Rep. Van Hollen’s ‘Action Plan’ Includes Financial Transaction Tax
House Budget Committee ranking member Rep. Chris Van Hollen (D-Md) unveiled a set of tax proposals Jan. 12 that are said to be designed, at least in part, to redistribute current tax breaks for the wealthy to middle-class workers.
While the “action plan” includes proposals that could draw bipartisan support, it also contains some controversial revenue raisers that are sure to draw intense opposition, including a tax on financial transactions and elimination of the ability of the top 1% of income earners to claim any tax deductions whatsoever. As a whole, the plan would seem to have no chance of being enacted in a Congress controlled by Republicans, but it could serve as a rallying point for Democrats as they look toward the next election cycle in 2016.
Executive Pay Limit
The centerpiece of Van Hollen’s action plan is based on H.R. 5662, legislation he introduced Sept. 18, 2014. H.R. 5662 included a provision that would have disallowed a business tax deduction for the “performance pay” of executives within a publicly traded corporation unless the rank-and-file employees in that corporation receive annual salary increases equal to a productivity growth measure, plus inflation. Those corporations would also not be allowed to lay off workers to continue to be eligible for the executive salary deduction. In his action plan, Van Hollen proposes to tweak the legislation to allow corporations to implement ownership and profit sharing plans for rank-and-file employees in order to continue to be eligible for the executive salary deduction.
‘Paycheck Bonus’ Tax Credit
The plan also features a new Paycheck Bonus Tax Credit (PBTC) that would enhance the existing Earned Income Tax Credit (EITC) for workers. The PBTC credit amount would be $1,000 for individuals and $2,000 for couples, indexed for inflation, and would be phased out for individuals making over $100,000 per year ($200,000 per year for couples filing jointly). The PBTC is coupled with a Saver’s Bonus of $250 for each worker who deposits at least $500 of his or her PBTC or EITC into a tax-advantaged savings plan. The proposal envisions allowing individuals who do not have access to a workplace savings plan to establish a MyRA account for this purpose.
Aid for Working Women
Finally, the action plan includes two proposals geared towards working women. One would create a Second-Earner Tax Deduction that would provide a 20% tax deduction on up to $60,000 of the income of second income earners with a dependent. The other would expand the Child and Dependent Care Tax Credit by making the credit refundable, raising the amount of expenses eligible for the credit to $8,000 for one child ($16,000 for two or more children) indexed to inflation, and phasing out the flat credit rate for households making more than $200,000 per year.
Andrew Remo is ASPPA’s Congressional Affairs Manager.