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1156 results in Taxation Law

Page 21 of 58

  • 3 - How Inexpensive Administration Creates Expensive Challenges

  • Michelle Lyon Drumbl
  • Book:
    Tax Credits for the Working Poor
    Published online:
    24 July 2019
    Print publication:
    19 September 2019, pp 46-82

  • Summary

    Chapter 3 addresses the ways in which EITC delivery and administration are problematic and challenging, both for the government and taxpayers. A major challenge with self-declaration is the persistently high overpayment rate. This chapter seeks to distinguish between intentional and unintentional taxpayer noncompliance, and describes the tension between accurate outcomes and inexpensive administration. The IRS relies on return processing filters and an inefficient automated examination process to pursue questionable EITC claims. A significant percentage of taxpayers chosen for audit prove to be eligible for the credit. However, the confusing and inefficient examination process creates untimely delays in benefit delivery, and sometimes eligible taxpayers are unable to prevail in an audit because of systemic barriers. Other issues related to delivering EITC as a tax refund include return preparer misconduct, predatory lending practices related to return preparation, and tax-related identity theft.

  • 1 - A History of the EITC

  • Michelle Lyon Drumbl
  • Book:
    Tax Credits for the Working Poor
    Published online:
    24 July 2019
    Print publication:
    19 September 2019, pp 5-24

  • Summary

    Chapter 1 provides a history of the EITC, explaining how the concept dates back to Milton Friedman’s idea for a negative income tax, Richard Nixon’s Family Assistance Plan proposal, and Russell Long’s work bonus plan. This chapter traces how, over four decades, a modest work incentive evolved into one of the most important antipoverty programs in the United States. It highlights studies correlating the EITC with positive outcomes for recipient families. The chapter also introduces the Code’s other refundable tax credit for working families – the Child Tax Credit – and distinguishes the two tax credits.

  • 8 - Beyond EITC Delivery and Administration

  • Michelle Lyon Drumbl
  • Book:
    Tax Credits for the Working Poor
    Published online:
    24 July 2019
    Print publication:
    19 September 2019, pp 203-220

  • Summary

    Chapter 8 delivers a broader critique of how Congress addresses the persistent problem of poverty in the United States. The largest antipoverty program in the United States is conditioned on a work requirement; this chapter pauses to consider whether the Code can also be used to deliver benefits to those who fall through the cracks because they cannot or do not work. The chapter identifies how the changes enacted in the 2017 Tax Cuts and Jobs Act will impact low-income individuals. It closes with thoughts about what Congress is asking of the Internal Revenue Code, and the IRS, by using both as a vehicle for social programs. There are compelling reasons to keep the EITC in the Code and with the IRS; the book concludes with a call for a more thoughtful design of both the credit and the way in which the agency implements it.

  • 7 - Protecting the Antipoverty Element

  • Michelle Lyon Drumbl
  • Book:
    Tax Credits for the Working Poor
    Published online:
    24 July 2019
    Print publication:
    19 September 2019, pp 176-202

  • Summary

    Chapter 7 identifies a conundrum of the EITC: It is intended to lift low-income individuals out of poverty, yet the credit is subject to capture by a number of creditors and agencies. Because it is delivered as a tax refund, the amount due to the taxpayer can be offset against outstanding federal and state tax liabilities, past-due child support, and federal student loan liabilities. The possibility of such offset betrays its function as an antipoverty supplement. Low-income families are subject to various economic stressors and are likely to have outstanding debts. In reconfiguring the credit into two distinct elements – an incentive to work and an antipoverty supplement – Congress might consider whether the latter should be protected from offset or garnishment (in whole or in part) in order to better serve its purpose. This chapter considers the pros and cons of such a protection, and proposes some possible structures.

  • 2 - Why the United States Uses Lump-Sum Delivery

  • Michelle Lyon Drumbl
  • Book:
    Tax Credits for the Working Poor
    Published online:
    24 July 2019
    Print publication:
    19 September 2019, pp 25-45

  • Summary

    Chapter 2 examines how and why the United States chose to deliver the EITC in one annual payment as a tax refund, and how this is a stark contrast to how other social benefits are administered. One reason is administrative cost – it is relatively inexpensive to allow taxpayers to self-declare eligibility and receive benefits as a tax refund. Because other social benefit programs have direct contact with their recipients prior to payment, those programs have far higher administrative costs and far smaller overpayment rates. Delivery of social benefits through the tax system also avoids the stigma associated with applying for benefits through social welfare workers. This chapter cites empirical studies about taxpayer preferences as to delivery method and timing of refund and evidence as to how EITC recipients spend their refund. It also describes experiments with periodic payment, including the Advance Earned Income Tax Credit.

