TaxVox: Federal Budget and Economy

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The voices of Tax Policy Center's researchers and staff

Federal Budget and Economy

Should We Dump the Home Mortgage Interest Deduction?

May 27, 2010 –
Do we want to use the tax code to subsidize home ownership? And, if we do, is the mortgage interest deduction the best way to do it? A new paper by my Tax Policy Center colleagues Eric Toder and Katherine Lim, along with Urban Institute researchers Margery Turner and Liza Getsinger, asks these provocative questions, and comes up with some surprising answers.
Federal Budget and Economy

The U.S. Is Not (Yet) Greece.

May 18, 2010 –
can’t resist jumping into the ongoing debate between New York Times economic columnists David Leonhardt and Paul Krugman. David worries that there are troubling similarities between the current Greek debt crisis and huge ongoing deficits in the U.S. “Nonsense,” replies Paul, who argues that the two nations have about as much in common as souvlaki and cheeseburgers. My take: The U.S. is not Greece. But this does not mean we cannot learn lessons from a nation that is marked by both great beauty and regular bouts of fiscal madness.
Federal Budget and Economy

Taxing Bank Risk

May 11, 2010 –
Washington is buzzing with talk about taxing banks. And after watching the Goldman Sachs masters of the universe testify on Capitol Hill a couple of weeks ago, it is no surprise that many want to tax these people until they bleed. Unfortunately, punitive taxes are a bad idea, no matter how good they make us feel. But could a well-designed levy drive financial firms to allocate capital more efficiently? Maybe so, says Narayana Kocherlakota, the new president of the Federal Reserve Bank of Minneapolis.
Federal Budget and Economy

The Political Economy of Consumption: ‘Tis Better To Give, and Give, and Give

May 6, 2010 –
Here is why deficit reduction is so hard: Politicians get reelected by encouraging spending, not savings. Supporting policies that reduce current consumption—either by government or households--rarely gets anyone elected to anything. Not to stereotype, but nations do have personalities. Italians eat. Russians drink. Americans spend. And when anything—or anyone—gets between us and our consumption, watch out.
Individual Taxes

Why We’re Going to Keep Patching the AMT—And Why It Will Cost So Much

May 4, 2010 –
It has become a regular stop on Washington’s fiscal merry-go-round: Congress patches the Alternative Minimum Tax for a year or two, but leaves future fixes for mañana. For instance, the Senate Budget Committee’s new fiscal blueprint makes room to fix the AMT for one year only and assumes money will be found from somewhere to pay for future patches. In its fiscal 2011 budget, the Obama Administration also assumes the AMT will be repaired, but buries the cost in its baseline and makes no effort to find the money to pay for the fix.
Federal Budget and Economy

More Dismal Prospects for the Federal Budget: It’s All Greek to Me

April 30, 2010 –
Bill Gale and Alan Auerbach are once again ruining another beautiful spring day. Bill, the Tax Policy Center’s co-director, and Alan, a highly-respected economics professor at Berkeley, have updated their federal budget outlook. And their projections—based on realistic assumptions of what may happen to tax and spending—are truly frightening.
Federal Budget and Economy

The Homebuyer Tax Credit Land Rush

April 29, 2010 –
If your neighborhood is anything like mine, “under contract” signs are blossoming like dandelions. Many (of the signs, not the weeds) were very likely the result of the artificial land rush created by tomorrow's expiration of Homebuyer Tax Credit II. The credit gives $8,000 to first-time buyers and up to $6,500 to move-up buyers.
Federal Budget and Economy

The Obama Deficit Commission: Five Issues to Watch

April 27, 2010 –
President Obama’s Bipartisan Commission on Fiscal Responsibility and Reform is having its first meeting today. As I peer at my bookshelf full of well-meaning policy prescriptions produced by similar panels over the years, I am skeptical at best. These enterprises are, as Dr. Johnson said of second marriages, “a triumph of hope over experience.” Still, you never know. As my colleague Gene Steuerle reminds me, few thought tax reform would get off the ground in 1984-85. Yet, by mid-1986, it had happened.
Federal Budget and Economy

Old Tricks: The Senate Budget Committee’s Fiscal Plan

April 23, 2010 –
At first glance, the 2011 budget resolution passed along party lines yesterday by the Senate Budget Committee shows signs of fiscal responsibility. Although it would result in a huge budget deficit next year, it promises to pare the deficit from nearly 10 percent of GDP this year to just 3 percent—a sustainable level with expected economic growth—by 2015.
Individual Taxes

Conservatives and the VAT

April 20, 2010 –
Last week, the Senate voted 84-13 for the following proposition: "It is the sense of the Senate that the Value Added Tax is a massive tax increase that will cripple families on fixed income and only further push back America's economic recovery." The sponsor was Senator John McCain, which is interesting because in his presidential campaign McCain endorsed a consumption tax, although not quite a VAT.