Ryan Ellis

Top Ten Tax Hikes in the Obama Budget


Posted by Ryan Ellis on Wednesday, April 10th, 2013, 1:09 PM PERMALINK


There are literally dozens of new tax increases in the FY 2014 Obama budget.  In total, they increase taxes by nearly $1 trillion over the next decade.  They would permanently bring the federal tax burden to 20 percent of economic output, a level only reached in one year since World War II (FY 2000, when the economy was roaring and tax revenues were pouring into Washington as a result).

Below are the top ten tax increases in President Obama's budget (all numbers are over a decade):

1. Chained CPI.  The budget would change the definition of inflation for all federal budget purposes, including federal tax provisions.  Because tax brackets and other tax items are indexed to inflation, slowing down their growth is an income tax increase.  This is a tax increase for all Americans who pay income tax, including middle class Americans.  In the past, Congress' Joint Committee on Taxation has estimated that enacted "chained CPI" would be a $100 billion tax increase

2. Itemized deduction cap.  The Obama budget limits the maximum value of itemized deductions, like those for charitable donations and mortgage interest. This is an income tax increase.  No matter what tax bracket you are in, under this Obama provision you can't benefit any more than if you were in the 28 percent bracket.  There are three tax brackets higher than this: 33 percent, 35 percent, and 39.6 percent.  These families will not be able to fully deduct things like mortgage interest, charitable deductions, and state taxes paid.  Note that this is on top of the phaseout of itemized deductions ("Pease") that President Obama forced on taxpayers in the fiscal cliff.  Tax increase: $529 billion

3. Death tax hike.  The Obama budget would raise the death tax rate from 40 percent today to 45 percent.  It would also reduce the inflation-indexed death tax "standard deduction" from $10.3 million today for married couples (half that for singles) to $3.5 million with no inflation adjustment.  There are also other death tax increases of a more technical nature.  Tax increase: $79 billion

4. "Buffett rule."  The President's budget would impose a new "Buffett rule" on taxpayers whose adjusted gross income exceeds $1 million.  These taxpayers would have to face an average tax rate (that is, their tax bill divided by their income less charitable contributions) of 30 percent.  Tax increase: $53 billion

5. Tobacco tax hike.  The President's budget nearly doubles the tobacco tax, from $1.01 to $1.95 per pack, and then indexes it to inflation from there.  This is a clear tax hike on middle class Americans.  According to independent estimates, the average smoker in America makes about $40,000 per year.  Additionally, tobacco taxes are a declining tax revenue base, and as a result it's inappropriate to fund new government programs using it. This isn't the first time President Obama has raised federal tobacco taxes. In 2009, on his sixteenth day in office, he signed into law a 156 percent increase in the tobacco tax.  Such tax increases are a violation of Obama's central campaign promise not to sign "any form of tax increase" on Americans making less than $250,000 per year. Tax increase: $78 billion

6. IRA and 401(k) plan restrictions.  There are two new tax increases on IRA and 401(k) savers in the President's budget.  The first restricts the total account balance in ALL tax preferred IRAs and 401(k)s to a combined $3 million.  The second would require that non-spouse beneficiaries of IRAs and 401(k)s distribute all money within five years, rather than over their lifetime.  Additionally, the budget forces all employers with 10 or more employees to open payroll-deduction IRAs at work.  Tax increase: $14 billion

7. "Carried interest" capital gains tax hike.  Under current law, capital gains are taxed at rates lower than ordinary income to reflect the double taxation of investment capital, risk, and other factors.  The current top capital gains tax rate is about 24 percent.  Some capital gains are received by managing partners of investment partnerships.  These capital gains are known as "carried interest."  Despite the fact that these capital gains are no different than capital gains anywhere else (and are the same source of capital gains that the limited partners in such arrangements receive), the President's budget taxes these capital gains at ordinary income tax rates, which are nearly 45 percent on an all-in basis.  Tax increase: $16 billion

8. Energy tax hikes.  There are energy tax hikes littered throughout the budget.  Taken together, these tax increases will have one effect and one effect only: higher prices for consumers at the gas pump and in their utility bills.  Tax increase: $94 billion

9. Tax increases on international income.  The U.S. is one of the only developed nations that taxes the income of U.S. companies and individuals which are earned overseas (so-called "worldwide taxation").  In so doing, we potentially expose this money to taxation in two different countries on the same earnings.  The Obama budget increases the liklihood that this double taxation will occur by removing protections against it.  Ideally, the U.S. would only seek to tax income earned within the United States, a system known as "territoriality."  Tax increase: $158 billion

10. Financial system tax increases.  These, too, are littered throughout the budget.  They would impose taxes on banks, brokerage firms, life insurance companies, and virtually every other way that the middle class saves and invests.  These costs will be passed along in the form of higher fees, bigger commissions, and lower returns to shareholders.  Tax increase: $94 billion

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ATR Supports Thune Amendment to Senate Budget to Kill Death Tax


Posted by Ryan Ellis on Friday, March 22nd, 2013, 2:36 PM PERMALINK


Senator John Thune (R-S.D.) will today offer an amendment (#307) to the Senate budget resolution.  This amendment would create a deficit neutral reserve fund to fully and permanently repeal the death tax.  ATR is supportive of this amendment and urges all senators to vote for it.

