President’s Budget, Economic Report in Focus
This week, Treasury Secretary Jack Lew is scheduled to testify before the House and Senate Appropriations Committees about President Obama’s FY 2016 Budget Request. On Tuesday, March 3, Secretary Lew, along with Internal Revenue Service (IRS) Commissioner John Koskinen and Treasury Inspector General for Tax Administration Russell George, will testify before the Senate Appropriations Financial Services and General Government Subcommittee to discuss the funding request and budget justification for the Department of the Treasury. The following day, on Wednesday, March 4, Secretary Lew will appear before the full House Appropriations Committee to further discuss the Budget Request.
Separately, on Wednesday, March 4, the Joint Economic Committee will hold a hearing with Jason Furman, Chairman of the Council of Economic Advisors, to discuss the Economic Report of the President, which was released on February 19. According to the report, which analyzes the merits of various approaches to tax reform, the recommended approach is business tax reform that complements other pieces of the President’s agenda, including investment in infrastructure, individual tax reform, and policies that “guarantee all Americans can share in this growth.”
JCT Releases Document on Tax Equity
In preparation for the Senate Finance Committee hearing scheduled for Tuesday, March 3, the Joint Committee on Taxation (JCT) released a report describing concepts of tax equity and providing data related to the current and historical distribution of income and taxes. In particular, the report outlines two principles: the benefit principle and the ability to pay principle. Under the benefit principle, taxes should be levied in proportion to the benefits received from the public sector. The ability to pay principle focuses only on the tax side of the budget, views taxation as imposing an aggregate cost that must be apportioned in a manner that taxes those with equal ability to pay equally, and imposes greater burdens on those with greater ability to pay. Additionally, the report analyzes horizontal and vertical equity, as well as progressivity in taxation.
New CBO Director Announced
On February 27, House Budget Committee Chairman Tom Price (R-GA) and Senate Budget Committee Chairman Michael Enzi (R-WY) announced the appointment of International Trade Commission Chief Economist Keith Hall as the Director of the Congressional Budget Office (CBO). Current CBO Director Douglas Elmendorf will remain at the agency until Mr. Hall begins acting in his new role on April 1.
This Week’s Hearings:
- Tuesday, March 3: The Senate Finance Committee will hold a hearing titled “Fairness in Taxation.”
- Tuesday, March 4: The Senate Appropriations Committee will hold a budget hearing on the Department of the Treasury.
- Wednesday, March 4: The Joint Economic Committee will hold a hearing to review the Economic Report of the President.
- Wednesday, March 4: The House Appropriations Committee will hold a budget hearing on the Department of the Treasury.
Treasury to Release Draft Revisions to Model Tax Treaty
Last week, a senior Treasury official announced that Treasury plans to release a draft of upcoming revisions to the U.S. Model Income Tax Convention of 2006. Specifically, the revisions will address mechanisms for creating stateless income. Treasury plans to seek feedback from taxpayers on the draft revisions once released.