School tax breaks get House support as Democrats object
Richard Rubin of Bloombergreported that the House of Representatives on Thursday voted to expand and simplify tax breaks for education as Republicans continue to pass piecemeal tax bills while Congress is deadlocked on broader changes to the US tax code.
The bill, called the Student and Family Tax Simplification Act, which passed in the GOP-controlled House by a 227-187 vote, would consolidate four education tax breaks into one credit and would remove a 2017 expiration date written into current law. It would cost the government $96.5 billion over a decade in forgone revenue.
The measure, however, probably won’t advance in the Senate, Rubin noted. The House plans to combine it with an expansion of the child tax credit that is scheduled for a vote on Friday.
President Obama opposes the education-credit legislation, though the administration didn’t threaten to veto it. The administration said in a statement that the president would veto the child tax credit bill because it doesn’t extend breaks for low-income families.
Under the education proposal, four separate breaks would be replaced by a single tax credit with a maximum value of $2,500, Rubin wrote.
Obama urges quick action on ‘inversions’
John D. McKinnon and Siobhan Hughes of the Wall Street Journalwrote on Thursday that President Obama threw himself into the politically charged effort to block US firms from reincorporating overseas for tax reasons, calling the relocations “wrong” and urging Congress to stop them through quick-fix legislation.
Speaking Thursday at Los Angeles Trade-Technical College, Obama accused the firms involved of “cherry-picking the rules” and damaging the country's finances and the economy.
“My attitude is I don't care if it's legal, it's wrong,” Obama said, according to the article. He and other Democrats increasingly have cast the issue in terms of economic patriotism, questioning the loyalty of firms that take advantage of American infrastructure and services, then take their profits elsewhere.
He also blamed Republicans, accusing them of “directly blocking policies that would help millions of Americans,” including his own ideas for overhauling the tax code, and instead focusing on preserving tax breaks for the wealthy and big businesses, McKinnon and Hughes wrote.
On a conference call with reporters Thursday, senior administration officials said the president continues to support a long-term rewrite of the tax code to make the United States a more attractive place to locate businesses, jobs, and investment, according to the article. But they said it is important to move quickly with separate anti-inversion legislation, in part to keep the US corporate tax base from eroding. Administration officials said they are particularly worried about what they termed “a bandwagon effect,” in which one firm in a sector inverts, raising pressure on other companies in the sector to invert as well.
Irish, Dutch, UK law firms in tax inversion beauty contest in US
Soyoung Kim and Olivia Oran of Reutersreported on Thursday that at least eight European law firms are pitching their services to major US law firms and Wall Street banks, hoping that US companies considering an inversion choose Ireland, Britain, or the Netherlands for their new tax domicile, according to people with knowledge of the matter.
The move has recently been particularly appealing to American companies given the US federal corporate tax rate of 35 percent is well above those prevailing in countries such as Britain, where the rate is set to drop to 20 percent next year, Kim and Oran wrote. Ireland and Britain have also become popular destinations because they allow companies to shift profits into a tax haven and then back to shareholders as dividends without paying any tax – a move that is not possible under the US tax code.
The European law firms are talking up the relative merits of the corporate laws and tax codes in their home countries over rival jurisdictions, according to the article.
The law firms include at least three from Ireland: Arthur Cox, A&L Goodbody, and Matheson; three from the Netherlands – De Brauw Blackstone Westbroek, Stibbe, and NautaDutilh; plus the UK-based Slaughter and May, and Macfarlanes.
IRS prepping for Obamacare employer mandate in 2015
The Obama administration signaled on Thursday it’s not backing down from the controversial health law employer mandate that has been delayed twice and is the centerpiece of the House’s lawsuit against the president, Jennifer Haberkorn and Kelsey Snell of Politicowrote.
The IRS posted drafts of the forms that employers will have to fill out to comply with the Obamacare requirement that employers provide health insurance to workers.
Some business groups said the information was still too tentative and too incomplete to let them prepare for new obligations under the health law. “Our immense frustrations with the IRS continue,” Christine Pollack, vice president of government affairs at the Retail Industry Leaders Association, said in a statement, according to the article.
Under the mandate, companies with 50 to 99 employees will have another year – until 2016 – to start the coverage. Companies with 100 or more employees do have to comply next year, although they have two years to phase up so that they are covering 95 percent of their workers. Smaller businesses are exempt.
The draft forms the IRS released on Thursday were more streamlined than the agency had earlier indicated, Haberkorn and Snell wrote. Three categories of information have been dropped. Employers can do a one-time checkoff for people covered year round, instead of filling out reports for everyone every month. And self-insured employers – those that assume the whole cost of their coverage – will fill out one form, not two.
Statement on health coverage information reporting by employers
And here’s a statement from the IRS on the draft forms: “On July 24, 2014, the IRS released draft forms that employers will use to report on health coverage that they offer to their employees. In accordance with the IRS’s normal process, these draft forms are being provided to help stakeholders, including employers, tax professionals, and software providers, prepare for these new reporting provisions and to invite comments from them. We anticipate that draft instructions relating to the forms will be posted to IRS.gov in August. Both the forms and instructions will be finalized later this year.”
Paul Ryan’s proposal hints at change in tone on poverty
On Wednesday at the American Enterprise Institute, Representative Paul Ryan (R-WI) unveiled his new anti-poverty plan. According to a blog by New York Times senior economic correspondent Neil Irwin on Thursday, Ryan proposed expanding the Earned Income Tax Credit (EITC) for people without children.
In his plan, Ryan proposed doubling the size of the tax credit for childless low-income workers, from $503 to $1,005, and to have it available for people at slightly higher incomes; it would phase out completely for people who make $18,070 a year, not $14,790 as in the current law.
Irwin wrote that it goes without saying, for somebody making around $15,000 a year, an extra $500 in hand from the IRS could go a long way.
“But beyond the direct financial benefits to the working poor, focusing on the EITC would help in a number of more subtle ways, Mr. Ryan argues,” Irwin wrote. “It might encourage more Americans with low levels of education and income to enter the labor market. You can’t receive the tax credit without some income, so it essentially makes taking a low-wage job more attractive than it would be otherwise. And it achieves that, Mr. Ryan argues, without the downsides of a minimum-wage increase, which has a potential side effect of making employers cut back on hiring.”
Irwin added that if Ryan were to succeed in expanding the EITC as he proposes, it would lead to more Americans paying no income tax.
“It is not a revolutionary policy, and would not by itself radically improve the lives of the working poor,” he wrote. “But it is at least something concrete that could put more money in the pockets of low-income, working Americans, even if some of Mr. Ryan’s ideological companions don’t like it.”
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