The death tax was permanently changed after the fiscal cliff.  The top death tax rate is 40 percent.  There is a death tax "standard deduction" of $10.3 million (indexed to inflation) for a married couple, half that for singles. 

While these levels exempt most Americans from having to pay the death tax, those who do face this liability spend billions of dollars every year paying lawyers, accountants, actuaries, and life insurers to plan tax avoidance strategies.  This sunk cost means less capital available to create jobs and grow the economy.

According to Reagan economist Steve Entin of the Tax Foundation, repealing the death tax would grow the economy by $1 trillion over the next decade and yield the U.S. Treasury an additional $150 billion in tax revenue due solely to economic growth. 

Repealing the death tax is relatively-easy from a budget perspective.  According to the Congressional Budget Office, the death tax will yield $200 billion in tax revenue over the next decade, less than one-half of one percent of all federal tax revenues.  This level is less than one-tenth of one percent of all economic output.  Repealing this destructive tax in a deficit-neutral and revenue-neutral way is not one of Washington, DC's greater policy challenges.

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ATR Supports Cruz Amendment to Defund Obamacare


Posted by Ryan Ellis on Tuesday, March 12th, 2013, 6:45 PM PERMALINK


The U.S. Senate will tonight take up consideration of H.R. 933, the continuing resolution for fiscal year 2013.  Senator Ted Cruz (R-Texas) will attempt to offer an amendment which would restrict any funding for the remainder of the fiscal year for the implementation of Obamacare.

ATR supports any and all efforts to restrict and/or repeal Obamacare, so we are proud to support Senator Cruz's common sense amendment.  The American people did not ask for the Obamacare law, and it remains deeply unpopular.  No tax dollars should be used to foist this law upon our country.

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Ways and Means Small Biz Draft a Great Step Toward Reform


Posted by Ryan Ellis on Tuesday, March 12th, 2013, 5:57 PM PERMALINK


The House Ways and Means Committee today released a draft of tax reform changes affecting small businesses.  The most important part of this draft is a "reset button" on how small businesses with multiple owners are taxed.  There are also smaller changes envisioned which will make life much easier for entrepreneurs.

Small Business Taxation 2.0.  For decades, small businesses with two or more owners have had to choose between two forms of "flow-through" taxation that were never coordinated, never made much sense, and were ultimately the product of political compromise.  Partnerships and S-corporations have been unwieldy ways for simple businesses to organize themselves. 

This discussion draft clears the decks, creating a brand new set of rules for these companies.  It actually reads as if the taxation of pass-through entities were to be legislated on purpose (imagine that).  The current system is more akin to something between a car wreck and a Salvador Dali painting.

Fallback provisions for pass-through reform.  As an additional option in lieu of more comprehensive pass-through small business tax reform, the draft provides a series of rifle-shot, common sense fixes for S-corporations and partnerships.  These ideas are based off of bipartisan proposals which have been introduced as legislation and talked about for many years in tax policy circles.

Permanent small business expensing.  The W&M draft makes small business expensing ("Section 179") permanent.  This means that small businesses will forever be able to deduct up to $250,000 of tangible personal property from business income, the rest subject to multi-year and complex depreciation deductions.  Examples of this property include computers, software, business machinery, smartphones, tablet devices, furniture, copiers, and other assets vital for any small business to function.  If small employers spend the money to buy these assets, they should be able to deduct them that same year off their taxes.

In the context of comprehensive reform.  This discussion draft for small businesses needs to ultimately be placed in the larger tax reform context.  Since small business owners are taxed at ordinary income tax rates, the income tax rate schedule is ultimately the most important component of small business tax reform.

The FY 2014 House budget today makes it clear that the Ways and Means Committee is moving toward a system with an individual rate no higher than 25 percent (down from 39.6 percent plus a 3.8 percent surtax under current law).  When this budget target is combined with the common sense small business tax reforms contained in the draft released today, it's easy to see how the groundwork is being laid for more robust economic growth and job creation.

