EPB Executive Committee Meeting - January 3, 1976 - Policy Issues in Special Analysis on Tax Expenditures

Sep 18, 2026

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A memorandum prepared for the EPB Executive Committee meeting explains policy issues involved in a special analysis of tax expenditures. It links inclusion or exclusion of specific tax items to differing interpretations under the Congressional Budget Act and to conceptual problems in defining tax expenditures. The memo discusses why several items were added this year, presents proposed language, and provides estimated revenue-loss figures for 1975–1977, including deferral of income of controlled foreign corporations and capital gains at death, with references to legislative changes such as the Tax Reduction Act of 1975.

LanguageEnglish

CategoryResearch & Report

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Pages47

Reading Time1 h 58 min

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EPB Executive Committee Meeting

Policy issues in the special analysis on tax expenditures

Items added or changed in the tax expenditures list

The original documents are located in Box57,folder“1976/01/03-Economic Policy Board”of the James M.Cannon Files at the Gerald R.Ford Presidential Library. Copyright Notice The copyright law of the United States(Title 17,United States Code)governs the making ofphotocopies or other reproductions of copyrighted material.Gerald Ford donated to the UnitedStates of America his copyrights in all of his unpublished writings in National Archives collections.Works prepared by U.S.Government employees as part of their official duties are in the publicdomain.The copyrights to materials written by other individuals or organizations are presumed toremain with them.If you think any of the information displayed in the PDFis subject to a validcopyright claim,please contact the Gerald R.Ford Presidential Library. | | | --- | | EPB EXECUTIVE COMMITTEE | | MEETING | | January 3,1976 | | 9:30 a.m. | | Roosevelt Room | EPB EXECUTIVE COMMITTEE MEETING 2:00 p.m. January 2,1976 Roosevelt Room MEHORANDUM FOR TIIE.DIRECTOR AJD DEPUTY DIRECTOR /S/ Fron : Rudy Penner # Subjact:Policy Issues in Speclal Analysis on Tax Expend1tures The Congressional Budget Act requlres that a 1isting of tax expenditures,estimated on the basis of existing tax law,and proposed changes in taxexpenditures be included in the budget.The Act's definition of taxexpenditures iB subject to varying interpretations,hence the Inclusionof some 1tans in the budget's list 1s a matter of policy jud gment. The following language appears in the text to explain why we are in-cluding some items thls year that we Baid last year were not includedin the definitfon of tax expenditures and why some additional 1tem8are included: "The specific list of tax expenditures presented in this analysis1B 8omewhat different from that presented in the 1976 budget,where tax axpenditures were 11sted for the first time。 Furtherconsideration of the conceptual problems of defining tax expend1-tures has led to listing four ites which were discussed,but notdeemed to be tax expanditure itons in the 1976 analysis:deferralof income of controlled foreign corporations;exclusion of foodstamps;capital gains at death;and maximum tax on earned income.Some additional items are 1isted for the frst tinc in thigapecial analyss.s either to reflect legislative changes or to makeits coverage more nearly complete." 1. Four Itame not included in last year's budget but included in 1istspublished by the Congreslonal Budget Comnittee. We propose that threeof these items be 11sted in the budget, We belleve it was a conceptualerror not to include therna 1ast year;their incluslon this year would reduceaontroversy with congressiona1 committees a8 to what 1s and what is not atax expenditure, The nurabers in paronthesia are the estimates in millionBof dollars for 1975,1976,and 1977,raspectively. Deferral of inconc of controlled foreign corporations(590,525,365). The introduction in last year's text explained our failureto include this itea 88 follows! "Earnings of foraign corporations. The gencral tax law doesnot seek to tax foralgn entlties or persons on income earnedabroad. Thus,earnings of foreign corporations oparatingoutside the United States are not taxable. The tax lav does,however,tax U.S.shareholders on dividends from corporations,regardless of where those corporationg are located or operated.The general principle,however,is that dividends are taxedonly whan recelved.For this reason,not taxing the inconeof controlled foreign corporations until received iB part ofthe normal tax structure." In fact,the earnings of controlled foreign corporationa aretaxed currently under certain circumstances(Subchapter F)and these cireumstancas were more broadly defined by theTax Reduction Act of 1975(which is why the estimates for1976 and 1977 are lower than 1975).The propoaed text forthis year! "The income of foreign corporations controlled by U.s.corporations or citizens 1s generally not sub

FAQs

Why does the memo focus on policy issues in a special analysis of tax expenditures?

Because the Congressional Budget Act requires listing tax expenditures, but the definition is subject to varying interpretations, making inclusion of items partly a matter of policy judgment.

What justification is given for including deferral of income of controlled foreign corporations this year?

The memo argues it was a conceptual error not to include the item in the prior year and explains that Subchapter F taxation and broader exceptions expanded by the Tax Reduction Act of 1975 affect the estimates.

How does the memo address capital gains at death and why it was treated differently last year?

It notes the prior exclusion and provides proposed text treating the failure to tax unrealized capital gains at death as a tax expenditure due to realization effects when heirs use market values at the estate valuation.

Sep 18, 2026

Uploaded by Mabel