Senate Finance Committee Blank Slate Project 2013 – Senator Rockefeller’s Suggestions

Evaluation of Senator Suggestions for the Blank Slate Project

As noted in my 9/9/13 post, I’m going to summarize and analyze proposals senators offered to the Senate Finance Committee, and that the senator made public. Despite falling behind on my project, as tax reform likely heats up in 2014, I’m back at it as I’d like to look at and share what might be a broader array of proposals and issues. In no particular order, the second set of suggestions I’m commenting on are from Senator Rockefeller (D-WV) (7/26/13 letter). Senator Rockefeller is a member of the Senate Finance Committee.


Equity and fairness
Require “the wealthiest individuals and businesses to contribute more.”
Not mentioned
Not mentioned
Not mentioned
Tax gap minimization
Not mentioned
Specific tax preferences to be repealed
None mentioned
Specific tax preferences to be retained
Suggests expanding refundable credits such as the EITC, Child Credit, American Opportunity Tax Credit and the Saver’s Credit.
New tax provisions suggested
None specifically mentioned, but suggests the need to have wealthiest pay more and to have tax reform generate revenue. He refers to his June 2011 proposal that would raise $1 trillion and suggests the SFC consider some of these proposals (without mentioning any specific ones). 
Other tax items
None specified, but there are 18 in his June 2011 proposal (see link above).
Non-tax suggestions
None noted other than generating revenue from tax reform.
Reduce income inequality.


Commentary: Senator Rockefeller refers to data from the Pew Charitable Trusts and the OECD, that the poorest 20% of individuals are doing worse than prior generations. Per the OECD, “the United States ranks 31 out of 34 developed countries in income inequality.” I think he raises a good point. There is a very wide range of income levels in the United States. Internal Revenue Service data for 2009 on the top 400 individuals in terms of income indicates that the average AGI for this group was $202 million! There are 89 in this group without wage income, while only 12 did not have capital gains subject to preferential rates. The average subject to preferential rates was $99 million of capital gains. That is a lot of income taxed at 15% which is lower than the total payroll tax rate (15.3%). While we often hear complaints from some lawmakers and citizens about the roughly 50% of lower income individuals not paying federal income tax, this group mostly have income below $50,000. Why don’t we hear more about the almost $5 million each of the top 400 individuals saved by having a 15% capital gains rate in 2009 rather than 20% (or the $12.87 million each saved if we instead still had the 28% capital gains rate that was in effect from 1987 to 1996)?

Bottom Line: I’m glad Senator Rockefeller raised the equity issue as I think it needs to be discussed. I wish he had said more about the amount of taxes each income quintile group pays as a percentage of their income as that also shows the heavy burden the lowest quintile faces. In discussing equity, we should look not only at federal income taxes paid, but also payroll taxes and other federal taxes (excise, estate, and gift).

btw – the first blank slate proposal I analyzed in September 2013 was from Senator Cantwell.

In accordance with Circular 230 Disclosure

Annette Nellen, CPA, Esq., is a professor in and director of San Jose State University’s graduate tax program (MST), teaching courses in tax research, accounting methods, property transactions, state taxation, employment tax, ethics, tax policy, tax reform, and high technology tax issues.

Annette is the immediate past chair of the AICPA Individual Taxation Technical Resource Panel and a current member of the Executive Committee of the Tax Section of the California Bar. Annette is a regular contributor to the AICPA Tax Insider and Corporate Taxation Insider e-newsletters. She is the author of BNA Portfolio #533, Amortization of Intangibles.

Annette has testified before the House Ways & Means Committee, Senate Finance Committee, California Assembly Revenue & Taxation Committee, and tax reform commissions and committees on various aspects of federal and state tax reform.

Prior to joining SJSU, Annette was with Ernst & Young and the IRS.

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