Tax Policy Center: Budget Issues

Pyrrhic victory on health reform?

info@taxpolicycenter.org ( Leonard E. Burman) — Tue, 01 Sep 2009 00:00:00 EST

Washington Times op-ed. Leonard Burman discusses the politics of the health care reform debate.

Activist Fiscal Policy to Stabilize Economic Activity

info@taxpolicycenter.org ( Alan J. Auerbach, William G. Gale) — Mon, 24 Aug 2009 00:00:00 EST

Facing the most severe recession since the 1930s, and probably the longest as well, the U.S. government has adopted an aggressive countercyclical fiscal policy stance, beginning with the Economic Stimulus Act of 2008 in February of that year, shortly after the recessions designated starting date, and followed one year later by the much larger American Recovery and Reinvestment Tax Act of 2009. These two bills, adopted under different presidents, both contained temporary tax rebates for households and temporary investment incentives for firms, indicating at least limited bipartisan acceptance of these approaches to countercyclical stimulus.

The Distribution of Federal Taxes, 2009-12

info@taxpolicycenter.org ( Rachel M. Johnson, Jeff Rohaly) — Fri, 21 Aug 2009 00:00:00 EST

Overall, the federal tax system is progressive. On average, households with higher incomes pay taxes that are a larger share of their income. But barring legislative action, the numerous sunsets and phase-ins that Congress has written into the tax code will result in a tax system that is in a state of flux over the next few years. As a result, current law dictates significant changes in the degree of progressivity in the federal tax system between now and 2012. This paper summarizes the Tax Policy Center's latest estimates of the distribution of federal taxes for 2009 through 2012.

Mitigating the Potential Inequity of Reducing Corporate Rates

info@taxpolicycenter.org ( Dan Halperin) — Wed, 29 Jul 2009 00:00:00 EST

Some tax proposals would reduce the marginal corporate tax rate. Others would boost the top individual rate. Although a differential between corporate and individual rates could reduce the overall tax on distributed corporate income, it could also enable higher-income taxpayers to shelter income from taxation. This paper explains how denying the lower corporate rate to income from services and passive investments combined with provisions that prevent people from permanently escaping tax on retained earnings would mitigate this problem.

Conversations: Leonard Burman

info@taxpolicycenter.org ( Sam Young) — Tue, 28 Jul 2009 00:00:00 EST

Tax Notes, July 27, 2009. Leonard E. Burman is a fellow at the Urban Institute and director of the Urban-Brookings Tax Policy Center. He previously served as deputy assistant secretary for tax analysis at the Treasury Department from 1998 to 2000 and as senior analyst at the Congressional Budget Office. This fall, he will become the first Daniel Patrick Moynihan Chair in Public Policy at the Maxwell School of Syracuse University. Burman recently sat down with Tax Analysts' Sam Young to discuss his future plans, the outlook for healthcare reform in Congress, and his proposal to create a VAT to pay for healthcare.

Here Comes the Next Fiscal Crisis

info@taxpolicycenter.org ( Alan J. Auerbach, William G. Gale) — Fri, 10 Jul 2009 00:00:00 EST

Los Angeles Times op-ed, July 8, 2009. In the immediate future, policymakers will face a delicate balancing act between encouraging economic recovery and establishing fiscal sustainability. Alan J. Auerbach and William G. Gale examine the economic challenges facing the U.S.

Give Up A Benefit, Gain Jobs

info@taxpolicycenter.org ( Leonard E. Burman) — Fri, 10 Jul 2009 00:00:00 EST

Washington Post op-ed, July 9, 2009. Employer-paid health insurance is entirely tax-free a break that will cost the Treasury about $250 billion this year. Len Burman looks at tax-free health insurance provided by employers.

Who Pays No Income Tax?

info@taxpolicycenter.org ( Roberton Williams) — Thu, 02 Jul 2009 00:00:00 EST

Nearly half of all tax units will pay no income tax in 2009. The fraction of non-taxpayers differs widely, depending on income, tax filing status, and whether the unit is elderly or contains children.

An Update on the Economic Crisis and the Fiscal Crisis: 2009 and Beyond

info@taxpolicycenter.org ( Alan J. Auerbach, William G. Gale) — Thu, 25 Jun 2009 00:00:00 EST

his paper reviews recent economic events and their impact on U.S. fiscal performance and prospects. We highlight the historic nature of the 2009 budget outcomes, the unsustainability of plausible ten-year budget projections, and the increasingly dire long-term fiscal problem. These conditions leave federal policy makers with difficult choices. Over the next several years, as the recession ends and the economy recovers, policy makers will face a delicate balancing act between encouraging economic recovery and establishing fiscal sustainability. Even if a successful recovery ensues, however, medium-term and long-term fiscal problems have become increasingly urgent.

Taxing Capital Gains in Australia: Assessment and Recommendations

info@taxpolicycenter.org ( Leonard E. Burman) — Wed, 25 Mar 2009 00:00:00 EST

One of the most vexing and contentious issues in taxation is the proper treatment of capital gains-the increase in value of an asset such as shares of company stock or a business. In principle, under an income tax, capital gains should be included in the tax base as they accrue. In practice, if they are taxed at all, capital gains are almost always taxed only when an asset is sold (or "realized") and generally at lower rates than other income.

Tax Proposals in the 2010 Budget

Mon, 16 Mar 2009 00:00:00 EST

President Obama's 2010 Budget contains a number of tax provisions that would cut taxes for low- and middle-income households and raise taxes on wealthier taxpayers. This resource guide describes the tax proposals, offers more detailed commentary on key provisions, and links to tables showing the distributional effects of the overall proposal and various elements of the plan.

The Economic Crisis and the Fiscal Crisis: 2009 and Beyond

info@taxpolicycenter.org ( Alan J. Auerbach, William G. Gale) — Thu, 19 Feb 2009 00:00:00 EST

In 2009, the federal deficit will be larger as a share of the economy than at any time since the 1940s. After 2009, we project an average deficit of $1 trillion per year for the next 10 years, under optimistic assumptions. The longer-run picture is even bleaker, with a fiscal gap of 7-9 percent of GDP -- between $1 trillion and $1.3 trillion annually in current dollars. Recent trends in credit default swap markets suggest that although fiscal policy problems are usually described as medium- and long-term issues, these problems may be upon us much sooner than previously expected.

Tax Stimulus Report Card: Conference Bill

Fri, 13 Feb 2009 00:00:00 EST

This report card evaluates the provisions of the Finance and Ways & Means Committees' conference tax stimulus bill (the "American Recovery and Reinvestment Tax Act of 2009"). The evaluation is preliminary and does not include all of the provisions in the bill most notably we omit provisions related to state and local debt and recovery zone credits. TPC will update the report card if significant changes occur before Congress passes the bill.

Tax Stimulus Report Card: Comparing the House and Senate Bills

Tue, 03 Feb 2009 00:00:00 EST

This report card compares the provisions of the House and Senate tax stimulus bills (the "American Recovery and Reinvestment Tax Plan of 2009"). The combined evaluation is preliminary and does not include all of the provisions in the bill - most notably we omit provisions related to state and local debt and recovery zone credits. TPC will update the report card as we learn more about specific provisions and as the stimulus bills move through Congress.

