Domestic Taxes

A senior Democrat on the House Ways and Means Committee has introduced legislation to permanently extend an education tax credit beloved by many Democrats.

Rep. Lloyd Doggett’s (D-Texas) office says his bill would also make the American Opportunity Tax Credit (AOTC) more accessible to students with Pell grants.

“Higher education success should depend on how hard you work, not how much you can afford to spend,” Doggett said in a statement. “Making this tax cut for tuition and textbooks permanent and easier to claim for families is critical to our future competitiveness.”

The Senate advanced a bill to allow states to collect online sales tax and will vote on it May 6.

Tax writers on both sides of the aisle sounded skeptical about rolling back the deduction for home mortgage interest on Thursday, underscoring the challenge Washington faces in giving the tax code a thorough rewrite.

Lawmakers at a House Ways and Means Committee hearing called the deduction a lifeline for the middle class and a helping hand toward the American dream of homeownership.

And while both Democrats and Republicans said that the tax code needs to be made simpler, few lawmakers showed any appetite for making radical changes to the mortgage deduction, which is both popular and expensive to maintain. The tax break cost the government an estimated $68 billion in 2012, according to the nonpartisan Joint Committee on Taxation (JCT).

Ways and Means Chairman Dave Camp (R-Mich.) said at the hearing that real estate taxes was “an area that needs careful, thoughtful review” and that the mortgage interest deduction had helped many potential homeowners reach their goal.

“While I often joke that the code is more than 10 times the size of the Bible with none of the good news, what I should also add is that not everything in the code is bad,” Camp said in his opening statement.

A Senate Finance Committee white paper on possible federal tax code changes for energy suggested establishing a carbon tax in place of most or all energy tax incentives.

The paper offered the carbon tax with a range of other policy options to help chip away at a Congressional Budget Office-estimated $16 billion of foregone energy-related tax expenditures in fiscal 2013.

The paper, released Thursday, came with the disclaimer that the policy suggestions “do not necessarily have the endorsement” of committee Chairman Max Baucus (D-Mont.) or ranking member Sen. Orrin Hatch (R-Utah).

The Republican said he's appalled at a report that found the agency had overpaid up to $13.6 billion in low-income tax credits. 

The National Governors Association has a message for Grover Norquist and Americans for Tax Reform: The online sales tax bill on the Senate floor does not violate ATR’s no-tax pledge.

The NGA, which backs the sales tax bill, noted in a Thursday statement that the Congressional Budget Office had ruled that the Marketplace Fairness Act had no impact on federal revenues.

The group also said that the anti-tax pledge that the ATR administers – and the vast majority of congressional Republicans have signed – calls on lawmakers to oppose marginal rate increases or the net reduction of tax credits and deductions.

“Marketplace Fairness does neither. It is not a new tax or a tax increase,” the NGA said in its statement. “It clearly does not violate the pledge. In fact, the American for Tax Reform themselves admitted to leadership of the National Governors Association that this was not a violation. To say anything else is disingenuous.

“This is a last ditch effort to undermine legislation that upholds the principles of federalism and levels the playing field between Main Street and e-street,” the association added.

Sen. Max Baucus (D-Mont.) objected to an amendment to the online sales tax bill from Sen. Susan Collins (R-Maine) on Thursday.

Baucus, who serves as chairman of the Senate Finance Committee, said it was a "travesty" that the Marketplace Fairness Act was not going through his committee before coming to the Senate floor.

"This is a travesty, the way this bill is being considered," Baucus said.

The Treasury Department announced Wednesday that it had awarded $3.5 billion in awards for a tax break aimed at helping spark economic development in areas of need.

The $3.5 billion given out under the New Markets Tax Credit will be funneled to 85 organizations in all, located in 28 states and Washington, D.C.

“These credits are often critical in turning these redevelopment efforts into a reality,” Sen. Chuck Schumer (D-N.Y.), a key supporter of the tax credit, said on a conference call on Wednesday. Read more...

“It would be a bloodbath if Schumer tried to leapfrog Wyden,” said one Senate Democratic aide.

The Congressional Budget Office said Wednesday that the online sales tax measure the Senate is considering would not have an effect on federal revenue. 

CBO added that the bill, the Marketplace Fairness Act, would not impose any mandates on the private sector, nor any costs on state or local governments.

The Marketplace Fairness Act cleared a procedural hurdle in the Senate on Wednesday with 75 votes, and Majority Leader Harry Reid (D-Nev.) has vowed to finish off the bill this week. Lawmakers are not scheduled to be in Washington next week.