Higher Education Tax Breaks Violate Several Principles of Good Tax Policy

Laura Saunders' Wall Street Journal article of 10/29/11 - "Back to School" includes a nice summary of many of the numerous special rules in the federal income tax that provide a tax break for either saving for high education costs or currently incurring them. I have written before about the problems many of these provisions post by being in the tax law (such as 3/8/11 and 3/22/11). These provisions, such as deductions for higher education expenses and $2,500 tax credits for each of the first four years of college) violate principles of equity, neutrality, simplicity and transparency. As noted in a report issued last week by the Treasury Inspector General's office (TIGTA), they also violate the minimum tax gap principle.

The title of the press release of the TIGTA report says a lot - 2.1 Million Taxpayers May Have Received $3.2 Billion in Erroneous Education Tax Credits (10/20/11). Worse yet, 52% of these returns were prepared by a paid preparer. I think that notes the complexity of the provisions. Also noted:

"Other findings include:

• 370,924 taxpayers received an estimated $550 million in education credits for which they were not eligible because they did not attend college for the required amount of time and/or were post-graduate students.
• 84,754 students who did not have a valid Social Security Number (SSN) were claimed by taxpayers who received $103 million in education credits. Each of these students had an Individual Taxpayer Identification Number (ITIN).
• 63,713 taxpayers erroneously received an estimated $88.4 million in education credits for students claimed as dependents or spouses on another taxpayer’s tax return; and, 250 prisoners erroneously received $255,879 in education credits. Additionally, an estimated 52 percent of the returns with potentially erroneous education credits were prepared by paid tax preparers, who should have been aware of the eligibility requirements.

“Based on the results of our review, the IRS does not have effective processes to identify taxpayers who claim erroneous education credits,” said J. Russell George, Treasury Inspector General for Tax Administration. “If not addressed, this could result in up to $12.8 billion in potentially erroneous refunds over four years,” Mr. George added."

Among the 11 recommendations made by TIGTA, is the following (#2):

"Revise the Form 8863 to require taxpayers to provide identifying information for the educational institution that the student(s) being claimed for the education credits attended. This identifying information should include the name, address, and Federal EIN of the educational institution. In addition, the form should be revised to include specific information supporting key eligibility requirements that could be used to verify requirements were met which may serve as a deterrent for those taxpayers who intend to erroneously claim these credits."

Other recommendations include having the IRS pursue the erroneous claims and having Congress modify the law to give the IRS "math error authority" to allow for earlier identification of the errors. (footnote 23 of the report defines "math error authority" as "granted by Congress and allows the IRS to identify calculation errors and obvious noncompliance. This provides an administrative benefit to the IRS because it can correct certain errors during tax return processing without having to wait to audit a taxpayer’s return.")

Some solutions:

1. Any credit or special deduction enacted by Congress should include "math error authority" for the IRS.
2. Congress should stop creating new tax deductions and credits. If the benefits connected to them are so worthwhile, they should find a better spot for them. For example, if the education credits were instead offered as scholarships or larger Pell grants, this issues of them being given to people not even in college or without the proper identification would not happen. Also, the dollars could be distributed based on needs (those seeking Pell grants and other scholarships complete a FAFSA form) and they would be distributed when needed - when tuition is due!
3. Reduce the number of existing tax expenditures and use the extra dollars generated to pay down the deficit and keep lower rates for those using them (generally those under $150,000) by keeping their lower rates after 2012.

What do you think?

CBO Trends in Household Income and Relevance to Current Tax Reform Debate

A lot of talk about tax reform today, including the proposals from presidential candidates, is either directly or indirectly about who should pay. The tax base and rate affect work, investment and spending decisions and affect how one's income and wealth may grow or not grow. For example, a few candidates are pushing for a consumption tax (Cain's 9-9-9 plan includes a 9% sales tax plus a 9% subtraction method VAT for businesses that will ultimately be paid by individuals; and Perry's flat tax). These are regressive taxes that without the Earned Income Tax Credit, will most likely result in a greater tax burden for low and middle-income taxpayers.

For over ten years, we have had lower capital gains rates than we had with the Tax Reform Act of 1986 which the maximum capital gains rate was 28%. In the late 1990s it was brought down to 20% (18% if the asset was held over 5 years) and the 2001/2003 tax cuts lowered the rate on many capital gains to 15%. The bulk of capital gain income is reported on the returns of high income individuals, such as Warren Buffett, bringing their average tax rate down often to a lower rate than middle-income taxpayers.

