Newsletter Archive
September 27, 2006
See below for the latest from the Urban-Brookings Tax Policy Center:
In the past 25 years, there has been a major tax bill about every 2-3 years, and since 2001, there has been at least one every year. This legislation has substantially altered our tax laws. In 1980, the top individual income tax rate was 70 percent and the top rate on corporations was 46 percent. Today, the top rates on both are 35 percent. In 1980, individual income taxes were 8.9 percent of GDP; today they comprise 8.1 percent. Payroll taxes have increased as a share of Federal revenues and corporate income taxes and excise taxes have declined. In addition, over the past quarter century, the Congress has enacted numerous new and expanded exemptions, tax credits, and special deductions for favored activities, while limiting and reducing others. The tax law is a major component of Federal policy towards health care, housing, retirement security, education, energy, support for low-income families, states and localities, and non-profit organizations and many other areas. In this way, the tax law affects virtually every aspect of American citizens' lives.
Link to Tax Legislation Page
Leonard E. Burman
September 13, 2006
The testimony discusses the usefulness of dynamic analysis and dynamic scoring for the policymaking process. Burman concludes that dynamic scoring is not feasible because of lack of knowledge about how deficits will be offset, uncertainty about key parameters in economic models, and inherent limitations in those models themselves. Dynamic analysis is useful, but it should be applied to spending as well as taxes. The economic analysis of tax and spending provisions should be done on a provision-by-provision basis, not just overall packages.
Link to testimony
Lily L. Batchelder, Fred T. Goldberg, Jr., Peter Orszag
September 8, 2006
The federal tax code provides about $500 billion each year in incentives intended to encourage socially-valued activities, including homeownership, charitable contributions, health insurance, and education. The vast majority of these incentives operate through deductions or other approaches that link the size of the tax break to a household's marginal tax bracket, which means that higher-income taxpayers receive larger incentives than lower-income taxpayers. Such an approach is often appropriate for provisions, such as deductions for business expenses, designed to measure income or ability to pay. But such an approach for incentives intended to promote socially-valued activities excludes more than a third of America, and misses an important opportunity to increase efficiency and economic growth. This paper discusses the desirability and feasibility of converting most such incentives into refundable tax credits.
Link to paper
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