Tax Stimulus Report Card: Senate Finance Committee

Thu, 29 Jan 2009 00:00:00 EST

The Tax Policy Center has graded the key tax provisions of the pending Senate stimulus bill (the "American Recovery and Reinvestment Tax Plan of 2009"). Our grades, which rely on the bill's legislative language, focus on how well these measures would boost the economy in the short run. Accompanying write-ups describe current law, the proposed change, and the short- and long-term effects on the budget, the economy, fairness and tax complexity. We will update the report card as we learn more about the provisions and as the stimulus bill moves through Congress.

Tax Stimulus Report Card: House Bill

Mon, 26 Jan 2009 00:00:00 EST

The Tax Policy Center has graded the key tax provisions of the pending House stimulus bill (the "American Recovery and Reinvestment Tax Plan of 2009"). Our grades, which rely on the bill's legislative language, focus on how well these measures would boost the economy in the short run. Accompanying write-ups describe current law, the proposed change, and the short- and long-term effects on the budget, the economy, fairness and tax complexity. We will update the report card as we learn more about the provisions and as the stimulus bill moves through Congress.

President-Elect Obama's Tax and Stimulus Plans

info@taxpolicycenter.org ( Roberton Williams) — Thu, 08 Jan 2009 00:00:00 EST

During the presidential campaign, Barack Obama proposed a comprehensive tax plan that would raise taxes on high-income taxpayers, cut taxes for low- and middle-income households, and lose $2.9 trillion dollars of revenue over ten years. Obama will take office with the economy in sharp recession and a deteriorating fiscal situation, made worse by new spending on a bailout plan. Faced with those crises, Obama says he will pursue both his campaign tax plan and additional tax-related proposals addressing problems created by the downturn. This paper examines revenue and distributional effects of the tax plan and describes some stimulus proposals.

How Big Are Total Individual Income Tax Expenditures, and Who Benefits from Them?

info@taxpolicycenter.org ( Eric Toder, Leonard E. Burman, Christopher Geissler) — Thu, 04 Dec 2008 00:00:00 EST

Analysts often add up tax expenditures to estimate an aggregate cost, but those tallies are inaccurate because they ignore interactions among provisions. We estimate that interactions raise the cost of nonbusiness tax expenditures by 5 to 8 percent, depending on whether an AMT patch is in effect. In 2007, these tax expenditures totaled about $750 billion5.5 percent of GDP. While tax expenditures benefit taxpayers in all income groups, high-income households gain more relative to income than low-income ones. Although the AMT eliminates some tax preferences, it increases overall tax expenditures because most AMT taxpayers face higher marginal tax rates.

Taxes under Obama and McCain

info@taxpolicycenter.org ( William G. Gale, Benjamin H. Harris) — Mon, 03 Nov 2008 00:00:00 EST

Tax policy has been a major issue in the Presidential election campaign, with both candidates proposing extensive changes. The candidates take very different approaches to tax policy. The main differences are two: first, McCains plans would reduce revenues by significantly more than Obamas; and second, McCains would be substantially less progressive, especially among very high income taxpayers. From the standpoint of growth or simplicity, both plans disappoint. It is hard to believe that either set of changes would have significant growth effects on the economy.

The Presidential Candidates' New Tax Proposals - October 27, 2008

info@taxpolicycenter.org ( Roberton Williams) — Mon, 27 Oct 2008 00:00:00 EST

In response to the deterioration of the economy and the decline in asset values, Senators McCain and Obama have offered new proposals related to unemployment compensation, retirement savings, taxation of capital gains, and job creation. Although the proposals would provide some benefit, they have significant shortcomings.

Back from the Grave : Revenue and Distributional Effects of Reforming the Federal Estate Tax

info@taxpolicycenter.org ( Leonard E. Burman, Katherine Lim, Jeff Rohaly) — Mon, 20 Oct 2008 00:00:00 EST

In this paper we review the current wealth transfer tax rules and the changes introduced in 2001. We offer an overview of the methodology underlying the TPC's estate tax model and then use the model to estimate the number of estate tax filers, taxable returns, and the distribution of burden under current law. Finally, we investigate the revenue and distributional effects of several proposals to reform the estate tax, including those put forth by the presidential candidates.

Sunday Forum: The Debt Bomb

info@taxpolicycenter.org ( Rudolph G. Penner) — Sun, 28 Sep 2008 00:00:00 EST

Pittsburgh Post-Gazette op-ed, September 28, 2008. The current financial crisis poses a severe threat to the economy, but it also creates a tremendous opportunity, writes Rudolph Penner in the Pittsburgh Post-Gazette. It gives politicians cover for undertaking painful actions to get the long-run deficit under control-actions that should have been taken long ago.

An Updated Analysis of the 2008 Presidential Candidates' Tax Plans: Executive Summary - Revised September 15, 2008

info@taxpolicycenter.org ( Roberton Williams, Howard Gleckman) — Mon, 15 Sep 2008 00:00:00 EST

Both John McCain and Barack Obama have proposed tax plans that would substantially increase the national debt over the next ten years, according to a newly updated analysis by the non-partisan Tax Policy Center. Compared to current law, TPC estimates the Obama plan would cut taxes by $2.9 trillion from 2009-2018. McCain would reduce taxes by nearly $4.2 trillion. Obama would give larger tax cuts to low- and moderate-income households and pay some of the cost by raising taxes on high-income taxpayers. In contrast, McCain would cut taxes across the board and give the biggest cuts to the highest-income households.

Deficit: What Caused It, Why It Matters

info@taxpolicycenter.org ( Alan J. Auerbach, William G. Gale) — Wed, 30 Jul 2008 00:00:00 EST

CNNMoney.com op-ed, July 30, 2009. William Gale and Alan Auerbach explain that the government is spending more than it's bringing in, resulting in a deficit. They explain why that gap must be brought under control.

Solvency Recommendations for Ohio

info@taxpolicycenter.org ( Wayne Vroman) — Mon, 28 Jul 2008 00:00:00 EST

This report examines the funding of unemployment insurance (UI) in Ohio. It proposes seven recommendations to improve program solvency, both in the short run and in the long run. The two main recommendations to improve short-run solvency are to: 1) implement a substantial increase in the taxable wage base and 2) institute a temporary freeze in weekly benefits, both recommendations to be effective in 2009. Indexation of the taxable wage base is a principal recommendation to improve solvency in the long-run.

An Updated Analysis of the 2008 Presidential Candidates' Tax Plans

Wed, 23 Jul 2008 00:00:00 EST

Tax and fiscal policy will loom large in the next president's domestic policy agenda. Nearly all of the tax cuts enacted since 2001 expire at the end of 2010 and the individual alternative minimum tax (AMT) threatens to ensnare tens of millions of Americans. While a permanent fix palatable to both political parties has proven elusive, both candidates have proposed major tax changes. This report describes how we performed our modeling and analysis, outlines the major tax proposals, and discusses the implications of their policies for the revenue raised, taxpayer economic activity, and the distribution of the tax burden.

