TaxVox: Individual Taxes

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The voices of Tax Policy Center's researchers and staff

Federal Budget and Economy

Baseline Redux: or When is a Tax Cut Not a Tax Cut?

June 3, 2009 –
Here we go again. I posted yesterday on a new TPC analysis of the tax cuts in President Obama’s proposed 2010 budget. The conclusion: Nearly everyone, even most of the very wealthy, would enjoy a big tax break. This, I suggested, was not smart, given the nation’s huge deficit and Obama’s ambitious priorities. Not surprisingly, a commenter—AMTbuff—called me to task. While many of these revenue provisions represent tax cuts relative to current law, they are not when compared to current policy—that is, assuming all the 2001 and 2003 tax cuts are made permanent, the AMT is patched into the future, etc. According to AMTbuff, “using current law as the baseline is misleading [since] neither the public nor any experts expect all tax rates to spring back to pre-2001 levels.”
Federal Budget and Economy

The Obama Tax Cuts: More Generous Than Ever

June 2, 2009 –
Everybody gets a tax cut! To look at TPC’s latest estimates of the tax provisions of President Obama’s 2010 budget, you’d think there was no deficit of $1.84 trillion, or that the White House has no need to pay for an ambitious health reform plan. Or more education spending. Or more infrastructure construction.
Individual Taxes

Obama Giveth and the AMT Taketh Away

June 1, 2009 –
After I wrote about how Obama’s tax proposals would cut taxes for many wealthy households, some readers objected that I’d ignored the fact that the alternative minimum tax (AMT) would wipe out any potential tax savings. I had commented that the AMT could, in fact, do just that, but TPC had not yet estimated how many taxpayers would be affected. Research assistant Katie Lim has now generated those estimates and they show, as expected, that the AMT would take the potential tax cut away from many people.
Individual Taxes

The Garrett Nomination and Pseudo-Ethics

May 29, 2009 –
Beth Garrett, President Obama’s choice to be Assistant Treasury Secretary for Tax Policy, has withdrawn her name from consideration. Beth didn’t say why, except for the usual boilerplate about her “personal family situation.” However, the Bloomberg story on her announcement quotes a friend, lobbyist Jeff Trinca, as saying she pulled out because she was unwilling to put her family through what has become a “harsh” confirmation process.
Individual Taxes

What a Choice: Raise Taxes for the Poor or Bust the Budget

May 29, 2009 –
As promised, TPC has crunched some numbers for the health reform plan introduced by congressional Republicans last week. They are pretty ugly, and an indication of just how hard it is to confront the taxation of medical care. The Patient’s Choice Act, sponsored by Representative Paul Ryan (R-WI), Senator Tom Coburn (R-OK) and others, takes some remarkable steps toward bipartisanship by embracing regional purchasing pools. It also includes some very Republican ideas, such as giving low-income families $5,000 to buy their way out of Medicaid.
Individual Taxes

The Benefits of Opacity

May 28, 2009 –
A basic tenet of public finance holds that people tend to do less of something when it is taxed. Raise income tax rates and some people will work less. Boost the gas tax and people will drive less. Hike the cigarette tax and people will smoke less. That inexorable law of demand poses two problems for the taxman. First, taxes distort behavior as people move from taxed activities to those that are taxed less or not at all. Sometimes, as in the case of cigarette taxes, we want to discourage the taxed activity. In other cases, the tax only makes the economy less efficient. Second, tax avoidance may reduce the revenue gained from a tax increase—or even negate it entirely. For example, if gasoline sales plummet when gas taxes rise, we get less revenue to build and maintain roads.
Individual Taxes

"Caring for Our Parents": My New Book on Long-Term Care

May 27, 2009 –
I am not just a tax wonk. For the past couple of years, when I wasn’t blogging on TaxVox, I was writing a book on long-term care. Caring for Our Parents critiques what is a completely irrational system for delivering and paying for these services. I had the great fortune of being able to tell this story through the eyes of both those who are receiving assistance and their families. About 10 million Americans need this care, and as many as 40 million of us help family members and friends—either the frail elderly or those with disabilities. Long-term care is hugely expensive. On average, a year in a nursing home costs $75,000 and home health aides cost $19 per hour. In 2007, we spent $230 billion on paid assistance. But that pales in comparison with the economic value of informal care provided by family members, which AARP estimates at $375 billion.
Individual Taxes

The $250,000 Question

May 26, 2009 –
During the 2008 presidential campaign, much was made of candidate Obama’s proposal to boost taxes on “high-income” taxpayers. Campaign attack ads warned those folks—couples with income over $250,000 and others with income over $200,000—that a big tax increase was on the way. Joe the Plumber complained that the tax increases would stifle his unborn entrepreneurial dreams.
Individual Taxes

GOP Health Reform: Surprise, A Big Tax Cut

May 21, 2009 –
Yesterday, conservative Republicans rolled out their health reform plan. The Patient’s Choice Act is an interesting mix of Massachusetts-like exchanges and other reforms intended to boost the individual insurance market. But, no surprise, its centerpiece is a giant tax cut.
Individual Taxes

Stop Picking on California

May 20, 2009 –
To no one’s surprise, California voters yesterday rejected 5 of 6 ballot measures intended to address the state’s budget problem. The propositions would have addressed the problem as it existed in February, not now. The state then faced a $40 billion gap between revenues and expenditures over 18 months. Lawmakers managed to close the gap after a marathon emergency session. However, thanks to California’s labyrinthine budget rules, about $6 billion of these solutions required voter approval. Hence, the state’s third special election in six years.