This week, the Congressional Budget Office (CBO) released a report - Trends in the Distribution of Household Income Between 1979 and 2007. Per the report:

"The share of income going to higher-income households rose, while the share going to lower-income households fell.

• The top fifth of the population saw a 10-percentage-point increase in their share of after-tax income.
• Most of that growth went to the top 1 percent of the population.
• All other groups saw their shares decline by 2 to 3 percentage points."

The chart at the start of this post, from the report, highlights the significance in the changes between the quintiles and top 1%.

Should the lower qunitiles be taxed more? Can the top 1% pay more? These are good questions that I hope will be answered with the support of data by those touting any particular tax reform.

What do you think?

Taxes and behavior

The "Up for Discussion" section of the Zocalo Public Square addresses the topic - "Taxes Hurt So Good." This ties to a presentation on 10/19/11 by Robert Frank, author of The Darwin Economy: Liberty, Competition, and the Common Good. Zócalo asked four professors (including me) about taxes and behavior. Zócalo's lead in ...

"Life has only one certainty other than death: taxes. And taxes may be less popular than death in 21st century America. Much of today’s politics is centered on opposition to taxes.

So what is the point of taxes? More than just securing money for the government. Taxes are often meant to promote good behavior. But are taxes an effective way of getting people to do something they otherwise would not do? And should we be using taxes this way? In advance of economist Robert H. Frank’s visit to Zócalo to ask, “Did Darwin Create Modern Economics?”, we checked in with some experts in tax policies about their thoughts."

That is a good question! As I noted in a blog post about today being the 25th anniversary of the Tax Reform Act of 1986, over 150 new provisions have been added to the federal tax law since 1986. That number doesn't represent modifications to existing rules, but new provisions. Many of them were intended to affect behavior in some way.

Psychology Professor Timothy Hackenberg of Reed College notes: "We have always had rules and regulations that temper unbridled self-interest. The real question is not whether to intervene, but rather, when we do so, whether we should continue to rely on intuition and conventional wisdom (as in the past) or use what is known about human behavior from a modern scientific perspective."

Take a look - here.

What Income Group Are You In? Help from Kiplinger website

Kiplinger has a nice interactive website that allows you to enter your income so you can learn where you fall within various income groups, such as the top 5%. The results also provide some information on the percentage of tax paid by that group. It is a nice tool that can help people understand the debate going on now regarding various tax proposals. In addition to putting your information in, you should try a few other income levels to get an even better understanding of tax and income demographics in the US.

Here is the link - http://www.kiplinger.com/features/archives/how-your-income-stacks-up.html

What do you think?

Taxing the rich - interesting article in Christian Science Monitor

Saturday's Christian Science Monitor had an extensive story on the current news item about President Obama's proposal on increasing taxes on individuals with very high income. See "Tax the rich: Should millionaires really pay more?" by Jessica Bruder (10/15/11). The article provides a variety of perspectives on the issue including some of the Wall Street protesters and some wealthy individuals. It also notes that some high income individuals in France and Germany are asking their governments to raise their taxes.

Former Labor Secretary Robert Reich is quoted as saying that the current issue is not just an economic one, but also a moral one. The article also refers to IRS data indicating that the top 400 income generators had an average tax rate of about 18%.

I encourage you to read the article - it is objective and raises a variety of things to think about in the real question of tax equity - how much should people at different income levels pay in tax.

My last post noted that 10/22/11 is the 25th anniversary of the Tax Reform Act of 1986. That Act resulted in two individual tax brackets - 14% and 28% with capital gains taxed the same as ordinary income. Today, most capital gains and dividends of individuals are taxed at 15%. Meanwhile, other income can be taxed as high as 35% (39.6% after 2012; and even higher due to some phaseout rules).

Perhaps the TRA86 structure with lower ordinary income rates and a broader base and fewer tax credits should be re-examined.

I am quoted in the CSM article noting that ideally tax reform should be non-partisan. Let's look at principles of good tax policy in identifying where improvements are needed. I also observe that any good tax change is challenged today when lawmakers are combining tax reform, deficit reduction and economic stimulus together.

What do you think?

10/22/11 - 25th Anniversary of the Tax Reform Act of 1986

On October 22, 1986, President Reagan signed a bill that had been worked on by Treasury and Congress for over two years. The Treasury Department had started with an 800+ page report that examined existing law and its strengths and weaknesses and included a variety of proposals, including a VAT. That bill and its major tax revision was the Tax Reform Act of 1986.

