TaxVox: Individual Taxes

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The voices of Tax Policy Center's researchers and staff

Individual Taxes

Will Tax Credits Sell Long-Term Care Insurance?

November 3, 2009 –
Long-term care insurance has been a model of market failure. The need for care in frail old age or disability seems to be the ideal insurable event. Two-thirds of those over 65 will need some assistance before they die and 20 percent will need it for more than five years. Yet only about 6 million people own this insurance, and few seem interested in buying.
Individual Taxes

Taxing Private Ryan

November 2, 2009 –
My colleague Howard Gleckman has summarized the tax plan that Congressman Paul Ryan (R-WI) presented at the Tax Policy Center on October 29. He describes it as a consumption tax, but that’s not what it is. It is actually mostly a tax on wage income that would treat those who work for a living very differently from those living off the income from inherited wealth.
Individual Taxes

Health Care: Taxing That Fella Behind the Tree, Again

October 30, 2009 –
The House leadership seems convinced that a relative handful of people should pay for health reform. In the plan released yesterday by Speaker Nancy Pelosi, Democrats would fund most of the cost of insuring millions more people in two ways: cutting subsidies to Medicare Advantage plans and imposing a stiff 5.4 percent surtax on individuals making $500,000 and couples making more than $1 million.
Individual Taxes

Paul Ryan’s Consumption Tax

October 29, 2009 –
Representative Paul Ryan (R-WI), one of Congress’ most interesting members, was the guest at this morning’s session of TPC’s Tax Reform 2.0 series. He came to talk about his Roadmap for America’s Future—a comprehensive plan for dramatically restructuring both entitlement spending and the tax code. Ryan is nothing if not ambitious.
Individual Taxes

Behavioral Economics and the Conservative Critique of VAT

October 28, 2009 –
Our grim fiscal outlook has led to renewed calls for a value added tax (VAT). As discussed by Greg Mankiw, conservatives have conflicting feelings about a VAT. The main appeal is that a VAT taxes consumption, so shifting from our current income tax system (which is actually a hybrid of an income tax and a consumption tax) to a VAT would remove existing disincentives to save, which in turn would promote long-term economic growth.
Individual Taxes

Who’d Get Hit by an Excise Tax on High-Cost Insurance?

October 27, 2009 –
As House and Senate leaders struggle to design their health reform bills, they remain at loggerheads over how to pay for broader access to insurance. The Senate Finance Committee’s plan to tax insurance companies that sell high-cost medical policies would generate over $200 billion in revenue over the next decade. But the excise tax is hugely controversial, mostly because influential unions oppose it.
Individual Taxes

Is Pay-or-Play Penalty a Tax?

October 23, 2009 –
President Obama is under attack for breaking his campaign promise to leave the middle class unscathed by future tax increases. The complaint: The requirement to purchase insurance is tantamount to a tax, because failure to buy incurs a fine. Since many families with incomes below $250,000 would be affected by the penalty, this appears to violate his campaign promise.
Federal Budget and Economy

The Homebuyer Tax Credit: When Will They Ever Learn?

October 22, 2009 –
The early returns are coming in on the First-Time Homebuyer Tax Credit. And it appears to be a bigger boondoggle than even I thought it would be. At a House Ways & Means Oversight subcommittee hearing today, the Internal Revenue Service inspector general reported that the IRS is auditing more than 100,000 of the roughly 1.4 million returns that included a claim for the credit. This is a staggering audit rate for an agency that usually reviews only about 1 percent of returns.
Individual Taxes

The Incredible Shrinking Estate Tax

October 22, 2009 –
The estate tax is only a faint shadow of its former self. In 2009, less than one-quarter of one percent of deaths—just 5,500 decedents—will leave taxable estates, the smallest percentage since at least the Great Depression. In part, that tiny fraction reflects the current recession’s devastation of assets—the Fed estimates that the total value of household and nonprofit assets fell by about one-sixth between 2007 and the first quarter of 2009. But changes in estate tax rules over the past decade have played a much larger role than economic swings.
Individual Taxes

Will the Real Marginal Tax Rate Please Stand Up? by Rosanne Altshuler and Jacob Goldin

October 21, 2009 –
Suppose that a taxpayer earns an additional dollar of income. How much tax would she owe on that dollar? A natural way to answer this question would be to look up the taxpayer’s statutory tax rate – the rate corresponding to her tax bracket and filing status. But that approach often gives the wrong answer and can mislead not only taxpayers but policymakers. Many tax preferences are phased in or out according to income, and as a result, those who earn extra income may face either a hidden tax or a subsidy as their tax benefits change in value. For example, for those in the phase-in range of the earned income credit earning an extra dollar increases the credit and reduces their tax liability, driving their actual rate below their statutory rate. But once they make enough so the EITC begins to phase out, the opposite happens and the rate they actually pay climbs.