Tax Policy Center: Simplification and Administration

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.

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.

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.

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.

Spending in Disguise

info@taxpolicycenter.org ( Donald Marron) — Tue, 28 Jun 2011 00:00:00 EST

A great deal of government spending is hidden in the federal tax code in the form of deductions, credits, and other preferences preferences that seem like they let taxpayers keep their own money, but are actually spending in disguise.

Cut the deficit? Go after tax breaks. Yeah, tax breaks.

info@taxpolicycenter.org ( Donald Marron) — Tue, 24 May 2011 00:00:00 EST

In a contribution to the Christian Science Monitor, Donald Marron discusses the hundreds of billions of dollars in spending plans that masquerade as tax breaks, and why these provisions need greater scrutiny.

Tax Simplification: Clarifying Work, Child, and Education Incentives

info@taxpolicycenter.org ( Elaine Maag) — Wed, 30 Mar 2011 00:00:00 EST

The federal income tax code is riddled with complex provisions concerning children. Families with children qualify for and receive substantial assistance, but the provisions are difficult for parents to understand and for the IRS to administer. This article proposes making uniform the definition of child under age 19, regardless of student status for the key child benefits: the earned income tax credit, the dependent exemption, head of household filing status, and the child tax credit. Savings from the proposal could be used to subsidize higher education, particularly for low-income families that would lose assistance from the EITC. The proposal would simplify the tax system, clarify incentives, and set the stage for broader reform.

How Large Are Tax Expenditures?

info@taxpolicycenter.org ( Donald Marron) — Wed, 30 Mar 2011 00:00:00 EST

Tax expenditures are getting increased scrutiny from budget hawks and tax reformers. New Treasury estimates, released as part of President Obamas recent budget, indicate that these tax preferences will reduce individual and corporate income tax revenues by almost $1.1 trillion in 2011. Those provisions will also increase spending on refundable tax credits by $108 billion and will reduce payroll and excise tax receipts by $111 billion. Together, the tax expenditures identified by Treasury will total almost $1.3 trillion this year.

Responses to Tax Incentives in a Complex and Uncertain Tax Law : Before the Senate Committee on Finance

info@taxpolicycenter.org ( Eric Toder) — Wed, 30 Mar 2011 00:00:00 EST

Eric Toder's testimony before the before the Senate Finance Committee on how tax law complexity limits the effectiveness of tax incentives.

Conversations: Eric Toder

info@taxpolicycenter.org ( Meg Shreve) — Tue, 22 Mar 2011 00:00:00 EST

Eric Toder is codirector of the Urban- Brookings Tax Policy Center and a fellow with the Urban Institute. He was previously Treasury deputy assistant secretary for tax analysis under President Clinton and served as director of the IRS Office of Research from 2001 to 2004. Earlier in his career, Toder was deputy assistant director for tax analysis at the Congressional Budget Office. With the Obama administration and Congress gearing up for a potential tax reform effort, Toder recently spoke with Tax Analysts' Meg Shreve to discuss the challenges facing lawmakers as they consider tax reform.

Federal Budget: Fix It Before A Crisis

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

In a contribution to the CNNMoney.com, Donald Marron discusses the urgent need to reverse the federal deficit and reform the tax code.

Tax Policy and Small Business : Before the U.S. House of Representatives Subcommittee on Select Revenue Measures, Committee on Ways and Means

info@taxpolicycenter.org ( Donald Marron) — Thu, 03 Mar 2011 00:00:00 EST

Donald Marron's testimony before the U.S. House of Representatives Subcommittee on Select Revenue Measures, Committee on Ways and Means on tax policy and small business.

Tax Reform In An Era Of Deficits

info@taxpolicycenter.org ( Eric Toder) — Thu, 17 Feb 2011 00:00:00 EST

Tax reform should focus on three goals:1) reducing needless complexity, 2) reducing backdoor spending through the tax code, and 3) reforming rules for taxing saving and investment to make our tax law more suitable for a globalized economy. This note summarizes steps that should be taken and how recent recommendations by the President's Economic Recovery Board, the National Taxpayer Advocate, the President's Fiscal Commission, and the Bipartisan Policy Center provide a road map for future changes.

Tax Reform: The Wheels Are Beginning To Turn

info@taxpolicycenter.org ( Donald Marron) — Wed, 16 Feb 2011 00:00:00 EST

In a contribution to the Christian Science Monitor, Donald Marron discusses strategies to reform Americas broken tax code. Marron proposes ridding the system of corporate and individual tax preferences to create a fairer, simpler, and revenue-generating system with fewer tax breaks and lower rates across the board.

Cutting Tax Preferences is Key to Tax Reform and Deficit Reduction : Before the Senate Committee on the Budget

info@taxpolicycenter.org ( Donald Marron) — Wed, 02 Feb 2011 00:00:00 EST

Donald Marron's testimony before the Senate Committee on the Budget on reforming the tax code.

Reforming Federal Taxes: Lessons From History : Before the Senate Committee on the Budget

info@taxpolicycenter.org ( C. Eugene Steuerle) — Wed, 02 Feb 2011 00:00:00 EST

Eugene Steuerle's testimony before the Senate Committee on the Budget on reforming the tax code.

