Tax Policy Center: Urban-Brookings Tax Policy Center

The Charitable Contributions Deduction: A Tax Debate or a Question of Charity Versus Government?

info@taxpolicycenter.org ( Adam Parachin) — Thu, 09 May 2013 00:00:00 EST

This paper attempts to better understand rhetoric over the charitable contributions deduction, arguing that debate surrounding the deduction is ultimately a projection of more fundamental debates relating to the theme of government versus charity. The phrase "government versus charity" can mean government as opposed to charity or government in opposition to charity. The first sense contemplates the need to choose which of government versus charity should supply a given good or service. The second sense contemplates the ideal regulatory posture of government in relation to charity. Competing views over the charitable contributions deduction often reduce to competing views over these two issues.

Analysis of Specific Tax Provisions in President Obama's FY2014 Budget

Wed, 08 May 2013 00:00:00 EST

This document reviews several notable tax proposals in President Obamas Fiscal Year 2014 Budget. These include a 28 percent limit on certain tax expenditures, a cap on tax preferences for retirement savers with high balances, a minimum tax ("Buffett Rule") on high-income taxpayers, alternative incentives for infrastructure investment, and a new measure of inflation ("chained CPI") for indexing tax parameters.

A Practical Challenge to Stand-Alone Corporate Tax Reform

info@taxpolicycenter.org ( Donald Marron) — Mon, 06 May 2013 00:00:00 EST

Leaders in both parties appear to favor revenue-neutral corporate tax reform that would lower today's 35 percent tax rate while slashing corporate tax breaks. Individual tax reform appears much more contentious, so some observers wonder whether Congress might pursue corporate tax reform by itself, separate from any individual reforms. Such reform faces a big practical challenge, however. Many corporate tax breaks also apply to noncorporate businesses, which are taxed under the individual income tax. Efforts to broaden the corporate base could therefore have significant effects on individual income taxes, making it difficult to pursue corporate reform separately.

Making the World Safe for Philanthropy: The Wartime Origins and Peacetime Development of the Tax Deduction for Charitable Giving

info@taxpolicycenter.org ( Joseph J. Thorndike) — Tue, 30 Apr 2013 00:00:00 EST

Since the charitable deduction first appeared in 1917, its fate has been bound up with arguments over the nature and size of government, as well as the relationship between government and the private sector. This paper examines historical debates over the deduction for charitable giving, focusing on three key periods: 1917, when the deduction was first added to the tax system; 1944, when the introduction of the standard deduction seemed to threaten the efficacy of the charity deduction; and 1981-1986, when the extension of the deduction to non-itemizers was quickly followed by a debate over curbing the deduction substantially as part of general tax reform.

Options to Reform the Home Mortgage Interest Deduction

info@taxpolicycenter.org ( Eric Toder) — Thu, 25 Apr 2013 00:00:00 EST

Eric Toder's testimony before the U.S. House of Representatives Committee on Ways and Means in a hearing on tax reform and residential real estate.

State and Local Governments in Economic Recoveries: This Recovery is Different

info@taxpolicycenter.org ( Benjamin H. Harris, Yuri Shadunsky ) — Mon, 22 Apr 2013 00:00:00 EST

Examining state and local finances in recent economic recoveries, we find that state and local government activity exhibited an unprecedented decline during the most recent recovery. Never before had state and local contribution to GDP been negative three years after a recession passed its low point. This decreased activity caused a contraction in state and local government payrolls. While many factors affect these trends, it is likely that the unusually low growth in property tax revenue heavily impacted this decline.

Top Individual Income Tax Rates: How Does the U.S. Compare?

info@taxpolicycenter.org ( Jim Nunns) — Wed, 03 Apr 2013 00:00:00 EST

Discussions of the effect of taxes on international competitiveness usually focus on corporate income tax rates, but individual income tax rates may also affect a countrys (or states) ability to compete for workers.

How Would Reforming the Mortgage Interest Deduction Affect the Housing Market?

Tue, 26 Mar 2013 00:00:00 EST

Opponents of MID reform warn that reducing the deduction would undermine the value of owner-occupied homes and impede the recovery of the depressed housing market. The best available evidence predicts far less dire effects and suggests that some reforms could actually bolster the housing market recovery. However, the results are far from definitive. As debate continues, the Urban Institute plans to further explore behavioral and market changes, strengthening the evidence upon which policymakers can rely.

The Charitable Contribution Deduction: Section 170 Reorganized

info@taxpolicycenter.org ( Dan Halperin) — Thu, 21 Mar 2013 00:00:00 EST

This paper attempts first to clarify tax rules concerning charitable contributions by reorganizing section 170 and simplifying the language, where possible, so that the operative rules will be clearer. In addition, a revision of the estate and gift tax provisions, intended to increase uniformity, is proposed. The possibility of further substantial simplification is explored in the section by section analysis which follows the proposed code revision. Whether or not the Code is actually revised in accordance with the proposed draft, having this tool available will help analyze the statute.

Urban Institute Announces New Members of Leadership Team : Len Burman Returns to Direct the Urban-Brookings Tax Policy Center; Donald Marron, Erika Poethig Appointed to Newly Created Posts

info@taxpolicycenter.org ( Urban Institute) — Wed, 20 Mar 2013 00:00:00 EST

The Urban Institute is adding to its leadership team: Donald Marron, the director of the Urban-Brookings Tax Policy Center, will become the Institute's first director of economic policy initiatives in June. Len Burman, former director of the Tax Policy Center and currently a professor at Syracuse University, will return to lead the center he co-founded in 2002. Erika Poethig, most recently the acting assistant secretary for policy development and research at the Department of Housing and Urban Development, will fill the newly created position of director of urban policy initiatives.

Financial Products Tax Reform Discussion Draft

info@taxpolicycenter.org ( Steven Rosenthal) — Wed, 20 Mar 2013 00:00:00 EST

Steven Rosenthal's testimony before the House Subcommittee on Select Revenue Measures of the Committee on Ways and Means on the Discussion Drafts proposals to reform the tax rules for derivatives and securities investments.

Options to Reform the Deduction for Home Mortgage Interest

info@taxpolicycenter.org ( Amanda Eng, Harvey Galper, Georgia Ivsin, Eric Toder) — Mon, 18 Mar 2013 00:00:00 EST

Taxpayers can currently deduct interest on up to $1 million in acquisition debt used to buy, build, or improve their personal residences and interest on up to another $100,000 of home equity loans. This brief estimates the effects on revenue and the distribution of the tax burden of proposals that would replace the current mortgage interest deduction with a non-refundable interest credit of either 15 or 20 percent of interest and reduce the ceiling on the amount of all eligible mortgage debt to $500,000. We also estimate the revenue effect of phasing in the proposals over five years.

