The idea of replacing our current income tax system with a "flat-rate tax" is receiving renewed congressional interest. This report contains information on recent developments regarding flat-rate taxes, the relationship between income and consumption, international comparisons, other fundamental tax reforms, and descriptions of selected proposals.
Some Members of Congress have expressed interest in the feasibility of using a value-added tax (VAT) to either replace all or part of the income tax, finance health care reform, or to fund America’s war effort. A VAT is imposed at all levels of production on the differences between firms’ sales and their purchases from all other firms. Policymakers may be interested in the following aspects of a VAT: revenue yield, international comparison of composition of taxes, vertical equity, neutrality, inflation, balance-of-trade, national saving, administrative cost, intergovernmental relations, size of government, and public opinion.
Proposals to replace all or part of the income tax, proposals for national health care, and a proposal to finance America’s war effort have sparked congressional interest in the possibility of a broad-based consumption tax as a newsource of revenue. A value-added tax (VAT) or a national sales tax (NST) have been frequently discussed as possible new tax sources. Both the VAT and the NST are taxes on the consumption of goods and services and are conceptually similar. Yet, these taxes also have significant differences. This issue brief discusses some of the potential policy implications associated with these differences.
The Foreign Sales Corporation (FSC) provisions of the U.S. tax code permit U.S. firms to exempt between 15% and 30% of export income from taxation. FSC was enacted in 1984 to replace another tax benefit for exporting - the Domestic International Sales Corporation (DISC) provisions. U.S. trading partners had charged that DISC was an export subsidy, and so violated the General Agreement on Tariffs and Trade (GATT). In 1998 the European Union (EU) complained to the World Trade Organization (WTO, GATT's successor) that FSC itself is an export subsidy and violates the agreements on which the WTO is based. A WTO panel subsequently supported the EU. Under WTO procedures
This report provides a brief overview of the U.S. international tax system, the mechanics of FSC’s partial tax exemption, and how FSC fits into the overall U.S. tax structure.
This report summarizes and discusses potential adjustments in civil monetary penalties. The report covers the history of both legislation and enforcement on this issue which is central to the deciding how to enforce civil monetary penalties. The report identifies three courses of action that include either maintaining the status quo, adjusting civil monetary penalty maximums through legislation, or implementing some of the recommendations in the General Accounting Office's (GAO) report.
This report gives an overview of the American Opportunity Tax Credit (AOTC)—enacted on a temporary basis by the American Recovery and Reinvestment Act and extended through the end of 2012 by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010— which is a partially-refundable tax credit that provides financial assistance to taxpayers who are attending college, or whose children are attending college. There are a variety of policy options mentioned in the report regarding the AOTC, including extending the credit, extending a modified AOTC, or repealing the Hope and Lifetime Credits and extending a modified AOTC that includes provisions included in these credits.
This Congressional Research Service Report for Congress details Medicare Hospital Insurance (HI) financing as well as history of solvency and current insolvency projections.
On December 17, 1999, President Clinton signed the Work Incentives Improvement Act of 1999 (H.R. 1180; P.L. 106-170). This Act contained revenue provisions extending several popular tax benefits such as the work opportunity tax credit, the welfare to work tax credit, and the applicability of the nonrefundable personal tax credits to the individual alternative minimum tax. To pay for the extension of these tax benefits the Act also included several tax changes that increased revenue. Among these revenue offset provisions was a modification and limitation on the use of the installment method of reporting asset sales for taxpayers who normally use the accrual method of accounting.
This report discusses the President, House and Senate tax proposals. Beyond the comprehensive tax proposals, both the House and the Senate have considered a range of targeted tax proposals. One of the first tax-related measures considered during the 108th Congress would provide tax reductions to armed services personnel. Congress has also initiated reconsideration of legislation not completed in the 107th Congress: tax incentives for charitable giving deductions, pension diversification, energy taxation, and tax shelters.
This report describes the basic structure of the estate and gift tax, provides a brief history of recent developments, discusses the revenue effects and distribution of the tax, and briefly discusses issues and options.