Taxes and the Deficit Reduction Plans

info@taxpolicycenter.org ( William G. Gale) — Wed, 24 Nov 2010 00:00:00 EST

Plans to rein in the U.S. budget deficit remain in the spotlight as the Bipartisan Policy Center's Debt Reduction Task Force released its plan to solve the debt crisis. TPC expert William Gale offers analysis of the recommendations and includes recommendations of his own.

Five Myths about the Bush Tax Cut

info@taxpolicycenter.org ( William G. Gale) — Tue, 03 Aug 2010 00:00:00 EST

The tax cuts enacted in 2001 and 2003, known as the Bush tax cuts, are set to expire Dec. 31, and the fight over what to do is increasingly heated. Should the tax cuts expire, as some Democrats have said? Should they be extended, as most Republicans maintain? Or does the answer lie somewhere in between, as the Obama administration, led by Treasury Secretary Timothy Geithner, has argued in recent weeks?

The Future of Individual Tax Rates: Effects on Growth and Distribution : Donald Marron's Testimony Before the Senate Committee on Finance

info@taxpolicycenter.org ( Donald Marron) — Wed, 14 Jul 2010 00:00:00 EST

Donald Marron's testimony before the Senate Committee on Finance on the individual tax system.

The Future of Individual Tax Rates: Effects of Economic Growth and Distribution : Leonard Burman's Testimony before the Senate Committee on Finance

info@taxpolicycenter.org ( Leonard E. Burman) — Wed, 14 Jul 2010 00:00:00 EST

Leonard Burman's testimony before the Senate Committee on Finance on whether and how to extend the 2001 and 2003 tax cuts.

The Impact of the Bipartisan Tax Fairness and Simplification Act of 2010 ("Wyden-Gregg") on Effective Marginal Tax Rates

info@taxpolicycenter.org ( Katherine Lim, Jeff Rohaly) — Wed, 14 Jul 2010 00:00:00 EST

The Wyden-Gregg tax reform proposal would represent a broad reform of the federal income tax system. This paper examines the plan's impact on individuals' effective marginal tax rates (EMTR), the incremental amount of tax owed on an additional dollar of income. We examine the impact on the EMTR for both wage income and realized capital gains against current law and current policy baselines. We find the Wyden-Gregg plan would lower the overall average EMTR on wages relative to both current law and current policy, but would raise the overall average EMTR on gains when compared with those same two baselines.

Countdown to Catastrophe

info@taxpolicycenter.org ( Leonard E. Burman) — Mon, 26 Apr 2010 00:00:00 EST

This article, written for a lay audience, discusses the causes and consequences of catastrophic budget failure. When Americas ballooning federal debt becomes unmanageable, we might simply refuse to honor our obligations, triggering a worldwide financial collapse and an economic downtown that would make the recent unpleasantness seem like a walk in the park. Or we might create enough money to pay back our creditors, domestic and foreign, triggering a hyperinflation reminiscent of failed states like the Weimar Republic in the 1930s (or, more recently, Zimbabwe) that would wipe out the savings of anyone caught holding wealth in dollars.

Let's freeze more than chump change

info@taxpolicycenter.org ( Leonard E. Burman) — Tue, 02 Feb 2010 00:00:00 EST

President Obama has proposed to freeze most domestic discretionary spending -- a step in the right direction, but not enough. The $250 billion in expected savings over the next decade is chump change compared with deficits that could top $10 trillion if policy doesn't change.

We need to ban the evil Santas

info@taxpolicycenter.org ( Leonard E. Burman) — Mon, 18 Jan 2010 00:00:00 EST

The two Santas came to Washington in 2000 and threaten to never leave. If we don't send them packing, Christmas Future could be very bleak indeed.

Comparing Subsidies for the House and Senate Health Care Bills

info@taxpolicycenter.org ( Stephanie Rennane, C. Eugene Steuerle) — Wed, 16 Dec 2009 00:00:00 EST

Consider an employer who bears an equal cost for their employees and must choose between the proposed subsidy for those on the exchange and the current subsidy for those who get employer-provided health insurance. What are the consequences for the employee? This article discusses the results for the employee under the current health care bills in the House and the Senate.

Real Tax Reform is Always Hard: Some Advice for the Task Force

info@taxpolicycenter.org ( C. Eugene Steuerle) — Thu, 05 Nov 2009 00:00:00 EST

Political theater? Such is the label many have attached to the tax reform task force headed by Paul Volcker. But I heard the same claim made about President Reagan's State of the Union request for a tax reform study from the Treasury Department to be made only after the 1984 election was over. Congress literally burst out laughing.

Automatic Enrollment in IRAs: Costs and Benefits

info@taxpolicycenter.org ( Benjamin H. Harris, Rachel M. Johnson) — Mon, 31 Aug 2009 00:00:00 EST

To encourage better retirement saving, President Obama recently proposed policies that would require firms without retirement savings plans to automatically enroll their workers in IRAs. In addition, the president proposed an expansion of the Saver's Credit to be fully refundable and available to middle-income taxpayers. This report estimates the revenue costs and distributional effects of the president's proposals.

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.

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.

