Representative Van Hollen Releases New $1.2 Trillion Tax Plan
January 13, 2015
This week, Representative Chris Van Hollen (D-MD) spoke at a Center for American Progress event. At this event he outlined a new tax plan that he says will boost the after-tax income of low- and middle-income taxpayers and raise taxes on high-income taxpayers.
“Today, I am proposing policies that will raise wages, increase personal savings, and grow the economy. These policies are on top of the tax relief and tax fairness proposals in last year’s Democratic budget resolution, which would extend important tax credit improvements for working families and students, expand the Earned Income Tax Credit, and raise revenue to lower deficits and help put us on a sustainable fiscal course.”
His plan creates a number of new tax credits and deductions and expands existing provisions aimed at the middle- and lower-income taxpayers.
- A “Paycheck Bonus” tax credit of $1,000 for individuals ($2,000 for couples) with incomes under $100,000 ($200,000 for couples). This credit will not be refundable and it will be adjusted for inflation.
- A “Savers Bonus” tax credit that directs $250 into a tax-preferred savings account if the taxpayer saves at least $500 of his “Paycheck Bonus” tax credit.
- Expand the Child and Dependent Care tax credit by raising the allowable expenses and making it refundable. It will also be adjusted for inflation.
- Create a 20 percent tax deduction (up to $60,000) for second earners with children in order to mitigate the marriage penalty.
- Provide tax benefits to businesses that invest in training programs
These new tax benefits for middle- and lower-income taxpayers will cost approximates $1.2 trillion over ten years and would be paid for by a number of tax increases aimed at high-income individuals and businesses.
- A 0.1 percent tax on financial transactions.
- The “CEO-Employee Pay Fairness Act,” which would eliminate the deduction for CEO pay (salary or otherwise) over $1 million if the corporation does not raise its workers’ wages by 4 percent each year.
- Some sort of cap on or reduction of itemized deductions, or an increase in investment income taxes. (It’s not entirely clear what he means by “Curb tax breaks that favor portfolios.” However, he mentions that this can be done without raising marginal rates, which could imply a cap on deductions.)
Some of these proposals are familiar (we previously discussed The CEO-Employee Pay Fairness Act last September) while others are new, but not necessarily novel policy (the pay check bonus credit is just a larger, non-refundable version of the “Making Work Pay” tax credit). Regardless, these proposals taken together would have a serious impact on the current tax code. They double down on its progressive nature and place a larger tax burden on business. Unfortunately, most of Representative Van Hollen’s tax plan would move the U.S. further away from having a competitive, modern tax code.
The details of each piece of this plan will be released in the coming weeks.