In the past 25 years, some of the Act's key features have disappeared, such as a 2-rate structure for individuals that taxed capital gains the same as ordinary income. The TRA86's re-invigorated AMT for individuals was estimated to raise $334 million in 1991 (yes, million!). Today, the temporary "AMT patch" used to keep about 20 million individuals from owing AMT costs over $85 billion!

I have a short article in the AICPA Tax Insider this week - The 25th Anniversary of the Tax Reform Act of 1986, that provides some history and notes some of the significant changes in the law since 1986.

What do you think about Congress trying to get back to the TRA'86 along with instituting some international tax reforms/modernization?

The photo of President Reagan signing the TRA86 is from the Social Security Administration archive.

Reality Check - How Many People Have Income Above the Social Security Wage Cap + S. 1558 proposal

There is an earnings cap on Social Security taxes, but not on Medicare taxes. For 2011, this cap is $106,800. Once an employee's wages or self-employed person's business income exceeds this amount, no more Social Security tax is owed for the year. In 2011, the employee's share of Social Security is 4.2% while the employer pays 6.2% (the employee's rate is scheduled to go back to 6.2% in 2012). The Medicare tax (1.45% each for employer and employee and 2.9% for self-employed) applies to all wages and self-employment income.

Much talk about the tax law and changes always sounds like the changes affect everyone directly. That is unfortunate because if we were talking about the tax issues facing the majority of U.S. taxpayers, we'd be talking about complexity of basic filing such as filing status, dependents, Earned Income Tax Credit and various education provisions. Instead, more talk is spent on the top corporate tax rate, the estate tax, repatriation, capital gains, energy credits, international tax provisions, and more. These later items involve a lot of dollars, but not always lots of taxpayers (at least not directly).

I mention this because of a report from the Center for Economic and Policy Research issued last month - "Who's Above the Social Security Payroll Tax Cap?" The issue paper explores who would be affected if the cap were removed and if it were instead raised to $250,000. It also reminds us that the vast majority of individual taxpayers (here, more specifically, workers) are not 6-digit (or greater) earners.

Their findings for 2009:

5.8% of workers had wages above $106,800 (so, 94.2% had wages below $106,800)

1.2% of workers had wages above $250,000 (so, 98.8% had wages below $250,000)

It is well depicted in a pie chart on page 3 of the report. They also break down the figures by various demographics.

The authors note that Senator Sanders (I-VT) is expected to introduce legislation that would keep the $106,800 cap (which is adjusted annually for inflation) but then remove it for wages above $250,000 (so no Social Security on wages between $106,800 and $250,000). I see that Senator Sanders has introduced S. 1558 which does just that. He calls this bill - `Keeping Our Social Security Promises Act'.

Some considerations:

• What are the dollar amounts? What are the earnings for employees and self-employeds with earned income above $250,000?
• Will the additional Social Security contributions lead to any increase in Social Security benefits for these individuals? If not, should there be a higher income tax rate with part of that money put into Social Security?
• What other changes should be made to Social Security to improve it? I have heard some talk over many years about modifying the CPI approach for annually adjusting benefits. What has happened to that idea?
• How does the S. 1558 proposal compare to the effect of the Medicare tax on unearned income of higher income individuals that goes into effect in 2013?
• How doe the S. 1558 proposal tie to any discussion of keeping the 2011 tax rate cuts (originally the 2001/2003 tax cuts)?

What do you think?

SB 508 vetoed - the future of accountability measures

I've discussed accountability in prior posts (such as 10/8/11 and 5/22/11 and 1/3/10) and there has been recent legislative activity in California, such as SB 364 and SB 508 both reaching Governor Brown's desk this month for signature (see 2011 posts above for information on these bills). This weekend, Governor Brown vetoed both bills as being too broad.

See Governor's veto messages for:

SB 364 (10/8/11)
SB 508 (10/9/11)

In vetoing SB 508, Governor Brown says he agrees with sunset provisions for personal and corporate tax credits, he thinks all bills should be examined to determine how long they exist rather than using a one size fits all approach.

I wish he had said more to help the legislature pass an accountability bill that he will not veto.

I wish he had said:

1. Do not be so narrow to only focus on special tax rules that come in the form of tax credits, also consider special deductions, exclusions, exemptions and rates.

