PPI - Weinstein Testimony Re Family Friendly Tax Reform (2005)

8/3/2019 PPI - Weinstein Testimony Re Family Friendly Tax Reform (2005)

1/13

Family Friendly Tax Reform

Testimony of Paul Weinstein Jr.Chief Operating Office and Senior Fellow

The Progressive Policy Institute

Presidents Advisory Panel on Federal Tax ReformMay 11, 2005


2/13

The problem

The tax code is too complicated

70 percent of Americans think the federal tax system is toocomplicated* Redundant tax breaks for individuals. 16 IRA type accounts, 5 college

tax breaks, and 4 incentives to help raise kids ** Since 1986, more than 84 new tax laws have been enacted ***

Tax compliance is costly According to the Department of the Treasurythe total cost of tax compliance is $115 billion per year****

Middle class burden According to Gale, Orszag, and Shapiro about 80percent of households, including a large majority of households in everyincome quintile, will end up worseoff over time as a result of theenactment of the 2001 and 2003 tax cuts*****

*Associate Press/IPSOS Poll April 4, 2005**Weinstein, Paul, Universal Pensions, PPI Paper, February, 2002***Schnepper, Jeff, Why the Tax System Drives Me and You Crazy, MSN Money****Memorandum for Treasury Secretary Paul ONeill from Pamela Olson, Department of the Treasury, November, 2002*****The Ultimate Burden of Tax Cuts: Once they are Paid for, Low- and Middle-Income Households Likely to be Net Losers, On

Average, Urban/Brookings Tax Policy Center and Center on Budget and Policy Priorities, June, 2004


3/13

Goals for tax reform

Make the system more generous Reduce confusion

Treat everyone the same/level playingfield

Streamline the tax code

Require taxpayers to do less paper work

Deficit neutral


4/13

Family Friendly Tax Reform

Creates four super incentives College Tax Credit

Home Mortgage Deduction for All

Family Tax Credit

Universal Pension


5/13

College Tax Credit

$3000 refundable credit Covers tuition and fees for 4 years of college and 2

years of graduate school

Substitutes for 5 existing breaks

Available to any student attending accreditedcollege/university more than half time, and willing tocommit to 2 summers of service

No phase-outs.


6/13

Home Mortgage Deductionfor All

Moves the deduction above the line and makes itavailable to non-itemizers

10 million more taxpayers benefit

Most of the benefits will go to those with incomes lessthan $50,000

Makes deduction available to all homeowners


7/13

Family Tax Credit Available for families with incomes up to $120,000

Eliminates 200 pages of code Combines 3 tax incentives (Earned Income Tax

Credit, Child Credit, and the Child and DependentCare Credit) into 1

Provides a maximum credit of $3,500 for a family withone child, $5,200 for two children, and a $7,000 taxcredit for a family with 3 children


8/13

Universal Pension Combines 16 different IRA type accounts into one

universal pension

Americans of all income levels could participate

$3000 contribution limit

Every American receives a $500 stake

Refundable credit for contributions by low incomeworkers

Portability 401k balances would automatically

transfer into UP when workers change jobs


9/13

Benefits Provides $436 billion in new tax relief (over ten years) for

college, homeownership, families, and retirement Reforms tax code by eliminating 68 tax provisions into 4

and reconfiguring $2.5 trillion in tax incentives Simplifies the code by removing complicated phase-outs,

multiple definitions, and eliminating at least 200 pages of

the code Reduces number of itemizers by making all four

incentives above the line Makes the code more progressive by closing tax breaks

for special interests and using the savings for taxincentives that can benefit all Americans Deficit neutral


10/13

Paying for Family Friendly Tax Reform(In Millions)

COLLEGE TAX CREDIT $175,000

OffsetsExisting college benefits to be consolidated

Hope Scholarship and Lifetime Learning Credit 54,000Deduction for higher education expenses 24,000Employer-provided education benefits 8,000Qualified tuition savings accounts 6,000Special interest incentives to be eliminated

Corporate shelters for highly mobile foreign income 55,000Corporate loophole for janitors' insurance 20,000Special rules for vessel and aircraft leasing 1,000NASCAR track owners subsidy 100Special expensing rules for independent film makers 336

Tax credit for railway track maintenance 501Corporate deduction for attorney fees 32714 other corporate tax breaks from

the American Jobs Creation Act* 5,730Subtotal $174,994

*Including incentives for fish tackle boxes, archery products, dog/horse track owners, sonar devices, shipbuilders, cruise shipindustry, oil recovery, distilled spirits, wine, and beer.


11/13

Paying for Family Friendly Tax Reform

(In Millions)

HOME MORTGAGE DEDUCTION FOR ALL 924,000

Offsets

Existing home mortgage deduction(Available to itemizers, only) 868,000Special interest incentives to be eliminated

Special breaks for large credit unions 15,200Special rules for the timber industry 5,000

Corporate jet loophole 3,000Lenient tax shelters standards* 8,800Corporate SUV and luxury car loophole 1,100Loophole for private activity bonds

to build sports facilities** 1,000

Special rules for extractive industries 19,000Five estate and trust loopholes*** 7,100Subtotal $928,200

*Options to Improve Tax Compliance and Reform Tax Expenditures, Joint Committee on Taxation, January, 2005**Ibid

***Ibid


12/13


FAMILY TAX CREDIT 1,123,000

OffsetsExisting child and family credits to be consolidatedEarned Income Tax Credit 390,000

Child Credit 462,000Dependent Care Credit 21,000Savings through tax simplification

Institute third-party reporting of capital gains* 250,000Subtotal $1,123,000

*Dodge and Soled, Inflated Tax Basis and the Quarter-Trillion Revenue Question January, 2005


13/13


UNIVERSAL PENSION $309,000

OffsetsSimplification of existing IRAs

Consolidate 16 tax-favored retirement account 262,000Make $3,000 contribution limit permanent* 4,200Special interest tax breaks to be eliminatedCEO pay loophole 2,000Bermuda loophole 5,000Eight provisions related to pensions and

employee benefits ** 15,800Subtotal $309,000

FAMILY FRIENDLY TAX REFORM TOTAL $2,535,194

*Family Friendly Tax Reform, Progressive Policy Institute, April, 2005**Options to Improve Tax Compliance and Reform Tax Expenditures, Joint Committee on Taxation, January, 2005

PPI - Weinstein Testimony Re Family Friendly Tax Reform (2005)

Documents

Transcript of PPI - Weinstein Testimony Re Family Friendly Tax Reform (2005)