Bush
Tax Cuts Reduced President's Taxes by 14 Percent, Cheney's by
21 Percent, in 2006
A new paper from Citizens for Tax Justice shows that President George W. Bush and his wife Laura received a $31,037 income tax reduction for 2006 due to the President's tax cut program. Vice-president Dick Cheney and his wife Lynne, whose income was much higher, saved $110,932.
CTJ director Bob McIntyre notes, "At a time when our nation is running huge deficits and spending hundreds of billions of dollars and thousands of American lives on the Iraq war, you'd think such people would be asked to sacrifice a little rather than receiving such largesse."
Congress Considers Taking Money from Social Security to Extend Tax Breaks
House and Senate leaders are hoping to overcome some disagreements so that they can appoint conferees and finalize a budget plan before the middle of May. Democratic leaders in both the House and Senate initially proposed budget plans that would supposedly produce a budget surplus by 2012. The Senate plan was amended before it was passed, at the urging of Max Baucus (D-MT), to spend that alleged surplus on tax breaks and, to a much lesser degree, on expanded children's health care.
Members of the House passed their plan without any such amendment. Now the two budget proposals must be reconciled and the House must decide whether to accept the Baucus amendment in the final budget plan. Few have noted that the surplus they're talking about doesn't really exist. The "surplus" money that would be spent on tax cuts and so forth would really be taken from funds that are supposed to be used to shore up Social Security.
In 2012, the Social Security surplus, which is supposed to be separate from the rest of the federal budget, is projected to be $248 billion. The Senate budget plan, as initially proposed, would produce a surplus of $132 billion in 2012 — but that includes the Social Security surplus. So clearly the federal government is relying on the Social Security surplus to stay in the black. If the Baucus amendment is adopted in the final budget, that would essentially mean the Social Security surplus is being spent, mostly on tax cuts.
Of course the House and Senate budget plans are far more responsible than the President's since at least they revive the "pay-as-you-go" rule, or PAYGO, which helped us balance the budget in the 1990s. But the Baucus amendment, if adopted in the final budget, will be a pledge to waive PAYGO to spend the projected "surplus" that's supposedly coming in 2012.
Energy Buzz on the Hill
While
the 110th Congress has not yet passed any major tax legislation related
to energy, the level of interest among members is so intense that it seems
likely that some legislation will be sent to the President's desk. There are plenty of options. A paper from
Citizens for Tax Justice from December pointed out that at very least Congress could repeal
several tax subsidies that provide billions of dollars to oil and gas companies
at a time when energy prices are at record highs.
Legislation Passed in the House is Only the Beginning
Back in January the House passed the
Creating Long-Term Energy Alternatives for the Nation (CLEAN) Act (H.R.
6), which repealed two of the tax subsidies criticized by CTJ. The first is the domestic manufacturing deduction for gas and oil, and the second is the five-year amortization of geological and geophysical expenditures, or, in plain English, the faster write-off of the cost of exploring for oil and gas. Other provisions would close loopholes that have allowed companies drilling on public lands to avoid paying royalties. Revenues raised through these provisions would go into a fund used to increase the development of alternative energy sources. The House Ways and Means Subcommittee on Select Revenue Measures held hearings last week on further steps the House could take, and members spoke of several possible measures. One that came up frequently was
extending the Section 45 Renewable Electricity Production Credit, which is a credit for the production of energy from various alternative sources.
Different Direction Possible in the Senate
Things
move more slowly in the Senate, which has not acted on H.R. 6, but some
Senators have indicated that they might add provisions from that bill
to other energy legislation. Last week Senator Robert
Casey (D-PA) introduced a bill (S. 1238) with several energy tax provisions. An accounting method that reduces taxes for oil companies ("last in, first out" or LIFO) would be curtailed. The faster write-off for exploring for oil and gas would be repealed, as in the House bill, as would several loopholes allowing companies to escape paying royalties when they drill on public lands. The
bill would also repeal another tax break criticized by CTJ, the foreign
tax credit for energy companies that aren't really paying foreign taxes.
The revenue raised from these provisions would go towards research on
ethanol and biodiesel and towards alternative energy infrastructure.
A Windfall Profits Tax?