 

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ATR Applauds House GOP "No Net Tax Hike" Balanced Budget Plan


Posted by Ryan Ellis, Mattie Duppler on Tuesday, March 12th, 2013, 10:59 AM PERMALINK


The House Budget Committee this morning released a ten-year balanced budget plan that does not raise net taxes. The blueprint will bring the federal budget into balance by the end of the decade by capping discretionary spending, reforming entitlements and getting the nation’s debt under control.
 

Spending Restraint

The House GOP budget is the only blueprint offered by leaders in Washington that balances – and it does so by the end of the ten year budget window and without raising taxes. Families and employers balance their budgets every day; the plan put forward today by the House Budget Committee shows it is time for lawmakers to do the same.

Brings spending in line with historical revenue levels. Spending has averaged 21 percent of GDP in the modern era; the House GOP budget brings outlays down to 19 percent. This balances the budget not on the backs of taxpayers, but by forcing politicians to come to terms with their spending priorities

Enforces BCA spending levels. The plan maintains and extends the Budget Control Act’s spending levels, leaving in place spending reductions promised to taxpayers.

Slows out-of-control spending. The House GOP budget lops $4.6 trillion from outlays over the next ten years. This means federal spending will rise at 3.4 percent, rather than 5 percent, for the next ten years.
 

Mandatory Reforms

Saves Medicaid from federal control. The House budget removes the federal incentives that increase Medicaid enrollment and prevent reform by block granting Medicaid to the states. The plan also repeals Obamacare Medicaid expansion, saving states from their own budget crises that would follow once the federal funding for the expansion runs out.

Reforms the social safety net. The plan addresses the rocketing costs of low-income assistance programs by repealing institutional incentives to increase participants. Food stamps (SNAP) is block-granted to the states.  The budget strengthens work requirements for the TANF program which have proven to reduce welfare rolls.

Saves Medicare for future generations. The GOP House budget will offer health care choices to seniors that will decrease costs by allowing private insurance companies to compete with Medicare. The plan maintains federal support for insurance premiums—regardless of what plan a beneficiary chooses.
 

Tax Reform without Raising Taxes

On the revenue side, the House GOP budget calls for no net tax increase.  The current law revenue baseline (19 percent of GDP as a durable revenue target) is adopted, meaning the government will have to live within its means.  Taxpayers already send far too much of their income (higher than the historical average) to Washington, and should not be asked to write an even bigger check to the IRS.  The fiscal cliff already raised taxes by $600 billion.  $1 trillion of Obamacare taxes came online with the fiscal cliff.  Taxpayers are doing their part, and then some.  It's time for the big spenders to start doing theirs.

The budget also makes sure that the government's tax take is less destructive to jobs and economic growth.  It works in tandem with House Ways and Means Committee Chairman Dave Camp's (R-Mich.) ongoing comprehensive tax reform efforts.  To this end, the budget gives the broad outlines of a far simpler and easier to comply with tax system which:

Simplifies tax brackets.  Replaces the current seven-bracket income tax (top rate of 39.6 percent) with a simple, two-bracket system of 10 and 25 percent

Eliminates the Alternative Minimum Tax (AMT), which forces millions of taxpayers to calculate their taxes two different ways and pay the higher result

Cuts the corporate income tax rate down to 25 percent.  The U.S. corporate income tax rate is the highest in the developed world, so lowering this rate closer to the average marginal rates of our competitors is a necessary step in bringing jobs and capital back to the United States

Implements international tax reform.  This budget envisions transitioning the tax system toward a more competitive system of international taxation.  Under current law, U.S. employers often have to face taxation abroad and from the IRS on the same income earned overseas.  This puts our employers at a big competitive disadvantage.

Most importantly, this budget envisions tax reform taking place within the fixed tax revenue target of current law.  "Tax reform" would not become a code word for "tax hikes," as too often happens in Washington.  Tax reform is not about bringing in more tax revenue to the government.  It's about bringing in the same amount of revenue more intelligently, with lower tax rates and a tax base which subjects all consumed income to taxation once and only once.
 

Obamacare Repeal

The FY 2014 budget repeals Obamacare.  This common sense idea saves $1.8 trillion in spending on a program the American people never asked for and don't want.  Implicitly, the budget also repeals the $1 trillion in new Obamacare tax increases by re-purposing that money within comprehensive, revenue-neutral tax reform.  Obamacare is replaced by consensus-driven reforms to healthcare like ending the tax bias in favor of employer-provided health insurance, moving toward a consumer driven healthcare model where patients--not insurance companies or government bureaucrats--are put in charge of their medical decisions, and medical liability reform.

