Bipartisan change of rules for hedge fund managers and more

Carried interest tax breaks, marriage penalties, the State of the States and more! This brief will keep readers up to date on current tax drama.

Reuters/File
U.S. President Barack Obama (L) is greeted by U.S. House Speaker John Boehner (R-OH) prior to delivering his State of the Union address before a joint session of Congress on Capitol Hill in Washington, January 20, 2015.

Can’t we all just get along? (and end the carried interest tax break?) Private equity and hedge fund managers can currently count compensation from the funds they manage as capital gains. Treasury estimates that taxing those payments as ordinary income could boost tax revenues by $18 billion over a decade. President Obama argues that changing the current rule is something both parties could agree on in the current Congressional battle over funding the government. But the GOP’s focus on the Iran deal and Planned Parenthood makes a shutdown far more likely.

Take my marriage penalty, please. GOP candidate Jeb Bush promises his tax plan would eliminate the marriage penalty, but TPC’s Bob Williams shows how the proposal—according to publicly released information—can still impose large marriage penalties on low-income families that take credits such as the Earned Income Tax Credit.

On the Hill. Today the House Way & Means Committee marks up several tax related bills, including “extender” bills that would make bonus depreciation and the subpart F active financing exemption permanent. The Senate Finance Committee postponed its consideration of a bill to combat tax fraud, in part because an influential  accounting group as well as some in the GOP worry the measure would give IRS too much power to regulate paid tax preparers.

Today at noon, tune in online for the State of the States. The Urban Institute’s State and Local Finance Initiative will host a live webcast forum examining how tax and budget pressures affect the way state and local governments make spending decisions. Panelists include Joseph Henchman of the Tax Foundation, Nick Johnson of the Center on Budget and Policy Priorities, Ryan King of the Urban Institute’s Justice Policy Center, David Quam of the National Governors Association, and Kim Rueben of the State and Local Finance Initiative. TPC’s Howard Gleckman will moderate.

In the United Kingdom: One step closer to reducing tax credits for low-income workers.While the Labour and SNP opposed finance minister George Osborne’s spending cuts, the Commons ultimately approved plans to reduce eligibility for earned income tax credits. Backers say the cuts would save £4.4 billion. The opposition says 3 million lower-income working families could lose an average of £1,000 annually.

In Canada: Perhaps a cap on the corporate tax rate. In a tight race to unseat Prime Minister Stephen Harper, the Socialist-leaning New Democratic Party says it would hold any increases in the nation’s corporate tax rate to less than 2.5 percentage points, or “less than 17.5 percent.” The rate is currently 15 percent. The new rate still could boost taxes by up to C$5 billion (US$3.8 billion).  The party also proposes higher taxes on stock options and cuts to the small-business tax rate. The Canadian election will be held on October 19.

The post Breaks, Penalties, and Extenders appeared first on TaxVox.

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