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Tag: Taxes
Pros and Cons of Cutting IRS Funding
Republicans in Congress are attempting to reduce the $80 billion increase in funding for the Internal Revenue Service (IRS) that Democrats approved as part of the Inflation Reduction Act of 2022. The funding was justified as a way to correct years of underfunding for the tax collection agency, leading to poor customer service and processing delays. The additional funding will be used for modernization and IT improvements as well as hiring 87,000 new IRS employees to help raise an additional $204 billion in tax revenue over a 10-year period. However, in January the House voted 221-210, along a party line…
Pros and Cons of Raising the Corporate Tax
President Joe Biden announced this spring that he plans to raise the corporate tax rate to help fund his more than $2 trillion infrastructure bill. Supporters of the plan argued that it would help support American workers and families because corporations would be putting money back into the U.S. economy. Detractors of the higher tax rate, however, said that a greater tax burden on corporations could lead to job losses and a weakened economy. Under the Trump administration, the corporate tax rate was cut from 35% to 21%. Biden has announced he would increase the rate to 28%. Biden touted…
Pros and Cons of Expanding the Child Tax Credit
The Biden administration moved to help middle-income families with an expanded child tax credit included in the $1.9 trillion COVID-19 relief package that passed Congress in March. The American Rescue Plan increased the child tax credit from $2,000 to $3,600 per child under age six and $3,000 per child between the ages of 6 and 17 for one year. The credit will also be 100% refundable for one year. Half of the credit would be paid directly to families starting in July 2021, rather than being solely a credit applied to a family’s annual tax bill. (Although the American Rescue…
Churches and Politics
The House-passed version of the tax reform bill included repeal of the Johnson amendment, which prohibits nonprofit, tax-exempt organizations from endorsing specific candidates. Named after then-Senator Lyndon Johnson (TX-D), the amendment was adopted as part of 1954 tax reform legislation. It added a clause to the Internal Revenue Service (IRS) definition of 501(c)(3) tax-exempt organizations that excludes any public charity, private foundation, or religious congregation “which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.” Advocates of Johnson amendment repeal,…
Congress Expected to Punt on Major Issues
As Congress nears the close of a truncated pre-election session, a series of significant issues have yet to be resolved and are likely to be put off until the post-election lame-duck session. The following is a summary of the most important unfinished business before the House and Senate:
President Signs Tax Cut Deal
On December 17, President Obama signed legislation extending the Bush-era tax cuts for all Americans for two years and emergency unemployment insurance for 18 months. Although the agreement struck by President Obama and the Republican congressional leaders initially met with substantial criticism, primarily from House Democrats, the legislation ultimately passed easily, 81 to 19 in the Senate and 277 to 148 in the House. The January 2011 Congressional Digest covers the debate leading up to these votes, during which Congress considered proposals to let the tax cuts expire only for the highest-income taxpayers.
In his remarks at the signing ceremony, the President said, “Over the course of 2011, 155 million workers will receive tax relief from the new payroll tax cut included in this bill — about $1,000 for the average family … real money that’s going to make a real difference in people’s lives.” The White House posted a summary of the new law’s provisions on its website.
Although the issue is settled for now, the provisions of the package — including a Social Security tax “holiday,” estate tax cuts, and various business tax incentives — are temporary, so there will be ample opportunity for Congress to rehash the pros and cons of the agreement over the next two years. The President has signaled his intent to propose a broad overhaul of the tax code next year — in which case that debate may come sooner rather than later.
What to Expect in the Lame Duck Session
Congress has a full plate of unfinished business to consider during the lame duck session, which begins November 15, continues for a week, and then resumes after Thanksgiving. Congressional Digest and International Debates have covered many of the issues on this agenda.