Different Way to Pay for Health Reform

info@taxpolicycenter.org ( Leonard E. Burman) — Thu, 28 May 2009 00:00:00 EST

Washington Times op-ed, May 19, 2009. Expanding health-care access is a top priority for the Obama administration, and leaders in Congress are on board. Political leaders also agree that any health insurance expansion must not increase the deficit. So how do we pay for health care without sinking the economy? The best option would be to phase in a value-added tax (VAT) dedicated to paying for health care. Packaged with the right bells and whistles, the VAT would help revive the economy, offset the burden on low-income families, and help slow health-care costs.

A Blueprint for Tax Reform and Health Reform

info@taxpolicycenter.org ( Leonard E. Burman) — Tue, 07 Apr 2009 00:00:00 EST

This paper outlines a plan for a VAT dedicated to paying for a new universal health insurance voucher combined with a vastly simplified and much flatter income tax. Top income tax rates could be cut to 25% or less and most taxpayers would not have to file returns. The health care voucher would offset the inherent regressivity of a VAT, since the voucher would be worth more than the VAT tax paid by most households. Moreover, with the VAT rate tied to health spending, the public would have a vested interest in reining in the growth of health care costs.

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.

When Marginal and Statutory Tax Rates Differ

info@taxpolicycenter.org ( Benjamin H. Harris, Ruth Levine) — Fri, 21 Nov 2008 00:00:00 EST

From an economic perspective, marginal tax rates play a critical role in determining the consequences of a change in tax policy. In an uncomplicated tax system the marginal rate is simply equal to the statutory rate. For millions of taxpayers, however, marginal tax rates differ markedly from statutory rates. Because of the tax code's wide array of phase-ins and phaseouts the majority of taxpayers face a different marginal rate than their statutory rate. Marginal and statutory rates differ for about two-thirds of married filers and heads of households and for about one-third of single filers.

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.

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.

The Individual Alternative Minimum Tax (AMT): 12 Facts and Projections

Thu, 03 Jul 2008 00:00:00 EST

Congress originally enacted a minimum tax in 1969 to guarantee that high-income individuals paid at least a minimal amount of tax. Under todays alternative minimum tax (AMT), middle- and upper-income taxpayers must add a number of "preference items" to their taxable income, subtract a special AMT exemption, and calculate their tax according to the AMT rules. If the tax under those rules turns out to be higher than their regular income tax, taxpayers pay the difference as AMT. Unless Congress acts, 26.8 million taxpayers will be affected by the AMT in 2008.

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.

A Preliminary Analysis of the 2008 Presidential Candidates' Tax Plans (Summary)

info@taxpolicycenter.org ( The Tax Policy Center) — Tue, 24 Jun 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 summary outlines our analysis of the 2008 presidential candidates' tax plans. The full length report is also available.

A Preliminary Analysis of the 2008 Presidential Candidates' Tax Plans (Full Report)

info@taxpolicycenter.org ( The Tax Policy Center) — Fri, 20 Jun 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.

Individual Taxpayers and Federal Tax Reform : Testimony before the United States Senate Committee on Finance

info@taxpolicycenter.org ( William G. Gale) — Wed, 14 May 2008 00:00:00 EST

In the next few years, several factors will push tax issues to the forefront of policy discussions. First, under current law, almost all of the Bush Administration's tax cuts will expire at the end of 2010. A second factor is the rapid growth in the alternative minimum tax (AMT), which will increase the inequity and complexity of the tax system. A third issue is the expected increase in government spending over the next several decades. Despite these pressures on the system, tax changes are not inevitable, and achieving meaningful reformthat is, with substantial design improvementswill require strong political leadership. Gale's testimony focuses on some overarching principles that should guide tax reform efforts.

A Blueprint for Tax Reform and Health Reform : Before the Senate Committee on Finance

info@taxpolicycenter.org ( Leonard E. Burman) — Tue, 13 May 2008 00:00:00 EST

In this testimony Burman outlines a plan for tax reform that would maintain progressivity, raise enough revenues to finance the government, and dovetail with plans to provide universal access to health insurance. It would combine a value-added tax (VAT) dedicated to pay for a new universal health insurance voucher with a vastly simplified and much flatter income tax. With a new financing source for health care, income tax rates could be cut sharply-the top rates could be cut to 25 percent or less. The health care voucher would also offset the inherent regressivity of a VAT. And, under the simplified system, most Americans would not have to file income tax returns.

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.

A Simple, Progressive Replacement for the AMT

info@taxpolicycenter.org ( Leonard E. Burman, Greg Leiserson) — Wed, 23 May 2007 00:00:00 EST

The individual alternative minimum tax (AMT) was originally an add-on tax intended to assure that high income people paid at least some tax. It has morphed and mutated over time, and now is on track to hit 23 million households in 2007. This note describes an option that would return the AMT by repealing the AMT and replacing it with an add-on tax of four percent of adjusted gross income (AGI) above $100,000 for singles and $200,000 for couples. It is a simple, approximately revenue neutral over the ten-year budget window and highly progressive.