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ATR Supports H.R. 38/S. 448, the "Senior Tax Simplification Act"


Posted by Ryan Ellis on Thursday, March 7th, 2013, 5:26 PM PERMALINK


ATR sent the following letter today to Congressman John Fleming (R-La.) and Senator Marco Rubio (R-Fl.):

On behalf of Americans for Tax Reform, I write today in support of H.R. 38/S. 448, the “Senior Tax Simplification Act.”  I would urge all Congressmen and Senators to support this common-sense, pro-senior taxpayer legislation.

This bill would instruct the IRS to create a new form in the 1040 series designed especially for senior citizens with relatively-simple tax filing situations.  The most common types of income reported by seniors would be on it—interest, dividends, capital gains, Social Security benefits, pension payments, IRA distributions, wages, and unemployment compensation.  

For younger taxpayers, a similar form exists today—the 1040-EZ.  It only reports wages, interest, and unemployment compensation.  Any (childless) single taxpayer or married couple under age 65 making less than $100,000 is eligible to file this short form.  Nearly 5 million taxpayers take advantage of this convenient form every year.

There is no reason why a similar form can’t be made available to seniors.  21 million tax returns are filed every year in households where the primary taxpayer is over age 65.  Many of these taxpayers could use this form easily to make tax season less complicated.

Tax compliance costs need to be lowered as a part of fundamental tax reform.  This bill is a good step in that direction.
 

Full Letter PDF

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ATR Supports H.R. 1040, the "Flat Tax Act"


Posted by Ryan Ellis on Thursday, March 7th, 2013, 4:27 PM PERMALINK


ATR today sent the following letter to Dr. Michael Burgess (R-Texas):
 

On behalf of Americans for Tax Reform, I am pleased to support H.R. 1040, the “Flat Tax Act.”  I would urge all Congressmen who want to see a more pro-growth, simpler, flatter, and fairer income tax to co-sponsor this legislation.

The Flat Tax Act puts into law the original one-rate income tax concept advanced by Stanford economists Robert Hall and Alvin Rabushka.  It would completely replace the current personal and corporate income tax structures (as well as the death tax) with a new, voluntary system featuring a flat rate of 17 percent.  

The tax base in the Flat Tax Act would be restricted entirely to business profits, wages, retirement plan distributions, and unemployment compensation.  This is a rough proxy for a consumed income base, which excludes the return on savings from income taxation and allows for a full deduction for all business inputs.  Only in this way can a key tax reform principle be achieved: taxing all income once and only once.

A key advantage of your version of the flat tax idea is that each taxpayer gets to choose for himself whether to stay in the current system or move over to the flat tax system.  Families and business owners who have built their lives around the current system’s maze of exclusions, adjustments, deductions, and credits can stay in the current system if they want to.  Most Americans will gladly migrate over to the far easier flat tax system.

The Flat Tax Act provides for a generous family deduction to ensure that the new system is steeply progressive and exempts families at or near poverty from income taxation.  Under the bill, a family of four would face no income taxation on its first $46,100 (plus inflation) of taxable earnings.  This is nearly twice the federal poverty level for a family this size.  No American family is taxed below about 150% of the federal poverty level.

Finally, the Flat Tax Act creates a two-thirds Congressional supermajority requirement to raise the tax rate or limit the standard deduction.  This is a wise and necessary protection for taxpayers.

As Congress considers fundamental tax reform legislation this year, it would do well to start from the wise policy contained in H.R. 1040, the “Flat Tax Act.”
 

Full Letter PDF

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Obamacare Taxes: IRS "determining who to audit and who not to."


Posted by Ryan Ellis, John Kartch on Wednesday, March 6th, 2013, 1:21 PM PERMALINK


On Wednesday, March 5, Treasury Inspector General for Tax Administration J. Russell George tesified before the House Appropriations Committee. As part of his exchange with lawmakers, Mr. George was asked about the tax implications of Obamacare.

As reported by POLITICO's Rachael Bade:

“It is unprecedented in recent history, the amount of responsibility the IRS is being given in an area that most people don’t think of as an IRS function,” George said. Americans, he added, will have more questions about their taxes because of health care penalties or credits, flooding already busy call-in and walk-in tax help centers. “This is going to lead to problems, sir.”

And these resource issues are bound to spill over into tax fraud enforcement, where the IRS will have to do a cost-benefit analysis when determining which tax fraudsters to chase.

“They have to determine what enforcement mechanisms they’ll employ … how they go about determining who to audit and who not to,” George said.

You might already know about the twenty new or higher taxes in Obamacare.  What you might not know is that the non-partisan Government Accountability Office (GAO) says that the IRS has 47 new taxes and regulations to administer in overseeing Obamacare. 

The IRS is not capable of doing all this, as the quotation above confirms. 

