Domestic Taxes

A value-added tax (VAT) is a "novel" idea for the U.S., President Barack Obama said Wednesday.

The president neither ruled in nor ruled out implementing a VAT on goods and services, saying that he is waiting to see what recommendations the committee he's set up on deficit reduction will generate.

"You know, I know that there's been a lot of talk around town lately about the value-added tax -- that is something that has worked for some countries," Obama said in an interview with CNBC. "It's something that would be novel -- for the United States."

The executive director of the White House panel on deficit reduction, Bruce Reed, has told Fox News that the VAT is in the mix of options for the commission, while House Speaker Nancy Pelosi (D-Calif.) said last fall that the VAT is among a number of revenue-generating options that are "on the table."

The VAT is a tax on manufacturers at each stage of production on the amount of value an additional producer adds to a product.

The president said that before he says the idea makes sense or not, he "want[s] to get a better picture of what our options are."

"And my first priority is to figure out how can we reduce wasteful spending so that we have a baseline of the core services that we need and the government should provide," Obama explained. "And then we decide how do we pay for that.  As opposed to figuring out how much money can we raise and then -- not have to make some tough choices on the spending side."

Senate Republican Whip Jon Kyl (R-Ariz.) on Wednesday said he opposes a plan by tax writers to pare back the tax on carried interest to help pay for legislation extending several expired tax breaks. 

"The reason why they are trying to pare it back is cause they realize that it is a bad thing to do for American competitiveness," he said. "It kills our ability to do business abroad."  Read more...

A value-added tax isn't on the table at this point but could be considered if a bipartisan debt commission recommends it, White House spokesman Robert Gibbs said Wednesday. 

Gibbs reiterated again today that the White House isn't considering the VAT, a consumption tax, and would wait for recommendations from the National Committee on Fiscal Responsibility and Reform, which could include raising taxes and cutting federal spending. 

"It wasn't something the president had under consideration," Gibbs told reporters. 

He added that the president "looks forward to the recommendations" of the panel. 

The 18-member bipartisan debt panel has until Dec. 1 to provide recommendations on how to reduce the federal budget deficit to 3 percent of gross domestic product by 2015. It also will look at getting costs under control for entitlement programs such as Medicare, Medicaid and Social Security. 

President Barack Obama is expected to address the debt panel before their first meeting April 27. 

Growth Energy, an advocate for green fuel alternatives, applauded Sens. Chuck Grassley (R-Iowa) and Kent Conrad (D-N.D.) for introducing legislation that extends the Volumetric Ethanol Excise Tax Credit and ethanol tariffs for 5 years, and the cellulosic tax credit for 3 years. 

"Extending these measures will ensure job growth and economic development across the entire country -- all while reducing our dependence on foreign oil and cleaning our skies," said Tom Buis, the group's CEO, in prepared remarks, adding that without the extensions "hundreds of thousands of jobs and billions of dollars" would be drained from the economy.

Grassley said the recent lapse of the biodiesel tax credit in 2009 cost the country 29,000 jobs and another 112,000 positions could be lost if Congress fails to extend the ethanol provisions. 

Senate Banking Chairman Kent Conrad (D-N.D.) on Tuesday outlined his budget proposal that aligns closely to President Obama's budget when it comes to tax cuts. 

Conrad provides $780 billion in tax relief over the next 5 years that is largely aimed at the middle class. Read more...

The House on Tuesday is set to approve legislation that allows the Federal Deposit Insurance Corporation (FDIC) to insure college savings accounts, known as 529 plans, up to $250,000. The bill is on tonight's suspension calendar and is expected to pass. 

Rep. Emanuel Cleaver (D-Mo.) is a key sponsor of the legislation. 

529 plans are tax-advantaged saving accounts where contributions are normally taxed at the time of deposit, but grow tax-free. 

That National Association of Manufacturers (NAM) on Tuesday urged lawmakers to extend the Bush tax cuts for upper-income taxpayers, saying the rate increase will hit small businesses that pay taxes based on individual rates. 

Approximately 70 percent of firms belonging to NAM are taxed at individual rates, said Dorothy Coleman, VP of tax and policy at the organization.

NAM released a poll by RSM McGladrey today showing that 87 percent of manufacturers and distributors are concerned about the impending rate increase. Over 60 percent of respondents are very concerned. Read more...

Two advocates of tax incentives for biofuels and ethanol are arguing that extending ethanol tax credits will create jobs and increase the nation's energy independence. 

Sens. Kent Conrad (D-N.D.) and Charles Grassley (R-Iowa) introduced a bill Tuesday that would extend through 2015 several tax credits including those for volumetric ethanol, small ethanol producers, cellulosic producers and the ethanol import tariff.  

Failure to extend the ethanol credit could cost 112,000 jobs, said Grassley, ranking member on the Senate Finance Committee. 

The bill, which has bicameral and bipartisan support, would extend the current 45-cent per gallon ethanol tax credit and the 10-cent per gallon credit for small producers for five years. In addition, the ethanol tariff would be extended through 2015. All three are set to expire at the end of this year. 

Sen. Chuck Schumer (D-N.Y.) on Tuesday said a tax on banks to limit excessive risk-taking should be rolled into financial reform legislation. 

"I believe it should be included in the financial reform legislation soon to be debated on the Senate floor, I agree with the administration in this regard," he said, adding that the tax should be "ready in time to be included" in the reform bill. 

Schumer is a member of the tax-writing Senate Finance Committee. His comments came during the first in a series of committee hearings on creating a bank tax.  

Testifying before Senate Finance on creating a bank tax, Neil Barofsky, the Special Inspector General for the TARP, told the committee that he does not have enough information on the tax to say how it should be structured.  

""Once it's more fully formed and we're going to be responsible for overseeing it is sort of when we roll up our sleeves and dig into it," he said. "But we really haven't had the opportunity to fully analyze the proposal as it has been reported in the press." 

President Obama recently directed Congress to create a tax on banks to limit excessive risk taking. Sources told The Hill that staffers are bit confused on how to fulfill the directive. They say basic questions from staffers to the administration about how the tax should be structured remain unanswered.