TaxVox

The voices of Tax Policy Center's researchers and staff

Federal Budget and Economy

The U.S. Is Not (Yet) Greece.

May 18, 2010 –
can’t resist jumping into the ongoing debate between New York Times economic columnists David Leonhardt and Paul Krugman. David worries that there are troubling similarities between the current Greek debt crisis and huge ongoing deficits in the U.S. “Nonsense,” replies Paul, who argues that the two nations have about as much in common as souvlaki and cheeseburgers. My take: The U.S. is not Greece. But this does not mean we cannot learn lessons from a nation that is marked by both great beauty and regular bouts of fiscal madness.
Individual Taxes

James Galbraith on Deficits: Dick Cheney of the Far Left

May 17, 2010 –
Ezra Klein interviewed James Galbraith, who argued quite forcefully that “the danger [posed by the long-term deficit] is zero. It’s not overstated. It’s completely misstated.” We now have an answer to the trivia question, “What do James Galbraith and Dick Cheney have in common?” Cheney famously said, “Reagan proved deficits don’t matter.”
Individual Taxes

Take the State Corporate Income Tax… Please!

May 14, 2010 –
In 1983, Ronald Reagan proposed eliminating the federal corporate income tax. Last week, Michael Boskin took up the charge. I have another idea: Get rid of the state corporate income tax. State corporate income taxes are lineal descendents of the federal version and share many of its flaws. They doubly tax income at the firm and individual level, penalize businesses that organize as corporations, and reward debt versus equity finance. They also are very sensitive to the business cycle, and tend to plunge when the economy sags.
Individual Taxes

Another Run at Taxing Carried Interest

May 13, 2010 –
TaxVox’s very first article—in October, 2007—was about congressional efforts to tax the compensation of hedge fund and private equity managers as ordinary income rather than capital gains. For three years now, the House has passed such a tax on this income, known as carried interest. And for three years the levy has died in the Senate.
Individual Taxes

The Senate Climate Bill Misses an Opportunity

May 13, 2010 –
Senators John Kerry (D-MA) and Joe Lieberman (I-CT) introduced a climate bill yesterday that, among other things, establishes a cap-and-trade program for greenhouse gases. The virtue of a cap-and-trade program is that it establishes a market price for a pollutant and allows flexibility within and across regulated entities in how to reduce emissions. But any cap-and-trade program must decide whether to allocate the pollution allowances for free or through a government auction, as well as how to distribute both the allowances and any auction revenue.
Individual Taxes

Feldstein Says Don’t Make the Bush Tax Cuts Permanent

May 12, 2010 –
In a move reminiscent of Richard Nixon’s visit to China, conservative economist Martin Feldstein argued in today’s Wall Street Journal that the Bush tax cuts should be extended for a year or two, but not made permanent.
Federal Budget and Economy

Taxing Bank Risk

May 11, 2010 –
Washington is buzzing with talk about taxing banks. And after watching the Goldman Sachs masters of the universe testify on Capitol Hill a couple of weeks ago, it is no surprise that many want to tax these people until they bleed. Unfortunately, punitive taxes are a bad idea, no matter how good they make us feel. But could a well-designed levy drive financial firms to allocate capital more efficiently? Maybe so, says Narayana Kocherlakota, the new president of the Federal Reserve Bank of Minneapolis.
Federal Budget and Economy

The Political Economy of Consumption: ‘Tis Better To Give, and Give, and Give

May 6, 2010 –
Here is why deficit reduction is so hard: Politicians get reelected by encouraging spending, not savings. Supporting policies that reduce current consumption—either by government or households--rarely gets anyone elected to anything. Not to stereotype, but nations do have personalities. Italians eat. Russians drink. Americans spend. And when anything—or anyone—gets between us and our consumption, watch out.
Individual Taxes

Why We’re Going to Keep Patching the AMT—And Why It Will Cost So Much

May 4, 2010 –
It has become a regular stop on Washington’s fiscal merry-go-round: Congress patches the Alternative Minimum Tax for a year or two, but leaves future fixes for mañana. For instance, the Senate Budget Committee’s new fiscal blueprint makes room to fix the AMT for one year only and assumes money will be found from somewhere to pay for future patches. In its fiscal 2011 budget, the Obama Administration also assumes the AMT will be repaired, but buries the cost in its baseline and makes no effort to find the money to pay for the fix.
Federal Budget and Economy

More Dismal Prospects for the Federal Budget: It’s All Greek to Me

April 30, 2010 –
Bill Gale and Alan Auerbach are once again ruining another beautiful spring day. Bill, the Tax Policy Center’s co-director, and Alan, a highly-respected economics professor at Berkeley, have updated their federal budget outlook. And their projections—based on realistic assumptions of what may happen to tax and spending—are truly frightening.