An Updated Analysis of the 2008 Presidential Candidates' Tax Plans: Executive Summary

info@taxpolicycenter.org ( Roberton Williams, Howard Gleckman) — Wed, 23 Jul 2008 00:00:00 EST

Both John McCain and Barack Obama have proposed tax plans that would substantially increase the national debt over the next ten years, according to an updated analysis by the non-partisan Tax Policy Center. Compared to current law, TPC estimates the Obama plan would cut taxes by $2.8 trillion from 2009-2018. McCain would reduce taxes by nearly $4.2 trillion. Under current law, the 2001 and 2003 tax cuts would expire in 2010 and the Alternative Minimum Tax would remain in full force.

Distribution of the 2001-2006 Tax Cuts : Updated Projections, July 2008

info@taxpolicycenter.org ( Greg Leiserson, Jeff Rohaly) — Tue, 22 Jul 2008 00:00:00 EST

Since 2001, Congress has passed a major tax bill almost every year. Most have reduced taxes significantly and, since they were not accompanied by spending cuts, the resulting deficits have increased the national debt. The tax cuts total almost $2.2 trillion over ten years, and that total may be vastly understated if some or all of the cuts are extended beyond their scheduled expiration date of 2010. In addition, the cuts exacerbated the growing problem of the alternative minimum tax (AMT). Barring legislative action, more than 33 million taxpayers will fall prey to the AMT in 2010.

The Individual Alternative Minimum Tax: Historical Data and Projections : Updated June 2008

info@taxpolicycenter.org ( Greg Leiserson, Jeff Rohaly) — Wed, 25 Jun 2008 00:00:00 EST

Congress enacted a minimum tax in 1969 to guarantee that high-income individuals paid at least some tax. The AMT now threatens to grow from a footnote in the tax code to a major component affecting tens of millions of taxpayers. Although most lower- and middle-income taxpayers will remain unaffected by it, policymakers need to deal with the explosive growth of the AMT from an obscure tax affecting only 20,000 filers in 1970 to one affecting more than 33 million-a third of all taxpayers-by 2010. This document provides updated estimates of AMT participation, revenue, and distribution.

Budgeting for Capital Investment : Testimony Before the U.S. House of Representatives Committee on Transportation and Infrastructure

info@taxpolicycenter.org ( Rudolph G. Penner) — Fri, 13 Jun 2008 00:00:00 EST

The unified budget of the U. S. government is, in most respects, a cash budget. It is somewhat biased against public investment, because the benefits of such investments accrue over a period of time whereas the cash outlay is immediate. This testimony looks at options for directing more funds to highways, mass transit, and other public investments. It examines higher fuel taxes, tolls and congestion fees; capital budgeting; infrastructure banks; a capital revolving fund; public-private partnerships; and approaches to improving the efficiency of current grants and subsidies. It concludes that tolls and congestion fees are very promising as are public-private partnerships. A capital revolving fund would be useful for agencies that only invest occasionally. A capital budget and infrastructure banks are less desirable.

Taking Back Our Fiscal Future

Mon, 31 Mar 2008 00:00:00 EST

The authors of this paperlongtime federal budget and policy expertswere drawn together by a deep concern about the nation's long-term fiscal outlook. Despite diverse philosophies and political leanings, they found solid common ground and agree that unsustainable deficits in the federal budget threaten the health and vigor of the American economy and the first step toward establishing budget responsibility is to reform the budget decision process so that the major drivers of escalating deficitsSocial Security, Medicare, and Medicaidare no longer on autopilot. The paper provides specific policy recommendations and outlines the reasons action is critical.

Understanding States' Fiscal Health During and After the 2001 Recession

info@taxpolicycenter.org ( Elaine Maag, David Merriman) — Wed, 30 Jan 2008 00:00:00 EST

Every state except Vermont operates under some sort of balanced budget requirement. That means that to serve the increased need of distressed populations during recessions, states must either increase revenue or reallocate resources dedicated to other programs. Similarly, when revenue declines, states must raise taxes or reallocate resources. This report examines the extent to which rainy day and general fund savings were a significant factor in helping states cope with fiscal stress during and after the 2001 recession, a possible explanation for the lower than expected legislated tax increases and social welfare cuts.

Emerging State Business Tax Policy : More of the Same, or Fundamental Change?

info@taxpolicycenter.org ( William F. Fox, LeAnne Luna, Matthew N. Murray) — Tue, 29 Jan 2008 00:00:00 EST

Much of the state tax policy discussion during the past decade has centered on the performance of corporate income taxes and ways to restructure them. This report focuses on state responses to the weak corporate tax collections during the 2000-2003 period as well as to the revenue performance during the years immediately preceding and following the recession. The report is not an attempt to argue that the corporate income tax is an important component of good state tax policy. Instead, our focus is on identifying state tactics to maintain or change the tax, determining whether those strategies are good tax policy, and evaluating whether they are working to achieve the basic goals of the states.

Make the Tax Cuts Work

info@taxpolicycenter.org ( Leonard E. Burman) — Wed, 23 Jan 2008 00:00:00 EST

New York Times, January 23, 2008 - Since 2001, official Washington's answer to every policy question has been the same. What should we do with a big surplus? Tax cuts. How do we beat back global terrorism? Tax cuts. Increase energy independence? Rebuild New Orleans? Expand health insurance coverage? Tax cuts, tax cuts, tax cuts. Now comes another question to which taxes have long been at least part of the answer. How do we stimulate the economy to prevent or shorten a recession?

Rangel's AMT Riddle Continues

info@taxpolicycenter.org ( C. Eugene Steuerle) — Fri, 18 Jan 2008 00:00:00 EST

In this article, C. Eugene Steuerle explores the political and budgetary pressures facing Charles Rangel, the House Ways and Means Committee Chairman, with regard to the Alternative Minimum Tax (AMT). He further analyzes various options to fix the AMT, the ramifications for Rangel, and the path taken.

The Alternative Minimum Tax : Assault on the Middle Class

info@taxpolicycenter.org ( Leonard E. Burman) — Mon, 29 Oct 2007 00:00:00 EST

In a tax code with no shortage of ironies, the alternative minimum tax (AMT) stands out. Created by Congress in 1969, it was aimed at millionaires, but relatively few millionaires pay it. It is billed as a low-rate levy, but most of its victims face higher taxes because of it. It undermines two widely lauded reforms of the income tax -- restoring both bracket creep and the marriage penalty. And though nobody favors keeping this Frankenstein alive, it will be very difficult to kill. Welcome to the tax policy twilight zone.

What is the Tax Gap?

info@taxpolicycenter.org ( Eric Toder) — Mon, 22 Oct 2007 00:00:00 EST

In this paper Toder addresses issues related to measurement of the tax gapthe difference between tax liability under the current Federal tax law and taxes paid. He discusses how the tax gap is defined, reviews the main components of the tax gap, and describes how the IRS estimates it, as well as some of the major methodological issues in and weaknesses of current estimates. Toder concludes with some brief observations on the use and potential misuse of tax gap estimates and how compliance data might lead to better tax law administration.

How Much Federal Spending Is Uncontrollable?

info@taxpolicycenter.org ( Rudolph G. Penner, Julianna Koch) — Mon, 16 Jul 2007 00:00:00 EST

Discussions of the federal budget often refer to mandatory spending on Social Security, Medicare, and similar programs as "uncontrollable." In contrast with discretionary programs that Congress usually funds with annual appropriations, entitlement spending is determined by permanent laws specifying who qualifies for what benefits. This article examines changes in the percentage distribution of federal outlays since 1962. It highlights the rapid growth in mandatory spending driven by increased spending for health and retirement programs and the contrasting decline in defense spending as a share of total spending.

