Thursday, July 15, 2010

Senate Deliberates Fate of Expiring Bush Tax Cuts

This Professor Burman's comment that "It shows people respond to incentives" when Sen. Jim Bunning, R-Ken., asked about New York Yankees owner George Steinbrenner dying the same year the estate tax was not in effect has to be one of the most stupid things I've read in a while. Does he really believe Mr. Steinbrenner died intentionally in 2010 so his estate doesn't have to pay estate tax?

http://www.webcpa.com/news/Senate-Deliberates-Fate-Expiring-Bush-Tax-Cuts-54945-1.html

The Senate Finance Committee held a hearing Wednesday to discuss the soon-to-expire 2001 tax cuts and how to extend any of them without increasing the budget deficit or hurting economic growth.

Those included lowering income tax rates for all taxpayers, doubling the child tax credit from $500 to $1,000 a child and making the credit partially refundable, increasing the amount families could claim for the dependent care credit, eliminating the marriage penalty, and making it easier to deduct student loan interest.

“We made a lot of tax law changes in 2001 that have very broad support, throughout the Congress,” said Senate Finance Committee Chairman Max Baucus, D-Mont., in his opening statement. “But now we face a problem. These tax cuts are not permanent. They expire at the end of the year. The big questions before us now are whether we should make some of these tax cuts permanent, and if so, which ones?”

He added that the elephant in the room is the growing federal budget deficit, which is expected to exceed $1 trillion this year and remain high for the rest of this decade, according to the Congressional Budget Office.

Ranking member Charles Grassley, R-Iowa, balked at the label “Bush tax cuts” and noted that they were supported on a bipartisan basis at the time. “There’s a lot of talk about extending some, or all, of the 2001 and 2003 tax relief on only a temporary basis,” he added. “I question whether that really addresses the problem of uncertainty. Perhaps it just kicks that problem down the road a bit.”

Douglas Holtz-Eakin, president of the American Action Forum and former director of the Congressional Budget Office, agreed that temporary fixes created uncertainty. “There’s nothing good about having the Tax Code up for grabs year after year,” he said.

Sen. Ron Wyden, D-Ore., asked the expert witnesses what would force tax reform onto the agenda in Washington. Leonard Burman, a professor at the University of Syracuse, noted that the deficit commission that has been meeting in recent months in Washington would create more demand for tax reform, along with the need for more government revenue.

He later noted that Congress “can't extend all the tax cuts because we wouldn't be able to pay for the government.”

Sen. Jim Bunning, R-Ken., asked about New York Yankees owner George Steinbrenner dying the same year the estate tax was not in effect. “It shows people respond to incentives,” Burman replied.

Sen. Mike Enzi, R-Wyo., the only accountant in the Senate, said he wished there were more accountants there. “When we talk about tax reform, I’m often accused of trying to protect the accountants to give them more work,” he said.

Carol Markman, a CPA at Feldman Meinberg & Co. in Syosset, N.Y., and former president of the National Conference of CPA Practitioners, talked about the new 1099 reporting requirements in the health care reform law and the impact of clients bringing in their 1099 forms to their CPAs. Enzi asked her how raising taxes on small businesses might hurt reinvestment by them. Markman said her CPA firm deals with what the AICPA defines as “microbusinesses.” “The businesses we deal with are not in those top two brackets,” she said.

She and other witnesses were asked about the 1986 tax reforms. Markman believes one of the biggest flaws with the Tax Reform Act of 1986 was the failure to index the Alternative Minimum Tax. Holtz-Eakin said the 1986 tax reform didn’t last long and became administratively impossible to carry out.

Donald Marron, director of the Urban Institute’s Tax Policy Center, was asked about whether there was more stimulative effect in extending tax cuts or increasing stimulus spending. He cited a study that found the greatest stimulative effect would come from extending unemployment benefits. In summing up the hearing, Wyden called for a bipartisan approach to reforming the Tax Code.
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For more on George Steinbrenner, see http://www.nydailynews.com/ny_local/2010/07/15/2010-07-15_woman_reveals_lifelong_secret_that_yankee_owner_george_steinbrenner_donated_13k_.html