2. Establish a framework that must be considered in all bills that create special rule to ensure that an appropriately tailored accountability system exists for the provision. Such a framework would get around the one-size-fits-all problem, yet would ensure that bills creating or modifying a special tax rule would have an accountability measure included with it.

In June 2009, I had an article, "Calls for Accountability: Will It Help the Overall Incentives Process?" in RIA's Journal of Multistate Taxation and Incentives. Here is an excerpt with an analogy to how businesses employ accountability measures. For the same reasons that businesses employ accountability measures to ensure they are spending their money wisely, government should do the same. The excerpt also includes an example of problems that can arise when goals and accountability measures are not included in tax incentives legislation.

"The Necessity of Accountability

While accountability often conjures up thoughts of someone looking over our shoulder or seeking reasons to deny a benefit, accountability is an important aspect in any decision for directing funds to a particular use.

Executive compensation analogy: Accountability in the incentives arena is analogous to what a business might do in designing a compensation package for an executive. Business X might use a signing bonus to entice an executive to leave his or her current job and take a new one at X. Arguably this upfront payment is risky because the executive might not work out. Yet, it is deemed reasonable due to the significance of the change X asked of the executive and the risk the executive assumed. Other incentives are likely to be performance-based, such as stock options and bonuses tied to meeting specific goals.

The executive’s compensation package is likely to include annual performance reviews, repayment of incentives for misrepresentations, and some protections for not meeting targets if due to reasons beyond the executive’s control, such as a natural disaster or an economic downturn. In designing the compensation package, X’s advisers will consider the short- and long-term goals for X and the need for accountability to shareholders.

Problems from inadequate accountability: Perhaps as frequently as the newspapers report companies leaving or moving to a state due to a package of incentives, there are reports of governments wasting funds on incentives that appear to have provided no benefit to the jurisdiction.

Lack of accountability can jeopardize incentives because with no data on use and effectiveness, the incentives are vulnerable to repeal due to the ease of arguing that their cost exceeds the benefits produced. In addition, it is important that the purpose and goals of an incentive be adequately stated up front so that accountability can occur. Otherwise, an incentive might be called into question because its supporters tout how wonderful it has been while its questioners tout that it has not lived up to its promise. For example, in California, some businesses state that enterprise zone incentives have worked effectively to stimulate the economy.[1] In contrast, the California Legislative Analyst’s Office has recommended that the enterprise zone incentives be phased out because they have not been shown to be cost effective in generating new economic activity in the state.[2] This extreme dichotomy of views likely indicates lack of sufficient data and specificity of goals to allow for effective accountability rather than an ineffective incentive.

---

[1] For example, see California Chamber of Commerce, “California Enterprise Zone Program Positive, Effective State Policy,” 5/1/08; available at the organization’s website at www.calchamber.com/Headlines/Pages/CaliforniaEnterpriseZoneProgram.aspx.

[2] California Legislative Analyst’s Office, “The 2008-09 Budget: Perspectives and Issues,” page 116, available at the LAO website at www.lao.ca.gov/analysis_2008/2008_pandi/pandi_08.pdf.

What do you think?

California Accountability Measures - SB 508 and SB 364

Several states, including California, have proposed actions and taken actions on adding accountability to the tax system. The measures usually apply to tax credits. A common approach is to place a sunset date on enacted credits to ensure that they don't remain in the law permanently and that they get back on lawmakers' radar screens, such as when the sunset date approaches. Another approach would be to include some assessment measures so that the tax agency or other government agency can measure periodically if the tax incentive is accomplishing the goals for why it was enacted. A good example of California doing this in the past was with the Manufacturers' Investment Credit (MIC). If California did not have an increase of over 100,000 jobs in certain sectors, the MIC would go away. It lasted for sometime, but then the jobs number went down and the MIC disappeared.

I blogged on a proposal in California - SB 508 in May (here). It is focused on accountability for future enacted income tax credits. That is good, but I point out that tax incentives don't only come in the form of credits and they exist in all types of taxes (not just the income tax). Thus, the bill is too narrow.

SB 508 passed in the legislature (enrolled bill / for analyses, search for SB 508 here). It is on the governor's desk awaiting signature or veto.

SB 364 also passed the legislature (enrolled bill / for analyses, search for SB 364 here). This is an odd bill. It would impose a penalty for future credits enacted, where the claimant had a decrease in employment. Governor Brown vetoed this one on 10/7/11 saying that the approach is too broad and penalties should be tailored to a credit's unique provisions. I agree. I think SB 364 would also have made the law more complicated in measuring employment and identifying which future credits would be subject to this penalty.