Reducing the Tax Gap: The Illusion of Pain-Free Deficit Reduction

info@taxpolicycenter.org ( Eric Toder) — Tue, 03 Jul 2007 00:00:00 EST

IRS recently estimated a gross tax gap of $345 billion, or 16 percent of tax liability, for tax year 2001. The gross tax gap is the difference between estimated tax liability in any year and the amount of tax that is paid voluntarily and on time. The tax gap could be reduced by expanding the scope of information reporting, as the current Administration and some Members of Congress have proposed, or increasing resources for IRS enforcement. Potential budgetary gains from these measures are modest, however, and will not enable politicians to avoid hard choices about future tax and spending levels.

Defining Our Long-Term Fiscal Challenges (Steuerle) : Testimony Before the U.S. Senate Budget Committee

info@taxpolicycenter.org ( C. Eugene Steuerle) — Tue, 30 Jan 2007 00:00:00 EST

In testimony before the U.S. Senate Budget Committee, senior fellow C. Eugene Steuerle explained how, in recent decades, the government has wound a straightjacket around federal spending and tax subsidies. The main culprits have been in the broad areas of retirement, health, and taxation. Left alone, it leaves Congress with almost no control over its own budget. Only major systemic reform can restore a normal democratic process. He also highlighted ten consequences of the current budgetary situation.

Defining Our Long-Term Fiscal Challenges (Reischauer) : Testimony Before the U.S. Senate Budget Committee

info@taxpolicycenter.org ( Robert D. Reischauer) — Tue, 30 Jan 2007 00:00:00 EST

The recent fiscal situation and the intermediate-term budget outlook may appear relatively benign, Urban Institute President Robert Reischauer told the Senate Budget Committee, but deficits and debt will gradually grow to unprecedented and unsustainable levels if current tax and spending policies are not altered significantly. "The challenge we face," he said, "is determining how to balance our desire for improved health against our other priorities. We cannot have it all and ask our children and grandchildren to pick up the tab." The longer policymakers wait to act, the more wrenching the adjustments will have to be.

Why Deficits Matter : Testimony Before the U.S. House Budget Committee

info@taxpolicycenter.org ( Edward Gramlich) — Tue, 23 Jan 2007 00:00:00 EST

With rapid increases in entitlement spending just over the horizon, now is the time to get deficits down and national saving up, senior fellow Edward Gramlich told the House Budget Committee.

Doing Nothing's a Good Thing

info@taxpolicycenter.org ( Leonard E. Burman) — Fri, 08 Dec 2006 00:00:00 EST

In this Marketplace commentary, Len Burman, director of the Urban-Brookings Tax Policy Center, says that extending temporary tax measures enables Congress to avoid serious tax reform and hide deep problems.

A Consensus Base for Tax Reform

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 23 Oct 2006 00:00:00 EST

The biggest mistake in tax reform is the label itself. Saying that one is in favor of tax reform is about as informative as saying that one is in favor of expenditures reform. Despite this murk, I suggest that there is a consensus base on which fundamental reform can and should rest -- the type of foundational base on which any tax system itself should rest and, by the way, the base on which reform in 1986 reform proceeded. That base is nothing more or less than developing, first, reform options that adhere to basic principles or taxation and, second, a legislative process that gives them heed.

The Tax Reform Act of 2010

info@taxpolicycenter.org ( Leonard E. Burman) — Mon, 23 Oct 2006 00:00:00 EST

Twenty years ago, President Reagan signed an amazing piece of legislation, the Tax Reform Act of 1986. It rid the income tax of many loopholes, shut down the flourishing tax shelter industry, and made taxes simpler and fairer for tens of millions of Americans. Now we need another tax reform miracle--even more than we did in 1986. The problems of 1986--tax sheltering, tax evasion, and the belief that the tax system is unfair--exist to some extent today, but the real motivation for the Tax Reform Act of 2010 is a tax and budget tsunami about to hit our shores.

Tax Expenditures and Tax Reform : Issues and Analysis

info@taxpolicycenter.org ( Eric Toder) — Fri, 20 Oct 2006 00:00:00 EST

Tax reform proposals include both restructuring of the tax system (such as replacing the income tax with a consumption tax or reforming taxation of foreign-source income) and cuts in targeted tax benefits that substitute for spending (such as tax benefits for home mortgage interest and employer paid health insurance). Criteria for analyzing tax reform and expenditure reduction differ. Tax expenditure lists provide useful measures of the costs of "backdoor" spending and departures from an ideal tax base, but have not succeeded in facilitating better choices between using the tax system or direct outlays to promote social and economic policy goals.

State Rainy Day Funds

info@taxpolicycenter.org ( Elaine Maag, Alison McCarthy) — Mon, 02 Oct 2006 00:00:00 EST

States use rainy day funds (RDFs), or budget stabilization funds, as a cushion against financial shocks. Every state except Vermont has some sort of balanced budget requirement so that, unlike the federal government, they must balance expenditures and revenues in any given budget cycle (typically one year). States can have RDFs that allow money to be carried over from good years to lean years. Five states--Arkansas, Colorado, Illinois, Kansas, and Montana--do not have RDFs.

Limits on State Revenue

info@taxpolicycenter.org ( Alison McCarthy, Elaine Maag) — Mon, 31 Jul 2006 00:00:00 EST

Several mechanisms, including traditional tax limits and legislative supermajority requirements, can limit the authority of states to increase or pass new taxes. As of February 2006, six states have a traditional tax limit in place and sixteen states require supermajorities. Eleven states are considering the adoption of new limitations or the expansion of existing restrictions.

Roth Conversions as Revenue Raisers: Smoke and Mirrors

info@taxpolicycenter.org ( Leonard E. Burman) — Thu, 11 May 2006 00:00:00 EST

The Tax Increase Prevention and Reconciliation Act of 2005 will extend the low tax rates on capital gains and dividends through 2010, grant temporary relief from the individual alternative minimum tax through 2006, and extend several expiring business tax breaks. To prevent Senators from raising a parliamentary "point of order" that would kill the bill, it had to reduce federal tax revenues by no more than $70 billion. Meeting this budget target required the inclusion of several tax increase provisions in the package. One of the largest allows taxpayers to convert IRA balances into so-called Roth IRAs. The Joint Committee on Taxation reckons that this provision would raise $6.4 billion in revenues over the 10-year budget window. In fact, this provision would reduce federal revenues over the long term by much, much more than it raises in the short run: On balance, the provision would reduce net long-term federal revenues by $14 billion in present value.

Tax Policy and Saving

info@taxpolicycenter.org ( Rudolph G. Penner) — Mon, 08 May 2006 00:00:00 EST

Economists have provided valuable insights into human behavior, and as a result, are pretty good at policy analysis. They are not very good at explaining savings, however. Perhaps that is because there is much that is irrational in saving behavior and economists are not good at irrationality. Whether irrational or not, we know that within each income group there are inveterate savers and inveterate spenders, and that may be important in trying to figure out how tax policy affects saving behavior.