Extending the Charitable Deduction Deadline to Tax Day

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 18 Mar 2013 00:00:00 EST

Extending the charitable deduction deadline is a move with precedent: the government has used it to encourage giving following a natural disaster. However, temporary laws have limited effect. Consider instead allowing charitable deductions made by April 15, aka tax day, to be applied to the previous year's tax returns. As in other facets of life, people are prone to making their decisions concerning giving at the last minute. If tax software companies such as TurboTax could show taxpayers how donating an extra $100 or $1,000 would lower their taxable income, this would be a powerful marketing tool for charities.

Carbon Taxes as Part of the Fiscal Solution

info@taxpolicycenter.org ( Samuel Brown, William G. Gale, Fernando Saltiel) — Tue, 12 Mar 2013 00:00:00 EST

The U.S. faces substantial and unsustainable budget deficits, which will require tax increases and spending cuts to resolve. A carbon tax could raise revenues, with several positive effects: it would improve environmental outcomes, increase economic efficiency, and allow the elimination of selected tax subsidies and spending programs. While a carbon tax imposes a larger burden on lower-income households, the opposite applies for many of the other options like scaling back tax expenditures. A long-term deficit reduction package that included a reduction in income tax expenditures as well as a carbon tax and offsetting payments could provide a balanced distributional effect.

The Charitable Contribution Deduction: Reform and Simplification

info@taxpolicycenter.org ( Martin Hall, Carolyn Osteen) — Thu, 28 Feb 2013 00:00:00 EST

Split interest and partial interest gifts have been with us for over a century. Donors have had a long-standing interest in making gifts and reserving certain critical rights with respect to the property given. This paper discusses certain important aspects of the split interest and partial interest gift rules and the problems that have become evident in their application, focusing on areas that need reform through either statutory amendment or interpretive guidance. It is vital to lower the 5 percent minimum annual payout requirement for charitable remainder trusts and adapt Section 7520 rates to current investment realities.

Estate Taxes After ATRA

info@taxpolicycenter.org ( Benjamin H. Harris) — Mon, 25 Feb 2013 00:00:00 EST

The American Taxpayer Relief Act (ATRA) made estate tax law permanent following more than a decade of constant change. Following ATRA, the estate tax remains one of the most progressive parts of the tax code. In 2013, estates with gross assets exceeding $20 million will account for nearly three-fourths of the total estate tax revenue. About one-fifth of the burden will fall on estates valued between $10 million and $20 million, while just 7 percent will come from estates worth less than $10 million.

Labor Force Participation, Taxes, and the Nation's Social Welfare System : Testimony before the Committee on Oversight and Government Reform United States House of Representatives

info@taxpolicycenter.org ( C. Eugene Steuerle) — Thu, 14 Feb 2013 00:00:00 EST

Gene Steuerle testifies before the Committee on Oversight and Government Reform on labor force participation, taxes, and the social welfare system. Although there is some disagreement over the extent to which the nations social welfare systems affect work efforts, there is almost no disagreement that they are designed in piecemeal fashion, leading to a variety of unfair, inefficient, and somewhat strange effects. Our modern economy requires modern approaches to social welfare and taxation. At a minimum, we need to begin approaching our wide assortment of programs, phase-outs of benefits, and tax rates in a more integrated fashion.

Tax Reform and Charitable Contributions : Testimony Before the Committee on Ways and Means United States House of Representatives Hearing on Tax Reform and Charitable Contributions

info@taxpolicycenter.org ( C. Eugene Steuerle) — Thu, 14 Feb 2013 00:00:00 EST

Gene Steuerle testifies before the Committee on Ways and Means on tax reform and charitable contributions. This testimony centers on the point that a tax subsidy like that for charitable contributions should be treated like any other program of government, examined regularly, and reformed to make it more effective. Moreover, the charitable deduction can be designed to strengthen the charitable sector at the same or even lower revenue cost. This is possible by taking the revenues that are spent with little effect on charitable giving and reallocating toward measures that would be more effective in encouraging giving.

Carbon Taxes and Corporate Tax Reform

info@taxpolicycenter.org ( Donald Marron, Eric Toder) — Mon, 11 Feb 2013 00:00:00 EST

The revenues from a carbon tax could help finance lower corporate tax rates, extending business tax preferences, or other corporate tax reforms. Such a tax swap would reduce the environmental risks of carbon emissions and improve the efficiency of Americas corporate tax system. But it would also pose a significant distributional challenge. A carbon tax would fall disproportionately on low-income families, while corporate tax cuts would disproportionately benefit those with high incomes. Policymakers may want to use some revenue to offset those impacts. They may also want to use some carbon revenues for deficit reduction.

Today's Unsustainable Budget Policy: A Recount

Wed, 30 Jan 2013 00:00:00 EST

Although the recently passed American Taxpayer Relief Act instituted meaningful deficit reduction relative to previous policy, it still left the budget a far distance from any sustainable path. Under a plausible scenario, deficits never fall below 3.4 percent of GDP and rise to 5.4 percent of GDP by 2022. Given this baseline, an additional $150-$300 billion of annual deficit reduction, instituted after the economy has fully recovered, would put the budget on a stable path in the intermediate term while allowing for continued economic recovery. Yet even that path leaves longer-term budget problems unresolved. Without a more far-reaching agreement over such long-term issues, policymakers may have limited leeway to respond to new emergencies and meet the demographic pressures of the forthcoming decade.

Taxing Private Equity Funds as Corporate 'Developers'

info@taxpolicycenter.org ( Steven Rosenthal) — Mon, 28 Jan 2013 00:00:00 EST

Private equity funds manage vast amounts of money: $2.5 trillion in 2010, much more than the $100 billion in 1994. They earn immense profits, largely from selling the stock of acquired and improved companies. This article focuses on the character of the funds' profits. It recommends that the IRS write new regulations to treat the funds' profits as ordinary income in light of the law, Congress's original intent, and tax policy.

Reforming the Charitable Contribution Substantiation Rules

info@taxpolicycenter.org ( Ellen P. Aprill) — Thu, 24 Jan 2013 00:00:00 EST

In May 2012, the Tax Court issued two decisions denying income tax deductions for gifts to charitable organizations because they failed to meet the requirements for a qualified appraisal. These cases lit a firestorm of outrage in various circles, raising questions of how strictly substation rules should be applied. This paper reviews the rationales behind the charitable contribution substantiation rules, sets out the complicated regime regarding these rules and applicable case law, and presents a number of possible reforms. Balancing the need to control overvaluation with the need to encourage legitimate charitable contributions is a difficult but important challenge.

What Does the Fiscal Cliff Deal Mean for Nonprofits?

Thu, 10 Jan 2013 00:00:00 EST

This fact sheet examines the effects of the American Taxpayer Relief Act of 2012 (ATRA) on charitable giving. The major individual income tax provisions are estimated to increase giving by $3.3 billion or 1.5 percent, relative to 2012 law, mainly because of the increase in the top marginal tax rate. Numerous other smaller provisions will also affect charitable giving.

