United States: Tax Policy Update - September 15th, 2014

Last Updated: September 22 2014
Article by Russell W. Sullivan and Danielle R. Dellerson

The number of developed countries that have a better tax code than the U.S., according to a report released this morning by the Tax Foundation, ranking members of the Organisation for Economic Co-operation and Development (OECD) on a variety of tax issues. The United States' poor showing is attributed to its 39.1 percent corporate tax rate—the highest in the developed world—and "its poorly structured property, individual, and capital gains and dividends taxes," the report said. Which country ranked the highest? Keep reading.


Inversions Fading From Spotlight. Despite a surge in media attention and legislative proposals from Democrats in both the House and Senate, the momentum for congressional action to slow corporate tax inversions appears to have burned out. Senate Finance Committee Ranking Member Orrin Hatch told reporters last week that Democrats' "fixation" on inversions, in which U.S.-based companies reincorporate abroad in lower-tax countries, ignores the real issue at hand — the need for corporate tax reform. Congress may be moving on to other tax issues, but Treasury is still expected to act, possibly even this week. Read more under "Regulatory World."

Senate: Wyden Shifts Focus to Extenders. In recognition of today's quarterly tax payment deadline (for all income on which taxes are not withheld), Senate Finance Committee Chairman Ron Wyden (D-OR) issued a statement urging his colleagues to pass a package of expired tax provisions in order to give "certainty and relief to American workers and businesses." Wyden said Congress's failure to renew the expired tax provisions is forcing companies to make "no interest loans" to the federal government through higher taxes.

House: Keep the Cash. . A letter signed by a bipartisan majority of the U.S. House urges House leadership to preserve the cash method of accounting for tax purposes. In the letter, the lawmakers noted that while "reforms to the tax code should provide a simpler and fairer tax system, requiring the use of the accrual method for entities currently using the cash method will not achieve these goals."


Treasury Still Plans to Act on Inversions. The Treasury Department has given few clues on when it might unveil its long-awaited crackdown on inversions, other than to say it could come in the "very near future." Rep. Sander Levin, the ranking Democrat on Ways and Means, told Bloomberg BNA that new guidance could come as soon as this week, though we would not be surprised if the administration waits until Congress leaves town.


Who Knew? The Tax Foundation released its 2014 International Tax Competitive Index ranking the OECD's 34 members across more than 40 tax policy variables. The United States finished third from the bottom, beating out only Portugal and France, which also have relatively high top marginal corporate income tax rates of 31.5 percent and 34.4 percent, respectively (still below the U.S. top rate of 39.1 percent). The OECD average is 25.4 percent.

The country that outshined the competition? The former Soviet republic of Estonia. Estonia has a relatively low corporate tax rate at 21 percent, no double taxation on dividend income, a nearly flat 21 percent income tax rate, and a property tax that only taxes land, not buildings and structures. I'm sure Estonia is lovely in the summer months....


Relevant Floor Activity


  • S. 2432: 'Buffet Rule' Back Again, Still Going Nowhere. The Senate will likely vote on a bill this week that would lower interest rates on some student loan debt, paid for by a familiar provision known as the "Buffet Rule." The measure, named for billionaire Warren Buffet, would assess a new minimum tax—30 percent on gross adjusted income—on those making more than $1 million annually. The tax hike is a nonstarter with Senate Republicans who are expected to block consideration of the bill.


  • Omnibus "Jobs" Bill (no bill number): The House plans to vote Friday on several tax "extender" bills as part of a single omnibus "jobs" package. Tax bills in the package include permanent extensions of the R&D tax credit, the Section 179 expensing measure, the S corporation conversion bill and bonus depreciation. The Senate has signaled it plans to address extenders during the lame-duck session in November and December.

Relevant Committee Activity

House Ways and Means Committee
On Wednesday, Sept. 17, the Subcommittee on Select Revenue Measures (Tax) will hold a hearing on "Private Employer Defined Benefit Pension Plans." The hearing will focus on some of the challenges facing employers, employees, and retirees who rely on defined benefit pension plans to help provide retirement security. It will examine the funding rules governing multiemployer plans, as well as selected issues that affect single employer plans.

House Financial Services Committee
On Wednesday, Sept. 17, the Subcommittee on Oversight and Investigations will hold a hearing on "Oversight of the Financial Stability Oversight Council." Witness testimony will be given by:

  • Patrick Pinschmidt – Deputy Assistant Secretary, Financial Stability Oversight Council
  • A. Nicole Clowers – Director, Financial Markets and Community Investment, Government Accountability Office

Senate Finance Committee
On Tuesday, Sept. 16, the Senate Finance Committee will hold a full committee hearing on "Retirement Savings 2.0: Updating Savings Policy for the Modern Economy." Witness testimony will be given by:

  • John C. Bogle – Founder and Former CEO, Vanguard
  • Dr. Brian Reid – Chief Economist, Investment Company Institute
  • Ellen Schultz – Author & Investigative Reporter, formerly with The Wall Street Journal
  • Scott Betts – Senior Vice President, National Benefit Services
  • Dr. Brigitte C. Madrian – Aetna Professor of Public Policy and Corporate Management, Harvard University, John F. Kennedy School of Government
  • Dr. Andrew G. Biggs – Resident Scholar, American Enterprise Institute

On Wednesday, Sept. 17, the Senate Finance Committee will hold a full committee hearing on "Reforming America's Outdated Energy Tax Code." The hearing is expected to cover a broad range of topics, including tax treatment of renewables and fossil fuels, emissions-based tax credit, and possible production tax credit phaseouts in the coming years. Witness testimony will be given by:

  • Don Nickles – Chairman and CEO, Nickles Group
  • Norman R. Augustine – Retired Chairman and CEO, Lockheed Martin Corporation
  • Dr. Gilbert Metcalf – Professor of Economics, Tufts University
  • Ethan Zindler – Head of Policy Analysis, Bloomberg New Energy Finance
  • David Kreutzer – Research Fellow in Energy Economics and Climate Change, Center for Data Analysis, Heritage Foundation

Senate Banking Committee
On Wednesday, Sept. 17, the Senate Banking Committee will hold a hearing on "Who is the Economy Working For? The Impact of Rising Inequality on the American Economy." Witness testimony will be given by:

  • Heather McGhee – President, Demos
  • Dr. Amir Sufi – Professor of Finance, University of Chicago
  • Claudia Viek – CEO, California Association for Micro Enterprise Opportunity (CAMEO).

Senate Homeland Security and Governmental Affairs Committee
On Thursday, Sept. 18, the Permanent Subcommittee on Investigations will hold a hearing on "Tax Audits of Large Partnerships." A witness list will be available Tuesday, Sept. 16, 2014.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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