Options to Fix the AMT

Fri, 19 Jan 2007 00:00:00 EST

The individual alternative minimum tax (AMT) was originally designed to limit the amount of tax sheltering and to assure that high-income filers paid at least some tax. The current AMT, however, has strayed from those original goals and under current law the tax will affect over 23 million taxpayers in 2007. This brief examines a variety of implications of AMT repeal or reform and an array of options for offsetting the revenues lost under such options. The ideal solution would be to address the AMT in the context of a complete overhaul of the income tax, such as the proposal made by the Presidents Advisory Panel on Federal Income Tax Reform.

Can Congress Use Budget Rules To Improve Tax Policy?

info@taxpolicycenter.org ( Rudolph G. Penner) — Mon, 23 Oct 2006 00:00:00 EST

Ovid said that "Gods have their own rules." So does Congress--a vast multitude of rules. The history of the Budget and Impoundment Control Act of 1974 and the Budget Enforcement Act of 1990 is one in which rules have been promulgated; Congress has found loopholes in those rules; more rules have been designed to plug the loopholes; and then the process starts over again. The end result is a set of budget rules that is so complicated that no single human understands them all. The whole panoply of rules associated with the congressional budget process needs a critical reexamination.

Tax Analysts Tax Reform 20 Years Later : Time for Another Round?

info@taxpolicycenter.org ( The Tax Policy Center) — Mon, 16 Oct 2006 00:00:00 EST

Twenty years after enactment of the Tax Reform Act of 1986, this conference reviewed the politics and economics that drove the 1986 act, discussed problems with the current tax law that create a need for another round of reform in the near future, and considered the possible shape and long-term viability of future tax reform.

IT Problems at IRS and Medicare : More to Come?

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 09 Oct 2006 00:00:00 EST

Already in 2006 alone, the IRS has potentially lost billions of dollars in revenue by failing to come up with a computer program that would replace one that identified returns likely to be fraudulently filed, while Medicare and Social Security have mistakenly sent refunds to 230,000 people who signed up for a prescription drug plan under the new Part D of Medicare. It is likely that these stories are symptoms of a much more serious government problem in hiring and retaining top-notch people who keep up with new technology, its uses, and its limitations.

Paulsonibilities

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 05 Jun 2006 00:00:00 EST

When President Bush announced his appointment of Henry Paulson of Goldman Sachs as Treasury Secretary, the press quickly popped the obvious question to former Treasury officials like me: "Why would he want to be secretary, especially this late in a president's tenure?"

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.

Taxing Capital Income : Do We? Should We? Can We? Can We Not?

info@taxpolicycenter.org ( The Tax Policy Center) — Tue, 10 Jan 2006 00:00:00 EST

The Urban-Brookings Tax Policy Center, American Tax Policy Institute, and Tax Analysts cosponsored a conference entitled Taxing Capital Income: Do we? Should we? Can we? (Can we not?). The one-day conference brought together leading economists, lawyers and accountants from across the political spectrum to discuss issues surrounding the choice of income or consumption as a tax base. Sessions addressed each question in the title. Douglas Holtz-Eakin, Director of the Congressional Budget Office, presented the luncheon address, and a wrap-up panel featured Henry Aaron, Leonard Burman and Dan Halperin. Drafts of the conference papers are available at the ATPI website, http://www.americantaxpolicyinstitute.org/.

Tax Law Changes Allow Employees to Contribute More to Tax-Deferred Accounts

info@taxpolicycenter.org ( Karen E. Smith, Eric Toder) — Mon, 19 Dec 2005 00:00:00 EST

Since 2001, the dollar limit on employee contributions to employer-sponsored tax-deferred retirement accounts has increased from 32 percent of average earnings ($10,500) in 2001 to 39 percent of earnings in 2006 ($15,000). Employees over age 50 may make additional "catch-up" contributions, which will raise the total dollar limit for them to 52 percent of average earnings in 2006. But very few employees contribute the maximum allowable amount. Of those participating in plans, only 6 percent contributed the maximum amount in 2003. Additional increases in the contribution limit are likely to reduce the share of those who contribute the maximum.

A Preliminary Evaluation of the Tax Reform Panel's Report

info@taxpolicycenter.org ( Leonard E. Burman, William G. Gale) — Mon, 05 Dec 2005 00:00:00 EST

This report summarizes the two options for reforming the tax system proposed by the President's Advisory Panel on Federal Tax Reform, offers a preliminary evaluation of the proposals, and discusses the overall effect on revenue, distribution, and growth.

Charities on the Frontline and Making the Best Use of Tax Policy to Help Them : Testimony before the Subcommittee on Social Security and Family Policy, Senate Finance Committee, United States Senate

info@taxpolicycenter.org ( C. Eugene Steuerle) — Tue, 13 Sep 2005 00:00:00 EST

One response to Hurricane Katrina was a very generous outpouring of concern and care by Americans throughout the country. Many of our contributions could be handled immediately only because a solid infrastructure of charities already existed. Our many charities are a tremendous source of strength of which we can and should be very proud. On a personal note, I have been involved with charities at almost every level: as a recipient, as a contributor, as a founder, and as a researcher who studies charitable giving and charitable organizations.

