TaxVox: Individual Taxes

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The voices of Tax Policy Center's researchers and staff

Individual Taxes

Sleepless Nights for Tax Evaders

August 20, 2009 –
Many people who have failed to pay taxes on funds stashed in overseas bank accounts will likely toss and turn during coming nights, worried that the tax man will soon come knocking at the door. Will they be among the nearly 4,500 account holders whose names Swiss bank UBS has agreed to give to the IRS? And even if their names aren’t on the list, will the IRS learn about them from others seeking amnesty? Should they apply for amnesty themselves, paying large tax bills but at least staying out of jail? Or lie low for fear the IRS will find other problems if they draw attention to their returns?
Individual Taxes

Stuck in the Middle with our International Tax System

August 18, 2009 –
President Obama took aim at multinational corporations last May at a press conference on international tax policy. I’ll leave out the details here, lest I put you to sleep or explode your brain. Let’s just say that the current system is a mess that drastically needs fundamental reform. Economists describe two contrasting “pure” approaches to taxing the income U.S. companies earn abroad. A “worldwide” approach would apply our domestic tax rules to all income (with a foreign tax credit to protect against double-taxation). In theory, that system would tax U.S. business income the same, whether it’s earned at home or overseas, so firms shouldn’t care where they invest. In contrast, under a “territorial” or “dividend exemption” system, the U.S. wouldn’t tax active business income earned overseas; American firms would pay only the taxes of the country where they earn income, just like any non-U.S. business operating there. In theory, that puts U.S. businesses that invest abroad on equal tax footing with foreign firms.
Federal Budget and Economy

What about the Spending Side?

August 17, 2009 –
Rosanne Altshuler and I have argued in recent posts that Washington will be hard pressed to close our ongoing budget gap with politically palatable tax increases. (Is that an oxymoron?) Neither raising the individual income tax nor boosting corporate levies will erase the deficit. But what about the spending side of the budget? We at the Tax Policy Center naturally focus on taxes but we do understand that cutting a dollar of spending has pretty much the same effect on the deficit as raising another dollar in taxes.
Individual Taxes

Death Panels and the Estate Tax

August 14, 2009 –
I’ve been struggling to understand the overheated rhetoric surrounding the proposal that allows Medicare to pay for end-of-life counseling. I think I get it now: It is all about the death tax. Here is the story the government doesn’t want you to know. The 2001 Bush tax cuts will repeal the estate tax next year, but only for a year. Starting in less than 18 months, estates in excess of $1 million will once again be taxed at a stiff 55 percent. This will cost the children of the very wealthy tens of billions of not-so-hard-earned dollars. And it creates a huge incentive for these offspring to, shall we say, accelerate nature’s course. You see where I'm going here.
Federal Budget and Economy

Why We Won’t Eliminate the Deficit with Corporate Tax Revenues

August 13, 2009 –
Yesterday my colleague Bob Williams blogged on how difficult it will be to dig ourselves out of our enormous budget hole. He examined CBO’s biennial Budget Options report, which contains a list of “revenue options” for modifying Federal taxes. Bob focused on the year with the smallest deficit over the ten year budget window which happens to be 2012. In that year, CBO predicts we will run a deficit of “only” $633 billion. The individual income tax raises the bulk of federal revenues, so naturally Bob looked at incremental reforms of those levies.
Federal Budget and Economy

How We Won’t Eliminate the Deficit

August 12, 2009 –
Last week the Congressional Budget Office issued a new edition of Budget Options, its biennial publication detailing hundreds of proposals that would raise or lower taxes and spending. Numbers in the revenue chapter of the nearly-300-page book show just how difficult it will be to raise the taxes needed to fill the huge deficit hole that we’ve dug for ourselves.
Federal Budget and Economy

Cash, Clunkers and the Environment

August 11, 2009 –
Commentors on last week's post on Cash for Clunkers have argued that the newly-expanded program is better than other government subsidies because of its positive environmental effects. So I did a little research and it turns out that the “green” benefits of this program may be wildly overblown.
Individual Taxes

The HAPPY Act

August 7, 2009 –
Representative Thaddeus McCotter, a fourth-term Republican from Livonia MI, has introduced the HAPPY Act—the Humanity and Pets Partnered Through the Years Act. It is HR 3501, and it was introduced on July 31. You could look it up. The HAPPY Act would allow taxpayers to deduct up to $3,500-a-year in pet care expenses, including vet care. The federal deficit so far this year is $1.268 trillion.
Federal Budget and Economy

Junk Cash for Clunkers

August 6, 2009 –
Washington is about to spend another $2 billion on cash for clunkers. I wish, instead, lawmakers would declare the program’s first $1 billion a roaring success, take a deep bow, and move on. In fact, the first $1 billion was not a total failure. It did get help bring auto inventories down, especially for small cars, and, as intended, it took some gas guzzlers off the road.
Campaigns, Proposals, and Reforms

The Wall St. Journal Editorial Page: Done In by the Facts Again

August 4, 2009 –
What would I do without The Wall Street Journal editorial page? I come to work on a slow summer’s day, not sure what I’m going to blog about, when I find this in the morning Journal: “A piece in The New York Times over the weekend declared in a headline that ‘the Rich Can’t Pay for Everything, Analysts Say.’ And it quoted Leonard Burman, a veteran of the Clinton Treasury who now runs the Brookings Tax Policy Center, as saying that ‘This idea that everything new that government provides ought to be paid for by the top 5%, that’s a basically unstable way of governing.’ They’re right, but where were they during the campaign?”