There is an informative California Watch article on these bills - Kendall Taggart, "Bills seek to better regulate tax breaks," 10/6/11. (Disclaimer: I'm not just saying this because I'm quoted in the article.)

Let's see what Governor Brown does with SB 508. I think if he signs it, that would be good. I would then hope that this is a trial for how to add accountability measures to income tax credits that might then be expanded to other special rules added to income, sales, property, excise or other taxes. This approach, particularly one of requiring lawmakers to state the goal for a special rule and how its effectiveness in reaching that goal will be measured, might also end up in fewer incentive provisions which would also prevent tax laws from becoming more complicated, inequitable and inefficient.

What do you think?

New Tax Return Details for 2011 Returns - Closing the Tax Gap

Who wouldn't want to see the $345 billion annual federal tax gap reduced? That's a lot of money! One way to make that happen is to be sure more taxable transactions are reported to the taxpayers and the IRS. In the past several years, we have seen a few of these items added, such as the requirement for brokers to report basis on Form 1099-B for stock sales. We also saw Section 6050W enacted to require processors of credit and debit cards have to report the amount processed for merchants to both the merchants and the IRS (Form 1099-K which is new).

Well, these forms are really only useful to the IRS if they can match them against information on taxpayer's returns. So, for 2011, we'll see a few changes in tax forms. For example, gross receipts lines for businesses will have 2 lines - one for amounts shown on 1099-K (credit and debit cards and Paypal) and amounts not on 1099-K (cash and transactions that did not require a 1099-K or someone failed to provide a 1099-K to the merchant).

New forms and lines are also needed for the basis reporting.

I have a short article on the AICPA website (for the Individual Taxation Technical Resource Panel) that explains the new forms and suggests extra activities taxpayers will likely want to undertake to be sure they are properly reporting these new 1099s and reducing the chance of notices from the IRS. Click here.

New Website for "Amazon" Click Through/Affiliate Nexus Laws

With all of the activity on the affiliate nexus laws that New York started with back in April 2008 and the recent saga in California (see prior posts - 8/27/11 and 3/9/11, and others), I decided to create a website on this affiliate nexus approach. As of now, it just covers the so-called "Amazon" nexus laws where a state tries to say that just having an arrangement with someone in-state who has a link on their website back to the vendor might create nexus for the out-of-state vendor. There are other forms of affiliate nexus laws, such as those that say that a remote vendor who has some type of ownership connection with an in-state entity and the two sell the same product, have the same name or trademark, or similar advertising cause the remote vendor to have nexus in the state.

Here is the URL - http://www.cob.sjsu.edu/nellen_a/affiliate_nexus.html

Caution - the website is a work in progress. I'll keep filling it out for some prior events and actions and do my best to keep it up for news on these so-called Amazon nexus laws.

Finally, with the deferral of the affiliate nexus law in California and the apparent likelihood that Amazon will start collecting use tax from California customers in September 2012 or January 2013 (depending on whether Congress passes legislation to allow certain states to collect from remote sellers), Amazon send emails to the affiliates it cancelled a few weeks ago and encouraged them to complete the steps to get reinstated (see information here).

Spending and Tax Reform - How to fix budget and tax problems

I have a guest post on the FranchiseHelp blog today on Spending and Tax Reform. I explain that there is spending in the tax law and that any spending reforms must not ignore it as it is almost as large as the discretionary spending in the federal budget!

What do you think?

Select Joint Committee hearing on revenue options and tax reform

On 9/22/11, the Joint Select Committee on Deficit Reduction (the committee that is supposed to find $1.5 trillion of reductions by 11/23/11), on Revenue Options and Reforming the Tax Code (here). Thomas Barthold, Chief of Staff of the Joint Committee on Taxation testified based on an 80+ report on the topic prepared by the JCT.

The JCT report starts off with lots of data about our tax system. For example, Figure 7 (page 10) shows the changes in number of passthrough and C corporation returns from 1978 to 2008. In 1978, just under 2 million passthrough entity returns were filed. There were more C corporation returns filed, but still under 2 million. In 1983 to 1986, there was a slight increase in the number of C returns and then it dropped to for 2008, there are just under 2 million C returns. In contrast, the number of passthrough entity returns steadily increased to over 7 million returns in 2008. This likely reflects the reality that after the Tax Reform Act of 1986, individual income tax rates were lower than those for C corporations.