Tax Provisions in the American Taxpayer Relief Act of 2012 (ATRA)

info@taxpolicycenter.org ( Jim Nunns, Jeff Rohaly) — Wed, 09 Jan 2013 00:00:00 EST

The fiscal cliff debate culminated in the passage of the American Taxpayer Relief Act of 2012 (ATRA). ATRA makes permanent most of the tax cuts enacted in 2001 and 2003, permanently patches the alternative minimum tax, extends for five years the enhancements to individual income tax credits originally enacted in the 2009 stimulus legislation, and temporarily extends certain other tax provisions. This paper provides a detailed description of the individual, corporate, and estate tax provisions in ATRA.

Is the Trillion-Dollar Platinum Coin Clever or Insane?

info@taxpolicycenter.org ( Donald Marron) — Wed, 09 Jan 2013 00:00:00 EST

In a contribution to CNNMoney, Donald Marron argues that minting a $1 trillion platinum coin if Congress refuses to raise the debt ceiling sounds crazy. But it might actually work if done in smaller denominations.

Legislative Options for Simplifying and Restructuring the Charitable Deduction

info@taxpolicycenter.org ( Dan Halperin) — Mon, 07 Jan 2013 00:00:00 EST

Section 170 of the Internal Revenue Code (Charitable Contributions) now contains 16 subsections divided into 75 paragraphs and who knows how many subparagraphs. The CCH version of Section 170 and its legislative history takes up 35 pages. In addition, much of this voluminous statute is difficult to parse. This brief reorganizes and, where possible, simplifies the rules of section 170 which, hopefully, will increase understanding and thereby enhance the possibility of both reform and simplification.

Some substantial changes are included, particularly general uniformity for income, gift, and estate tax deductions and many more potential modifications are presented.

How Marginal Tax Rates Affect Families at Various Levels of Poverty

Thu, 20 Dec 2012 00:00:00 EST

High marginal tax rates can make moving above poverty very difficult for low-income families. These high tax rates result from increasing direct taxes and decreasing transfer payments. A single parent with two children who increases her wages from poverty-level to 150 percent of poverty-level can face a tax rate between 26.6 percent and over 100 percent, depending on which state she lives in. In addition, her marginal tax rate can vary radically, depending on her earning pattern. This paper shows how sensitive marginal tax rates are to assumptions about state of residence, earning patterns, and program participation.

Evaluating the Charitable Contribution Substantiation Rules

info@taxpolicycenter.org ( Ellen P. Aprill) — Wed, 19 Dec 2012 00:00:00 EST

Two Tax Court decisions, including two from May 2012, demonstrate the concerns that arise both when the charitable contributions substantiation rules are strictly applied and when they are not. In order to address problems of valuation, the U.S. Congress has addressed the charitable substantiation rules five times in the past 30 years. Each time, Congress has strengthened the rules to try to prevent overvaluation, but the rules have not proved satisfactory. This brief suggests reasonable and fair reforms to substantiation rules.

The Tax Policy Center Receives $5 Million Grant to Enhance Research and Public Education : Roberton Williams named the first Sol Price Fellow

info@taxpolicycenter.org ( Urban Institute) — Thu, 29 Nov 2012 00:00:00 EST

The Price Family Charitable Trust has awarded the Urban Institute a seven-year, $5 million grant to support the Tax Policy Center. The Center, a joint project of the Urban Institute and the Brookings Institution, will use the grant to expand its independent, objective research on taxes and equity and to enhance its sharing of timely, reliable information with policymakers, journalists, advocates, educators, and citizens.

Back from the Dead: State Estate Taxes After the Fiscal Cliff

info@taxpolicycenter.org ( Norton Francis) — Wed, 14 Nov 2012 00:00:00 EST

The 2001 tax cuts temporarily phased out a credit for state estate and inheritance taxes and replaced it in 2005 with a deduction. Responding to the repeal, some states simply repealed their estate taxes. Others decoupled from the federal law, either establishing a stand-alone tax or explicitly linking their taxes to the 2001 law. But most states did nothing, leaving dormant legislation in place linked to the repealed federal credit. The uncertain future of the credit highlights the inter-relationship between federal and state tax systems and the uncertainty federal temporary actions create for taxpayers and other levels of government.

The Hard Road to Fiscal Responsibility

info@taxpolicycenter.org ( John L. Palmer, Rudolph G. Penner) — Wed, 17 Oct 2012 00:00:00 EST

The paper describes the current U. S. fiscal problems showing that without significant changes in revenue and spending policies, the country is headed for a sovereign debt crisis similar to that afflicting countries in Southern Europe. Various options for stabilizing the debt-GDP ratio are analyzed including the proposals of the President's National Commission on Fiscal Responsibility and Reform and the Bipartisan Policy Center's Deficit Reduction Task Force. The budgets passed by the House of Representatives and the president's response are also considered. The paper goes on to describe the Budget Control Act passed after the debt limit debate of 2011.

Social Security and Medicare Taxes and Benefits Over a Lifetime: 2012 Update

info@taxpolicycenter.org ( C. Eugene Steuerle, Caleb Quakenbush) — Fri, 05 Oct 2012 00:00:00 EST

These tables update previous estimates of the lifetime value of Social Security and Medicare benefits and taxes for typical workers in different generations at various earning levels based on new estimates of the Social Security Actuary. The "lifetime value of taxes" is based upon the value of accumulated taxes, as if those taxes were put into an account that earned a 2 percent real rate of return (that is, 2 percent plus inflation). The "lifetime value of benefits" represents the amount needed in an account (also earning a 2 percent real interest rate) to pay for those benefits. All amounts are presented in constant 2012 dollars.

Toppling Off the Fiscal Cliff: Whose Taxes Rise and How Much?

Mon, 01 Oct 2012 00:00:00 EST

The looming fiscal cliff threatens to boost taxes by more than $500 billion in 2013 when many temporary tax provisions are scheduled to expire. Nearly 90 percent of Americans would pay more tax, primarily because the temporary cut in Social Security taxes and many of the 2001/2003 tax cuts would expire. Low-income households would pay more due to expiration of tax credits in the 2009 stimulus. High-income households would be hit hard by higher tax rates on ordinary income, capital gains, and dividends and by the new health reform taxes. And marginal tax rates would rise, potentially affecting economic decisions.

Tax Policy Center Analyzes "Fiscal Cliff" Impacts on Taxpayers : Going over the "Fiscal Cliff" Means Significantly Higher Tax Bills for Americans of All Incomes

info@taxpolicycenter.org ( Urban Institute) — Mon, 01 Oct 2012 00:00:00 EST

The fiscal cliff would increase Americans' taxes by more than $500 billion in 2013, or almost $3,500 per household. A typical middle-income household would see its taxes go up roughly $2,000. Using the Tax Policy Center's microsimulation model of the U.S. tax system, the authors examine in detail how the tax changes in the fiscal cliff would affect taxpayers at different income levels.