  • 4 - Importing Ideas

  • Michelle Lyon Drumbl
  • Book:
    Tax Credits for the Working Poor
    Published online:
    24 July 2019
    Print publication:
    19 September 2019, pp 83-110

  • Summary

    Chapter 4 delivers a comparative perspective. The United States served as a model for many other countries to adopt earnings-based family tax credits, and this chapter seeks to borrow ideas back by examining how New Zealand and Canada administer similar credits. The chapter provides an overview of New Zealand’s Working for Families Tax Credits and Canada’s Working Income Tax Benefit and Canada Child Benefit. It describes the mechanics of each, explores critiques raised by domestic scholars, and draws takeaways for the United States. While acknowledging that there are cultural differences and conceding that no design is perfect, this chapter sets the stage for a reimagination of how the United States delivers its antipoverty benefits to working families.

  • 5 - Reimagining the Credit

  • Michelle Lyon Drumbl
  • Book:
    Tax Credits for the Working Poor
    Published online:
    24 July 2019
    Print publication:
    19 September 2019, pp 111-141

  • Summary

    Chapter 5 presents the argument for why and how the United States should reimagine the EITC. Drawing on social science research, it argues that the framing of social benefit programs matters, both to recipients and to the general public. It makes the case for splitting the EITC into two distinct parts, as other scholars and policy makers have proposed in the past: (1) a work-support credit to offset the regressive nature of payroll or self-employment taxes; and (2) a family-support credit to offset poverty. It proposes decoupling EITC delivery from the tax return filing process. Drawing upon ideas from Canada and New Zealand, the chapter also proposes more radical changes, such as determining income based on household composition rather than marital status, allowing parents who share custody to share the credits, and adjusting the size of the credits regionally or locally according to cost of living.

  • 6 - Making a Case for Year-Round EITC Delivery

  • Michelle Lyon Drumbl
  • Book:
    Tax Credits for the Working Poor
    Published online:
    24 July 2019
    Print publication:
    19 September 2019, pp 142-175

  • Summary

    Chapter 6 makes the case for periodic delivery of the EITC. Returning to the Advance Earned Income Tax Credit as a failed experiment in periodic delivery, the chapter describes the advantages of periodic payment, outlines the pros and cons of different possible periodic payment structures, and identifies challenges that would arise in a transition from lump sum to periodic distribution. It describes how decoupling the credit from income tax return filing would reduce low-income taxpayer reliance on unfavorable borrowing practice and remove the incentives for return preparers to engage in misbehavior. It also proposes ways that the IRS might improve its procedures for verifying benefit eligibility, and the need to balance that with an application process that is simple for taxpayers to understand.

  • Introduction

  • Michelle Lyon Drumbl
  • Book:
    Tax Credits for the Working Poor
    Published online:
    24 July 2019
    Print publication:
    19 September 2019, pp 1-4

  • Summary

    The Introduction explains that the EITC is a largely successful social program, but one that can be improved upon as part of a broader effort to address poverty in the United States. It provides a roadmap for the book, identifying some of the challenges taxpayers face and summarizing why the time is right for a reimagination of the EITC. It outlines potential benefits of the reimagination, such as a more coherent tax policy, a simplified structure for family benefits, a reduction in opportunities for tax return preparer fraud and tax-related identity theft, and a periodic distribution of benefits.

Tax Credits for the Working Poor
  • A Call for Reform
  • Michelle Lyon Drumbl
  • Published online:
    24 July 2019
    Print publication:
    19 September 2019
  • The United States introduced the earned income tax credit (EITC) in 1975, where it remains the most significant earnings-based refundable credit in the Internal Revenue Code. While the United States was the first country to use its domestic revenue system to deliver and administer social welfare benefits to lower-income individuals or families, a number of other countries, including New Zealand and Canada, have experimented with or incorporated similar credits into their tax systems. In this work, Michelle Lyon Drumbl, drawing on her extensive advocacy experience representing low-income taxpayers in EITC audits, analyzes the effectiveness of the EITC in the United States and offers suggestions for how it can be improved. This timely book should be read by anyone interested in how the EITC can be reimagined to better serve the working poor and, more generally, whether the tax system can promote social justice.

