The Joint Committee on Taxation reported that the “Buffett Rule” would generate less than $5 billion per year for a total of less than $47 billion over the next eleven years. From these numbers, the “Buffett Rule” would barely put a dent into the $7 trillion projected federal budget deficit during that period.
More “Buffett Rule” Coverage
Citizens for Tax Justice published a report today explaining why Congress should raise revenue by eliminating tax loopholes and tax subsidies. The report goes on to outline eleven specific options to raise revenue and how much revenue could be raised from each option. The table below briefly describes each option and shows how much revenue could be raised from each option.
For the complete Citizens for Tax Justice report see this link
In one of my first posts I discussed the tax benefit Facebook will receive from its IPO. Earlier this week Senators Carl Levin and Kent Conrad proposed legislation to do away with what they called “the stock option tax loophole.” Under the senators’ bill, corporations would not be allowed to claim tax deductions for stock options that are larger than the expense they report on their financial statements. The bill would also subject stock options to the same $1 million cap on deductions for executive compensation that currently applies to other forms of compensation. The bill also proposes to close many tax loopholes besides the stock option tax loophole discussed here.
For my previous post on the tax consequences of Facebook’s IPO see this link
For Senator Levin’s statement on the stock option tax loophole see this link
For more information on the complete bill see this summary
The Center on Budget and Policy Priorities published a report outlining the six objectives a well-designed corporate tax reform proposal should accomplish.
- Contribute to long-term deficit reduction
- Reduce the tax code’s bias towards overseas investments
- Improve economic efficiency by reducing special preferences
- Provide more neutral treatment of corporate and non-corporate businesses
- Reduce the tax code’s bias towards debt financing
- Take specific steps to discourage tax sheltering
For the complete report see this link
Calvin H. Johnson proposes how to raise $1 trillion of revenue a year under our current tax system without a VAT or a rate hike in a Shelf Project article. He would raise this revenue by making tax accounting better reflect economic income. The tax base has been eroded as tax accounting and economic income have grown apart, so by bringing them closer together the tax base will be broadened. The result of a broader tax base is that tax rates do not have to be increased to raise more revenue. Assuming the tax base is not broadened, the Tax Foundation projects that the current deficit will require maximum tax rates of 85%. Taxpayers are unlikely to be receptive to maximum tax rates of 85%, and as Johnson describes, a maximum tax rate of 85% would be disastrous to the economy, so some sort of tax base broadening seems to be a much better solution.
A Wall Street Journal editorial explains that the total tax on corporate earnings distributed to shareholders as dividends would be 64.12% under President Obama’s 2013 budget. The current total tax on corporate earnings distributed to shareholders as dividends is 44.75%, which means Obama’s 2013 budget would result in an almost 20% increase. Under Obama’s 2013 budget, the 64.12% number would only apply to single taxpayers with adjusted gross income greater than $200,000 and married couples with adjusted gross income greater than $250,000, but the WSJ editorial argues that this increase will affect all shareholders. The editorial supports this argument with historical evidence that shows corporate dividend payouts are sensitive to the dividend tax rate. The amount of dividends reported on tax returns grew substantially starting when the dividend tax rate dropped to 15% in 2003, and companies that had never paid a dividend before, such as Microsoft, began paying dividends when the dividend tax rate dropped to 15%. The historical evidence from the editorial certainly raises some interesting questions that need to be analyzed before such a large increase in the dividend tax rate takes effect.