Budget & Taxes

Time to Do Away With the Tax on Expats

“Only two nations in the world tax their citizens who live abroad. One of them is a small and vicious African dictatorship. The other is the world’s most powerful democracy. Does the U.S. really want to share this distinction with Eritrea?” asks Bloomberg View.

“It’s true that most expatriate Americans end up with no U.S. taxes to pay on their worldwide income, because they can exclude some income and offset host country taxes against what remains. Yet all must file and many do pay, because anomalies are rife. Apart from this, the principle is simply wrong. ”

“The taxation of Americans abroad was designed to deter draft dodgers who fled the country to avoid fighting the Civil War more than 150 years ago. From the beginning, in other words, bad intentions were assumed. Yet hardly any of the estimated 7.6 million U.S. expatriates today are trying to evade taxes — indeed, most pay more than they would at home.”

GOP Presidential Candidates Split on Tax Reform

Al Hunt looks at the interesting debate within the Republican party over the proper way to cut taxes.

“The Republican presidential candidate Marco Rubio has proposed a huge tax cut… The proposal, offered with the Florida senator’s colleague, Mike Lee of Utah, reflects the thinking of the party’s ‘reform conservatives,’ who believe Republican tax orthodoxy has focused too much on marginal cuts in the top rate and too little on struggling middle-class families.”

“Several other Republican presidential candidates, including Senators Rand Paul of Kentucky and Ted Cruz of Texas, probably will…embrace a so-called flat tax, with perhaps only a single rate and fewer deductions and credits.”

“In the middle will be Jeb Bush, whose tax cut plans — reductions are axiomatic for most Republican aspirants — are unclear. One of his chief advisers is Glenn Hubbard, who served as chairman of the Council of Economic Advisers in the George W. Bush administration, which lowered top rates sharply and enacted more modest credits.”

GOP Hopefuls Offer Varied Tax Plans

Stan Veuger looks at the tax reform plans offered by the Republican presidential candidates who have announced so far: Sens. Ted Cruz (R-TX), Rand Paul (R-KY), and Marco Rubio (R-FL).

“Cruz has supported a nationwide 23 percent sales tax to replace the income tax in the past, but more recently he has also expressed support for a flat income tax that would presumably feature a similar rate (at 25 percent, it would be close to revenue-neutral).”

“Paul, who’s still a libertarian, has been a bit more specific on the tax policy front. Yes, he also wants to abolish the IRS, and the entire tax code while he’s at it, but he’s also announced what he wants instead: A flat tax, with a 17 percent rate for both individuals and firms, and no death or capital taxation.”

“The most specific by far of the three senators has been Rubio, who has been trying to adopt the role of the policy wonk in this field of presidential contenders. His plan is similar in some ways to Paul’s (it ends capital taxation at the individual level, eliminates most deductions and credits, for example, and reduces the corporate tax rate), but it is much more detailed and doesn’t lose nearly as much revenue. It lowers rates less drastically and even increases rates on income from work between $75,000 and $410,000 for single filers, and between $150,000 and $410,000 for and married couples.”

Lawmakers Push to Index Gas Tax to Inflation

“A bipartisan group of House members has filed legislation to hike the federal gas tax and index it to inflation to pay for a new transportation bill,” The Hill reports.

“The measure would increase the gas tax, which has been 18.4 cents per gallon since 1993, to index it to inflation in January 2016 and set it to rise again in three years unless Congress comes up with a new way to pay for federal transportation projects.”

“If the gas tax has been indexed to inflation in 1993, it would be about 30 cents-per-gallon now. Transportation advocates have pushed to permanently increase the gas tax to that level to provide a recurring source of funding for future rounds of infrastructure spending instead of another of a one-time cash infusion. But lawmakers have been reluctant to ask drivers to pay more at the pump to help finance construction projects”

Business Community Complicates GOP Tax Reform Plans

“It’s fair to say the business community isn’t thrilled by the latest GOP efforts to spur progress on tax reform,” according to The Hill.