Five Myths About the 47 Percent

info@taxpolicycenter.org ( William G. Gale, Donald Marron) — Tue, 25 Sep 2012 00:00:00 EST

As Mitt Romney recently noted, about 47 percent of U.S. households do not pay federal income taxes. Some see this as evidence of a welfare state run amok. Others think that gimmicks and loopholes let both rich and poor Americans duck their taxes. This commentary corrects some misconceptions about this group, now colloquially called the 47 percent.

International Competitiveness: Who Competes Against Whom and for What?

info@taxpolicycenter.org ( Eric Toder) — Wed, 19 Sep 2012 00:00:00 EST

Political leaders and commentators frequently claim that the policies they favor will make the United States more competitive, without defining what competiveness between countries means. This paper defines competitiveness as a contest between nations for scarce and mobile resources and explores how different tax policies may help or hinder efforts to attract high-skilled labor, capital investment, and headquarters of multinational corporations. While these inputs contribute to living standards, elevating competition for them into a final goal of policy instead of a consideration that must be weighed against costs of tax policies that attract them could lead to seriously flawed policies.

Corporate Dividends Paid and Received, 2003-2009

info@taxpolicycenter.org ( Joseph Rosenberg) — Mon, 17 Sep 2012 00:00:00 EST

This article presents IRS data on corporate dividends paid and received. Following the 2003 legislation that lowered the individual tax rate on dividends, roughly $350 billion of net corporate dividends have been paid annually. Less than half that amount has shown up as qualified dividend income on individual tax returns.

How TPC Distributes the Corporate Income Tax

info@taxpolicycenter.org ( Jim Nunns) — Thu, 13 Sep 2012 00:00:00 EST

Recent economic research has improved our understanding of who bears the burden of the corporate income tax. One key finding is that returns to corporate capital are substantially "supernormal," returns in excess of the "normal" riskless return to waiting. The other key result is that international capital mobility shifts some of the corporate income tax burden to labor. Based on these recent research findings, for standard distributional analyses TPC now assigns 20 percent of the corporate income tax burden to labor, 20 percent to normal returns to all capital, and 60 percent to supernormal returns to corporate equity (shareholders).

The Charitable Property-Tax Exemption and PILOTs

info@taxpolicycenter.org ( Evelyn Brody, Mayra Marquez, Katherine Toran) — Wed, 29 Aug 2012 00:00:00 EST

Driven by increasing pressure on local budgets, some municipalities have sought a reexamination of the property-tax exemption for nonprofit organizations provided by state law. The property tax is a major source of revenue for many municipalities, and large nonprofits such as universities and hospitals may own significant portions of land within a given city. Some cities have begun asking nonprofits for voluntary PILOTs, or Payments in Lieu of Taxesan attempt to collect a portion of the property tax revenue which would be owed if nonprofits were not tax-exempt. However, concerns from nonprofit organizations have arisen regarding PILOTs.

IRA Charitable Rollover

info@taxpolicycenter.org ( Joseph Rosenberg, Katherine Toran) — Thu, 16 Aug 2012 00:00:00 EST

Issue Brief Number 1 for the Tax Policy and Charities Project discusses the IRA charitable rollover, a tax provision that allows certain taxpayers to distribute money directly from an individual retirement account (IRA) to a qualifying charity without paying taxes.

Data Appendix to Kids' Share 2012

Thu, 19 Jul 2012 00:00:00 EST

Kids' Share 2012: Report on Federal Expenditures on Children through 2011, a sixth annual report, looks comprehensively at trends in federal spending and tax expenditures on children. This appendix details our data sources, the programs we include, and the methodology used to estimate the percentage of all expenditures that went to children.

Kids' Share 2012 : Report on Federal Expenditures on Children Through 2011

Thu, 19 Jul 2012 00:00:00 EST

Kids' Share 2012: Report on Federal Expenditures on Children through 2011, a sixth annual report, looks comprehensively at trends over the past 50 years in federal spending and tax expenditures on children. Key findings suggest that the size and composition of expenditures on children have changed considerably, but children have not been a budget priority. In 2011, federal outlays on children fell for the first time since the early 1980s, dropping from $378 billion in 2010 to $376 billion. Over the next decade, outlays on children are projected to decline from 10 to 8 percent of the federal budget.

Kids' Share Website

Are Pension Reforms Helping States Attract and Retain the Best Workers?

Mon, 16 Jul 2012 00:00:00 EST

Recent budget pressures have led many states to cut future pension benefits for state workers. Using New Jersey as a case study, this report describes how these reforms ignore larger employee recruitment and retention issues for today's more mobile workforce. State retirement plans generally do not attract younger workers, lock in middle-aged workers even if a job is not a good fit, and push older workers into retirement. Recent reforms also shift pension financing burdens to the young, largely sparing taxpayers and current older workers and retirees.

How Hard Is It to Cut Tax Preferences to Pay for Lower Tax Rates?

Tue, 10 Jul 2012 00:00:00 EST

Some political leaders have proposed to lower individual income tax rates and make up the lost revenue by eliminating tax preferences. To help inform the discussion of such proposals, we examine illustrative revenue-neutral combinations of lower rates and cuts in tax preferences and their effects on the distribution of tax burdens. We conclude that paying for lower rates would require substantial reductions in broadly-used and popular preferences. In addition, requiring that changes maintain the current progressivity of the federal income tax would make it much harder to find a politically acceptable mix of preferences to curtail.

Mobility, the Tax System, and Budget for a Declining Nation : Testimony Before the U.S. Senate Finance Committee

info@taxpolicycenter.org ( C. Eugene Steuerle) — Tue, 10 Jul 2012 00:00:00 EST

Nothing so exemplifies the American Dream than the possibility for each family to get ahead and, through hard work and faithful service, advance from generation to generation. Today mobility across generations is threatened by three aspects of current federal policy: a budget for a declining nation that promotes consumption ever more and investment, particularly in the young, ever less; relatively high disincentives to work and saving for those who have just attained a poverty level income; and a budget that generally favors mobility for those with higher incomes, while promoting consumption but discouraging mobility for those with lower incomes.

Income and Taxes of the Very Rich

info@taxpolicycenter.org ( Roberton Williams) — Fri, 06 Jul 2012 00:00:00 EST

Roberton Williams compares the adjusted gross incomes of the top 400 with the incomes of all other taxpayers with income over $1 million and finds that because they realize more capital gains, the top 400 tend to have lower effective income tax rates than other very high-income taxpayers.