Here is the list:

  1. Prohibits group health plans from discriminating in favor of highly compensated individuals.
  1. Establishes a temporary reinsurance program to provide reimbursement for a portion of the cost of providing health insurance coverage to early retirees.
  1. Imposes a penalty on health plans identified in an annual Department of Health and Human Services (HHS) penalty fee report, which is to be collected by the Financial Management Service after notice by the Department of the Treasury (Treasury).
  1. Requires state exchanges to send to Treasury a list of the individuals exempt from having minimum essential coverage, those eligible for the premium assistance tax credit, and those who notified the exchange of change in employer or who ceased coverage of a qualified health plan.
  1. Provides tax exemption for nonprofit health insurance companies receiving federal start-up grants or loans to provide insurance to individuals and small groups.
  1. Provides tax exemption for entities providing reinsurance for individual policies during first 3 years of state exchanges.
  1. Provides premium assistance refundable tax credits for applicable taxpayers who purchase insurance through a state exchange, paid directly to the insurance plans monthly or to individuals who pay out-of-pocket at the end of the taxable year.
  1. Provides a cost-sharing subsidy for applicable taxpayers to reduce annual out-of-pocket deductibles.
  1. Outlines the procedures for determining eligibility for exchange participation, premium tax credits and reduced cost-sharing, and individual responsibility exemptions.
  1. Allows advance determinations and payment of premium tax credits and cost-sharing reductions.
  1. Authorizes IRS to disclose certain taxpayer information to HHS for purposes of determining eligibility for premium tax credit, cost-sharing subsidy, or state programs including Medicaid, including (1) taxpayer identity; (2) the filing status of such taxpayer; (3) the modified adjusted gross income of taxpayer, spouse, or dependents; and (4) tax year of information.
  1. Provides nonrefundable tax credits for qualified small employers (no more than 25 full-time equivalents (FTE) with annual wages averaging no more than $50,000) for contributions made on behalf of its employees for premiums for qualified health plans.
  2. Requires all U.S. citizens and legal residents and their dependents to maintain minimum essential insurance coverage unless exempted starting in 2014 and imposes a fine on those failing to maintain such coverage.
  1. Requires every person who provides minimum essential coverage to file an information return with the insured individuals and with IRS.
  1. Imposes a penalty on large employers (50+ FTEs) who (1) do not offer coverage for all of their full-time employees, offer unaffordable minimum essential coverage, or offer plans with high out-of-pocket costs and (2) have at least one full-time employee certified as having purchased health insurance through a state exchange and was eligible for a tax credit or subsidy.
  1.  Requires information reporting of health insurance coverage information by large employers (subject to IRC 4980H) and certain other employers.
  1. Offers tax exclusion for reimbursement of premiums for small-group exchange participating health plans offered by small employers to all full-time employees as part of a cafeteria plan.
  1.  Subjects new group health plans to certain Public Health Service Act requirements and imposes the excise tax on plans that fail to meet those requirements. (Conforming amendment)
  1.  Authorizes IRS to disclose certain taxpayer information to the Social Security Administration (SSA) regarding reduction in the subsidy for Medicare Part D for high-income beneficiaries. (Conforming amendment)
  1.  Requires the independent institute partnering with the National Academy of Sciences (NAS) to implement a key national indicator system to be a nonprofit entity under section 501(c)(3).
  1. . Imposes a fee through 2019 on specified health insurance policies and applicable self-insured health plans to fund the Patient-Centered Outcomes Research Trust Fund to be used for comparative effectiveness research.
  1.  Imposes a 40 percent excise tax on high cost employer-sponsored health insurance coverage on the aggregate value of certain benefits that exceeds the threshold amount.
  1.  Requires employers to disclose the value of the employee’s health insurance coverage sponsored by the employer on the annual Form W-2.
  1.  Repeals the tax exclusion for over-the-counter medicines under a Health Flexible Spending Arrangement (FSA), Health Reimbursement Arrangement (HRA), Health Savings Account (HSA), or Archer Medical Savings Account (MSA), unless the medicine is prescribed by a physician.
  1.  Increases tax on distributions from HSAs and Archer MSAs not used for medical expenses.
  1.  Limits health FSAs under cafeteria plans to a maximum of $2,500 adjusted for inflation.
  1.  Imposes additional reporting requirements for charitable hospitals to qualify as tax-exempt under IRC 501(c)(3) and requires hospitals to conduct a community health needs assessment at least once every 3 years and to adopt a financial assistance policy and policy relating to emergency medical care.
  1.  Imposes a fee on each covered entity engaged in the business of manufacturing or importing branded prescription drugs.
  1.  Imposes an annual fee on any entity that provides health insurance for any U.S. health risk with net premiums written during the calendar year that exceed $25 million.
  1.  Allows the deduction for retiree prescription drug expenses only after the deduction amount is reduced by the amount of the excludable subsidy payments received.
  1. Increases the threshold for the itemized deduction for unreimbursed medical expenses from 7.5 percent of Adjusted Gross Income (AGI) to 10 percent of AGA (unless taxpayer turns 65 during 2013-2016 and then threshold remains at 7.5 percent).
  1.  Denies the business expenses deductions for wage payments made to individuals for services performed for certain health insurance providers if the payment exceeds $500,000.
  1. Imposes an additional Hospital Insurance (Medicare) Tax of 0.9 percent on wages over $200,000 for individuals and over $250,000 for couples filing jointly.
  1.  Limits eligibility for deductions under section 833 (treatment of Blue Cross and Blue Shield) unless the organizations meet a medical loss ratio standard of at least 85 percent for the taxable year.
  1.  Allows an exclusion from gross income for the value of specified Indian tribe health care benefits.
  1.  Allows small businesses to offer simple cafeteria plans—plans that increase employees’ health benefit options without the nondiscrimination requirements of regular cafeteria plans.
  1.  Establishes a 50 percent nonrefundable investment tax credit for qualified therapeutic discovery projects.
  1.  Requires employers to provide free choice vouchers to certain employees who contribute over 8 percent but less than 9.8 percent of their household income to the employer’s insurance plan to be used by employees to purchase health insurance though the exchange.
  1.  Imposes a tax on any indoor tanning service equal to 10 percent of amount paid for service.
  1.  Excludes from gross income amounts received by a taxpayer under any state loan repayment or loan forgiveness program that is intended to provide for the increased availability of health care services in underserved or health professional shortage areas.
  1.  Increases the maximum adoption tax credit and the maximum exclusion for employer-provided adoption assistance for 2010 and 2011 to $13,170 per eligible child.
  1.  Extends the exclusion from gross income for reimbursements for medical expenses under an employer-provided accident or health plan to employees’ children under 27 years.
  1.  Imposes an unearned income Medicare contribution tax of 3.8 percent on individuals, estates, and trusts on the lesser of net investment income or the excess of modified adjusted gross income (AGI + foreign earned income) over a threshold of $200,000 (individual) or $250,000 (joint).
  1.  Imposes a tax of 2.3 percent on the sale price of any taxable medical device on the manufacturer, producer, or importer
  1.  Amends the cellulosic biofuel producer credit (nonrefundable tax credit of about $1.01 for each gallon of qualified fuel production of the producer) to exclude fuels with significant water, sediment, or ash content (such as black liquor).
  1.  Clarifies and enhances the applications of the economic substance doctrine and imposes penalties for underpayments attributable to transactions lacking economic substance.
     
