Obama wants to tax the rich. It's a plan abroad, too.
President Obama called on Congress last night to address wealth inequality through the tax code. But taxing the rich isn't just an American thing; Russia, Great Britain, and Brazil have rules or proposals in motion to put the tax code to work agains income inequality.
The State of the Union: Tax reform depends on where you are sitting. In his State of the Union Address last night, President Obama called on Congress to address wealth inequality through the tax code, largely by increasing the capital gains tax and imposing a bank tax to fund tax relief for middle-income earners. Senate Finance Committee chair Orrin Hatch likens the White House plan to “class warfare” but hopes his panel can vote on its own version of reform this year. TPC’s Howard Gleckman says the Obama and Hatch speeches reflect how wide the chasm is between the parties on fundamental reform issues. This morning, Treasury Secretary Jack Lew will focus on business tax reform in a Brookings Institution webcast.
Back to Russia, with Love. Some of the country’s richest are repatriating off-shore earnings. The usual rate on foreign earnings is 13 percent, but if the government concludes these assets are held in shell corporations controlled from Russia (which many reportedly are), the rate goes up to 20 percent. Russian entrepreneurs hold as much as $1 trillion offshore. The Bloomberg Billionaires Index finds that Russia’s 20 richest people each controlled a share of their wealth through overseas holding companies $181 billion of assets. President Putin needs the tax revenue: The country’s ruble is sagging in the wake of plunging oil prices and US and European sanctions.
A British mansion tax: Perhaps too crude an instrument. Senior Labour party member Peter Mandelson argues as much, going against Labour leader Ed Miliband’s plan to levy a tax on properties worth more than two million pounds. Miliband wants the tax to pay for a new National Health Service Fund. But Mandelson would rather see a progressive structure that sets rates based on home values. “It will be more effective and efficient in the longer term than simply clobbering people…” Lord Grantham would surely approve.
In Brazil, higher taxes on fuel, imports, loans, and makeup. The taxes will take effect next month and the government expects they’ll increase revenue by more than $7.5 billion annually. Brazil’s President Dilma Rousseff also vetoed a tax cut that would have cost the government about $2.6 billion. In her first four-year term, Brazil’s budget deficit grew, economic growth slowed, and inflation ticked up quickly. New finance minister Joaquim Levy says Brazil is “making changes step by step so it can reach, with as little sacrifice as possible, what’s needed to resume the path to growth.”
And back at home, tax filing season might be smoother with a better letter audit program.TPC’s Howard Gleckman explains why this recommendation from Taxpayer Advocate’s Nina Olson would improve the agency’s standing with taxpayers and save the agency money. Mailed correspondence from the IRS to a taxpayer is the most common way the agency resolves disputes with taxpayers. But the process often relies on multiple IRS examiners who have to keep track of paper records and notes from previous calls. That means more frustrated taxpayers and higher IRS cost. Howard concludes, “Assigning one examiner to see a case to conclusion is only common sense.” But when it comes to Congress and the IRS: Common sense is rare.
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