The drive for tax reform: Hitting the brakes or the gas?(Read article summary)
As the Senate's finance committee chairman, Ron Wyden, is expected to introduce a bill that would reinstate expired tax breaks, Illinois and Pennsylvania are raising some local taxes of their own.
Tax reform is certainly the road less traveled, but is it even possible for Congress to take the journey? On Monday, the Tax Policy Center will host a panel on the politics of tax reform. Speakers will be Karlyn Bowman of the American Enterprise Institute, Chris Faricy of the Maxwell School at Syracuse University, and Bill Galston of the Brookings Institution. Theyâ€™ll try to answer the musical question: Can Congress really pass a reform that has no natural constituency, is extraordinarily complicated, and requires exceeding amounts of compromise in a distrustful environment? Fasten your seat belts.
Wyden will move next week to restore the expired tax breaks. Stay tuned on Monday: Senate Finance Committee chair Ron WydenÂ is expected to introduce a bill to restore until 2015 most of the 50+ tax breaks that expired last December 31. Without offsets, theyâ€™d add $50 billion to the deficit. This approach runs counter to House Ways & Means chair Dave Campâ€™sÂ approach.
A Governor wants to solidify some tax hikes. Democratic Governor Pat Quinn of Illinois wouldÂ make permanent corporate and individual income tax increases that were to start expiring in 2015, decrease reliance on the property tax, and increase the state Earned Income Credit. Without a net tax hike, argues Quinn, the state would have toÂ dramatically cut spending on education and social services. It could well happen, if Kansasâ€™ experience is any guide. Not surprisingly, many Illinois Republican lawmakers will oppose Quinnâ€™s plan.
A state is set to raise its gas tax. Pennsylvania plans to raise fees and its gas tax to fund transportation and infrastructure. The state will â€śgradually remove the limit on the wholesale tax on gasoline and eliminate the 12-cents-a-gallon retail gas tax.â€ť This could effectively â€śboost the state gas tax from 31.2 cents a gallon in 2013 to 59.2 cents by 2018â€ťâ€”a tax not touched since 1997. Governor Tom Corbett (R) signed the legislation with fanfare last November after urging compromise to craft it.
Would Congress merge into that kind of tax traffic? Meanwhile, the Department of Transportationâ€™s Highway Trust Fund, supported by the federal gas tax, is beginning to run on empty, according to the CBO. At 18.4 cents per gallon, the federal gas tax has not been raisedÂ since 1993. Congress will need to consider it, or alternative sources of revenue, sooner rather than later.
In digital traffic, a Bitcoin spender might owe capital gains tax. TPCâ€™s Steve Rosenthal examines a complicated and challenging result of IRS guidance on how virtual currency should be taxed. Steve writes, â€śEach time a consumer spends Bitcoin, heâ€™ll have to figure the cost basis of his virtual currency, subtract it from the value of his purchase, and pay tax if there is a gain. But, if thereâ€™s a loss, it may not be deductible.â€ť Is a Bitcoin loss a personal one, or is it a business or investment loss?
Three more weekends till Tax Day. The Tax Institute at H&R Block released survey results on consumer tax fraud this week. The IRS could take heart in one key finding: â€śA large majority [of taxpayers] are willing to take a variety of actions to prevent fraud, whether answering more specific questions in their IRS filings, waiting a little longer for a refund or requiring consistent questions for all filers.â€ť
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