. We rely on them so much it’s hard to imagine how we could function without 24 hour access to Twitter, Facebook, and email. That means we are willing to pay up each month – for the service connection charge, one-size-fits-all data access plan, and all the taxes and fees that go with it.

And all of the wireless taxes and fees that go with it certainly add up – to about 17.2 percent of our monthly bill according to a new report by Scott Mackey. That’s up from 16.3 percent in 2010, a 5.5 percent increase in just two years. Not a very festive thought during the holiday season.

But there is one tax bill currently in Congress that may spread some holiday cheer just yet. The Wireless Tax Fairness Act, if passed, would provide a five-year reprieve on any tax increases for our wireless service. That means no new state or local government wireless taxes through 2018.

A five-year reprieve on wireless taxes would of let us keep more of our money to spend on other things, like an increase in income and payroll taxes after the fiscal cliff. Or on the next iPhone, since it will be obsolete by the time our eligible discount-for-contract-renewal-once-every-two-years comes up (and who wants to wait that long?). Continue reading “How a Wireless Tax Bill Can Spread Holiday Cheer” →

Why Obama Dropped His $250,000 Tax Target

Posted on December 19, 2012 by The Progressive Policy Institute

Writing for The Wall Street Journal, PPI President Will Marshall explains why Obama should show some flexibility now and set the stage for a more comprehensive tax overhaul in 2013:

Barack Obama is under pressure from his left flank to break House Republicans on the wheel of higher marginal tax rates, but he is showing flexibility in negotiations with Speaker John Boehner. This is wise. By settling for something less than unconditional surrender, the president could get a deal that will avoid plunging the U.S. economy into austerity and set the stage for a historic tax overhaul next year.

So how do we get there from here? The first step is to resolve the dispute that has snagged the fiscal-cliff talks—how to raise taxes on the rich. To the horror of tea party purists, Mr. Boehner has acceded to higher tax rates on millionaires. Obama countered on Monday by proposing higher rates on households making $400,000 or more, and he lowered his overall revenue goal to $1.2 trillion from $1.6 trillion.

The president has the edge here. If Republicans refuse to accept higher rates for any wealthy taxpayers, there will be no deal. Then tax rates will rise for all Americans, and Republicans will be blamed for driving the economy off the cliff.

Read the piece at The Wall Street Journal.