TaxVox

The voices of Tax Policy Center's researchers and staff

Individual Taxes

Who Pays No Income Tax?

July 8, 2009 –
Nearly half of all families and individuals will pay no income tax this year. But who are they? It turns out that whether a taxpayer is single or married, is elderly, or has children makes a big difference. Nearly 47 percent of single tax units will owe no tax, compared with about 40 percent of joint filers and over 70 percent of household heads. About 55 percent of the elderly and tax units with children will pay no tax. Two factors primarily explain the variation: differences in income and available tax preferences.
Individual Taxes

On-line Sales Tax Hardball

July 7, 2009 –
A long-simmering dispute over whether online retailers must collect sales taxes is boiling over again. Two Web retailing giants, Amazon.com and Overstock.com, are severing relationships with local businesses in states that are trying to force them to collect the levy, angering cash-strapped states and sending bloggers into an on-line frenzy. There are three things you should know about this squabble. 1. It has nothing whatever to do with ‘taxing the Internet.” 2. You owe the tax anyway. Amazon would make the paperwork easier for its customers by collecting the money at the time of sale, but whether it does so or not, you still have to pay. Not that many of us do, but that is another story. 3. According to one estimate, by 2012 state and local governments will be losing as much as $12 billion annually from uncollected taxes on online sales. There is real money at stake here.
Individual Taxes

Pruning the Income Tax Rolls

July 6, 2009 –
Last year’s election campaign sparked a major debate over refundable tax credits. Barack Obama insisted they were the only way to make tax benefits available to low-income households. (If you have no tax liability, you get a cash payment.) Critics countered loudly: How can you cut taxes for people who don’t pay them? And there are a lot of non-taxpayers—under 2008 law, the Tax Policy Center estimated 38 percent of all tax units would pay no income tax in 2009.
Individual Taxes

Paying for Health Reform: Tax the Fella Behind the Tree

July 2, 2009 –
The American public is deeply divided over whether to raise taxes to pay for health reform. A fascinating Kaiser Family Foundation review of recent survey data finds that in five polls taken over the past four months, about half of those questioned said they’d be willing to pay higher taxes as the price of reform. However, the amount of tax they are willing to pay appears to be low, they’d much prefer someone else pay, and they don’t like the idea of taxing employer-sponsored insurance one bit. Most striking, a dispiriting 60 percent think the system can be fixed without spending any more money at all—an outcome that no health economist I know thinks is remotely possible.
Individual Taxes

Will Obama Regret the House’s Cap and Trade Give-Away?

June 30, 2009 –
During the presidential campaign, Barack Obama and John McCain profoundly disagreed on many issues, among them climate change legislation and the tax treatment of health care. Now, President Obama seems to be bowing to one of McCain’s poor ideas while resisting one of his better proposals. It is funny how the politics of these issues is playing out. Many economists agree that McCain had the right idea on health care—the Arizona senator proposed replacing the current exclusion for employer-sponsored insurance with a generous tax credit. Yet, Obama continues to resist (though with increasingly less vigor) any change in the tax treatment of insurance.
Individual Taxes

Obama off the leader board

June 29, 2009 –
There’s an interesting exchange on the climate change bill going on over at Capital Gains and Games. Budget wonk Stan Collander was impressed that “…the White House once again has demonstrated an excellent ability to get Congress to go along with the things it wants.” Dartmouth economist and former Bush CEA member Andrew Samwick, however, argues that this is backwards. He thinks the legislative branch should take the lead on developing legislation and the executive branch should take a subordinate role.
Individual Taxes

Raising the Medical Deduction Floor: Is It Worth the Trouble?

June 25, 2009 –
What if we helped pay for health reform by raising the floor on deductible medical expenses from 7.5 percent of adjusted gross income to 10 percent? That, at least, is an idea leaked to The Wall Street Journal earlier this week by the Senate Finance Committee The move, which TPC figures would raise about $23 billon over 10 years--about 2 percent of the likely cost of health reform--would lift the floor that was set back in 1986. To get a sense of what it would mean, I asked TPC’s Jeff Rohaly and Rachel Johnson to run some quick numbers.
Federal Budget and Economy

Gale and Auerbach’s “Problematic” Budget Outlook

June 23, 2009 –
Bill Gale and Alan Auerbach are nice guys, but they sure know how to ruin a beautiful summer day. I’ve spent the morning reading through their latest long-term budget forecast. It’s not even Noon and I think I need a drink. Gale, who is TPC’s co-director, and Auerbach, who heads the Burch Center for Tax Policy and Public Finance at Berkeley, have done this exercise for the past few years--each iteration more depressing than the last. The story this year: Long after the economy recovers and returns to full employment, long after the TARP and the auto bailouts are history, the U.S. will face massive and unsustainable deficits. Don’t let anyone tell you this is a temporary problem that will fade with the recession. It isn’t and it won’t.
Individual Taxes

Taxing Junk Food

June 19, 2009 –
One proposal to help finance health reform would tax fast food, salty snacks, and/or sugary drinks like soda. While critics see government meddling in citizens’ private lives, supporters of a “junk food” tax say such a levy could help finance expanded insurance coverage as well as lower health care costs by inducing people to switch to healthier diets. Taxpayers pay much of the expense of obesity-related disease through Medicare and Medicaid.
Individual Taxes

The Estate Tax and the Economy

June 18, 2009 –
Unless Congress acts in the next six months, the estate tax will be repealed in 2010 and then revert to its 2001 parameters — substantially more burdensome than current levels — in 2011. This bizarre policy makes it very likely that Congress will reform the levy by the end of this year, but it’s unclear exactly how.