April Tax Recap

This monthly tax roundup series reviews some of the major stories making headlines in tax policy over the past month, with brief analysis and links attached.

CONGRESSIONAL ACTION UNCLEAR AS HIGHWAY TRUST FUND DEADLINE APPROACHES: As the May 31 deadline looms closer, lawmakers are running out of time to resolve the Highway Trust Fund’s chronic deficit problem. Key players last month appeared skeptical of either a gas tax hike or repatriation holiday as a viable solution, making yet another temporary patch from the General Fund seem most likely. One way or another, lawmakers will eventually have to produce a long-term solution, and revenue-increasing alternatives such as these are not the answer. As long as Congress continues to siphon funds away from the interstate highway system and toward programs best left to the states and localities, the yearly fiscal imbalance will only get worse. Lawmakers should aim instead to reform the highway program:

• Empowering the States by Turning over the Federal Highway Program (Heritage Backgrounder)
• Hiking the Federal Gas Tax is a Mistake. Here’s Why. (Daily Signal)
• Changes to Repatriation Best Left to Tax Reform (Heritage Backgrounder)

NEW PUSH TO REPEAL THE CADILLAC TAX: On April 28, Representative Joe Courtney (D-CT) introduced legislation to rescind Obamacare’s “Cadillac Tax”—the 40 percent excise tax on high-cost health plans that is set to take effect on January 1, 2018. Courtney’s bill, H.R. 2050, will likely find broad support both among Republicans and a fair number of Democrats, though it will undoubtedly face staunch opposition from the Obama Administration. The Cadillac tax will make health insurance more costly and complex for Americans:

• Obamacare: Impact on Taxpayers (Heritage Backgrounder)
• Why Do You Want to Tax ‘Cadillac’ Health Care Plans? (CATO Institute)

BILL MOVES FORWARD IN SENATE TO EXPAND 529 ACCOUNTS: The Senate Finance Committee last month unanimously approved legislation (S. 335) sponsored by Senator Chuck Grassley (R–IA) that would expand the tax-preferred college saving accounts to cover new technology including computers, Internet access, and related equipment. H.R. 529, the House counterpart to Grassley’s bill, passed with a veto-proof majority in February. Expanding 529 accounts would promote school choice and help make higher education more affordable for American families. However, while it is a step in the right direction, S. 335 could go farther. An even better alternative would be Representative Matt Salmon’s (R–AZ) School Choice Education Savings Account Act, which allows parents to use 529 tax savings accounts for qualified K-12 expenses in addition to college expenses.

• Continuing the School Choice March: Policies to Promote K-12 Education Investment (Heritage Backgrounder)
• Senate Finance Committee Set to Approve Legislation to Improve 529 College Savings Plans (Americans for Tax Reform)

HOUSE VOTES TO REPEAL ESTATE TAX: H.R. 1105, the Death Tax Repeal Act, passed the House on April 16 by a vote of 240–179, largely along party lines. Although the bill is unlikely to make it through the Senate, the vote may signal doom for the death tax if a Republican occupies the White House come 2017. The death of the death tax should be a no-brainer for policymakers:

• The Economic Case Against the Death Tax (Heritage Backgrounder)
• How the Death Tax Kills Small Businesses, Communities and Civil Society (Heritage Backgrounder)
• The Economic and Fiscal Effects of Eliminating the Federal Death Tax (Heritage Backgrounder)

LEE AND RUBIO AT HERITAGE: Senators Mike Lee (R-UT) and Marco Rubio (R-FL) came to The Heritage Foundation on April 15 to discuss their Economic Growth and Family Fairness Tax Reform Plan. You can view their presentation here. Their plan removes or restricts a slew of credits and deductions, consolidates the income bracket structure, lowers corporate rates and moves to a territorial system, expands the child credit, and eliminates capital gains and dividends on corporate equity (among other things). The business side of the plan would provide a tremendous boost for economic growth:

• The Lee-Rubio Tax Plan’s Business Reforms Are Tremendously Pro-Growth (Heritage Backgrounder)
• The Economic Effects of the Lee-Rubio Tax Reform Plan (Tax Foundation)
• Rubio Already Spearheading Tax Reform (Manhattan Institute)

TAKE A LOOK: A collection of useful tax studies published over the last month:

• Rich States, Poor States, 2015 Edition (American Legislative Exchange Council)
• IRS’ FATCA Reporting System Leaves Taxpayer Data Vulnerable (Center for Freedom and Prosperity)
• Tax Freedom Day 2015 is April 24th (Tax Foundation)
• Taxes Cost More Than What We Pay (Manhattan Institute)
• How Much Do the Top 1 Percent Pay in Taxes? (Daily Signal)
• The Taxes that Divide Them: The GOP’s 2016 Hopefuls Have Some Very Different Ideas for Reforming the Tax Code (American Enterprise Institute)
• Congress Can Raise Your Income 10 Percent By Updating the Tax Code (Daily Signal)
• A Tax Reform Primer for the 2016 Presidential Candidates (Heritage Backgrounder)
• What You Need to Know About Tax Reform in 99 Seconds (Daily Signal)