6 Developments This Washington Think Tank Is Watching

The House may vote this week on a one-year retroactive tax break extension. Maybe you've heard this song before, but Bloomberg reports the GOP figures the bipartisan tax extender package proposed last week is in fact dead.

As many as one in six taxpayers could be affected without an extension of the 60 or more tax breaks, according to tax-preparation company H&R Block. The House's Plan B would extend nearly all of them to finish the congressional session as soon as possible, and allow for a smoother start to tax filing season.

Yes, you've definitely, unfortunately, heard this song before. TPC's Len Burman knows the tax extender melody by heart, and assumes that Congress will ultimately pass a one-year retroactive extension.

But this “illustrates how bad extender tax policy is.

Many of the provisions slotted for revival are regressive, fiscally irresponsible, and inefficient” and “create a vehicle for all sorts of budget-busting mischief.” If you'd like to sing along for a few bars, TPC's Bob Williams has some new extender lyrics for you.

A lame duck's swan song: The House may vote on an omnibus bill to keep the government open. Or,The Hill reports, the GOP, under pressure to respond to President Obama's executive order on immigration, may consider a “crominbus” bill. It would fund much of the government, but would require continuing resolutions on agencies responsible for immigration, such as the Department of Homeland Security.

But do Republicans wants to risk the consequences with the threat of terrorism lurking? No final decision has been made: The House GOP Conference meets today, the first time since the Thanksgiving recess.

Taxing Social Security benefits doesn't seem to change an older worker's tune. A new TPC study by Len Burman, Norma Coe, Kevin Pierce, and Liu Tian explains. Social Security benefits are taxed under complex rules that raise marginal effective tax rates as high as 85 percent. That's pretty steep, and an older worker might work and earn less to avoid the high tax rate. But the researchers found no such effect.

In fact, they conclude: “Overall, the findings suggest that older taxpayers have little understanding of the rules governing Social Security benefit taxation.” Is tax advice another possible member service for AARP?

Germany, France and Italy would like the EU to hurry up and harmonize. The EU lacks corporate “tax harmonization,” and the three nations' finance ministers sent a letter to the EU's Economic and Tax Commissioner Pierre Moscovici and urged him to develop a “general principal of effective taxation.” Such a move, they argue, would do more to prevent sweetheart tax deals in countries with lower corporate tax rates than promises of “greater transparency and company registries.”

They'd like Moscovici to draft a directive by the end of the year, and would like member nations to adopt EU rules by the end of 2015.

If not harmony, then maybe in unison—at least to tax banks? A “Robin Hood” transaction tax on banks would require that they pay a levy on every executed trade in stocks, bonds, or other financial instruments. Most EU nations, including Britain, oppose the plan, saying banks would pass the cost to investors, or execute trades in low- or no-tax regions.

Still, eleven EU nations, among them France, Germany, Italy, and Spain, would like to levy the tax but have until the end of this year to agree to a plan. They want banks to repay the EU for aid received during the financial crisis of 2007-09. Trouble is, they can't agree on what should be taxed, or when, how, or where it would be collected.

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