Dynamic Scoring: Not so Fast!

info@taxpolicycenter.org ( Rudolph G. Penner) — Fri, 21 Apr 2006 00:00:00 EST

Using dynamic scoring to weigh the effects of tax and spending proposals poses a high risk that ideological biases will pollute the analysis, senior fellow Rudolph Penner warns in a Ripon Forum commentary. The former director of the Congressional Budget Office also points out that consistent dynamic scoring is logistically impossible given current technology.

New Estimates of the Budget Outlook: Plus Ça Change, Plus C'est la Même Chose

info@taxpolicycenter.org ( Alan J. Auerbach, William G. Gale, Peter Orszag) — Mon, 17 Apr 2006 00:00:00 EST

Despite substantial attention given to fiscal policy concerns in recent years, the federal government's fiscal status has continued to deteriorate, with the enactment of tax cuts, a massive new Medicare entitlement, increased spending on defense and homeland security, and related economic developments. This paper provides new estimates of the nation's fiscal status over both the 10-year and long-term horizon, based on the most recent (January 2006) Congressional Budget Office official budget figures (CBO 2006). Our general conclusions are not surprising: under plausible assumptions, the nation faces significant short- and medium-term deficits and massive long-term shortfalls. Dealing with these problems will require spending cuts or tax increases that are far beyond the scale of anything currently considered politically palatable.

Working To Fix Our Fiscal Woes

info@taxpolicycenter.org ( C. Eugene Steuerle) — Fri, 14 Apr 2006 00:00:00 EST

Work may be a four-letter word to some citizens in slow-growing Western European economies, but Americans know better. Senior fellow Eugene Steuerle explains why our work habits are suddenly so important.

17th Annual Roundtable on the President's Budget and the Economy

info@taxpolicycenter.org ( The Urban Institute) — Wed, 08 Feb 2006 00:00:00 EST

At the 17th annual event, budget and tax analysts and congressional staff explored questions including: How does the president's proposal deal with long-run budget pressures? Will this budget do much to constrain the rapid increase in the cost of health care? Who are the winners and losers in this budget? What budget process changes might help reduce the deficit? The opening panel featured Robert Reischauer, Eugene Steuerle, and Eric Toder of the Urban Institute; Joseph Antos from AEI; Scott Gudes from the Senate Budget Committee; John Hamre from CSIS; Bill Hoagland from the Office of the Senate Majority Leader; Douglas Holtz-Eakin from the Council on Foreign Relations; and Isabel Sawhill from the Brookings Institution.

Transforming the Tax Code: An Examination of the President's Tax Reform Panel Recommendations : Statement of Leonard E. Burman before the Subcommittees on Tax, Finance, and Exports, and Rural Enterprises, Agriculture, and Technology, House Committee on Small Business

info@taxpolicycenter.org ( Leonard E. Burman) — Wed, 01 Feb 2006 00:00:00 EST

This Congressional testimony by Leonard Burman examines how the plans put forth by the President's Advisory Panel on Federal Tax Reform would affect small businesses, focusing particularly on the effect of: adopting a national retail sales tax on small business and the viability of federal and state tax systems; the effect on small business health insurance and retirement coverage; the effect of disallowing state and local tax deductions for businesses; and the effect of certain simplification proposals.

The Impact of Tax Reform on Low- and Middle-Income Households : Testimony Submitted to the House Committee on Ways and Means

info@taxpolicycenter.org ( Leonard E. Burman) — Wed, 08 Jun 2005 00:00:00 EST

This testimony focuses on how the income tax system affects low- and middle-income taxpayers and the potential effects of tax reform. Despite its flaws and some recent erosion, the income tax is highly progressive and is an important source of income support for low-income households. Tax reform could help low- and middle-income households by reducing their tax burdens further, but some so-called fundamental tax reform proposals could shift the tax burden away from those most able to pay to those least able. Moreover, the claimed economic gains from such proposals are speculative at best, based solely on theoretical models that have little relationship to economic reality.

A Radical Proposal for Escaping the Budget Vise

info@taxpolicycenter.org ( Rudolph G. Penner, C. Eugene Steuerle) — Wed, 01 Jun 2005 00:00:00 EST

It's clearer by the day that fundamental, radical reform is needed to restore fiscal responsibility to the federal budget. Under current policy, spending grows automatically by default, faster than tax revenues as the population ages and health costs soar. These defaults are threatening the economy with large, unsustainable deficits. More important they deny to each generation the opportunity to orient government toward meeting current needs and its own preferences for services. This brief discusses some ways this might be achieved.

Alternatives to Strengthen Social Security : Testimony of C. Eugene Steuerle before the U.S. House Committee on Ways and Means

info@taxpolicycenter.org ( C. Eugene Steuerle) — Thu, 12 May 2005 00:00:00 EST

Since Social Security was first enacted, vast changes have occurred in the economic and social circumstances of the nation. In testimony before the U.S. House Committee on Ways and Means, senior fellow Eugene Steuerle addresses Social Security reform and related budget pressures. He presents an array of observations and recommendations dealing with labor force participation, inequities and inefficiencies in the Social Security program, automatic and unsustainable federal spending growth, and private retirement and employee benefit systems.

If You Think Taxes Are a Pain Now...

info@taxpolicycenter.org ( Leonard E. Burman) — Fri, 15 Apr 2005 00:00:00 EST

[Los Angeles Times] If you thought this year's tax bill was a burden, wait until you see your "share" of government spending in 2050. Tax Policy Center codirector Len Burman looks into the future according to CBO and sees a number of doomsday scenarios looming. Among them are a doubling of all taxes, a tripling of income taxes, and drastic slashes in credits and deductions. Fortunately, the sky is not falling--yet--but much work remains to be done. Namely, to avoid this doomsday, we need to reduce runaway spending, tame deficits, and rethink our priorities regarding further tax cuts until the bigger issues are addressed.

The Role of Employer-Sponsored Retirement Plans and National Saving : Testimony before the Special Committee on Aging, United States Senate

info@taxpolicycenter.org ( C. Eugene Steuerle) — Tue, 12 Apr 2005 00:00:00 EST

The evidence that retirement and pension incentives have done much recently for national saving is weak. Total personal saving in the United States is now below the annual revenues spent in supporting retirement and pension plans. One major reason is that all government subsidies are for deposits, not saving. A second is the extraordinary complexity of the laws. Yet another negative influence on saving is that most people now retire in late middle age. Finally, the incentives provided to low- and moderate-income households often are also fairly small and sometimes nonexistent. This testimony discusses various ways to try to deal with these issues.

Don't Ignore Tax Expenditures

info@taxpolicycenter.org ( Leonard E. Burman) — Wed, 02 Mar 2005 00:00:00 EST

[Marketplace] The President was in North Carolina and Pennsylvania today. He's been stumping like a candidate to win support for his changes to Social Security and cuts in the budget. In Detroit, Mr. Bush said it's time to eliminate the programs that don't deliver on their promises. Commentator and tax expert Len Burman likes this 'good government test'. So he wonders why hundreds of programs are getting a pass.

The Trend in Federal Housing Tax Expenditures

info@taxpolicycenter.org ( Adam Carasso, C. Eugene Steuerle, Elizabeth Bell) — Mon, 28 Feb 2005 00:00:00 EST

Tax programs that provide deductions to homeowners or credits to both builders and owners, greatly exceed direct federal outlays on housing. The beneficiaries of these tax programs tend to be middle-to-upper income families who own their homes while the recipients of outlays tend to be lower income families who rent. In effect, the federal government pays those with more income to own their homes while paying those with less income to rent.