Marginal Tax Rates, Work, and the Nation's Real Tax System : Joint Hearing of the Subcommittee on Human Resources and Subcommittee on Select Revenue Measures Committee on Ways and Means

info@taxpolicycenter.org ( C. Eugene Steuerle) — Thu, 28 Jun 2012 00:00:00 EST

Gene Steuerle testifies before the House Subcommittees on Human Resources and Select Revenue Measures on the true marginal tax rates facing low- and moderate-income families. The nations real tax system includes not just the direct statutory rates explicit in the income tax and the Social Security tax systems, but the implicit taxes that derive from the phasing out of various benefits in both expenditure and tax programs. These rates can be quite high, especially for families with children, and can carry incentives that discourage work, marriage, and upward mobility.

Evaluating the Charitable Deduction and Proposed Reforms

info@taxpolicycenter.org ( Roger Colinvaux, Brian Galle, C. Eugene Steuerle) — Wed, 13 Jun 2012 00:00:00 EST

Many recent proposals for budget and tax reform would change the value of the charitable contribution deduction. This report provides context for policymakers who may be considering one or more of these reforms, as well as for other interested observers. We first offer a basic overview of charitable giving and the legal rules for claiming the deduction. Next we discuss the various rationales that have been offered in its support and highlight critiques of the deduction. We then examine various proposed reforms, including caps, floors, credits, and grants, in light of those critiques.

The "Tax Expirers"

info@taxpolicycenter.org ( Donald Marron) — Fri, 08 Jun 2012 00:00:00 EST

Donald Marron's testimony before the House Subcommittee on Select Revenue Measures of the Committee on Ways and Means on evaluating tax extenders.

The Better Base Case

info@taxpolicycenter.org ( Edward D. Kleinbard, Joseph Rosenberg) — Tue, 05 Jun 2012 00:00:00 EST

This article develops an alternative post-2012 personal income tax regime, the "Better Base Case." It argues that revenue collections of the same magnitude as those projected by the CBO (i.e., "current law") are necessary over the medium term, but that the efficiency and equity of current law's scheduled post-2012 tax system can readily be improved. We further consider the political economy implications of the proposal, and conclude that the Better Base Case is a logical and feasible next step in the evolving debate over the size and financing of the federal government.

State Tax Systems Can Be Important Part of Safety Net

info@taxpolicycenter.org ( Elaine Maag) — Mon, 21 May 2012 00:00:00 EST

Taxes and transfers at the state and federal level can have a large impact on the well-being of low-income families. How large a role states play varies, as demonstrated by the Urban Institutes recently released Net Income Change Calculator (http://nicc.urban.org). In twelve states, state taxes account for over 10 percent of total support and in others, state income taxes provide no support.

What Federal Tax Reform Means for State and Local Tax and Fiscal Policies

info@taxpolicycenter.org ( Kim Rueben) — Wed, 25 Apr 2012 00:00:00 EST

Kim Rueben's testimony before the Senate Finance Committee on federal tax reform and what it means for the tax and fiscal policies of states.

Basis Reporting: Lessons Learned and Direction Forward

info@taxpolicycenter.org ( Steven Rosenthal) — Wed, 25 Apr 2012 00:00:00 EST

Stockbrokers began reporting sales proceeds and cost basis to the IRS and taxpayers this year. This article describes how those information reports came about and discusses the issues they raise. It also argues that compliance gains and simplification benefits justify the reporting burdens that come with advances in information technology, but asserts that Congress and the IRS should take steps to alleviate the burden.

Gas Taxes, Gas Prices, and Fuel Economy

info@taxpolicycenter.org ( Kim Rueben, Yuri Shadunsky ) — Tue, 24 Apr 2012 00:00:00 EST

Gas prices have increased substantially since the beginning of this year, continuing their upward trend since 1990. American drivers are pushing the federal and state governments to implement policies to lower gas prices. But gasoline taxes have not contributed to the increase in gas prices. Rather than bringing pump prices down, lowering gasoline taxes or having gas tax holidays will mostly shift gasoline purchases across state lines or encourage people to fuel up during the gas tax holidays. Such proposals will siphon away revenues from already cash-strapped states and do little to help consumers and the economy.

Gasoline Taxes and Rising Fuel Prices

info@taxpolicycenter.org ( Kim Rueben, Yuri Shadunsky ) — Tue, 24 Apr 2012 00:00:00 EST

How Large Are Tax Expenditures? A 2012 Update

info@taxpolicycenter.org ( Donald Marron) — Mon, 09 Apr 2012 00:00:00 EST

Tax expenditures are getting increased scrutiny from budget hawks and tax reformers. New Treasury estimates, released as part of President Obama's recent budget, indicate that these tax preferences will reduce individual and corporate income tax revenues by almost $1.1 trillion in 2012. Those provisions will also increase spending on refundable tax credits by $91 billion and will reduce payroll and excise tax receipts by $113 billion. Together, tax expenditures will total almost $1.3 trillion this year.

Changes in Reported Income, 2007-2009

info@taxpolicycenter.org ( Eric Toder) — Tue, 27 Mar 2012 00:00:00 EST

Adjusted gross income (AGI) reported on individual income tax returns dropped 12 percent between 2007 and 2009, but AGI reported by taxpayers with income of $1 million or more fell by near half. Lower realized capital gains, which are concentrated among the highest income groups, accounted for three-fifths of the drop in AGI. These changes reduced the share of AGI reported by taxpayers with incomes of a $1 million or more from 16.1 percent to 9.5 percent. But the concentration of income at the very top of the distribution has begun to increase again as the stock market has rebounded.

How Big is the Federal Government?

info@taxpolicycenter.org ( Donald Marron, Eric Toder) — Mon, 26 Mar 2012 00:00:00 EST

The federal government is larger than conventional budget measures suggest. Many tax preferences are effectively spending programs. Adding these preferences to federal outlays and receipts makes the government appear about 4 percent of GDP larger. The 1986 tax reform cut these benefits, but they have since rebounded to a larger share of GDP than before. Using this broader measure of government size, many base-broadening reforms viewed as tax increases would be reclassified as spending cuts. Raising marginal tax rates would be recorded as a tax increase and a spending increase because it would boost the value of many tax preferences.

US Corporate Tax Rates Must Come Down

info@taxpolicycenter.org ( Donald Marron) — Fri, 23 Mar 2012 00:00:00 EST

In a contribution to the Christian Science Monitor, Donald Marron discusses the U.S.'s controversial coporate income tax rates.

US Budget: Fiscal Showdown or Kick the Can?

info@taxpolicycenter.org ( Donald Marron) — Tue, 13 Mar 2012 00:00:00 EST

In a contribution to the Christian Science Monitor, Donald Marron discusses the six-pack of expiring temporary tax cuts which could provide the incentive to reshape the tax code and boost the budget.

Changes in the Distribution of Top Marginal Tax Rates, 1958-2009

info@taxpolicycenter.org ( Daniel Baneman, Jim Nunns) — Tue, 06 Mar 2012 00:00:00 EST

The statutory rate structure of the federal individual income tax the number and width of brackets and the level of rates has changed significantly over time, as has the distribution of taxpayers across rates. This article examines how the top statutory marginal tax rate changed at various percentile breaks using data from all available years, 1958-2009.

