Republicans who control the U.S. House of Representatives have proposed a budget framework that would raise the incomes of millionaires while cutting services for families and individuals with low and moderate incomes. The leader of the House of Representatives, Paul Ryan, represents a Wisconsin district that includes the cities of Kenosha, Racine, and Janesville.
The budget framework, called A Better Way, includes an emphasis on cutting taxes for people with very high incomes. According to an analysis by the Urban-Brookings Tax Policy Center, the GOP House tax plan would:
- Cut taxes for millionaires by an average of $330,000 per household in 2017, with their after-tax incomes rising by 15%. In contrast, the middle fifth of households by income would receive an average tax cut of $260, boosting their after-tax income by just 0.5%;
- Cut taxes for the top 0.1% of the population by income – a group with an average income of more than $3.7 million – by an average of $1.3 million per household in 2017, increasing their after-tax income by 17%; and
- Cut taxes for millionaires by $2.6 trillion over the next decade, forty times the $56 billion in tax cuts that the middle fifth of taxpayers would receive.
An Increased EITC for Childless Adults Would Reduce Poverty and Enjoys Bipartisan Support
Income inequality has been on the minds of many voters during the presidential primaries. If you think it’s only a concern of Democrats, take a look at the results of the most recent “Wisconsin Survey” – a St. Norbert’s poll conducted for Wisconsin Public Radio and Wisconsin Public Television. The survey last week of 616 registered Wisconsin voters found that 66% favor “increasing taxes on wealthy Americans and large corporations in order to help reduce income inequality in the U.S.,” compared to only 28% who said they were opposed.
There are lots of different ways to adjust taxes (and labor policy) to reduce income inequality. Unfortunately, most of those – such as closing corporate tax loopholes and increasing the minimum wage – have little chance in Congress right now. But one promising policy option that does have a chance is to provide a significant increase in the Earned Income Tax Credit (EITC) for adults who don’t have dependent children. Read more
President Obama’s Budget Would Make Expansion an Even Better Deal
The budget bill introduced this week by President Obama would make the expansion of Medicaid an even better deal for states like Wisconsin that have not yet taken up the option. If Wisconsin expanded BadgerCare eligibility in January 2017, the president’s recommendations would increase the savings for Wisconsin taxpayers by $252 million by the end of fiscal year 2021.
The president’s proposal calls for reimbursing each state for the full cost of newly-eligible adults for the first three years after expanding coverage, regardless of when the expansion begins. As a result, states that expand coverage of adults this year or any time in the future would get the same enhanced federal funding as the states that expanded coverage in 2014. Read more
This week is national Sunshine Week, which is a time to celebrate openness and transparency in government. That seems rather ironic after the House Budget Committee Chairman offered a plan for the federal budget that fails basic standards of transparency. As Robert Greenstein of the Center on Budget and Policy Priorities wrote on Wednesday:
“The plan proposes a whopping $1.1 trillion in essentially unspecified cuts in mandatory (i.e., entitlement) programs outside health care and Social Security, which reflects an exceptional if not unprecedented lack of transparency.” Read more
Holiday shoppers are increasingly turning to the internet to make their purchases, but Congress has yet to close a loophole that gives online only retailers an advantage over their bricks and mortar counterparts.
Currently, online retailers that do not have a physical presence in a particular state are not required to charge sales tax to residents of that state. That doesn’t mean that these purchases are tax free, though: purchasers are still legally required to pay the sales tax, by declaring it on their income tax form. Few do.
When online-only retailers do not charge consumers sales tax – even though sales tax is owed on the purchases – those retailers have a competitive advantage over other retailers that are required to collect sales tax.
Ideally, Congress would step in to level the playing field between different types of retailers, by passing legislation that would allow states to require all retailers to collect sales tax. Read more
Congress is on the verge of passing a tax cut plan that would prioritize tax breaks for corporations over middle-income and low-wage working parents, while significantly increasing the federal deficit. As the New York Times reported this morning, President Obama has threatened to veto the bill if it reaches him in its current form.
The bill in question is referred to as “tax extender” legislation, which comes up on a regular basis as the start of the next tax year approaches. In his On the Economy blog today, Jared Bernstein describes this annual process as follows:
“Tax extenders are a series of allegedly temporary tax breaks that are conventionally extended, unpaid for, year after year. These include tax credits for research and development, expensing deductions for small businesses, deductions for state and local sales taxes, and more. To put them in the annual budgets that Congress and the President construct each year would mean they’d either have to be paid for with higher taxes or spending cuts elsewhere or added to the deficit. Read more
Today’s Circuit Court Ruling Reinforces the Inconsistencies in State Lawmakers’ Reasoning
Should state lawmakers turn down federal funds whenever there’s a risk that the funding in question could be cut in future years? If so, why is Wisconsin proceeding with major highway and bridge construction plans at a time when Congress is using short-term gimmicks to keep the Highway Trust Fund from becoming insolvent? And why did Wisconsin cut BadgerCare eligibility in half for parents, based on reliance on federal funding to subsidize the federal health insurance Marketplace?
That last question has gotten little attention over the past year, but it will be raised more often following a ruling today by a subset of the DC Circuit Court of Appeals. Two of the three judges participating in that ruling concluded that federal subsidies for the health insurance Marketplace can only go to people in states that set up their own Marketplaces. Read more
Report Released Today Recommends State and Federal Reforms to Close Offshore Tax Havens
Maine legislators recently gave preliminary approval to a bill that could make it the third state to pass legislation to crack down on corporate tax avoidance in off-shore tax havens. The proposed legislation would close the so-called “water’s edge” loophole by requiring corporations to report income from a list of 38 known offshore tax havens. Passage of the bill would generate an estimated $10 million per year (in a state less than a quarter of the size of Wisconsin).
Oregon and Montana have already enacted such legislation. In 2010, Montana recovered $7.2 million, and state analysts expect Oregon to recover $18 million this year. The problem costs states about $1 billion, according to a report by US PIRG report. You can read more about the bills in these three states in an April 3 Washington Post blog post. Read more