Congressional Democrats are cracking down on multinational corporations(Read article summary)
This breakdown keeps you up-to-date on international deadlines and tax crackdowns.
The highway funding deadline could stretch well past October 29. The Transportation Department says current highway funding could last into 2016. That could give Congress an extra six months to finalize a long-term infrastructure funding plan—but also remove the pressure for lawmakers to act any time soon. Senate Finance Committee Chair Orrin Hatch and Majority Leader Mitch McConnell oppose using corporate tax reform to pay for highway projects. House GOP tax writers, however, continue their work on international tax reform to pay for road improvements. As top House Ways & Mean Democrat Sander Levin told The Hill, “Unfortunately the highway bill remains very much unresolved… Very much unresolved.”
As for cracking down on multinational corporations’ tax practices: Congressional Democrats say the time has come. In a letter, seven members called on Treasury Secretary Jack Lew to publicly list multinationals that have moved their mailboxes abroad to reduce their tax bills. They also want Treasury to bar inverted companies from getting federal contracts, and demand executive action against foreign companies that load tax-deductible debt onto US subsidiaries—a practice known as earnings stripping.
The Senate Finance Committee has a bipartisan bill to fight tax fraud, among other things. The Senate Finance Committee holds an open executive session Wednesday on the measure. The bill would raise about $286 million over ten years. It would require the IRS to inform taxpayers that their identity has been has been stolen and to ease some filing requirement if it has. It would require more—and more secure—electronic filing, give the agency new authority to regulate tax preparers (power that it lost in a recent court case), and increase penalties for identity theft. The measure would also make it possible for taxpayers to avoid having to file amended returns for small mistakes.
The European Union moves ahead on new tax rules. EU Economics Commissioner Pierre Moscovici hopes members will solidify an agreement on the automatic exchange of information on European countries tax rulings by October 6. And so far, eleven European Union countries are willing to introduce a financial transactions tax. But a commission proposal for a Common Consolidated Corporate Tax Base could face opposition from some member nations and business groups. They see it as an attack on competition and national autonomy.
Childcare tax subsidies aren’t helping many poor parents, but they are helping wealthier families. TPC’s Elaine Maag reviews new Treasury data on the Child and Dependent Care Tax Credit and the employer-provided childcare exclusion. The tax subsidies will deliver $5.3 billion in benefits to 6.9 million families in 2015. But only 20 percent will have an adjusted gross income under $40,000, and they’ll only receive 15 percent of the subsidies. Meanwhile, 40 percent of families tapping the subsidies will have an adjusted gross income of at least $100,000. They’ll receive 52 percent of the benefits.
Two new TPC papers shine a light on state finances. “The Growth Mirage: State Tax Cuts Do Not Automatically Lead to Economic Growth,” by William G. Gale, Aaron Krupkin, and Kim Rueben, shows how cuts in top state income tax rates could instead force punishing spending cuts, as revenues fall and states confront borrowing constraints. They also show how recent state cuts have done little to drive economic growth. “Governing with Tight Budgets: Long Term Trends in State Finances,” by Norton Francis and Frank Sammartino, examines the history and outlook of state revenues and expenditures. It gives special attention to the effects of the last recession. Both papers will be available at Thursday’s TPC and State and Local Finance Initiative State of the States event at the Urban Institute.
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