“Senate Finance Chairman Orrin Hatch (R-Utah) and House Ways and Means Chairman Paul Ryan (R-Wis.) reached out to business groups this week, saying they were searching for ways to help all businesses in tax reform even though President Obama is opposed to reducing tax rates for many companies. On Wednesday, the business groups responded that there’s no way tax reform works without reducing tax rates across-the-board, and that Ryan and Hatch should already be fully aware of how they feel.”

“The back-and-forth underscores the challenges facing would-be tax reformers, and suggests the debate could be causing splits between even traditional allies like Republicans and the business community. Obama and the GOP have said they believe that they can find common ground on business tax reform.”

Federal Gas Tax Increase Unlikely, Despite Final Push

“Democrats, contractors and unions are pressing Congress to raise the gas tax to fund the Highway Trust Fund despite opposition from key Republicans that makes any increase unlikely,” according to USA Today.

“The Highway Trust Fund is the primary source for federal highway and transit programs funding for local, state and national projects. It is funded by the federal gas tax — currently set at 18.4 cents per gallon — which hasn’t been raised since 1993. In the past six years, there have been 32 short-term measures taken to maintain the fund.”

“Already, Arkansas, Delaware, Georgia, Mississippi, Tennessee and Wyoming have had to postpone transportation projects because of funding delays.”

An All-Time High on Tax Day

Philip Bump: “So how much money do Americans actually turn over to the government? We pulled data from the Office of Management and Budget to find out. We’ve included OMB’s 2015 estimates on the charts below.”

“Americans paid $1.4 trillion in income tax in 2014. That’s expected to climb this year. It is, as you’d expect, an all-time high.”

“The year 2014 was a high, of course, because the value of the dollar shifts over time and the workforce increases with population growth. (And so too grows the government.)”

“If you compare how much is paid in taxes to national income totals from the Department of Commerce, it’s actually fairly consistent over time, usually in the 8 to 10 percent range. (This is only income taxes, mind you.)”

Who Thinks Taxes Are Fair?

Gallup: “Americans’ perceptions of the fairness of their federal income taxes have diverged along income lines in recent years. From 2005 to 2008, roughly six in 10 Americans in each income group said what they paid in income taxes was fair. Since then, higher- and lower-income Americans have grown less likely to consider it fair, while middle-income Americans have remained largely content.”

Perceptions of Income Taxes Paid as Fair, by Annual Household Income

“As Tax Day approaches, more Americans continue to say their taxes are fair than to say they are not. In recent years, though, there has been a growing disparity in perceptions of fairness by income group. Middle-income Americans are the most likely to believe their taxes are fair, and their views on the matter have changed little. But lower- and higher-income Americans are less likely than roughly a decade ago to view their taxes as fair, even though the tax rates for most people in these groups have not changed.”

“Along these lines, between 85% and 90% of Americans said their taxes were fair in Gallup polls conducted during World War II.”

Taxing Marijuana Won’t Cure State Budget Woes

The Upshot challenges the common argument in favor of recreational marijuana: that legalizing and taxing it will save state budgets.

“States, looking for ways to close budget shortfalls without raising broad-based taxes, have leaned on “sin” revenues: higher taxes on cigarettes, higher fees and fines and higher revenue from gambling. And as they have sought to squeeze more revenue from these sources, they have often been disappointed.”

“In the case of marijuana, Colorado’s revenue has disappointed because legal recreational marijuana sales have been lower than expected. State officials thought many customers of medical marijuana dispensaries would migrate to the recreational market. But this process has been slow, in part because there is a financial disincentive to switch: Medical marijuana is subject only to general sales tax, while a 15 percent tax is imposed on recreational marijuana at wholesale and a further 10 percent at retail, in additional to the general sales tax.”

Comparing Property Taxes Across States

The Los Angeles Times looks at a study that compares property taxes across states.

“Hawaii had the cheapest property taxes with an average of $482; New Jersey was most expensive at $3,971… Politics also seemed to play a role in a state’s ranking. Property taxes were 39% higher on average in blue states than red states, the study found. The website based those designations on how the state voted in the 2012 presidential election.”