The Hefty Penalty on Marriage Facing Many Households with Children

info@taxpolicycenter.org ( Adam Carasso, C. Eugene Steuerle) — Tue, 13 Sep 2005 00:00:00 EST

Over the past seventy years Congress has enacted dozens of tax and transfer programs, giving little if any attention to the marriage subsidies and penalties that they inadvertently impose. Although the programs affect both rich and poor Americans, the penalties fall most heavily on low- or moderate-income households with children. In this article, Adam Carasso and Eugene Steuerle review important penalties and subsidies, explain how they work, and help fill a big research gap by beginning to provide comprehensive data on the size of the penalties and subsidies arising from all public programs considered together. [ www.futureofchildren.org]

Suppose They Took the AM Out of the AMT?

info@taxpolicycenter.org ( Leonard E. Burman, David Weiner) — Thu, 25 Aug 2005 00:00:00 EST

The individual alternative minimum tax (AMT) was originally intended to assure that high-income people paid at least some tax, but the AMT was poorly designed and affects more middle-income people every year. The AMT raises a lot of tax revenue, however: reforming or eliminating it could cost $500 billion over the next decade. Some suggest that the best option would be to make the AMT the regular tax system. This paper examines the implications of basing a reformed tax system on AMT rules. (A shorter version of this paper is forthcoming in the 97th Annual Conference NTA Papers and Proceedings.)

Expanded Information Reporting For Charitable Giving

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 15 Aug 2005 00:00:00 EST

The IRS does not administer well items for which it does not have information reporting. Extending information reporting to most charitable contributions would simplify life for most individual givers, improve compliance, and likely be better for the charitable sector as well. An improved information reporting for charitable contributions goes hand-in-hand with the continually improving systems of accounting that accompany the advances of information technology.

Improved Information Reporting for Capital Gains

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 08 Aug 2005 00:00:00 EST

Eugene Steuerle suggests one ripe area for expanded reporting involving capital gains, particularly from mutual funds and brokerage houses. The IRS could match net gains from information reports with what taxpayers report on their returns, taxpayers would not be faced with multiple choices, they would not have to pay extra fees to their tax preparers to track down additional data, and financial intermediaries would get fewer requests for information from taxpayers at the end of the year.

The Effects of Tax Software and Paid Preparers on Compliance Costs

Thu, 14 Jul 2005 00:00:00 EST

In recent years, the percentage of individual taxpayers using paid preparers and software has increased, while the share of taxpayers who self-prepare without software has dropped sharply. Using the Individual Taxpayer Burden Model developed by IBM Business Consulting Services for the IRS, we simulate the effects of preparation method on time and money costs of preparing tax returns. When we correct for self-selection bias, we find that each group on average selects the preparation method that costs the least for them. For example, software costs more than self-preparation for current self-preparers, but costs less than self-preparation for current software users.

Designing a Work-Friendly Tax System : Options and Trade-Offs

Thu, 09 Jun 2005 00:00:00 EST

The federal tax system often imposes its highest effective marginal tax rates on low- and moderate-income individuals. This paper suggests several ways to reduce those high effective marginal rates but illuminates the large trade-offs involved. One approach would replace the current earned income credit (EIC) with a $2,000 EIC for working parents and a refundable $1,000 per child tax credit. A more comprehensive approach would integrate the individual income and Social Security tax systems into a single tax system with just two tax rates and a refundable $2,000 EIC for working parents and a $1,000 universal grant for every person.

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.

Return-Free Tax Systems : Testimony Before the President's Advisory Panel on Federal Tax Reform

info@taxpolicycenter.org ( Eric Toder) — Tue, 17 May 2005 00:00:00 EST

In a return-free system, either all taxes are paid in advance through withholding (exact withholding system) or the tax agency computes liability based on reports from third parties (agency reconciliation). The UK has an exact withholding system for many taxpayers and California is experimenting with agency reconciliation. Exact withholding would require major tax simplification and administrative changes. Agency reconciliation is more feasible, but would impose large costs on the IRS and private businesses, could result in delayed refunds, and would not help taxpayers with the most complex returns. Return-free systems are not a substitute for tax simplification.

A Unified Children's Tax Credit

info@taxpolicycenter.org ( Adam Carasso, Jeff Rohaly, C. Eugene Steuerle) — Sun, 15 May 2005 00:00:00 EST

We suggest a tax reform that would repeal the EITC, the child tax credit, and the dependent exemption and replace them with a far simpler and often more generous Unified Child Credit (UCC) by 2010. Furthermore, while the dependent exemption is not allowed under the alternative minimum tax (AMT) and nearly 30 million taxpayers will be on the AMT in 2010, the UCC would provide necessary AMT relief in lieu of the dependent exemption and can be the vehicle for bipartisan AMT reform.

Changes in Tax Preparation Methods, 1993-2003

info@taxpolicycenter.org ( Eric Toder) — Mon, 09 May 2005 00:00:00 EST

Few taxpayers still prepare their returns the old-fashioned way - with pencil and paper. The percentage of individual taxpayers who prepare their own returns without software dropped from 40 percent to 13 percent in the last decade, while paid preparer and software use increased. In tax year 2003, 62 percent of taxpayer used paid preparers and an additional 25 percent used tax software. Use of tax software and paid preparers is one way of reducing the compliance burden of an increasingly complex Federal income tax, but some components of burden, such as recordkeeping, will remain no matter how we prepare returns.

