More About Chuck Marr

Chuck Marr

Chuck Marr is the Director of Federal Tax Policy at the Center on Budget and Policy Priorities.

Full bio and recent public appearances | Research archive at CBPP.org


Paul-Boxer Repatriation Tax Holiday Can’t Pay for Highways

January 29, 2015 at 4:48 pm

Senators Rand Paul (R-KY) and Barbara Boxer (D-CA) just proposed a “repatriation tax holiday,” which would allow U.S.-based multinational corporations to bring profits they hold overseas back to the United States at a temporary, vastly reduced tax rate.  They claim it would not only “boost economic growth and create jobs” but also raise revenues to pay for extending the Highway Trust Fund.  In reality, it wouldn’t do either.

A repatriation holiday enacted a decade ago proved a dismal economic failure.  As our paper explains, a wide range of studies — by the National Bureau for Economic Research, Congressional Research Service, Treasury Department, and outside analysts — found no evidence that it produced any of the promised economic benefits, such as boosting jobs or domestic investment.

Moreover, a repatriation holiday would lose billions of dollars after the first two years, so it can’t “pay for” highway construction or anything else.  A new repatriation holiday would lose $96 billion over 11 years, the Joint Committee on Taxation (JCT) estimated last year (see graph).  The Paul-Boxer proposal has a somewhat higher “holiday” tax rate on those overseas profits than the one JCT analyzed (6.5 percent versus 5.25 percent) so it might lose less revenue.  But it wouldn’t raise money.  And it would make our long-term fiscal challenges harder.

A repatriation tax holiday would boost revenues in the first couple of years, as companies rushed to take advantage of the temporary low rate.  But it would bleed revenues for years and decades after that.  As JCT explained, the biggest reason is that a second holiday would encourage companies to shift more profits and investments overseas in anticipation of more tax holidays, thus avoiding taxes in the meantime:

A second repatriation holiday may be interpreted by firms as a signal that such holidays will become a regular part of the tax system, thereby increasing the incentives to retain earnings overseas rather than repatriating those earnings and to locate more income and investment overseas.

To be clear, a repatriation holiday is very different from a transition tax on overseas profits, such as the proposal from former House Ways and Means Chairman Dave Camp.  Any future corporate tax reform package would likely include a transition tax on existing foreign profits to clean the slate of existing tax liabilities.  But a transition tax would be mandatory:  multinationals would have to pay U.S. taxes on their foreign profits whether they repatriate them or not.  By contrast, under a repatriation tax holiday, companies choose whether to repatriate their earnings, and the tax rate would be set extremely low to incentivize them to do so.

Also, a transition tax would be coupled with reforms to reduce or eliminate companies’ incentive to stockpile profits overseas — whereas another repatriation holiday would encourage firms to stockpile profits offshore, as noted above.

For these reasons, a well-designed transition tax — unlike a repatriation holiday — would reduce deficits, not raise them.

Working-Family Tax Credit Essentials, Part 5: The Impact in Your State

January 27, 2015 at 4:08 pm

Previous posts in this series on our new chart book have explained that the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC):

Our chart book also includes fact sheets with by-state data on how the EITC and CTC reduce poverty, who benefits, and how state EITCs can supplement the federal credit.  The fact sheets also give state-specific data on the impact of making the key EITC and CTC provisions permanent and of strengthening the EITC for childless adults.  Click on a state below for its fact sheet.

Working-Family Tax Credit Essentials, Part 4: Bipartisan Support for Helping Childless Workers

January 23, 2015 at 2:05 pm

Today’s post on our chart book on the pro-work Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) focuses on the most glaring hole in the EITC: it largely excludes childless adults and non-custodial parents.  President Obama and House Ways and Means Chairman Paul Ryan (R-WI) have advanced important proposals to address this problem, and, as Chairman Ryan said this week, his proposal “basically mirrors the president’s proposal.”  Senators Sherrod Brown (D-OH), Richard Durbin (D-IL), Patty Murray (D-WA), and Jack Reed (D-RI) and Reps. Danny Davis (D-IL), Richard Neal (D-MA), and Charles Rangel (D-NY) also have introduced key proposals.

The EITC misses many low-income childless workers entirely and provides only minimal help to many others.  All childless workers under age 25 are ineligible for the credit and the average credit for eligible workers between ages 25 and 64 is only about $270, or less than one-tenth the average $2,900 credit for filers with children.  A childless adult working full time at the minimum wage is ineligible.