  2. Increases the required payment of corporate estimated tax due in the third quarter of 2014 by 15.75 percent for corporations with more than $1 billion in assets, and reduces the next payment due by the same amount.

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47 Reasons the IRS Is Unprepared to Enforce Obamacare


Posted by Ryan Ellis on Tuesday, March 5th, 2013, 4:11 PM PERMALINK


“It is unprecedented in recent history, the amount of responsibility the IRS is being given in an area that most people don’t think of as an IRS function...[t]his is going to lead to problems, sir...“[t]hey have to determine what enforcement mechanisms they’ll employ … how they go about determining who to audit and who not to.”

Treasury Inspector General for the IRS Russell George
March 5, 2013

Testimony before House Committee on Appropriations

You might already know about the twenty new or higher taxes in Obamacare.  What you might not know is that the non-partisan Government Accountability Office (GAO) says that the IRS has 47 new taxes and regulations to administer in overseeing Obamacare.  The IRS is not capable of doing all this, as the quote above confirms. 

Here is the list:

  1. Prohibits group health plans from discriminating in favor of highly compensated individuals.
  1. Establishes a temporary reinsurance program to provide reimbursement for a portion of the cost of providing health insurance coverage to early retirees.
  1. Imposes a penalty on health plans identified in an annual Department of Health and Human Services (HHS) penalty fee report, which is to be collected by the Financial Management Service after notice by the Department of the Treasury (Treasury).
  1. Requires state exchanges to send to Treasury a list of the individuals exempt from having minimum essential coverage, those eligible for the premium assistance tax credit, and those who notified the exchange of change in employer or who ceased coverage of a qualified health plan.
  1. Provides tax exemption for nonprofit health insurance companies receiving federal start-up grants or loans to provide insurance to individuals and small groups.
  1. Provides tax exemption for entities providing reinsurance for individual policies during first 3 years of state exchanges.
  1. Provides premium assistance refundable tax credits for applicable taxpayers who purchase insurance through a state exchange, paid directly to the insurance plans monthly or to individuals who pay out-of-pocket at the end of the taxable year.
  1. Provides a cost-sharing subsidy for applicable taxpayers to reduce annual out-of-pocket deductibles.
  1. Outlines the procedures for determining eligibility for exchange participation, premium tax credits and reduced cost-sharing, and individual responsibility exemptions.
  1. Allows advance determinations and payment of premium tax credits and cost-sharing reductions.
  1. Authorizes IRS to disclose certain taxpayer information to HHS for purposes of determining eligibility for premium tax credit, cost-sharing subsidy, or state programs including Medicaid, including (1) taxpayer identity; (2) the filing status of such taxpayer; (3) the modified adjusted gross income of taxpayer, spouse, or dependents; and (4) tax year of information.
  1. Provides nonrefundable tax credits for qualified small employers (no more than 25 full-time equivalents (FTE) with annual wages averaging no more than $50,000) for contributions made on behalf of its employees for premiums for qualified health plans.
  1. Requires all U.S. citizens and legal residents and their dependents to maintain minimum essential insurance coverage unless exempted starting in 2014 and imposes a fine on those failing to maintain such coverage.
  1. Requires every person who provides minimum essential coverage to file an information return with the insured individuals and with IRS.
  1. Imposes a penalty on large employers (50+ FTEs) who (1) do not offer coverage for all of their full-time employees, offer unaffordable minimum essential coverage, or offer plans with high out-of-pocket costs and (2) have at least one full-time employee certified as having purchased health insurance through a state exchange and was eligible for a tax credit or subsidy.
  1.  Requires information reporting of health insurance coverage information by large employers (subject to IRC 4980H) and certain other employers.
  1. Offers tax exclusion for reimbursement of premiums for small-group exchange participating health plans offered by small employers to all full-time employees as part of a cafeteria plan.
  1.  Subjects new group health plans to certain Public Health Service Act requirements and imposes the excise tax on plans that fail to meet those requirements. (Conforming amendment)
  1.  Authorizes IRS to disclose certain taxpayer information to the Social Security Administration (SSA) regarding reduction in the subsidy for Medicare Part D for high-income beneficiaries. (Conforming amendment)
