TaxVox: Federal Budget and Economy

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The voices of Tax Policy Center's researchers and staff

Federal Budget and Economy

Now that I’ve got your attention

April 20, 2009 –
I was quoted in the New York Times yesterday, which is kind of fun. Many of my friends read the Times, and it’s a great way to make new friends, and enemies.
Federal Budget and Economy

Tax Refund Stimulus?

April 20, 2009 –
Tax Day has come and gone and IRS commissioner Doug Shulman says refunds this year will total roughly $300 billion. About two-thirds of that amount had already gone out to early tax filers by the beginning of this month. That’s a significant amount of money and it could boost the economy—if recipients spend it. In today’s economic environment, that’s a big if.
Federal Budget and Economy

Energy Taxes and the Detroit Bailout

March 31, 2009 –
If there are any ranches in Detroit, President Obama has just bet one on his yet-unborn plan to cap greenhouse gasses. Obama has effectively ordered GM and Chrysler to build more fuel-efficient cars in return for billions more in federal bailout money. But will enough people buy those cars with gas at $2-a-gallon to make this a successful strategy?
Federal Budget and Economy

The Stephen King Budget

March 20, 2009 –
Do not read the new CBO budget projections by the dark of night. Instead, pick a bright sunny day and keep a significant other or perhaps a pet by your side. A good stiff drink wouldn’t hurt. If Stephen King were a budget wonk, A Preliminary Analysis of the President’s Budget and an Update of CBO’s Budget and Economic Outlook would be his kind of book. The headline is CBO’s projection that the deficit will hit $1.8 trillion this year under President Obama’s policies. That’s a deficit of more than 13 percent of GDP—twice as large as any annual deficit since 1946. But that’s far from the scariest number in this report. Far more troubling to me is what will happen after the economy recovers and fiscal policy returns to what I suppose will be the New Normal.
Federal Budget and Economy

Taxing AIG Bonuses: Worse Than Paying Them.

March 19, 2009 –
The AIG bonuses are an outrage. But the bigger scandal is that a grandstanding Congress wants to use the tax law to punish the companies that paid them and the employees that got them. If Congress wants to limit bonuses for employees of bailed-out companies, it should just do it. But using the Internal Revenue Code is a truly terrible idea. And dipping into the Code to win political points is worse. Long ago, people were rightly outraged when Richard Nixon tried to turn the IRS into a weapon to punish his enemies. This gotcha tax is another variation on the theme, and nearly as inexcusable. Imagine, for instance, if a GOP Congress retroactively barred people from deducting charitable gifts to Planned Parenthood. Or Democrats imposed a 50 percent surtax on companies that that do security work in Iraq.
Federal Budget and Economy

It’s True, Nearly Everybody Does Get a Tax Cut in the Obama Budget.

March 16, 2009 –
In the presidential campaign, Barack Obama promised he’d cut taxes for 95 percent of all Americans. And, so far at least, it looks like he’s coming close to meeting that goal. I think this sort of largess is a mistake given the nation’s long-run fiscal problems. But GOP claims that Obama is trying to raise taxes for many Americans are bogus. TPC has just completed a major analysis of the tax provisions of the President’s 2010 budget. We found that, compared to current law, 91 percent of taxpayers would get a tax cut under the Obama plan. That is, they’d pay less tax than they would if the Bush tax cuts expired as scheduled in 2010 and the Alternative Minimum Tax is allowed to bite millions more taxpayers.
Individual Taxes

The Economy Is Bad, But It Isn’t The Great Depression.

March 12, 2009 –
We need to get a grip, people. This is not The Great Depression—The Sequel. Make no mistake, the economy is very bad, as rough as it has been since the early 1980s. But, despite what many are saying and writing, the recession that began in the winter of 2008 is not the Great Depression. Not even close. Employment, price levels, Gross Domestic Product, the stock market. Pick a data series, any data series, and you’ll get the same result: awful, for sure, but hardly 1929. CEA chair Christy Romer, a highly respected scholar of the Depression before joining the Obama Administration, put the current unpleasantness in context the other day at Brookings.
Federal Budget and Economy

The Opacity of Hope

March 10, 2009 –
President Obama’s promise of transparency in government is a laudable goal after too many years of near-obsessive secrecy by the Executive Branch. Unfortunately, at least when it comes to his tax agenda, the president’s new budget falls far short of that vow. Too many tax proposals are written in Inside-the-Beltway code. For many provisions, there is no description at all in the 134-page budget. Most can be found only by deciphering the tables in the back. Some items worth hundreds of billions of dollars appear only as mere footnotes. Others are nothing more than numbers in revenue tables. There are no real proposals at all.
Federal Budget and Economy

Is Obama's Deduction Cap A Revenue Plug?

March 5, 2009 –
There are already signs that a key tax element of President Obama’s budget--his proposal to limit to 28 percent the value of all tax deductions—may not survive on Capitol Hill. And if it is allowed to die, Congress may find itself staring squarely at another hard-to swallow tax hike—trimming the tax exclusion for employer-sponsored insurance. Key Republicans have strongly objected to the curb on deductions. Powerful Democrats, including Finance Committee chairman Max Baucus (D-Mt), are less than enthusiastic. Charities that fear they will lose contributions are gearing up for a big fight, even though TPC estimates that gifts would decline by only about 2 percent. And in the face of this criticism the Administration has signaled that it may not fight very hard to save the proposal. "We recognize there are other ways to do this," Treasury Secretary Tim Geithner told the Finance panel yesterday.
Federal Budget and Economy

Giving Up on the Advanced Earned Income Tax Credit

March 4, 2009 –
President Obama’s budget would eliminate a small but meaningful program for low-income families – the Advanced Earned Income Tax Credit (AEITC). A far better idea would be to expand the program. This credit allows eligible families to receive a portion of their Earned Income Tax Credit (EITC) throughout the year through a reduction in tax withholding, so they don’t have to wait until they file their tax returns to get the extra cash. In 2009, the program could boost a family’s take-home pay by up to $35 a week.