Reducing the Deficit by Increasing Individual Income Tax Rates

info@taxpolicycenter.org ( Eric Toder, Jim Nunns, Joseph Rosenberg) — Tue, 06 Mar 2012 00:00:00 EST

This paper analyzes three options to increase individual income tax rates to reduce the projected debt-to-GDP to 60% by 2020, 2025 or 2035. Option 1 increases all individual income tax rates, Option 2 increases only the top three rates, and Option 3 only the top two rates. Options are analyzed using a Current Law baseline (2001-2003 tax cuts expire) and Current Policy baseline (2001-2003 tax cuts are extended). Under Current Policy, Options 2 and 3 would not meet all targets, even with rates near 100%. Under Current Law, required top rates would range from 44% (Option 1) to 58% (Option 3).

Can Tax Reform Save the Economy? : The Best Tax Systems Have A Broad Base and Low Rates

info@taxpolicycenter.org ( Donald Marron) — Wed, 15 Feb 2012 00:00:00 EST

In a contribution to the International Economy magazine, Donald Marron offers his perspective on tax reform.

Implications of Different Bases for a VAT

info@taxpolicycenter.org ( Eric Toder, Jim Nunns, Joseph Rosenberg) — Tue, 14 Feb 2012 00:00:00 EST

A value added tax (VAT) with a broad base and a VAT that excludes food, housing, and medical care would both impose larger burdens as a share of income on low-income than on high-income taxpayers. A rebate aimed at low-income taxpayers would reduce their VAT burden more than exclusions of selected goods and services. A broad-based VAT that was accompanied by a rebate consisting of an earnings credit up to a ceiling amount and an adjustment in cash transfer payments would impose relatively smaller burdens on lower than on higher income taxpayers throughout most of the income distribution.

Measuring Effective Tax Rates

Wed, 08 Feb 2012 00:00:00 EST

Effective tax rates (ETRs) measure how much people pay in taxes as a percentage of their pretax incomes. That seems simple, but theres an important complication: there are different ways to measure how much someone pays in taxes and how much he collects in pretax income. Those choices matter a great deal. As a result, it is essential to use the same ETR measure when comparing tax burdens across individual taxpayers or groups.

Distributional Effects of Individual Income Tax Expenditures: An Update

info@taxpolicycenter.org ( Daniel Baneman, Eric Toder) — Fri, 03 Feb 2012 00:00:00 EST

Tax expenditures on average raise after-tax incomes more for upper-income than for lower-income taxpayers. As a share of income, special rates for capital gains and dividends and itemized deductions provide the largest benefits for taxpayers in the top 1 percent of the income distribution, exemptions and exclusions benefit taxpayers in upper middle-income groups the most, and refundable credits provide the largest benefits to those in the bottom two quintiles of the distribution. Interactions among provisions make the revenue cost of all tax expenditures about 10 percent larger than the sum of the costs of the separate provisions.

Curbing Tax Expenditures

Tue, 31 Jan 2012 00:00:00 EST

This paper takes a broad look at tax expenditures in the context of revenue raising tax reform. It first reviews how tax expenditures have changed over the past 25 years and provides estimates of the distribution of tax savings resulting from tax expenditures today. The paper then examines three approaches for applying across-the-board limits to a selected group of the largest and most widely utilized tax preferences. The three optionsa fixed percentage credit, a cap based on income, and a constant percentage reductioncan all be designed to raise significant revenue for deficit reduction in a progressive manner.

Health Reform's Tax on Investment: Facts and Myths

info@taxpolicycenter.org ( Donald Marron) — Tue, 31 Jan 2012 00:00:00 EST

To help pay for expanded health insurance coverage, the health reform legislation enacted in 2010 included a new 3.8 percent tax on the net investment income of high-income taxpayers. When it goes into effect in 2013, it will increase the top tax rate on capital gains, dividends, and other investment income, regardless of whether the 2001 and 2003 tax cuts are allowed to expire. Almost all the burden will be borne by taxpayers with extremely high incomes. More than half the burden, for example, falls on taxpayers in the top 0.1 percent of the income distribution.

Using a VAT to Reform the Income Tax

info@taxpolicycenter.org ( Eric Toder, Jim Nunns, Joseph Rosenberg) — Fri, 27 Jan 2012 00:00:00 EST

In 100 Million Unnecessary Returns, Columbia University law professor Michael J. Graetz proposed a sweeping reform of the federal tax system that is intended to simplify the tax system, improve economic incentives, and maintain fairness. The Graetz proposal would remove most current taxpayers from the income tax rolls, reform the corporate income tax, significantly reduce the top individual and corporate rates, and adopt a value-added tax (VAT). This paper describes the Graetz proposal in detail and analyzes its effects on federal revenues, spending and the deficit, the distribution of tax burdens, economic incentives, and tax administrative and compliance costs.

America Owes $10 Trillion! No, $50 Trillion! Let Me Explain.

info@taxpolicycenter.org ( Donald Marron) — Fri, 27 Jan 2012 00:00:00 EST

In a contribution to the Christian Science Monitor, Donald Marron discusses the estimates of America's debt which vary by tens of trillions of dollars, depending on how you count. The bottom line: It's deep but not yet fatal.

Tax Rates on Capital Gains

info@taxpolicycenter.org ( Roberton Williams) — Wed, 25 Jan 2012 00:00:00 EST

Tax rates on capital gains have fluctuated over the past century, sometimes matching the rates for ordinary income but more often substantially below them. The current top gains tax rate is 15 percent, less than half the 35 percent top rate on ordinary income and lower than at any time since the depression. But if Congress does not change the law, the expiration of the Bush-era tax cuts and imposition of taxes associated with the 2010 healthcare legislation will boost the maximum tax rate on gains to 25 percent in 2013.

Controlling the Deficit: The Debate Continues

info@taxpolicycenter.org ( John L. Palmer, Rudolph G. Penner) — Fri, 20 Jan 2012 00:00:00 EST

The report discusses the important budget events of 2011. It begins with the House Republican budget and the president's response. The very different approaches to health and discretionary spending and tax policy are analyzed in detail. The policy debate continued into the confused debt limit negotiations of July. The Budget Control Act finally emerged. It capped discretionary spending and created a "super committee" that was to propose additional deficit reductions. The committee failed miserably. An automatic across-the-board spending cut is supposed to result from that failure. The report describes its effects on defense and nondefense spending.