  • Conclusion: Impact of GST and What Might Happen

    • By R. Kavita Rao, Professor at the National Institute of Public Finance and Policy, New Delhi., Sacchidananda Mukherjee, Associate Professor at the National Institute of Public Finance and Policy, New Delhi.
  • R. Kavita Rao, Sacchidananda Mukherjee
  • Book:
    Evolution of Goods and Services Tax in India
    Published online:
    26 April 2019
    Print publication:
    23 May 2019, pp 182-196

  • Summary

    The goods and services tax (GST) has been presented as the major tax reform for the Indian economy. It is therefore of importance to examine the impact it has had on the economy, as well as on the citizens of the economy. There are three broad categories of evidence to look at:

  • The economy

  • Tax administration/compliance

  • Revenues of various governments

    • The impact on revenues of various governments has been examined at some length in Chapter 9. Hence this chapter will look into some of the remaining aspects and present some concluding observations.

    Impact of GST on Economic Growth and Inflation

    One of the long-term objectives of introducing GST is that it will reduce the extent of hidden and embedded taxes in the system and thereby create opportunities for investment in order to capitalise on the altered tax regime. The change to GST as a predominant indirect tax was expected to increase gross domestic product (GDP) and reduce inflation. International experience shows that GDP growth falls after introduction of GST but it recovers after two—three quarters and, conversely, inflation rises in the initial quarters before it declines (The Treasury, Australian Government 2003). While it is barely four quarters since the introduction of GST in India and hence the evidence of the reversal of the initial trends might not be visible yet, it would be interesting to identify the trends so far.

    Impact on Overall Growth

    Year-to-year growth rate of gross value added (GVA) at basic prices (2011–12 series, at constant prices) shows

    that growth rate was falling since Q4 of 2015–16 and it was 5.6 per cent at Q1 of 2017–18. The introduction of GST on 1 July 2017 lifts the growth rate of GVA as evident in Figure C.1. However, the average growth rate during 2017–18 (6.4 per cent) is lower than that achieved in 2015–16 (8.1 per cent) and 2016–17 (7.1 per cent). In drawing conclusions about the impact of GST on GVA from these numbers, it should be borne in mind that seven months prior to the introduction of GST, the economy received a shock in the form of withdrawal of high denomination notes.

  • 1 - Decades of Indirect Tax Reforms in India: A Journey towards Goods and Services Tax (GST)

  • from Part I - Genesis and Evolution of GST in India
    • By Sacchidananda Mukherjee, Associate Professor at the National Institute of Public Finance and Policy, New Delhi., R. Kavita Rao, Professor at the National Institute of Public Finance and Policy, New Delhi.
  • R. Kavita Rao, Sacchidananda Mukherjee
  • Book:
    Evolution of Goods and Services Tax in India
    Published online:
    26 April 2019
    Print publication:
    23 May 2019, pp 7-35
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  • Summary

    Introduction

    The quest for a suitable indirect tax framework in India encompassing goods as well as services started a long time back. The constitutional assignment of powers for taxation in India included a number of stand-alone taxes on goods and services in addition to a few relatively more broad-based taxes, none of which were comprehensive in covering both goods and services. Further, this assignment divided the powers between the union and the state governments, thereby requiring a considerable degree of cooperation and coordination between the union and the state governments in order to initiate and establish a new indirect tax regime which addressed some of the concerns emanating from the old regime. Given the constitutional assignment of taxation power to different governments, fiscal autonomy enjoyed by the subnational governments, and complexities involved in bringing consensus among the subnational governments, the evolution of the Indian goods and services tax (GST) provides an interesting example of reforms in indirect taxes for scholars interested in public finance, especially in the case of federal countries.

    Reforms in indirect taxes initiated since 1986–87 helped in sequencing big tax reform such as GST in India. It helped to accommodate the political-economy dimensions as well as the acceptability aspects of the tax reform. What is significant about the Indian GST is that each and every aspect of design, structure and administration of the GST has evolved on the basis of political consensus between the union and provincial governments. For a federal country like India where subnational governments enjoy more or less a power structure similar to that of the union government and where there is considerable diversity among provincial (subnational) governments, building consensus for a destination-based dual GST system is a great achievement in the history of fiscal federalism. The role played by different institutions/committees in achieving the Indian GST requires special mention here. The present chapter is an attempt to provide readers an overview into the evolution of the concept of GST in India.

    India introduced GST from 1 July 2017. It is a comprehensive multistage value-added tax (VAT) on goods as well as services and it provides concurrent taxation powers to the centre (federal) and state (provincial) governments to collect tax on every stage of value addition.

Page 21 of 58