Can Tax Time Be Less Burdensome?

info@taxpolicycenter.org ( The Tax Policy Center) — Mon, 11 Apr 2005 00:00:00 EST

The Tax Policy Center held a forum on April 11, 2005, on the burden of complying with the tax law. David Wessel, senior economics correspondent of the Wall Street Journal, served as moderator for the panel. Eric Toder of the Urban Institute presented recent IRS estimates of the compliance costs of the individual income tax. Nina Olson, the IRS national taxpayer advocate, discussed her experiences helping taxpayers cope with the tax system. Lorrie Brown of the State of Washington Department of Revenue presented evidence on compliance costs with the Washington retail sales tax. A lively discussion followed the presentations.

Tax Reform and Fairness for Families : Presentation to the President's Advisory Panel on Tax Reform New Orleans, LA

info@taxpolicycenter.org ( C. Eugene Steuerle) — Wed, 23 Mar 2005 00:00:00 EST

Tax reform affects many areas of policy--children, charitable contributions, federal policy toward states and localities, health care, retirement policy, and business--to mention only a few. Tax reform cannot dodge these important issues, but must come to grips with how each of these areas of policy should be treated under a reformed system. In this powerpoint testimony, Gene Steuerle outlines many of the ways that current policies violate norms of simplicity, fairness, and efficiency and suggests possible means of improvement.

Options to Reform the Estate Tax

info@taxpolicycenter.org ( Leonard E. Burman, William G. Gale, Jeff Rohaly) — Wed, 23 Mar 2005 00:00:00 EST

Retargeting the estate tax to very wealthy households and lowering its rates would blunt much of the criticism against it while retaining many of its advantages. This brief explains how the estate tax works and examines who is affected by it under current law. It discusses how reform would affect tax revenues, the distribution of tax burdens, farms and small businesses, and charitable giving and bequests. A concluding section discusses ways to reduce the tax's complexity.

Time for the IRS to Quit Tinkering with the Tax Forms

info@taxpolicycenter.org ( Leonard E. Burman) — Fri, 18 Mar 2005 00:00:00 EST

[Marketplace] In this commentary, Len Burman argues that, if Congress can't reform the tax system, the next best thing would be to just leave it alone. Constant tinkering just adds to complexity.

Disparities in Knowledge of the EITC

info@taxpolicycenter.org ( Elaine Maag) — Mon, 14 Mar 2005 00:00:00 EST

The Earned Income Tax Credit (EITC), administered through the federal income tax system, is the largest cash assistance program for low-income families. Data from the 2001 National Survey of America's Families (NSAF) show large disparities in who knows about the EITC amongst families with income below twice poverty. Only a small portion (27.1 percent) of low-income Hispanic parents know about the EITCsignificantly less than their peers of other races and ethnicities.

Alternative Alternative Minimum Tax Reform

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 14 Feb 2005 00:00:00 EST

Like a gathering storm, the full force of the AMT is scheduled to intensify with time. Almost every elected official pledges to do something about the AMT, but just not now since any reform would have substantial costs in foregone revenues. In this note we discuss a politically palatable option: addressing each item in the AMT individually and adjusting the regular tax accordingly. Simply put, Congress would decide on the treatment of an item of income or preference once and only once for the regular tax only.

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.

Deductibility of State and Local Taxes

info@taxpolicycenter.org ( Leonard E. Burman, Kim Rueben) — Mon, 17 Jan 2005 00:00:00 EST

Some have called for eliminating the itemized deduction for state and local income and property taxes as part of tax reform. This Tax Facts column looks at the states most affected by the current deduction and some aspects of repeal.

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.

Suppose they took the AM out of the AMT?

info@taxpolicycenter.org ( Leonard E. Burman, David Weiner) — Sat, 13 Nov 2004 00:00:00 EST

The individual alternative minimum tax (AMT) was originally intended to assure that high-income people paid at least some tax, but the AMT was poorly designed and affects more and more middle-income people every year. The AMT raises a lot of tax revenue, however: reforming or eliminating it could cost $500 billion or more over the next decade. Consequently, some suggest that the best option would be to make the AMT the regular tax system, rather than an alternative. This paper examines the implications of basing a reformed tax system on the AMT rules.

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.

Tax Preparer Usage Rises Significantly Since 1981

info@taxpolicycenter.org ( William G. Gale) — Mon, 20 Sep 2004 00:00:00 EST

The use of tax preparers provides a simple metric of tax complexity, by providing evidence on the extent to which taxpayers are willing or able to prepare their own returns. It is by no means a perfect metric, though. People use preparers for reasons unrelated to the complexity of the tax system, for example, to save time or to receive "rapid-refund loans." As these factors changed over time, so would the use of preparers.

Chinese Accounting for Stock Options

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 30 Aug 2004 00:00:00 EST

For a long time I have tried to remain open on the issue of valuing stock options. I know that despite modern finance theory they can be hard to value perfectly, due mainly to their unusual and asymmetric risk structure and lack of open trading in the market. I have listened patiently to all the arguments of start-up companies who complain that it is somehow harder to give restricted stock than stock options to their executives. I know that valuation for financial purposes and for tax purposes are not exactly the same policy issue. Still, none of this offsets my fundamental distaste for accounting badly for income, a distaste that derives in no small part from my experience with Chinese accounting as it had evolved in the 1960s and even the 1970s.

