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CRS — Tax Deductions for Individuals: A Summary (February 18, 2015)

March 5, 2015 Comments off

Tax Deductions for Individuals: A Summary (PDF)
Source: Congressional Research Service (via Federation of American Scientists)

Every tax filer has the option to claim deductions when filing their income tax return. Deductions serve four main purposes in the tax code: (1) to account for large, unusual, and necessary personal expenditures, such as extraordinary medical expenses; (2) to encourage certain types of activities, such as homeownership and charitable contributions; (3) to ease the burden of taxes paid to state and local governments; and (4) to adjust for the expenses of earning income, such as unreimbursed employee expenses.

CRS — Tax-Preferred College Savings Plans: An Introduction to 529 Plans (February 23, 2015)

March 5, 2015 Comments off

Tax-Preferred College Savings Plans: An Introduction to 529 Plans (PDF)
Source: Congressional Research Service (via Federation of American Scientists)

In the face of the rising cost of higher education, families may consider a variety of ways to finance their children’s college expenses. In order to make higher education more affordable, Congress has enacted legislation that provides favorable tax treatment for college savings. Among the options families may choose to save for college, they may consider using tax-advantaged qualified tuition programs (QTPs), also known as 529 plans. This report provides an overview of the mechanics of 529 plans and examines the specific tax advantages of these plans. For an overview of all tax benefits for higher education, see CRS Report R41967, Higher Education Tax Benefits: Brief Overview and Budgetary Effects, by Margot L. Crandall-Hollick.

Many Aspects of the Affordable Care Act Would Not Be Affected by King v. Burwell, CRS Insights (March 3, 2015)

March 5, 2015 Comments off

Many Aspects of the Affordable Care Act Would Not Be Affected by King v. Burwell, CRS Insights (PDF)
Source: Congressional Research Service (via Federation of American Scientists)

The U.S. Supreme Court is preparing to hear oral arguments on March 4, 2015, in the King v. Burwell case where the court is to examine whether or not the statutory language of the Patient Protection and Affordable Care Act (ACA) allows the IRS to make premium tax credits available to residents of states that declined to establish health insurance exchanges. For a more detailed examination of the issues at stake in King v. Burwell, see CRS Report R43833, Premium Tax Credits and Federal Health Insurance Exchanges: Questions and Answers.

The outcome of this case may have significant implications for the future of the private health insurance expansion provisions contained in the ACA. However, what has garnered less attention is the fact that the ACA established numerous programs and policies that operate independently of the premium tax credit regime and would remain current law absent any further action by Congress. This Insight highlights some of the key public health and health services-related issues and programs that would remain in effect. A discussion of other ACA provisions that would not be affected by King v. Burwell—including changes to Medicare, Medicaid, and the State Children’s Health Insurance Program, as well as some of the private insurance changes (e.g., guaranteed issue and renewal of coverage)—is beyond the scope of this document. In addition, indirect effects such as potential impact of the case on safety net providers are not addressed. For a detailed overview of many of the non-health insurance expansion related provisions of the ACA, see CRS Report 41278, Public Health, Workforce, Quality,
and Related Provisions in ACA: Summary and Timeline.

Statistics of Income Bulletin: Winter 2015

March 4, 2015 Comments off

SOI Bulletin: Winter 2015
Source: Internal Revenue Service

Sole Proprietorship Returns, 2012
For Tax Year 2012, taxpayers reported nonfarm sole proprietorship activity on approximately 23.6 million individual income tax returns, a 0.5-percent increase from 2011. Profits rose to $304.9 billion in 2012, a 7.9-percent improvement over the previous year. In constant dollars, total nonfarm sole proprietorship profits increased 6.0 percent in 2012. Profits as a percent of business receipts rose 1.1-percentage points to 23.4 percent, resulting in the highest level during the 25-year period, 1988 through 2012.

Foreign Recipients of U.S. Income, 2011
US.-source income paid to foreign persons, as reported on Form 1042-S, totaled $568.5 billion for Calendar Year 2011. This represents an increase of 1.9 percent from 2010. Withholding taxes on this income fell by 11.9 percent to $8.9 billion in 2011. Almost 90 percent of all U.S. source income paid to foreign persons was exempt from withholding tax. The residual U.S.-source income subject to tax was withheld at an average rate of 15 percent.

Individual Tax Returns Filed by Dependents, 1987–2011
The goal of this article is to help customers, who use individual tax data published in Statistics of Income’s annual publications, separate the data collected from tax returns filed by dependents (dependent returns) from the data collected from all individual tax returns. Prior to the Tax Reform Act of 1986 (TRA86), all taxpayers received the benefit of taking a personal exemption, including those claimed as a dependent on another person’s tax return. Separating tax returns filed by dependents from all returns claiming a personal exemption would be difficult to determine for years prior to TRA86. For that reason, the figures and tables in this article include only post-1986 tax data.

Partnership Returns, 2012
The number of partnerships and partners in the United States continued to increase for Tax Year 2012. Partnerships filed more than 3 million tax returns for the year, representing more than 25 million partners. The real estate and leasing sector contained nearly half of all partnerships (49.1 percent) and just over a quarter of all partners (28.9 percent).