The Outlook for Fiscal Policy

info@taxpolicycenter.org ( William G. Gale, Peter Orszag) — Mon, 14 Feb 2005 00:00:00 EST

The new budget projections released by the Congressional Budget Office (2005) provide an opportunity to assess fiscal policy in the first four years of the Bush administration and to discuss prospects for the next four years and beyond. This report examines the baseline CBO projections, adjusts the official data in ways that more accurately reflect the current trajectory of tax and spending policies, and discusses some of the implications.

Should the Budget Exclude the Cost of Individual Accounts?

info@taxpolicycenter.org ( Jason Furman, Peter Orszag, William G. Gale) — Mon, 24 Jan 2005 00:00:00 EST

Proposals to replace part of Social Security with individual accounts are now a focus of attention, with the President expressing a strong desire to push forward on creating individual accounts within Social Security. This paper considers the appropriate budgetary treatment of proposals to create such accounts. The paper concludes that borrowing to finance such accounts should count as part of the unified deficit and that the transfer of funds into such accounts should count as outlays.

Setting the Stage for Tax Reform--A Tax Policy Center Forum

info@taxpolicycenter.org ( The Tax Policy Center) — Tue, 18 Jan 2005 00:00:00 EST

This Urban-Brookings Tax Policy Center forum discussed issues that the new tax reform commission will have to grapple with in setting forth proposals to advance tax reform. Pamela Olson of Arps, Slate, Meagher & Flom, LLP and former Assistant Treasury Secretary for tax policy explained the goals of the tax system and presented some of the basic principles guiding tax reform, Gene Steuerle of the Urban Institute and the Tax Policy Center explained the need for reforming the tax policy process and William Gale of Brookings Institution and the Tax Policy Center discussed the question of whether to make tax cuts permanent or not.

Sisyphus Had it Easy : Reflections on Tax and Budget Reform

info@taxpolicycenter.org ( C. Eugene Steuerle) — Wed, 05 Jan 2005 00:00:00 EST

In the heady days after his re-election, President Bush promised to replace the current tax system with something better. Politicians often delude themselves that reform can be summoned by proclamation. But, a wholesale transformation of the income tax system isn't about to happen quickly or painlessly. In fact, only painstaking bottom-up planning could do the trick. [ The Milken Institute Review]

Retirement Saving Incentives and Personal Saving

info@taxpolicycenter.org ( Elizabeth Bell, Adam Carasso, C. Eugene Steuerle) — Mon, 20 Dec 2004 00:00:00 EST

To encourage saving for retirement, private pensions such as employer sponsored 401(k) plans or IRAs receive favorable tax treatment by the federal government. A major goal of such tax provisions is to increase personal saving. A measure of the value of these tax benefits is provided by the Treasury Department, and the National Income and Product Accounts contains a measure of personal saving. With the sudden drop in personal savings in 1999 and its steady decline in more recent recession years, government tax expenditures on pension benefits began to approach the personal savings level by the end of the 1990s.

The Distribution of the Estate Tax and Reform Options

info@taxpolicycenter.org ( Leonard E. Burman, William G. Gale, Jeff Rohaly) — Thu, 09 Dec 2004 00:00:00 EST

In 2001, when Congress decided to phase down the estate tax through 2009, repeal it in 2010, and restore it in 2011, it was clear that the ultimate fate of this tax was yet to be determined. One key factor that policymakers should consider in any permanent repeal or reform effort is the distribution of tax burdens that would result. This paper uses a microsimulation model containing household-level information on demographic characteristics and the level and composition of wealth and income to simulate the revenue effects and distributional burdens of alternative options for estate tax reform.

Tough Choices, Opportunity, or Both?

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 06 Dec 2004 00:00:00 EST

For the last several years, Congress has been on a spending spree unlike any in the nations history a turnaround of about 7 percent of gross domestic product in going from surplus to deficit. In addition to size, what made this spree unique was that tax cuts, defense increases, large automatic growth in entitlement spending, new health entitlements, and discretionary spending increases all were pursued at the same time, even while revenue projections were dropping after the collapse of a late-1990s bubble stock market. In the mid-1970s, The Wall Street Journal editorial page started pushing for what it called a "two Santa Claus" policy. The complaint was that the Democrats got to be Santa Claus with expenditures, then the Republicans reluctantly had to increase taxes. Better it argued, would be for the Republicans to be Santa Claus, too, on the tax side of the ledger creating, it argued, a better economy and a viable political position for the Republicans. But no one then predicted the world to which we have evolved two-Santa-Clauses-at-thesame- time. When both show up together when taxes are cut while expenditures are increased its especially hard to hold onto any belief that somehow the budget will remain balanced in the long run.

What Should Be Discussed at Campaign Time

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 18 Oct 2004 00:00:00 EST

Presidential and congressional campaigns are frustrating times. So much of what is said is misleading. It is easy to see why political advisers are so adept at moving from one campaign to another without skipping a beat or dwelling on any implied discrepancy in their own pattern of support. One can always find a multitude of sins on all sides and in almost all campaigns. It's easier to criticize than come up with constructive solutions, and at campaign time the opportunities are in spades. It's not surprising that campaigns quickly turn negative.

The Primary Deficit from 1962 to 2004

info@taxpolicycenter.org ( Elizabeth Bell, C. Eugene Steuerle) — Mon, 11 Oct 2004 00:00:00 EST

The primary surplus or deficit equals government receipts minus all outlays other than net interest. By excluding net interest, the primary surplus or deficit provides a more direct measure of overall government spending and taxing for a given fiscal year, as opposed to interest costs arising from past years. Historically, sharper drops in the primary surplus or deficit usually coincide with periods of recession, increased government spending, and the implementation of tax cuts. The strikingly rapid drop from a surplus of 4.8% of GDP in 2000 to a deficit of -2.0% in 2003 was the largest increase in the primary deficit outside World War II. Much like earlier drops, the 2000 to 2003 change corresponded with tax cuts and a relatively mild recession.

Tax Reform: Prospects and Possibilities : Statement before the Committee on the Budget United States House of Representatives

info@taxpolicycenter.org ( C. Eugene Steuerle) — Wed, 06 Oct 2004 00:00:00 EST

The gains in efficiency, equity, and simplicity from systematic tax reform could be substantial. However, to achieve those gains requires attention to many details. Tax reform efforts have failed often, but they have also succeeded, especially when rising problems created the opportunity and demand for reform, and tough issues were tackled in a spirit of bipartisan cooperation.

Bush Administration Tax Policy : Revenue and Budget Effects

info@taxpolicycenter.org ( William G. Gale, Peter Orszag) — Mon, 04 Oct 2004 00:00:00 EST

This paper evaluates recent tax policies in light of the fiscal status of the federal government, and is the third paper in a series that summarizes and evaluates tax policy in the Bush Administration. We show that the government faces significant medium-term deficits and unsustainable long-term shortfalls, even if the tax cuts are allowed to expire as scheduled; making them permanent would significantly exacerbate these problems. In addition, permanent tax cuts have to be paid for, and the required spending cuts would far exceed any that have been proffered in the public discussion. Over the next 75 years, the total costs of the tax cuts, if they are made permanent, are roughly the same order of magnitude of the actuarial shortfall in the Social Security and Medicare Part A trust funds. On a permanent basis, the tax cuts would cost significantly more than fixing the entire Social Security shortfall.

