TaxVox: Individual Taxes

I worry whether the recent hearings with the CEOs of the major Wall Street banks, with their focus on blame and personality, will draw attention away from the more important issue: how we can best insure that money flows from savers to those investors who can produce the highest returns for society. Certainly bank reform is required. But we’ve got a huge problem with bad incentives, and they apply not just to banks, but to other corporations and even to households. These incentives make it possible for corporate managers to make big bucks while running losses, allow households to borrow beyond their means, and permit auto companies to pass highly leveraged auto loans to the government.

Should the Joint Committee on Taxation cede its key role as scorekeeper for tax bills to the Congressional Budget Office? A former boss of JCT suggests that maybe it should, at least for a big chunk of the tax code. To outsiders, these arbiters of the budget implications of tax and spending bills are something of a mystery. CBO tracks the costs of spending bills and, as we've seen in the debate over health reform, its influence can be enormous. At the same time, JCT performs a parallel task by doing revenue estimates of tax bills (JCT also has a staff of lawyers who provide lawmakers with technical tax-writing advice) . But behind the scenes, the two offices have been rivals for many years.

Last year’s stimulus bill extended the Child Tax Credit to millions of poor children, boosting their families’ incomes by as much as $825 in 2009 and 2010. Now, Congress must decide whether to continue that benefit beyond this year, when the credit is scheduled to shrink for low-income families who need it the most.

The stock market collapse of 2007-2009 was the worst since the 1930s, and rivaled in modern times only by the crash of 1973-74. But the real question for those counting on equities to help fund their retirement security is: “What are my long-term prospects in the wake of the carnage?”