The Power of the Purse: The Contributions of Hispanics to America’s Spending Power and Tax Revenues in 2013

March 3, 2015 Comments off

The Power of the Purse: The Contributions of Hispanics to America’s Spending Power and Tax Revenues in 2013
Source: Partnership for a New American Economy

The Partnership for a New American Economy’s new report, “The Power of the Purse: The Contributions of Hispanics to America’s Spending Power and Tax Revenues in 2013,” highlights the important role that both native and foreign-born Hispanics play as consumers and taxpayers, as well as their contributions to Medicare and Social Security programs.

Key findings include:

  • Hispanic households, both native and foreign-born, account for a large portion of America’s overall spending power. In 2013, Hispanics had an estimated after-tax income of more than $605 billion. That figure is equivalent to almost one out of every 
10 dollars of disposable income held in the United States that year. Foreign-born Hispanic households made up a sizeable portion of that figure: We estimate their spending power totaled $287 billion that year.
  • The growing earnings of Hispanic households have made them major contributors to U.S. tax revenue. In 2013, Hispanic households contributed more than $190 billion to U.S. tax revenues as a whole, including almost $67 billion in state and local tax payments. Of this, foreign-born Hispanics contributed more than $86 billion in tax revenues nationwide. That included almost $32 billion in state and local taxes and more than $54 billion in taxes to the federal government.
  • In some states, Hispanics now account for a large percentage of spending power and tax revenues overall. In both Texas and California, Hispanic households had more than $100 billion in after-tax income in 2013, accounting for more than one of every five dollars available to spend in each state that year. In Arizona, a state with a rapidly growing Hispanic population, their earnings after taxes accounted for almost one-sixth of the spending power in the state. In Florida, Hispanics contributed more than one out of every six dollars in tax revenue paid by residents of the state.
  • Hispanics, and foreign-born Hispanics in particular, play an important role sustaining America’s Medicare and Social Security programs. In 2013, Hispanic households contributed more than $98 billion to Social Security and almost $23 billion to the Medicare’s core trust fund. Foreign-born Hispanics in particular contributed more than $46 billion to Social Security, while paying in more than $10 billion to the Medicare program. Past studies have indicated that in Medicare in particular, immigrants draw down far less than they put in to the trust fund each year, making such tax contributions particularly valuable.

Legalized Tax Fraud: How Top US Corporations Continue to Profit Through Offshore Tax Havens

March 3, 2015 Comments off

Legalized Tax Fraud: How Top US Corporations Continue to Profit Through Offshore Tax Havens
Source: U.S. Senate Committee on the Budget (Sen. Bernie Sanders, I-VT)

Sen. Bernie Sanders (I-Vt.), the ranking member of the Senate Budget Committee, today called on America’s leading corporations to stop sheltering profits in the Cayman Islands and other offshore tax havens. He also urged them to stop lobbying Congress for additional tax breaks as the Business Roundtable, an organization representing some of the largest corporations in the country, is expected to do tomorrow.

Sanders issued a new report that provides a fresh glimpse into the far-reaching corporate tax avoidance strategies of large and profitable companies represented by the Business Roundtable, including what he calls the “legalized tax fraud” of sheltering profits in offshore tax havens.

The report shows for the first time how more than 50 percent of the companies represented by the Business Roundtable are collectively holding more than $1 trillion in profits in offshore tax haven countries where it is not subject to U.S. taxes.

The report also shows that several of the companies have been profitable for years but pay nowhere near the 35 percent income tax rate that nominally applies to corporate profits. In fact, according to a report last year by the Government Accountability Office, the effective tax rate for large, profitable corporations was just 12.6 percent in 2010, a figure that Sanders is asking the GAO to update today. The report also points out that a number of huge corporations – including General Electric, Boeing, Duke Energy and Verizon – not only have paid nothing in federal income tax in recent years, they received refunds from the IRS.

Great Gaps Persist in State Safety Nets, Interactive Policy Tool Shows

February 27, 2015 Comments off

Great Gaps Persist in State Safety Nets, Interactive Policy Tool Shows
Source: National Center for Children in Poverty

Today, the National Center for Children in Poverty (NCCP) launches an updated and enhanced edition of its 50-State Policy Tracker, a unique online tool for comparing safety net policies that are critical to the economic security of working families. The tool reveals striking variation among states, showing that state of residence has a major impact on whether low-income working parents succeed in making ends meet.

The Policy Tracker makes it easy for policymakers, journalists, social researchers, and advocates to quickly and accurately compare state policies and programs vital to the well-being of low-income families. It includes key state data for 10 important social programs:

  • Child care subsidies
  • Child and Dependent Care Tax Credit
  • Earned Income Tax Credit
  • Family and medical leave
  • Income tax policy
  • Medicaid/Children’s Health Insurance Program
  • Minimum wage
  • Supplemental Nutrition Assistance Program
  • Temporary Assistance for Needy Families
  • Unemployment insurance
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