Quietly, The Taxes Are Changing

info@taxpolicycenter.org ( Leonard E. Burman) — Tue, 21 Sep 2004 00:00:00 EST

[Marketplace] While everyone is focusing on those things President Bush and Senator John Kerry disagree about, perhaps they should be paying attention to those things on which they do agree. Senior fellow and Tax Policy Center co-director, Len Burman, takes a look at what he calls the "bad bipartisan legislation" that is the middle-class tax cut in this installment from Marketplace.

Budget Errors Causing Today's Budget Bind

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 13 Sep 2004 00:00:00 EST

At no point in our prior history has so much already been promised for the future, with revenues for 100 years from now already given away—and then some. Our would-be next presidents simply promise more, without indicating where the money is coming from. But what is it about the budget that creates such extraordinary imbalance at this point in history? There are five major budget errors or problems that have gotten us into this bind. Each has arisen in different ways over recent history, but all have intensified their pressure on the budget in recent years.

Bush Administration Tax Policy : Introduction and Background

info@taxpolicycenter.org ( William G. Gale, Peter Orszag) — Mon, 13 Sep 2004 00:00:00 EST

This paper is the first of a series that summarizes and analyzes these policies and proposals. The series has two broad goals: to describe, interpret, and assess what has happened; and to examine the consequences of making the tax cuts permanent. This paper provides background information intended to help frame the issues analyzed in subsequent papers. Those papers will examine the distributional effects; tax cuts and fiscal policy; the effects on long-term growth; the effects as a short-term stimulus; the effects on government spending; and the extent to which the tax cuts serve as an effective prelude to fundamental tax reform.

The Individual Alternative Minimum Tax : A Data Update

Tue, 31 Aug 2004 00:00:00 EST

The individual alternative minimum tax (AMT) was intended to guarantee that high income people paid at least some tax, but it is poorly designed. Absent a change in law, close to 30 million taxpayers will become subject to the AMT by 2010. This data update presents new data for the tables in our July 2003 Tax Notes article and expands on the reform options presented in the Spring 2003 Journal of Economic Perspectives article. We also briefly explain the tables.

The Fiscal Gap and Retirement Saving Revisited

info@taxpolicycenter.org ( Alan J. Auerbach, William G. Gale, Peter Orszag) — Mon, 26 Jul 2004 00:00:00 EST

Because of the strikingly large long-term fiscal gaps being projected recently for the United States, researchers have searched for hidden assumptions underlying revenue projections that might be biasing the results. This paper addresses the extent to which alternative projections of tax-preferred retirement accounts affect estimates of the long-term fiscal gap. We review previous work by Boskin (2003), and the Congressional Budget Office (CBO 2004). We show that Boskin's projections imply only very small revisions to standard fiscal gap estimates. The CBO analysis implies an even smaller adjustment. Thus, neither of these contributions changes the conclusion that the United States faces a substantial fiscal gap.

Senator Kerry's Tax Proposals

info@taxpolicycenter.org ( Leonard E. Burman, Jeff Rohaly) — Fri, 23 Jul 2004 00:00:00 EST

This note provides a very preliminary summary and distributional analysis of Senator Kerry's tax proposals. Some details of the proposal are not publicly available. The following summary is based on information from Kerry's website (speeches, press releases, and policy papers), communications with campaign staff and advisors, and some guesses about how the proposals will be made operational. The Tax Policy Center will update and correct this as more details become available.

Budget Rules

info@taxpolicycenter.org ( Rudolph G. Penner, C. Eugene Steuerle) — Fri, 23 Jul 2004 00:00:00 EST

Budget rules are both necessary and arbitrary, apply one-time or over time, and are frequently associated with some numerical target. The Budget Enforcement Act (BEA) rules of 1990 worked primarily because they enforced an agreement already made, backing up a broad political consensus with much of the explicit deficit cutting legislated up front. Conditions today are very different. No political consensus now exists, yet the task is even harder: some control over existing entitlement growth is required, e.g., through automatic adjustments. Various other issues, such as sunsets, rule suspensions, and technical feasibility are also examined.

Effects of Recent Fiscal Policies on Today's Children and Future Generations

info@taxpolicycenter.org ( William G. Gale, Laurence J. Kotlikoff) — Thu, 01 Jul 2004 00:00:00 EST

Recent and proposed fiscal policies--the tax cuts, proposals to make them permanent, and the Medicare prescription drug bill--will hurt economic prospects for most of today's children and all future generations. The programs will leave economic growth largely unchanged, but will redistribute resources from future to current generations and, within each generation, from low- and middle-income families toward an affluent minority. These effects exacerbate the impact of underlying federal budget trends and processes that will place significant, imminent pressure on funding for children's programs. An expanded program of investments in children is both feasible and desirable.

Be Careful What You Wish For

info@taxpolicycenter.org ( Leonard E. Burman) — Wed, 23 Jun 2004 00:00:00 EST

Tax cut advocates favor lower taxes and smaller government, but so far they've gotten lower taxes and bigger government. In this Marketplace commentary, Len Burman argues that the resulting deficits will translate into much higher taxes in the future, especially on those with high incomes. In the long run, they may wish they hadn't won so many legislative victories.

Effects of Recent Fiscal Policies on Children

info@taxpolicycenter.org ( William G. Gale, Laurence J. Kotlikoff) — Mon, 07 Jun 2004 00:00:00 EST

Today's children represent the future of the century. This notion that children and future generations should have better living standards than current generations is central to universally shared views of economic progress. This article examines the effects of recent fiscal policies on children and the direct and indirect effects of one set of policies--the tax cuts and the Medicare spending increases that have been proposed and enacted since January 2001--on the long-term economic prospects of today's and tomorrow's youth.

The Long-Run Budget Squeeze and the Short-Run Race to November

info@taxpolicycenter.org ( The Urban Institute) — Tue, 01 Jun 2004 00:00:00 EST

[First Tuesdays Transcript] The 2004 First Tuesday series continued with a timely look at a tough topic: "the perfect budget storm." Almost half of all federal spending apart from defense and interest goes to people 65 and over. If scheduled entitlements, tax cuts, and defense spending are maintained, by 2011 no revenues will be left for other domestic programs, particularly those affecting families and children. Researchers provided the hard facts needed to size up policy options and public opinion experts explained how domestic spending issues are being weighed--or ignored--by the electorate as November 2 nears.

Let It Snow: Opportunity Time For the Treasury Secretary

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 31 May 2004 00:00:00 EST

Management theory holds that the major goals for an organization need to be clearly specified and few in number. When workers are given multiple goals, it is often hard to distinguish among them. Failure to achieve primary goals also becomes easier when one has the excuse that he was working on the many other goals.