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.

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.

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.

Ultimate Objectives for the IRS : Balancing Revenue and Service

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

Although it is widely understood that the Internal Revenue Service has the mission to collect federal taxes, there is some debate as to whether that is its only mission. If there is a crisis in tax administration, it may be one of identity. There is a consensus that the IRS must collect revenues, but there is little agreement on how and sometimes even whether it should pursue its many other functions. Even members of Congress have waxed and waned between demanding that almost all effort be put into pursuing noncompliance as opposed to emphasizing service and taxpayer rights.

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.

Is The Tax System Rigged in Favor of the Super-Rich?

info@taxpolicycenter.org ( The Tax Policy Center) — Fri, 09 Jan 2004 00:00:00 EST

This Tax Policy Center forum featured New York Times reporter David Cay Johnston discussing his book, Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich--and Cheat Everybody Else. Commentary followed from Bruce Bartlett, senior fellow at the National Center for Policy Analysis, and John Buckley, democratic chief tax counsel at the House Ways and Means Committee, moderated by Len Burman, co-director of the Tax Policy Center.

Is the Tax Expenditure Concept Still Relevant?

info@taxpolicycenter.org ( Leonard E. Burman) — Tue, 02 Sep 2003 00:00:00 EST

The term "tax expenditure" refers to departures from the normal tax structure designed to favor a particular industry, activity, or class of persons. Most budget experts view the tax expenditure budget as a useful tool in managing the size and scope of the federal government, but a growing contingent of conservative critics has raised questions about the concept. The paper examines tax expenditure measurement issues, the debate about their relevance and new measures tentatively explored by the Bush Administration's budget, the way tax expenditure estimates are used in the U.S., and how they might be made more useful.

Income Tax Brackets Since 1985

info@taxpolicycenter.org ( Leonard E. Burman, Deborah Kobes) — Mon, 28 Jul 2003 00:00:00 EST

Before enactment of the Tax Reform Act on 1986, the individual tax code included 25 marginal tax rates. No more than 10 percent of tax filers were in a single bracket and eight brackets included less than 1 percentage of filers. Read this article to learn more about the history of Income Tax Brackets.

Tax Evasion, IRS Priorities, and EITC Precertification : Statement of Leonard E. Burman before the United States House of Representatives Committee on Ways and Means; On Waste, Fraud, and Abuse

info@taxpolicycenter.org ( Leonard E. Burman) — Thu, 17 Jul 2003 00:00:00 EST

The testimony discusses current statistics on tax evasion, the argument for trying to stem it, and why IRS efforts so far have been disappointing. It then focuses on specific issues related to the earned income tax credit (EITC). The testimony concludes that, while deterring system-wide tax evasion should be a high priority, the approach of targeting EITC recipients for intrusive pre-audits represents a poor use of limited compliance resources and threatens to undermine a highly effective program.

Tax Evasion, IRS Priorities, and the EITC : Statement of Leonard E. Burman before the United States House of Representatives Committee on the Budget; On Waste, Fraud, and Abuse In Federal Mandatory Programs

info@taxpolicycenter.org ( Leonard E. Burman) — Wed, 09 Jul 2003 00:00:00 EST

The AMT: Projections and Problems

info@taxpolicycenter.org ( Leonard E. Burman, William G. Gale, Jeff Rohaly) — Mon, 07 Jul 2003 00:00:00 EST

The individual alternative minimum tax (AMT) operates parallel to the regular income tax, imposing a different income definition, allowable deductions, and rate structure. The AMT grew out of a minimum tax that first took effect in 1970, due to legislation enacted in response to public outrage in the wake of testimony by Treasury Secretary Joseph W. Barr (1969) that 155 high-income households had paid no income tax in 1966. Although it has historically applied to only a very small share of taxpayers, the tax is projected to grow rapidly over the next decade, transforming it from a class tax to a mass tax. The growth of the AMT will create problems of equity, efficiency, complexity, and transparency in the tax system. It will also inevitably force policy makers to focus more attention on the issue, in part because many reform options will prove expensive. This column provides new projections of AMT taxpayers and revenues, and uses the projections to examine some broader implications for tax policy and the AMT.

Tax Reform for Families : An Earned Income Child Credit

info@taxpolicycenter.org ( Adam Carasso, C. Eugene Steuerle, Jeff Rohaly) — Tue, 01 Jul 2003 00:00:00 EST

[ Brookings Institution] This brief argues that the time is ripe for an integrated credit that combines the Earned Income Tax Credit (EITC) and the CTC into an Earned Income Child Credit (EICC). The proposed EICC simplifies and standardizes the definition of qualifying children and those who may claim them, and indexes the new credit for inflation so that it retains its purchasing power over time. The EICC also provides enhanced benefits to low-income working families and reduces marginal tax rates. One version would cost $6 billion relative to current law (JGTRRA) in calendar year 2003.