Funding and Investing in Infrastructure

info@taxpolicycenter.org ( Michael A. Pagano) — Wed, 18 Jan 2012 00:00:00 EST

Funding and investing in infrastructure are not only about finding adequate resources to meet the demands of citizenry, but rather requires understanding of how infrastructure fits into the broader functions of government. This brief examines the key role of pricing infrastructure projects and how the total cost of a project (including lifetime maintenance costs) should be included in funding decisions. Current federal and state policies often encourage new building rather than maintenance and care of existing infrastructure. The role of public-private partnerships in infrastructure projects is also sometimes more about political rather than economic considerations. The author presents options to better coordinate infrastructure financing and payments across levels of government.

International Competitiveness : Who Competes against Whom and for What?

info@taxpolicycenter.org ( Eric Toder) — Tue, 10 Jan 2012 00:00:00 EST

Twelve Days of Christmas Hopes for Tough Economy, Deadlocked Congress

info@taxpolicycenter.org ( Donald Marron) — Thu, 22 Dec 2011 00:00:00 EST

In a contribution to the Christian Science Monitor, Donald Marron discusses hopes for the global economy and the political leaders struggling to keep it on an even keel.

Sarah Rosen Wartell, Think Tank Executive and Housing Finance Expert, to be the Urban Institute's Third President

info@taxpolicycenter.org ( Urban Institute) — Tue, 20 Dec 2011 00:00:00 EST

Sarah Rosen Wartell, a public policy executive and housing markets expert who co-founded the Center for American Progress (CAP) and serves as its executive vice president, will become the third president of the Urban Institute at the end of February.

Teddy Roosevelt Redux?

info@taxpolicycenter.org ( C. Eugene Steuerle) — Wed, 14 Dec 2011 00:00:00 EST

The debate over the relationship between government and the rich has been part of every presidential contest for more than a century. But myths and misunderstandings pervade attempts to compare 2012 and 1910 with policy prescriptions in mind. Chief among the myths propagated by both political parties is that, for better or worse, larger and more engaged government has come about through taxing the rich.

Composition of Tax-Deductible Charitable Contributions

info@taxpolicycenter.org ( Joseph Rosenberg) — Tue, 13 Dec 2011 00:00:00 EST

Taxpayers who elect to itemize can claim a deduction against federal income tax liability for contributions made to registered charitable organizations. While cash gifts still account for the vast majority of charitable donations reported on tax returns, gifts of noncash property have grown as a share of total contributions. Gifts of corporate stock, mutual funds, and other investments account for the largest share of noncash donations and are almost exclusively reported by high-income taxpayers.

The Property Tax Exemption for Nonprofits and Revenue Implications for Cities

info@taxpolicycenter.org ( Daphne A. Kenyon, Adam H. Langley) — Fri, 09 Dec 2011 00:00:00 EST

The charitable property tax exemption can have significant revenue implications for municipalities with large nonprofit sectors and heavy reliance on the property tax. Interest in policies to offset these revenue implications has grown because of the growth of the nonprofit sector in recent decades and the fiscal crisis currently facing many local governments. This policy brief discusses some of these policies, including nonprofit payments in lieu of taxes (PILOTs), municipal service fees, heavier reliance on user fees and special assessments, in-kind contributions from nonprofits, state aid to municipalities hosting tax-exempt nonprofits, and local control over the charitable property tax exemption.

Do Low-Income Workers Benefit from 401(k) Plans? (Full Report)

info@taxpolicycenter.org ( Eric Toder, Karen E. Smith) — Fri, 09 Dec 2011 00:00:00 EST

Economists frequently assume that employees pay for employer-provided fringe benefits, such as contributions to retirement plans, in the form of reduced wages. This paper challenges these assumptions. Because low-income employees receive little tax benefit from saving in qualified retirement plans, they may not be willing to accept a one dollar reduction in their wage in return for an additional dollar contributed to their 401(k) plan. We find that employers reduce wages of high-income workers by 90 to 99 cents for every dollar contributed to a 401(k) plan, but they reduce wages of low-income workers by only 11 to 29 cents.

Do Low-Income Workers Benefit from 401(k) Plans? (Brief)

info@taxpolicycenter.org ( Eric Toder, Karen E. Smith) — Fri, 09 Dec 2011 00:00:00 EST

Real Tax Reform: Flat-Tax Simplicity with a Progressive Twist

info@taxpolicycenter.org ( Donald Marron) — Fri, 25 Nov 2011 00:00:00 EST

In a contribution to the Christian Science Monitor, Donald Marron agrees that there are good reasons for a simpler tax system, as found in the flat-tax plans of GOP hopefuls Perry, Gingrich, and Cain. But they need to be made more progressive to amount to real tax reform that can pass muster politically.

Using a VAT for Deficit Reduction

info@taxpolicycenter.org ( Jim Nunns, Joseph Rosenberg, Eric Toder) — Tue, 22 Nov 2011 00:00:00 EST

Two ways of reducing the deficit are imposing a broad VAT with a rebate to offset the burden on low-income households and increasing marginal income tax rates. The prototype VAT would impose a larger burden on low- and middle-income households than raising income tax rates and increase compliance costs for taxpayers and administrative costs for the government, especially during a startup period. But the VAT would lead to a smaller increase in marginal tax rates on labor income than an income tax, not affect incentives to save and invest, and impose fewer, but not necessarily smaller, distortions on economic decisions.

Congress Begs a Crisis to Fix the Debt

info@taxpolicycenter.org ( Rudolph G. Penner) — Mon, 21 Nov 2011 00:00:00 EST

In a contribution to the CNNMoney.com, Rudolph Penner discusses the super committee's failure to fix the deficit.

Tax Reform: Lessons From History

info@taxpolicycenter.org ( C. Eugene Steuerle) — Thu, 20 Oct 2011 00:00:00 EST

This article was published as part of the Tax Note series "The Legacy of the TRA '86." As current budget pressure forces us to consider tax reform as a means of raising revenue, past reforms provide us some valuable lessons. Reforms typically begin with a consensus that something is broken and that while we disagree on the perfect solution, no one favors the unequal justice, inefficiency, or complexity in our tax code. It was that type of bipartisan agreement that led to past successful tax reforms, such as in 1986, 1969, and 1954. Similar ideas are relevant today.

Reprinted with permission from Tax Analysts

The Tax Treatment of Charities & Major Budget Reform : Testimony Before the Committee on Finance United States Senate

info@taxpolicycenter.org ( C. Eugene Steuerle) — Tue, 18 Oct 2011 00:00:00 EST

Eugene Steuerle testifies before the Senate Finance Committee on "Tax Reform Options: Incentives for Charitable Giving," presenting options on how to increase tax revenues with minimal impact or perhaps even an increase in charitable giving. Among other recommendations, he suggests a floor under charitable giving, improved compliance measures, greater restrictions on non-cash gifts, a better system of information reporting, allowing taxpayers to immediately deduct contributions they make while filing their tax returns, extending the deduction to taxpayers who don't itemize, raising the ceiling on allowed charitable giving for some types of gifts, and reforming the foundation excise tax.

