October 19, 2009
Federal taxes in fiscal year 2009 claimed the smallest share of GDP since 1950—14.9 percent according to the Congressional Budget Office (see top figure). The revenue drop has many causes: tax reductions in this year’s economic stimulus, the collapse of the economy, and the Bush tax cuts from earlier in the decade.
October 16, 2009
If we may be permitted a small bit of self-indulgence, TaxVox would like to wish itself a happy second birthday.
October 16, 2009
Last week the Congressional Budget Office quietly released its October Monthly Budget Review showing preliminary 2009 budget numbers. The $1.4 trillion deficit more than tripled the previous record of $459 billion set just last year (see top table). More than half of the increase was due to a $530 billion jump in outlays but 44 percent came from a 17 percent drop in revenues. That decline resulted in the federal government collecting a smaller share of taxes than at any time in the last half century.
October 15, 2009
The congressional fog is slowly parting and the fundamental issues of health reform are coming clear. And perhaps most controversial is the question of how Congress will pay for it all. Somebody’s taxes are going to be raised. But whose? And by how much? Despite the whining about 1000-page bills, there are only a few big moving parts to health insurance reform. It will require insurance companies to sell to all, regardless of their health. It will mandate that everyone purchase coverage (a trade-off rightly insisted upon by the insurers). It will create exchanges to make it easier for people to buy in the non-employer market. And it will create subsidies to help make those policies affordable. Finally, Congress has to pay for those subsidies.
October 13, 2009
Just abut every conversation I’ve had with a Democratic elected official or staffer in the past few weeks came around to the same urgent question. And, no, it was not about health reform. It was about jobs. When, they ask with more than a hint of panic in their voices, will the jobs come back?
October 8, 2009
Tax experts will argue about nearly anything. But on one issue, there is something approaching a consensus: Corporate tax rates in the U.S. are too high. Where all that harmony turns dissonant, however, is over the matter of what to do about it. Cutting the corporate rate, it turns out, raises all sorts of complex technical problems, to say nothing of being a political nightmare.
October 7, 2009
In a posting last week, I discussed the tools under existing law for curbing bad tax return preparers and suggested that these tools may not adequately address the problem. Too many returns are poorly done. Many taxpayers are victims, not only of incompetence, but fraud. The other victim is the government, which likely loses substantial tax revenue from those whose returns are poorly—or dishonestly—prepared.
October 6, 2009
I’ve just spent 90 minutes listening to five Washington hands discuss “the financial and economic consequences of an exploding debt.” The prognosis, they agree, is grim. The chances of policymakers acting any time soon to address the looming fiscal crisis are remote. As one audience member asked the panelists during the Urban Institute discussion, “Which anti-depressant should I take?”
October 2, 2009
In a blog post earlier this week, I concluded that whether a payment to government service is classified as a tax or a user fee is sometimes arbitrary and that how the payment is labeled is of secondary importance. Mike Udell of Ernst and Young, a former staffer on the Joint Committee on Taxation, reminds me, however, that labeling could have real consequences. Mike raises another example from the health reform legislation – the proposed “fee” on sales of pharmaceutical and medical device products. If the fee were an excise tax, it would be deductible and not included in the gross revenue of manufacturers of these products. But as a fee, it is not deductible, so income tax collections from these firms are higher than if they could exclude the payments from taxable income.
October 1, 2009
In recent years, paid preparers have done more than half of all individual income tax returns. In 2006, the most recent year for which the IRS has released statistics, 81.9 million returns were signed by paid preparers. Low-income taxpayers, especially those claiming the earned income credit, hire paid preparers with even greater frequency than the general population of taxpayers.