  1.  Requires the independent institute partnering with the National Academy of Sciences (NAS) to implement a key national indicator system to be a nonprofit entity under section 501(c)(3).
  1. . Imposes a fee through 2019 on specified health insurance policies and applicable self-insured health plans to fund the Patient-Centered Outcomes Research Trust Fund to be used for comparative effectiveness research.
  1.  Imposes a 40 percent excise tax on high cost employer-sponsored health insurance coverage on the aggregate value of certain benefits that exceeds the threshold amount.
  1.  Requires employers to disclose the value of the employee’s health insurance coverage sponsored by the employer on the annual Form W-2.
  1.  Repeals the tax exclusion for over-the-counter medicines under a Health Flexible Spending Arrangement (FSA), Health Reimbursement Arrangement (HRA), Health Savings Account (HSA), or Archer Medical Savings Account (MSA), unless the medicine is prescribed by a physician.
  1.  Increases tax on distributions from HSAs and Archer MSAs not used for medical expenses.
  1.  Limits health FSAs under cafeteria plans to a maximum of $2,500 adjusted for inflation.
  1.  Imposes additional reporting requirements for charitable hospitals to qualify as tax-exempt under IRC 501(c)(3) and requires hospitals to conduct a community health needs assessment at least once every 3 years and to adopt a financial assistance policy and policy relating to emergency medical care.
  1.  Imposes a fee on each covered entity engaged in the business of manufacturing or importing branded prescription drugs.
  1.  Imposes an annual fee on any entity that provides health insurance for any U.S. health risk with net premiums written during the calendar year that exceed $25 million.
  1.  Allows the deduction for retiree prescription drug expenses only after the deduction amount is reduced by the amount of the excludable subsidy payments received.
  1. Increases the threshold for the itemized deduction for unreimbursed medical expenses from 7.5 percent of Adjusted Gross Income (AGI) to 10 percent of AGA (unless taxpayer turns 65 during 2013-2016 and then threshold remains at 7.5 percent).
  1.  Denies the business expenses deductions for wage payments made to individuals for services performed for certain health insurance providers if the payment exceeds $500,000.
  1. Imposes an additional Hospital Insurance (Medicare) Tax of 0.9 percent on wages over $200,000 for individuals and over $250,000 for couples filing jointly.
  1.  Limits eligibility for deductions under section 833 (treatment of Blue Cross and Blue Shield) unless the organizations meet a medical loss ratio standard of at least 85 percent for the taxable year.
  1.  Allows an exclusion from gross income for the value of specified Indian tribe health care benefits.
  1.  Allows small businesses to offer simple cafeteria plans—plans that increase employees’ health benefit options without the nondiscrimination requirements of regular cafeteria plans.
  1.  Establishes a 50 percent nonrefundable investment tax credit for qualified therapeutic discovery projects.
  1.  Requires employers to provide free choice vouchers to certain employees who contribute over 8 percent but less than 9.8 percent of their household income to the employer’s insurance plan to be used by employees to purchase health insurance though the exchange.
  1.  Imposes a tax on any indoor tanning service equal to 10 percent of amount paid for service.
  1.  Excludes from gross income amounts received by a taxpayer under any state loan repayment or loan forgiveness program that is intended to provide for the increased availability of health care services in underserved or health professional shortage areas.
  1.  Increases the maximum adoption tax credit and the maximum exclusion for employer-provided adoption assistance for 2010 and 2011 to $13,170 per eligible child.
  1.  Extends the exclusion from gross income for reimbursements for medical expenses under an employer-provided accident or health plan to employees’ children under 27 years.
  1.  Imposes an unearned income Medicare contribution tax of 3.8 percent on individuals, estates, and trusts on the lesser of net investment income or the excess of modified adjusted gross income (AGI + foreign earned income) over a threshold of $200,000 (individual) or $250,000 (joint).
  1.  Imposes a tax of 2.3 percent on the sale price of any taxable medical device on the manufacturer, producer, or importer
  1.  Amends the cellulosic biofuel producer credit (nonrefundable tax credit of about $1.01 for each gallon of qualified fuel production of the producer) to exclude fuels with significant water, sediment, or ash content (such as black liquor).
  1.  Clarifies and enhances the applications of the economic substance doctrine and imposes penalties for underpayments attributable to transaction lacking economic substance.
  1.  Increases the required payment of corporate estimated tax due in the third quarter of 2014 by 15.75 percent for corporations with more than $1 billion in assets, and reduces the next payment due by the same amount.