Income Tax Paid at Each Tax Rate, 1958-2009 (Updated)

info@taxpolicycenter.org ( Daniel Baneman, Jim Nunns) — Wed, 12 Oct 2011 00:00:00 EST

The federal individual income tax has had many more brackets and much higher rates in the past than it does today. In 1958, for example, there were 24 brackets (versus 6 today) and the top rate was 91 percent (versus 35 percent today). The impact of more brackets and higher rates on taxpayers and revenues depends on how much taxable income falls in each of the tax rate brackets. We find that only a small fraction of returns was subject to rates above todays top rate of 35 percent in any year since 1958, but a significant fraction of tax was paid at these higher rates in many years. For example, prior to 1982 (when the top rate was reduced to 50 percent), taxable income in brackets above todays top 35 percent rate was taxed at an average effective rate of 49 percent. We estimate that increasing the effective tax rate on taxable income in the 35 percent bracket to 49 percent would have raised $78 billion of additional income tax revenue in 2007.

California's Initiative Turns 100: What's the Single Best Thing We Can Do to Improve the Initiative Process? Make it harder.

info@taxpolicycenter.org ( Kim Rueben) — Wed, 12 Oct 2011 00:00:00 EST

This year marks the 100th Anniversary of California's initiative process. In 1911, California famously adopted the direct initiative process and ballot box decision-making has become almost as synonymous with the Golden State as beaches, hi-tech innovation, and Hollywood. While 75% of voters in California still see direct initiatives as a good thing, a similar percentage thinks it could use some tweaking. In honor of the anniversary, Zcalo Public Square garnered commentary on the initiative process.

Simple Tweak, Profound Effects

info@taxpolicycenter.org ( Roberton Williams) — Fri, 30 Sep 2011 00:00:00 EST

In a contribution to the New York Times' Room for Debate, Roberton Williams suggests Congress scale back on tax subsidies in a way that protects America's hard-hit middle class.

Energy Policy and Tax Reform

info@taxpolicycenter.org ( Donald Marron) — Thu, 22 Sep 2011 00:00:00 EST

Donald Marron's testimony before the House Subcommittee on Select Revenue Measures and the Subcommittee on Oversight of the Committee on Ways and Means on energy policy and tax reform.

Five Tough Deadlines for Decisions on Spending, Government Debt

info@taxpolicycenter.org ( Donald Marron) — Thu, 22 Sep 2011 00:00:00 EST

In a contribution to the Christian Science Monitor, Donald Marron discusses the five deadlines that will force Congress to address spending and government debt.

Changing the Budget Process

info@taxpolicycenter.org ( Rudolph G. Penner) — Wed, 21 Sep 2011 00:00:00 EST

Rudolph Penner's testimony before the House Committee on the Budget on proposals for changing the budget process.

Trends in Tax Expenditures, 1985-2016

info@taxpolicycenter.org ( Allison Rogers , Eric Toder) — Fri, 16 Sep 2011 00:00:00 EST

The landmark Tax Reform Act of 1986 greatly changed the cost of tax expenditures. The revenue lost to tax expenditures declined sharply after enactment of the 1986 Act, falling from nearly 9 percent of total GDP in fiscal year 1985 to 6 percent in 1988. Since then, tax expenditures have gradually increased as a share of GDP but have remained below the 1985 level. Furthermore, the composition of tax expenditures has changed significantly.

Poverty and Income Tax Entry Threshold

info@taxpolicycenter.org ( Elaine Maag) — Wed, 07 Sep 2011 00:00:00 EST

The tax entry threshold is the income level at which a person begins paying federal income taxes. Unlike payroll taxes, income taxes do not start at the first dollar of earnings. Rather, the federal income tax system exempts an amount of income from taxation based on the type of tax unit (married or unmarried, with or without children) and the number of people in the tax unit. Tax credits can raise the tax entry threshold further. This article compares the tax entry threshold to the poverty line providing one way to judge how the tax system treats low-income families and providing a comparison of the relative generosity of the income tax for families with and without children.

Budget Hawks, Doves Deadlocked? Send in the Foxes!

info@taxpolicycenter.org ( Donald Marron) — Wed, 17 Aug 2011 00:00:00 EST

In a contribution to the Christian Science Monitor, Donald Marron argues for a new way of approaching the U.S.'s budget woes.

Options to Reform the Deduction for Home Mortgage Interest

Tue, 16 Aug 2011 00:00:00 EST

Currently, taxpayers can deduct interest on up to $1 million in acquisition debt used to buy, build, or improve their primary residence or a second designated residence. In addition, taxpayers can deduct interest on up to $100,000 in home equity loans or other loans secured by their properties regardless of the loans purpose. We consider a proposal that would limit the amount of deductible interest to the amount incurred on the first $500,000 of debt on a primary residence only, and would replace the itemized deduction with a nonrefundable tax credit equal to 15 percent of eligible home mortgage interest.

Options to Limit the Benefit of Tax Expenditures for High-Income Households

Tue, 02 Aug 2011 00:00:00 EST

This analysis measures the revenue and distributional impacts of three proposals to limit tax expenditures for higher-income households: the Obama Administration's plan to cap the value of itemized deductions at 28 percent; an effective minimum tax (EMT) to ensure that tax liability is at least a certain percentage of a taxpayer's income; and a modified version of a recent proposal to limit the value of specific tax expenditures to two percent of adjusted gross income (AGI).

Why Some Tax Units Pay No Income Tax

Wed, 27 Jul 2011 00:00:00 EST

About 46 percent of American households will pay no federal individual income tax in 2011, roughly half of them because of structural features of the income tax that provide basic exemptions for subsistence level income and for dependents. The other half are nontaxable because tax expenditures special provisions in the tax code that benefit selected taxpayers or activitieswipe out tax liabilities and, in the case of refundable credits, yield net payments from the government. Provisions that benefit senior citizens and low-income working families with children particularly affect households with income under $50,000 but other factors make higher-income households nontaxable.

America Doesn't Need A Debt Limit

info@taxpolicycenter.org ( Donald Marron) — Mon, 18 Jul 2011 00:00:00 EST

In a contribution to the Christian Science Monitor, Donald Marron argues for eliminating the U.S.'s debt limit.

Which Industries Pay Corporate Income Taxes?

info@taxpolicycenter.org ( Eric Toder) — Mon, 11 Jul 2011 00:00:00 EST

Over the past decade, three-fourths of corporate income tax liability was incurred by firms in four sectors: manufacturing, finance and insurance, wholesale and retail trade, and management of companies (holding companies). Manufacturing firms paid a significantly higher share of taxes than their share of net worth, but about the same as their share of receipts. Finance and insurance companies paid very little tax in relation to their net worth, but a larger share of taxes than their share of receipts. Retailers paid high taxes relative to their net worth, but low taxes in relation to receipts.