TaxVox: Individual Taxes

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The voices of Tax Policy Center's researchers and staff

Individual Taxes

So long, for now

August 4, 2009 –
The energetic young packers have just left my home, as if it had been hit by a super-organized tornado. Almost all of our possessions are hidden from view, piled in boxes. (Fortunately, I prevented the movers from packing my laptop.) So I guess this is really happening. I’m no longer director of the Tax Policy Center. Friday was my last day. I’m moving to Syracuse University to become the first Daniel Patrick Moynihan Professor of Public Affairs at the Maxwell School. I’ll need extra large business cards to fit the title.
Individual Taxes

Caps and “Gold Plated” Health Plans

July 31, 2009 –
NPR interviewed me about “gold plated” health plans. I am a big proponent of capping the tax benefits for overly generous plans as part of health reform. Critics responded that many low-income people with modest insurance plans could be hit by a cap simply because they work for a small firm, have health problems, are old, or live in a high-cost region. It's a valid point if a cap were enacted in isolation. Much of the variation in insurance premiums is not attributable to differences in the generosity of benefits. But some of it is.
Federal Budget and Economy

Loose Handcuffs

July 30, 2009 –
Way back in the last century, PAYGO rules in the 1990 Budget Enforcement Act (BEA) helped control spending and contributed significantly to four years of budget surplus. Since BEA expired after 2002, looser PAYGO rules have applied and Congress has repeatedly chosen to ignore them. That was easy since violating PAYGO could only trigger a point of order, which was pretty easy to overcome, at least in the House. The Senate requires 60 votes to beat back a point of order but senators got around that by putting tax cuts and spending increases in budget resolutions, which are not subject to points of order.
Individual Taxes

Kerry’s Premium Tax

July 29, 2009 –
Senator Kerry has floated the idea of a tax on high premiums as an alternative to caps on the exclusion for employer-sponsored health insurance (ESI). There are no public details, but press reports indicate bipartisan interest in the idea. The proposal would tax insurers and self-insured employer plans if the average premium “substantially” exceeded the highest premium on policies offered to federal employees under the Federal Employees Health Benefits Plan (FEHBP).
Individual Taxes

Presidential Movement

July 28, 2009 –
As Congress and the administration grope their way toward healthcare reform, a major obstacle is financing: how do we pay the $1 trillion cost over the next decade? Many economists and members of Congress favor reducing or eliminating the tax exclusion of premiums paid for employment-based health insurance (ESI). We owe no income or payroll tax on the premiums our employers pay. The exclusion will cut an estimated $240 billion from federal revenues next year and $3.5 trillion over ten years. And it hits state tax collections too.
Individual Taxes

Targeting Obesity

July 23, 2009 –
A few weeks back, I discussed proposals to reduce obesity by taxing junk food. I argued that such a tax could encourage healthier eating but would be difficult to design and would hit low-income families the hardest. Now a new report by the University of Virginia’s Carolyn Engelhard and Arthur Garson and the Urban Institute’s Stan Dorn addresses some of these issues.
Individual Taxes

California Scheming

July 22, 2009 –
I was going to make a (fiscal) new year's resolution to stop picking on California. There are, after all, 49 other states doing things that don’t necessarily pass the good governance test, but the latest Golden State deal warrants comment. It would close the reputed $26 billion deficit by cutting spending by $15.5 billion, selling off assets, and deferring payments. Despite histrionics, the agreement comes less than a month into the budget year, much sooner than in past years.
Individual Taxes

How Should We Tax Climate Change Permits?

July 21, 2009 –
Now that the House has decided to give away, rather than auction, most CO2 emission permits, I’ve been wondering how Treasury is going to tax this windfall. There is a huge amount of money at stake--by some estimates more than $100 billion-a-year in emissions permits. Remember, how they would work: Congress would turn the right to emit CO2 into a valuable, saleable asset. Into, one might say, money. The companies that receive these permits—mostly big producers or generators of fossil fuels such as oil refiners or utilities—could either use them for the right to pollute or sell them.
Individual Taxes

Will A Surtax Encourage More Gold-Plated Health Coverage?

July 16, 2009 –
Imagine you are a successful business owner confronting the House Democrats’ proposed tax rate hike. Your first question: How do I shelter as much of my income as possible? Will one answer be to buy the richest, most generous health insurance policy you can find? It only makes sense. Why take cash compensation that could face a top rate of more than 45 percent when you could easily get more tax-free health insurance? Forget Cadillac plans. Now we’re talking Lamborghini coverage.
Individual Taxes

Paying for Health Reform By Taxing the Rich—An Update

July 14, 2009 –
Now we know how many American taxpayers will be asked to pay for health reform under the new tax rate structure being designed by House Democrats: about 2 million. That would be a bit more than 1 percent of all taxpayers. They’d be asked to pay an additional $540 billion in taxes over the next 10 years, while those making less than $350,000 would be asked to contribute approximately nothing. Seems fair to me. According to the draft House bill, starting in 2011 those making more than $1 million would pay a surcharge of 5.4 percent. Add that to President Obama’s plan to restore the pre-Bush top rate of 39.6 percent and the new maximum marginal rate would be an even 45 percent. You can also add a couple of extra percentage points thanks to Obama’s plan to restore the pre-Bush limits on personal exemptions (PEP) and itemized deductions (Pease).