Sources of the Long-Term Fiscal Gap

info@taxpolicycenter.org ( Alan J. Auerbach, William G. Gale, Peter Orszag) — Mon, 24 May 2004 00:00:00 EST

Over a permanent horizon, the fiscal gap now exceeds 7 percent of GDP under the CBO baseline and 10 percent of GDP under an adjusted baseline, substantially higher than a year ago. Allocating the fiscal gap to different programs is not straightforward, though. Most government programs are intended to be financed out of general revenue, and alternative, reasonable ways of allocating general revenue generate very different allocations of the fiscal gap across programs. In addition, focusing on a program-by-program basis tends to obscure the role of tax policy in generating a fiscal gap.

Let It Snow: Opportunity Time For the Treasury

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 24 May 2004 00:00:00 EST

Almost no one who has served at the Treasury can help but feel pride at the integrity, vitality, and importance of the institution. With a heritage going back to Alexander Hamilton, time after time it has had to grapple with the economic and financial problems facing the nation--and come up with solutions. Treasury must not get tied up in trying to please every constituent group represented by some political hack in the administration waiting to move on to his new lobbying job. It must start with principles and follow them to their logical conclusions.

Congress Spends More to Increase Number of Uninsured

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 12 Apr 2004 00:00:00 EST

Congress continues to let the cost of a tax subsidy grow without bound. Perhaps one day Congress will take on the broader issue of entitlement reform, forcing all entitlement programs to go through some of the hurdles required of discretionary programs. Then those programs would be allowed to increase in cost from year to year only after a vote was taken and consideration given to the costs and benefits of any expansion. When that day comes, tax entitlements like the exclusion for employer-provided health insurance should be treated more like any other entitlement on the direct spending side of the budget.

Should the President's Tax Cuts be Made Permanent?

info@taxpolicycenter.org ( William G. Gale, Peter Orszag) — Mon, 08 Mar 2004 00:00:00 EST

This paper examines the economic impacts of the Bush Administration's proposal to make its recent tax cuts permanent. Making the tax cuts permanent would be regressive and would dig a fiscal hole over the next 75 years that is as big as the combined social security and medicare trust fund shortfalls over the same period. This would raise uncertainty about future policy and it highlights that a key issue is how the tax cut would be financed. If it were financed with deficits, the tax cut would reduce long-term growth. If it were financed by spending cuts, it may increase growth, but the spending cuts would likely be regressive, in which case lower and moderate income households could actually be worse off. In addition, the required spending cuts are monumental and hence extremely unlikely to occur. Because of the salience of the financing issue, no proposal to make the tax cut permanent should be considered unless the financing is specified as well. The Administration has not specified how its tax cut would be financed.

President Turns to IRS to Raise Levels of Math Education

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 01 Mar 2004 00:00:00 EST

The president's effort to "leave no child behind" has run into opposition on a variety of fronts. The Congress complained that the money was too little, insisted that the president spend less to reduce the deficit, and then passed the Omnibus Reconciliation and Giveaway Acts of 2003 and 2004. In desperation, the president has done what all modern presidents have done when they cannot achieve their goals through direct appropriations: Turn to the IRS for help.

State and Local Receipts and Business Cycles

info@taxpolicycenter.org ( C. Eugene Steuerle, Adam Carasso) — Mon, 01 Mar 2004 00:00:00 EST

The behavior of state and local receipts around the end of a business cycle is historically mixed, but the last three recessions exhibit a common trend: receipts trail expenditures during the recession, and even a year or two afterwards.

The President's 2005 Budget: First Impressions

info@taxpolicycenter.org ( Peter Orszag, William G. Gale) — Mon, 23 Feb 2004 00:00:00 EST

On February 2, the Bush administration released its budget proposals for fiscal years 2005-2009. This article provides initial analysis of the budget, with several interesting conclusions.

The Budget Outlook: Updates and Implications

info@taxpolicycenter.org ( Peter Orszag, William G. Gale) — Mon, 16 Feb 2004 00:00:00 EST

The Congressional Budget Office (2004) has released new baseline budget projections, covering fiscal years 2005-2014. This article examines the baseline CBO projections, adjusts the official data in ways that more accurately reflect the current trajectory of tax and spending policies, and discusses some of the implications.

Reversal in Budget Policy : Bush's First vs. Proposed Second Term

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 16 Feb 2004 00:00:00 EST

Much of the discussion over President Bush's 2004 submission of a proposed budget for fiscal year 2005 and beyond has focused on what it is not. It is not an agenda for major reform. It is not a budget that Congress appears to take seriously, especially given the number of days it is scheduled to be in session for 2004. Here, however, I wish to take the budget at face value and to see what preferences are revealed in it.

Foreign Holdings of Federal Debt

info@taxpolicycenter.org ( William G. Gale) — Mon, 16 Feb 2004 00:00:00 EST

When federal outlays exceed tax receipts, the government typically borrows money from domestic or foreign creditors. When national saving is low relative to national investment, government debt is more likely to be purchased by foreigners. The share of public debt held by foreigners rose from 15 percent in the 1970s to 24 percent in the 1990s. By 2003, the share had reached 37 percent--the highest level in at least 40 years. A rising average share implies an even more steeply rising foreign share of new debt issues.

15th Annual Roundtable on the President's Budget and the Economy

info@taxpolicycenter.org ( The Urban Institute) — Thu, 05 Feb 2004 00:00:00 EST

This first look at the president's proposed budget for fiscal 2005 included discussion of deficits, tax cuts, discretionary spending, and the political implications of all of these in an election year.

Key Thoughts on RSAs and LSAs

info@taxpolicycenter.org ( Leonard E. Burman, William G. Gale, Peter Orszag) — Wed, 04 Feb 2004 00:00:00 EST

In his FY2005 budget, released Monday, President Bush proposes a set of new tax-preferred saving accounts (which were first presented in last year's budget). Under the Administration's proposal, two new types of individual accountscalled Lifetime Saving Accounts (LSAs) and Retirement Saving Accounts (RSAs)would be created. This note provides information to help assess these proposals.

AMT Relief in the FY2005 Budget : A Bandaid for a Hemorrhage

Wed, 04 Feb 2004 00:00:00 EST

The President's Budget, released on February 2, 2004, admits that there is a problem with the AMT, but proposes only a small and temporary fixextending through 2005 an existing temporary fix that currently expires at the end of 2004. This not only fails to resolve the problem, it also substantially reduces the apparent budgetary cost of the President's main proposals to make the 2001 and 2003 tax cuts permanent (because taxpayers on the AMT will get less benefits from the rate reductions).

Is a Fair Tax System an Oxymoron?

info@taxpolicycenter.org ( The Tax Policy Center) — Wed, 14 Jan 2004 00:00:00 EST

This Tax Policy Center forum featured senior fellow Rudy Penner presenting his report, "Searching for a Just Tax System". A panel discussion on tax fairness followed, moderated by Nada Eissa, of Georgetown Public Policy Institute, with Joseph Thorndike, of the Tax History Project, and Jeffrey Rohaly, of the Urban Institute and Tax Policy Center.

The Incredible Shrinking Budget for Working Families and Children

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 01 Dec 2003 00:00:00 EST

Programs for working families and children are scheduled to shrink rapidly over the next few years, squeezed between rising expenditures on programs for the elderly and declines in tax revenues. This scenario will play out even if only modest defense and international needs are factored into the division of federal funds. Temporary deficit financing can delay the day of reckoning very little, since borrowing against the future only compounds today's problems.