As a result, childless adults are the only group that the federal tax code taxes into — or deeper into — poverty (see first chart).

Providing a more adequate EITC to low-income childless workers and lowering the eligibility age would raise these workers’ incomes and help offset their federal taxes.  Also, some leading experts believe that an expanded credit would begin to address some of the challenges that less-educated young people face, including low and falling labor-force participation rates, low marriage rates, and high incarceration rates.

The Obama and Ryan proposals would lower the age floor from 25 to 21 and expand the EITC for childless workers by doubling its phase-in rate, from 7.65 cents per added dollar of income to 15.3 cents (to fully offset workers’ payroll taxes on this income).  And they would raise the income levels at which the credit starts phasing out and phases out completely, as our paper explains.  These changes would make a big difference for childless workers (see second graph).

Working-Family Tax Credit Essentials, Part 1: Overview

January 13, 2015 at 4:43 pm

As Congress returns to work this week, a key area of potential bipartisan agreement is strengthening two vital tax credits for working families: the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC).  This series of posts will highlight our new chart book on the credits, which encourage work, help offset the cost of raising children, and lift millions out of poverty.  (Roughly half the states also have their own EITCs to build on the benefits of the federal EITC.)

The EITC and CTC have historically received bipartisan support.  President Obama has championed measures to strengthen the credits and Paul Ryan, ascending this year to chairing the House Ways and Means Committee, has highlighted the EITC as one of the most effective anti-poverty programs.

The first step in strengthening the credits is to make permanent key EITC and CTC features that will expire at the end of 2017, causing millions of low-income working families to lose all or part of their credits.  More than 16 million people in working families with low or modest incomes, including 8 million children, would fall into — or deeper into — poverty in 2018 if these provisions expire.

In addition, President Obama and Chairman Ryan have nearly identical proposals to fill a glaring gap in the EITC by boosting the credit for “childless workers” — that is, adults without children and non-custodial parents.  Childless workers receive little or nothing from the EITC.

Substantial research over the past 15 years supports these changes.  The EITC significantly increases recipients’ work effort, numerous studies have found, and the EITC and CTC together lift 9 million people out of poverty — more than any other federal program besides Social Security — while making 22 million others less poor (see chart).  The credits lift more children out of poverty than any other program.

On top of these direct impacts, recent research suggests that income from these credits has benefits at virtually every stage of life for children in recipient families — improving school performance, college enrollment, and work effort and earnings in adulthood.

Policymakers should make strengthening the EITC and CTC a top priority in 2015.

Check out our chart book and other EITC and CTC resources for more!

Stay tuned.  The next post in this series will highlight the growing body of research that suggests the EITC and CTC provide benefits at virtually every stage of life.

Let Ineffective “Bonus Depreciation” Die Next Year

December 18, 2014 at 3:06 pm

We strongly agree with today’s Washington Post editorial that calls on policymakers to let the “bonus depreciation” tax break, which they extended for a year in the recent “tax extenders” package, expire next year.

Bonus depreciation lets businesses take bigger upfront deductions for certain purchases such as machinery and equipment.  As our report explains, Congress enacted it on a temporary basis in 2008 to bolster the economy during the Great Recession, not to make it a permanent part of the tax code or extend it year after year.

The House, however, voted earlier this year to expand bonus depreciation and extend it permanently at a cost of $276 billion over ten years — enough to wipe out one-third of the revenue raised by the high-income revenue provisions of the 2012 “fiscal cliff” legislation.  (See graph.)

Permanent bonus depreciation wouldn’t just be fiscally irresponsible.  It would also be economically unjustified.  As the Post points out:

[S]everal economic studies have shown that, in practice, bonus depreciation is “not very effective” as a boost to economic growth, in the words of a recent Congressional Research Service report — and probably less effective than other tax cuts or spending increases that have since expired.  Tax break or no, many firms won’t invest at times of weak demand for their products; in any case, bonus depreciation affects only one incentive in what, for many companies, may be a highly complex tax-planning scenario.

Whatever stimulative effect bonus depreciation has, though, depends on its being both temporary and timely — i.e., that companies understand it will be available during recessions and only then.  Extending the measure now amounts to a gratuitous handout; indeed, it’s been decreasingly necessary ever since the “Great Recession” officially ended in June 2009. Since the proposed one-year extension, which would cost $5 billion, is retroactive, it actually amounts to a windfall benefit for investment decisions corporations have already made.

In short, bonus depreciation provides only modest benefit as a temporary stimulus measure and none at all as a de facto permanent part of the code. . . .