TaxVox

The voices of Tax Policy Center's researchers and staff

Federal Budget and Economy

The Homebuyer Tax Credit Land Rush

April 29, 2010 –
If your neighborhood is anything like mine, “under contract” signs are blossoming like dandelions. Many (of the signs, not the weeds) were very likely the result of the artificial land rush created by tomorrow's expiration of Homebuyer Tax Credit II. The credit gives $8,000 to first-time buyers and up to $6,500 to move-up buyers.
Federal Budget and Economy

The Obama Deficit Commission: Five Issues to Watch

April 27, 2010 –
President Obama’s Bipartisan Commission on Fiscal Responsibility and Reform is having its first meeting today. As I peer at my bookshelf full of well-meaning policy prescriptions produced by similar panels over the years, I am skeptical at best. These enterprises are, as Dr. Johnson said of second marriages, “a triumph of hope over experience.” Still, you never know. As my colleague Gene Steuerle reminds me, few thought tax reform would get off the ground in 1984-85. Yet, by mid-1986, it had happened.
Individual Taxes

Shutting Down Virginia’s iFile

April 26, 2010 –
Okay, this one’s personal. For years I’ve filed my state tax return using iFile, Virginia’s free on-line tax filing service. I do that partly because I’m cheap—I don’t want to pay Intuit $15 to send my return electronically—and partly because it reduces errors and saves the state money. But this year the General Assembly, with the concurrence of new governor Robert McDonnell, voted to end the iFile program. So next year I’ll go back to mailing in a paper return. A 44-cent stamp costs just 3 percent of Intuit’s bill. I did say I’m cheap, didn’t I?
Federal Budget and Economy

Old Tricks: The Senate Budget Committee’s Fiscal Plan

April 23, 2010 –
At first glance, the 2011 budget resolution passed along party lines yesterday by the Senate Budget Committee shows signs of fiscal responsibility. Although it would result in a huge budget deficit next year, it promises to pare the deficit from nearly 10 percent of GDP this year to just 3 percent—a sustainable level with expected economic growth—by 2015.
Individual Taxes

More on Conservatives and the VAT

April 22, 2010 –
I share Howard’s criticism of the Senate proposition that characterizes a Value Added Tax (VAT) as “a massive tax increase that will cripple families on fixed income and only further push back America’s economic recovery.” However, my problem with the Senate vote isn’t that it opposes a VAT; rather, it’s that it rules out any VAT, even one that is part of a broader tax reform that reduces distortionary income and corporate taxes.
Individual Taxes

Taxes and Housing Prices

April 21, 2010 –
The combination of the recently-passed health care legislation and the President’s proposed rollback of the Bush tax cuts for upper-income taxpayers would sharply boost tax rates on the wealthy. This is great news for the high-end real estate market. It may seem counterintuitive, but raising taxes on those in the top brackets could increase urban house prices by as much as 10 percent, and even more in east and west coast cities where homes are most expensive. The drivers of this windfall: higher top rates on ordinary income and hikes in capital gains taxes. Obama’s proposal to limit the benefit of itemized deductions to 28 percent could more than reverse this housing windfall, but that measure is unlikely to win congressional approval.
Individual Taxes

Conservatives and the VAT

April 20, 2010 –
Last week, the Senate voted 84-13 for the following proposition: "It is the sense of the Senate that the Value Added Tax is a massive tax increase that will cripple families on fixed income and only further push back America's economic recovery." The sponsor was Senator John McCain, which is interesting because in his presidential campaign McCain endorsed a consumption tax, although not quite a VAT.
Individual Taxes

Should We Help Low Income Families With Tax Credits or Direct Subsidies?

April 19, 2010 –
Public opinions polls have shown that about two-thirds of Americans think government should provide a helping hand to low-income working families. But how? For many years, the answer was direct cash (or cash-like) assistance aimed at the poor, whether they worked or not, through programs such as Aid to Families with Dependent Children and Food Stamps. But beginning in the 1970s, the accelerating trend has been to target assistance to working families and to provide such aid through refundable tax credits rather than direct spending.
Federal Budget and Economy

Why We Run Subsidies through the Tax System

April 19, 2010 –
I disagree with former IRS Commissioner Don Alexander. Sometimes the IRS is the best, most efficient agency to administer a subsidy. And if we want to encourage low-income families to work—a key premise of welfare reform—refundable tax credits make a lot of sense.
Individual Taxes

Was Don Alexander Right: Should We Stop Using the IRS to Run Social Programs?

April 19, 2010 –
As I contemplate the furor over the Tax Policy Center’s calculation that 47 percent of Americans owed no income tax in 2009, I am reminded of Don Alexander, who was an IRS Commissioner during the Nixon and Ford Administrations. For decades Don, who passed away last year, argued passionately that the IRS’s job is to collect tax revenues, and not administer social programs. And that conflict is at the root of the 47 percent controversy.