TaxVox: Individual Taxes

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The voices of Tax Policy Center's researchers and staff

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Unless Congress acts in the next six months, the estate tax will be repealed in 2010 and then revert to its 2001 parameters — substantially more burdensome than current levels — in 2011.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.
Individual Taxes

California is not Lehman Bros. (Thank goodness)

June 17, 2009 –
A recent blog post at TheEconomist.com nicely summarizes California’s fiscal mess. It’s an exaggeration to say the state suffers from “extraordinarily low levels of taxation”—its revenues rank 10th in the nation on a per capita basis, 18th as a share of personal income. But California has been captive to a “something for nothing mentality” since at least the recession of 2001 and probably back to 1978, when voters slashed property taxes in half without relenting in their demands for schools, parks, roads, etc. (See also the Washington Post.)
Individual Taxes

Public Insurance Isn't Coming, It's Been Here for Years

June 16, 2009 –
Note to critics of the public plan option for health insurance: This debate is over. You lost. In 2007, more than 45 percent of all medical costs in the U.S. were paid by government, vastly more than the one-third funded by private insurance. Many Americans already have access to public coverage. There is Medicare for those over 65, Medicaid for the poor, SCHIP for kids, coverage for the active military, and for many veterans. Together, the share of medical spending paid by government has grown from one-third in 1970 to nearly half today, according to the Current Population Survey. If your definition of “public plan” includes insurance available through highly-regulated private carriers to federal, state, and local employees, the numbers are even bigger. And, of course, there is the quarter-trillion dollar government tax subsidy for health insurance.
Individual Taxes

Indexing the Health Exclusion: Pay Me Now or Pay Me Later

June 11, 2009 –
Senate Finance Committee Chairman Max Baucus (D-MT) is floating the following trial balloon: Congress would fund part of health reform with a cap on the tax exclusion of employer-sponsored health insurance but only at a level “significantly above” the cost of the standard plan offered to federal employees. The measure would also exclude policies bargained under current union contracts. In a bit of unsenatorial understatement, Baucus told reporters on Tuesday that this version of the cap “wouldn’t affect very many people.” Or, he might have added, raise very much money.
Individual Taxes

Capping the Health Exclusion: May a Thousand Flowers Bloom

June 10, 2009 –
Until now, unions have been among the strongest critics of paying for health reform by limiting the tax exclusion for employer sponsored insurance. But on Monday, a well-connected labor lobbyist told me a deal could be done. “It all depends,” he said, “on what the cap looks like.” Remarkably, in just a few weeks, lawmakers seem to have moved beyond the argument over whether the exclusion should be capped. Now, they are debating how. It is not easy. There are caps based on employee income, the value of the insurance, or both. There are caps tied to the actuarial value of coverage, or linked to geography. Then, there is the issue about how to index a cap.
Federal Budget and Economy

Sharing the Wealth—The Sequel

June 9, 2009 –
As I promised in last Friday’s TaxVox post, here is TPC’s estimate of the 2012 distribution of President Obama’s tax proposals in the 2009 budget, measured against the administration’s chosen baseline. That baseline looks a lot like current policy: extend the Bush tax cuts, index and make permanent the 2009 estate tax, and permanently patch the alternative minimum tax by indexing forward the 2009 parameters.
Individual Taxes

The Temptation of Sin Taxes

June 8, 2009 –
San Francisco Mayor Gavin Newsom recently proposed a new 33-cent tax on a pack of cigarettes to help pay for the city’s annual $10.7 million litter-collection program, which includes removing cigarette butts from gutters, drainpipes, and sewers. Though this litter tax may be unique, San Francisco is not alone in targeting sin taxes this year. At least 25 states want to raise tobacco taxes, and 12 would either create or increase taxes on alcohol. While smoking, drinking, and littering are relatively easy political targets when more tax revenue is needed, raising sin taxes to fill large and growing budget deficits during a recession might be more regressive and less countercyclical than other options. What’s more, in the case of city taxes, they may not raise much additional revenue.
Federal Budget and Economy

Sharing the Wealth?

June 5, 2009 –
Following last month’s release of the Treasury Green Book, the Tax Policy Center reworked its distributional analysis of the tax proposals in President Obama’s 2010 budget. We learned many new details about specific tax provisions, including the practical definition of who has enough income to face higher taxes. The bottom line? You have to have a lot of income to be in Obama’s crosshairs.
Individual Taxes

Obama and the Health Tax Exclusion: Are His Lips Moving?

June 4, 2009 –
President Obama appears to be ever-so-slowly backing away from his hard-edged campaign opposition to capping the $246 billion employer-sponsored insurance tax exclusion as a way to help pay for health reform. It’s the typical Washington dance. First, on June 2, the President met privately with two dozen Senate Democrats to talk about health reform. Senate Finance Committee Chairman Max Baucus (D-MT), who favors curbing the exclusion, told reporters after the meeting that the President was now willing to consider some limits on the tax subsidy. Another Democrat, Chris Dodd of Connecticut, heard it differently, telling the Wall Street Journal that Obama was not budging. Finally, a White House spokesman ended the day with this: "The president made it clear during the campaign that he has serious concerns about taxing health-care benefits.”