Data on the largest individual and corporate tax expenditures is also included. Here are the largest individual tax expenditures for 2010-2014 in billions of dollars (page 25):

1. Exclusion of employer contributions for health care, health insurance premiums, and long-term care insurance premiums $659.4
2. Deduction for mortgage interest on owner-occupied homes $484.1
3. Reduced rates of tax on dividends and long-term capital gains $402.9
4. Net exclusion of pension contributions and earnings: Defined contribution plans $303.2
5. Earned income credit $268.8
6. Deduction of nonbusiness State and local government income, sales and personal property taxes $237.3

Here are the six largest tax expenditures for corporations for 2010-2014 in billions of dollars (page 34):

1. Deferral of active income of controlled foreign corporations $70.6
2. Exclusion of interest on public purpose State and local government debt $45.3
3. Deduction for income attributable to domestic production activities $43.2
4. Inventory property sales source rule exception $38.0
5. Depreciation of equipment in excess of alternative depreciation system $37.1
6. Inclusion of income arising from business indebtedness discharged by the reacquisition of a debt instrument $28.8

The JCT report then asks a question we don't hear asked often - what happens if any existing tax expenditures are repealed or cut back? For example, if employer-provided retirement benefits were repealed, would income on existing retirement accounts still continue to accrue tax free?

With respect to possible repeal of the home mortgage interest deduction, the JCT report states (page 37):

"As of what date would mortgage interest no longer be deductible? Would the repeal apply to all existing mortgages or only to mortgages undertaken after the effective date? Either choice could be said to substantially eliminate the tax expenditure. These decisions will affect taxpayer’s behavior regarding owning versus renting, the size of a home that they may choose to purchase, as well as the amount of debt they undertake and the choice of assets that they may retain in their portfolios. These decisions will affect the magnitude of revenues that redound to the Federal Treasury from the elimination of the tax expenditure and, as discussed below, these revenues will generally be less than the value of the estimated tax expenditure."

Table A-16 (page 59 - 60) lists the 32 tax credits that are part of the general business credit.

Pages 61 - 70 lists the provisions that have been added to the tax law since the Tax Reform Act of 1986 (through 9/2010) and which Public Law added them. "Modifications and extensions of pre-existing tax expenditures are not listed." There are 157 provisions there! The JCT report notes that it might not be complete depending upon, for example, if something should have been considered a modification and omitted from the list or was it a new provision.

Observations:

• There is a lot of talk about eliminating or cutting back tax expenditures (including in this blog). I think there are many that should either be removed from the tax law (such as subsidies for higher education which should instead be handled as direct grants) or reduced (such as the mortgage interest deduction). President Obama's deficit commission suggested repealing all of the $1.1 trillion of annual tax expenditures to allow for lower rates and deficit reduction. This would not be an easy task for a few reasons. First, there are many taxpayers using these provisions who don't want to lose them, even with a lower rate. Another challenge is the transition rule. For example, if the mortgage interest deduction is cut back, are existing mortgages grandfathered or phased out. Another challenge is that some of the tax expenditures are for simplification purposes and removing them adds complexity and sometimes, not much revenue. For example, requiring small businesses to use the accrual method rather than cash would be problematic. Also, repeal of the fringe benefit exclusion for de minimis fringe benefits would be costly to administer.
• The Tax Reform Act of 1986 flipped corporate and individual rates in that the corporate rate was higher than the individual rate. This led to more businesses becoming passthroughs rather than C corporations. Will this reverse if the corporate rate is lowered below the top individual rate (it might not due to double taxation of C corporations)?
• How does international tax reform factor into all of this?
• What about improvement to filing systems as part of reform? Can we move to having the IRS prepare most returns with data it already has today? Can data reporting be modified as it is for many large businesses (with enterprise resource planning (ERP) software)? Why doesn't the tracking of my wages and interest income that feeds into my employer and bank's databases, also feed into a tax return system that would just need a few modifications to get a return filed?
• Should the Select Committee address tax reform? I say no because it doesn't have time to address this big topic. It will have to offer some tax changes though. Hopefully when the committee looks at spending, it will also look at the spending in the tax law because today, it is almost as large as the discretionary spending in the budget.

Links:

• Committee website
• C-SPAN info

What do you think about the JCT report and the Select Committee's use of the testimony?