For a PDF version, click here.

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Taxpayer Advocates Issue Joint "Free File" Letter


Posted by Ryan Ellis on Monday, March 4th, 2013, 11:16 AM PERMALINK


The following joint letter was issued to Capitol Hill this morning:

 

Dear Congressmen:
 
We, the undersigned groups and conservative movement leaders, write today to express our support for H.R. 495, the “Free File Program Act,” sponsored by
Congressman Peter Roskam (R-Ill.) This legislation would make the private sector “Free File” program permanent.  We would urge you to co-sponsor this pro-taxpayer, anti-IRS power grab legislation.
 
It’s no secret that the IRS and big spenders in Washington, D.C. want to socialize all tax preparation in America.  The (ironically-named) IRS Office of Taxpayer Advocate has been pushing for IRS preparation of tax returns for years.  There’s only one reason proponents want to do this—tax revenues.  If the IRS invites a conflict of interest by adding “tax preparer” to its role as “tax collector,” it’s a near-certainty that everyone’s taxes will rise.  In fact, higher tax revenues are a major selling point of mandatory IRS-prepared tax returns.
 
The “Free File Program Act” is the best hope for preventing this taxpayer nightmare.  Since 2003, sixteen private sector tax software providers have voluntarily banded together to provide free tax preparation services to low- and moderate-income families with simple tax situations.  70 percent of all taxpayers—more than 100 million families—have access to this voluntary, private sector initiative.  To date, 37 million tax returns have been processed by Free File, saving taxpayers $129 million in administrative costs.
 
H.R. 495, the “Free File Program Act,” would permanently authorize this free and voluntary private sector effort.  More importantly, it directs the IRS that it “shall not compete with the private sector in providing these services to taxpayers, nor acquire, develop, or deploy enabling systems to duplicate or replace private tax preparation services.”  Never again would taxpayers have to worry about the IRS filling out a Form 1040 for them against their will.
 
As your fellow Americans struggle this tax season to comply with our nation’s costly and complicated tax system, we urge you to stand up for them by co-sponsoring H.R. 495, the “Free File Program Act.”

Sincerely:

 

Grover Norquist
Americans for Tax Reform

Duane Pardee
National Taxpayers Union

Tim Phillips
Americans for Prosperity

Tom Schatz
Council for Citizens Against Government Waste

Jim Martin
60 Plus Association

Heather Higgins
Independent Women's Forum

Phil Kerpen
American Committment

David Williams
Taxpayer Protection Alliance

Andrew Moylan
R Street Institute

Andrew Quinlan
Center for Freedom and Prosperity

Seton Motley
Less Government

Jimmy LaSalvia
GOProud
 

Letter PDF
 

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