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Will the IRS Get What It Needs?

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President Biden proposes a $1.2 billion IRS budget hike. The first tranche of President Biden’s proposed fiscal year 2022 budget includes $13.2 billion for the IRS, a 10.4 percent increase from this year.  Biden wants the money to increase audits on wealthy individuals and corporations as well as “ new and improved online tools for taxpayers to communicate with the IRS easily and quickly.” He also wants the agency to improve its telephone and in-person taxpayer customer service, “including outreach and assistance to underserved communities,” according to the budget document.

But the IRS needs more than money to collect taxes from the rich. It needs better tax law. TPC’s Steve Rosenthal argues that “the real solution to tax avoidance and evasion is better tax law. If Congress enacted simpler laws and required additional reporting, the IRS would do a better job collecting taxes owed by businesses and investors.”

Rettig on the Hill tomorrow. IRS Commissioner Charles Rettig appears  tomorrow before the Senate Finance Committee to discuss the 2021 tax filing season as well as the agency’s future.  

Follow up with The Prescription on Thursday. Long-time National Taxpayer Advocate Nina Olson will be this week’s guest. Olson, currently executive director of the nonprofit Center for Taxpayer Rights, will talk with TPC senior fellow Howard Gleckman about the second COVID-19 tax season as well as the agency’s future. Learn more and register here for the April 15 noontime event.

Treasury engages on international tax reform. Senate Democrats propose their own plan. Unlike the Trump Administration, which refused to engage with the international community on a system for taxing corporations, the Biden Treasury seems all-in. One goal: a multinational minimum tax on global income. Biden also is pushing a destination-based model for the largest firms. Separately, a framework laid out by Finance Committee Chair Ron Wyden and others is similar, but not identical, to the plan proposed by Biden in his American Jobs Plan. 

Fifty percent business meal expense deduction for lunch at the gas ‘n go. Last week the IRS released guidance on when a diner can claim the temporary 100 percent business expense deduction for meals.  A taxpayer can deduct 100 percent of a meal purchased at a restaurant, but only 50 percent if the food or beverage comes from a business that primarily sells prepackaged goods not for immediate consumption. Examples include grocery stores, liquor stores, drug stores, convenience stores, newsstands, or vending machines.

When it comes to its revenue base, there’s at least one way the US can “build back better.” TPC’s Thornton Matheson makes the case that Congress and President Biden could build back a better economy—and address climate change—by “taxing fossil fuels at their full social cost–which includes not only carbon emissions but also local air pollution–and offsetting the burden on lower-income households with other policy measures. For example, the cost of a carbon tax could be rebated to low-income households through an expanded earned income tax credit.”

But Biden’s no-tax pledge could sink his climate change initiative. TPC’s Howard Gleckman explains that while Biden could fund his infrastructure initiative program and attack climate change with a carbon tax, he has a problem. Such a levy inevitably would raise taxes on  some households making less than $400,000—something Biden vowed never to do. “Biden should not allow a misbegotten promise to block an effective weapon in his war on climate change.”

Should all families receive the child tax credit? TPC’s Tax Hound considers the evolution of the child tax credit and recommends a simple modification to make the benefit more equitable.

For the latest tax news, subscribe to the Tax Policy Center’s Daily Deduction. Sign up here to have it delivered to your inbox weekdays at 8:00 am (Mondays only when Congress is in recess). We welcome tips on new research or other news. Email Renu Zaretsky at dailydeduction@taxpolicycenter.org.

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