Under the American Jobs Creation Act of 2004 (AJCA, P.L. 108-357), the Internal Revenue Service (IRS) has acquired for the second time in its history the legal authority to hire private debt collection agencies (PCAs) to assist in the collection of certain individual tax debt. The grant of authority grew out of a proposal made by the Bush Administration in its budget request for the IRS in both FY2004 and FY2005. This report focuses on IRS’s current plan for hiring PCAs to collect delinquent individual taxes and the policy issues it raises. It begins with an examination of the scope of IRS’s authority to use PCAs under the AJCA and concludes with a discussion of the main issues for Congress as it oversees IRS’s efforts to implement and manage the private tax debt collection initiative. The report will be updated to reflect significant legislative action and new developments related to the initiative
This report examines the Organization for Economic Cooperation and Development (OECD) and its role in changes to U.S. laws related to bribery, tax havens.
Political organizations have the primary purpose of influencing federal, state, or local elections and conducting similar activities. Those that qualify under section 527 of the Internal Revenue Code are taxed only on a certain income. Under the Code, 527 organizations are subject to reporting requirements that involve registration, the periodic disclosure of contributions and expenditures, and the annual filing of tax returns. Section 527 organizations must also comply with applicable campaign finance laws. This report will briefly describe these organizations and the reporting requirements they face under the Code. The report will be updated as events warrant.
This report examines the limitations that the Internal Revenue Code places on political activity -- including lobbying and campaign intervention -- by tax-exempt organizations.
This report provides an overview of the individual mandate, its associated penalty, and the exemptions from the mandate. It discusses the ACA reporting requirements designed, in part, to assist individuals in providing evidence of having met the mandate. The report includes some national- and state-level data on the application of the mandate's penalty in tax year (TY) 2014 and TY2015.
This report examines how the composition of saving might change with the introduction of a consumption tax. Specifically, the report analyzes the possible impact of a consumption based tax system on various forms and levels of saving.
This report provides information about Corporate “Inversions” and “Expatriation” on Firms That Incorporate Abroad for Tax Purposes which have altered their structure by substituting a foreign parent corporation for a domestic one.
This report discusses the impact of taxes on international trade and investment has been debated for decades. Most recently, a variety of bills addressing international taxation have been introduced in the 110th Congress—some would cut taxes for U.S. firms overseas, while others would increase taxes on foreign investment. The debate over taxes and foreign outsourcing has tended to grow more heated during times of domestic economic weakness and high unemployment; questions arise over whether taxes contribute to such weakness by discouraging exports (or encouraging imports) or by encouraging U.S. firms to move abroad. The debate over international taxation has again become prominent as a part of the wider debate over “outsourcing.” With taxes, the debate asks how the current system affects outsourcing, and whether policies designed to limit the phenomenon might be desirable.
This report shares the historical background information of the proposal. This file contains the pro and con arguments on Federal Tax sharing and the different proposals introduced during the first session of the 91st Congress.
Under provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA, P.L. 107-16, enacted June 7, 2001), the estate tax is scheduled to be repealed in 2010 but reinstated in 2011. All tax cut provisions of EGTRRA are scheduled to sunset on December 31, 2010. This report tracks actions in the 108th Congress to permanently repeal the estate tax or to retain but alter the tax.
The provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA, P.L. 107-16) are scheduled to sunset on December 31, 2010. On April 18, 2002, the House passed legislation, H.R. 586, that would remove the sunset provision and thereby make permanent all other provisions of the tax cut law enacted in June 2001. This includes making permanent the repeal of the estate tax. On June 6, the House passed a free-standing estate tax repeal bill. H.R. 2143 would remove the sunset provision of EGTRRA solely with respect to the estate tax provisions of the 2001 Act.
This report examines the effects of the federal excise tax on gasoline and analyzes the positive and negative effects of the tax. The report also evaluates the incentive structure that a higher gasoline tax would likely create, and examines a revised version of the tax, a variable gasoline tax.
Following the release of BP's second quarter earning statement, which showed a $10 billion reduction in tax liability for oil-spill-related cleanup and expenses, media headlines have generated public concern, and in some cases outrage, over these tax savings. Further, the ability of BP to realize these tax savings has generated a number of inquiries as to how and why BP is entitled to this reduction in tax liability. This report discusses the nature of BP's $10 billion "credit" and the nature of corporate tax deductions.
This report discusses, in broad terms, disaster-related tax policy. Challenges associated with using the tax code to deliver federal financial assistance following natural disasters are also discussed.
This report discusses the Internet Tax Freedom Act (ITFA; P.L. 105-277), which enacted in 1998, implemented a three-year moratorium preventing state and local governments from taxing Internet access, or imposing multiple or discriminatory taxes on electronic commerce.
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