Toying With the Economic Future

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 26 May 2003 00:00:00 EST

If one is a traditional tax reformer, there was much to recommend in the president's initial approach to tax policy. As the tax "reform" process has unraveled, however, Congress has twisted various tax bills into budget packages oriented toward meeting some sound bite, such as the size of each package over a limited span of years. Its way of achieving this goal has been to schedule very large tax increases in the future. First, these scheduled tax increases could cause timing shifts in economic behavior large enough to threaten economic growth. Second, they will inevitably distort investment and financing decisions in firms and the capital markets. Finally, they mess up the budget process for the future by making it difficult to know even what the law will be in the future.

The Enron Debacle : Lessons for Tax Policy

info@taxpolicycenter.org ( Jane G. Gravelle) — Thu, 13 Feb 2003 00:00:00 EST

The Enron debacle had potential implications in three areas of tax policy: tax-favored retirement plans, stock options, and differences in book versus tax accounting. The most important issue relates to the increasing riskiness of retirement plans that (1) can pay in a lump sum amount, (2) are of the defined contribution variety, and (3) may be excessively concentrated in employer stock. Proposals to remedy this issue even in a limited way may be unsuccessful if they do not address the especially favorable tax treatment of employee stock ownership plans (ESOPs). The spectacle of a purportedly profitable company paying little or no tax has become a common phenomenon. The Enron case suggests the need for more disclosure regarding the sources of book versus tax differences, if not some substantive corporate tax reforms.

Ten Guidelines for Systematic Reform

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 16 Dec 2002 00:00:00 EST

Systematic tax reform, that ever-elusive but ever-desirable elf, has made some appearances recently before quickly ducking out of sight. Although many tax enactments involve changing the boundaries of the tax system - say, tax rates or deductions or limits - history warns us that seldom has systematic reform succeeded. Systematic reform recognizes important societal trade-offs, and trade-offs mean that something must be given up to achieve something better. With this string of failures in mind, I thought it might be useful to set out some broad guidelines for engaging in a process that enhances the probability of success. For the record, most of these guidelines for reforming the tax system apply equally well to budgetary and expenditure reform.

The Tax Fairness Debate : Nine Leading Experts Weigh in on Tax Justice

info@taxpolicycenter.org ( Urban Institute) — Mon, 02 Dec 2002 00:00:00 EST

How taxes should be distributed among the public has been a source of debate in the United States for more than 50 years. Tax Justice: The Ongoing Debate, edited by Joseph J. Thorndike and Dennis J. Ventry, Jr., provides scholars and policymakers alike with fresh insights into the important issue of tax fairness. Contributors assess recent reform proposals, scrutinize measures of inequality, demystify the flat tax, examine the role of property taxes in local finance, address equity concerns, evaluate tax justice in the states, and provide case studies, as well as an overview and historical context.

The AMT: Out of Control

Wed, 18 Sep 2002 00:00:00 EST

The practice of requiring well-to-do Americans to pay a minimum tax was developed more than three decades ago. In January, 1969, then-Treasury Secretary Joseph W. Barr informed Congress that 155 individual taxpayers with income exceeding $200,000 paid no tax in 1966. The news set off a political firestorm that resulted in the creation of a minimum tax. Under current law, 36 million taxpayers will be subject to the current minimum tax by 2010. This Issues and Options paper examines how tax designed to target 155 taxpayers grew so dramatically, the economics of the AMT, and the options for reform.

The Individual AMT: Problems and Potential Solutions

Wed, 18 Sep 2002 00:00:00 EST

Originally targeted at high-income households, the individual alternative minimum tax (AMT) is now on the verge of switching from a "class" tax to a "mass" tax. Under current law, the AMT will encroach dramatically on the middle-class over the next decade and will become the de facto tax system for upper-income households. These changes occur because of the non-indexation of the AMT for inflation and the tax cuts enacted in 2001. The trends are troubling because the AMT is notoriously complex, its effects on efficiency and equity are questionable, and its underlying purpose is controversial. This paper provides information on the AMT, its economic effects, and options for policy reform, and is intended to help inform the debate and the eventual reforms that will be required in the near future.

Tax Sideshow Threatens to Become One-Ring Circus : Growth of AMT Raises Issues of Fairness, Efficiency, and Simplicity

info@taxpolicycenter.org ( Urban Institute) — Wed, 18 Sep 2002 00:00:00 EST

The descendant of a 1969 tax designed to prevent 155 wealthy people from escaping federal tax liability will affect 36 million, mostly middle-class taxpayers by 2010, say researchers from the nonpartisan Tax Policy Center, a joint venture of the Urban Institute and the Brookings Institution. [Read the report and the companion policy brief]

The 2001 Tax Cut: One Year Later

info@taxpolicycenter.org ( Urban Institute) — Tue, 04 Jun 2002 00:00:00 EST

June's First Tuesday forum looked at the 2001 tax cut from the vantage point of one year later. Panelists examined the features and consequences of EGTRRA; discussed the effects that tax cuts have on individuals, the economy, productivity, and government spending; analyzed the explosive growth of the Alternative Minimum Tax (AMT) and considered alternatives to it; and explored the political considerations of tax cuts.