A
more controversial part of Casey's bill would raise a "windfall profits tax" on oil companies equal to 50 percent of the portion of sales prices exceeding $50 per barrel. Companies would be able to lower or eliminate the tax by making certain investments, including investments in alternative energy production. The revenue raised would be put in a fund to help low-income people purchase gasoline or pay for public transportation.
IRS Avoiding Audits of Offshore Tax Cheaters
A
new report from the General Accounting Office (GAO) explores the murky
waters of overseas tax avoidance by wealthy Americans, and finds that
while IRS audits of Americans using offshore tax havens often uncover large tax scams and a great deal of revenue, the government is hampered in its investigative work by rules requiring tax administrators to wrap up most audits in three years. The GAO report was presented in a Senate Finance Committee hearing yesterday, where a Treasury official did not say whether the Bush administration would consider changing the statute of limitations for these particular tax audits. The report
examines case studies showing that three years is simply not enough time
to effectively catch tax cheats who are running away as fast as they
can. The New York Times' Edmund Andrews has the story. The Talking Taxes weblog has commentary.
State
Tax Justice News
Michigan Proposal Would Replace Revenue Lost from Recent Repeal of Business Tax
Last year, Michigan repealed its longstanding Single Business Tax, without first putting in place another tax to replace it. The SBT, though unpopular, was responsible for 20% of Michigan's general fund revenue, so the rush is on to create a new tax to replace that revenue before the repeal takes effect on December 31st.
Support is building behind the House Democratic proposal, which would levy
a 6.95% tax on business profits, and a 0.488% tax on a company's net worth.
While the bill still has obstacles to clear before it can be enacted, it
has the support of Governor Jennifer Granholm and the bipartisan House Tax
Policy Committee, as well as the "Big Three" automakers. The repeal of the
SBT greatly damaged Michigan's ability to pay for needed services. This bill
is an important step towards repairing that damage.
Tax Reform in Massachusetts: Out of Commission?
Massachusetts policymakers this week announced the
formation of a fifteen-member commission to study the Commonwealth's corporate
tax system. Massachusetts' corporate
tax is certainly in need of an overhaul, as evidenced by its long-term erosion as a revenue
source and by the broad-ranging reforms Governor
Deval Patrick proposed earlier this year to address the issue.
Yet, in some respects, the formation of a commission may represent a step backwards. While a commission had been initially floated by the Governor in January, this particular panel was named only after the Massachusetts House of Representatives rejected the Governor's corporate tax reforms in its version of the FY 2008 budget. As Joan Vennochi of the Boston Globe has observed, the House's approach demonstrates that its leadership, in the person of Speaker Sal DiMasi, is "standing up for … unfairness" and standing "with the coalition of the greedy at the Greater Boston Chamber of Commerce and other business-backed groups." Indeed, the commission is heavy with members who hardly seem predisposed to support efforts to put an end to corporate tax avoidance. Upon being named to the commission, one member yawned, "Of all the priorities that the state faces, I would not put this near the top … The impetus for the commission really is a response to the governor's proposal rather than a crying need in itself." Another organization represented on the panel, the Associated Industries of Massachusetts (AIM), has boasted to its members that it has successfully "fought … efforts to establish combined reporting" - the central element of the Governor's tax reform proposals.
Property
Tax Gimmick Prevails During Last Hours of Indiana's Legislative
Session
During the final hours of Indiana's Legislative Session lawmakers attempted to provide some property tax relief, but missed out on an opportunity to truly reform the state's property tax. Legislators voted to
temporarily send property
tax rebate checks to homeowners (after they already paid their property
tax) worth $300 million to help offset increasing property taxes. Republicans are calling the legislation a political trick and in the end taxpayers are the real losers because inherent issues with Indiana's property tax are allowed to continue. For more, check out the Talking Taxes blog. Legislators also voted to allow counties to increase local income taxes in an attempt to allow locals to diversify
their own revenue sources.
Smokers are also impacted by this last minute lawmaking and will soon pay 44 cents more for a pack of cigarettes. The new revenues generated are going to be used for health care programs and are expected to lower the number of Hoosiers who smoke. Of course, the increase is quite controversial given the ongoing need to fund health care and the fact that cigarette tax revenue declines overtime. For more on cigarette taxes read ITEP's Policy Brief on the topic.
