TaxVox

The Obama Administration has once again proposed eliminating the Advanced Earned Income Tax Credit. The idea, which the president also raised a year ago, is unlikely to go anywhere, given that not much has changed since the last time it was proposed. The White House would be better off putting its energy into figuring out how to make the advanced credit work, rather than writing it off. One model: the new tax credit contained in the just-passed health law.

My best guess is that the top tax rate on capital gains and dividends in 2013 will be almost 24 percent—a significant increase over today’s 15 percent rate. As a result, the decade-long tax holiday for investors is coming to a gradual end. At the moment, the fate of all of these tax rates is a bit uncertain. But here is the recipe for big tax increases on investments: Take the tax hikes included in the newly-enacted health law. Combine with other tax changes President Obama has proposed in his 2011 budget. Add huge deficits and the scheduled expiration of the Bush tax cuts in less than nine months. The result is likely to be a big increase in taxes on capital, at least for the wealthiest investors.

While most everyone else in Washngton was viewing the cherry blossoms or otherwise enjoying a beautiful weekend, I was trapped indoors trying to get a handle on my taxes. Unlike most folks, as described in this great column in the Washington Post on Tax Myths by my Tax Policy Center colleagues Rosanne Altshuler and Bob Williams, I usually do my taxes myself and often without the aid of software. I'm a tax geek, so doing my return on my own gives me an up close and personal look at what I study. Plus I get a charge out of conquering the tax code. I did admit to being a tax geek.

Where, as they say, is the outrage? For all of the indignation over the new health insurance mandate, I am amazed at the serenity at which we accept another (near) mandate: That we must pay somebody to help us do our taxes. The government does not specifically require us to hire paid tax preparers or buy commercial software, of course. But it has, in effect, left millions of taxpayers with no real choice. Congress has created a tax code that makes it nearly impossible for many Americans to file returns without paid help. And even those who could (most non-itemizers for instance) are so intimidated by the whole process that they pay people to help them anyway.