TaxVox: Federal Budget and Economy

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The voices of Tax Policy Center's researchers and staff

Individual Taxes

Did the Double Tax on Corporate Income Kill the Economy?

December 11, 2008 –
Did bad tax policy help cause the economic meltdown? Former assistant Treasury Secretary for Tax Policy Pam Olson thinks so. Speaking at a Dec. 5 tax reform conference sponsored by TPC and Tax Analysts, Pam fingered what she called an “anti-equity and pro-leverage” Internal Revenue Code as one culprit in the collapsing credit markets. TPC’s Bill Gale agrees--after a fashion--although other tax experts are unconvinced.
Federal Budget and Economy

Bleeding Red Ink

December 10, 2008 –
The federal budget deficit has worsened over the past year as the economy collapsed into recession, Congress once again patched the alternative minimum tax (AMT), and the Treasury took steps to stabilize credit markets and rejuvenate the economy. Red ink drenches the federal budget for the foreseeable future.
Federal Budget and Economy

Bailing Out Chrysler

December 4, 2008 –
The headlines today say Chrysler has asked Congress for a bridge loan of $7 billion on top of the $8.5 billion it already requested to subsidize development of fuel efficient cars. But it is not exactly Chrysler that is asking for the money. Rather it is its majority shareholder: the private equity firm Cerberus Capital Management. Thus I cannot help but wonder whether the true beneficiaries of this transaction will be Cerberus and its partners rather than Chrysler’s workers, suppliers, and dealers.
Federal Budget and Economy

Deficits and The Future: Other Views

December 2, 2008 –
I just finished moderating an Urban Institute panel discussion featuring three confirmed deficit hawks—former CBO directors Bob Reischauer and Rudy Penner, and TPC’s Len Burman. The question on the table: What will the now-official recession and the federal government’s massive deficits mean for Barack Obama’s hugely ambitious domestic agenda?
Individual Taxes

A Not-So-Sweet Story of the Value-Added Tax

November 27, 2008 –
Before you head out for Black Friday shopping, take note of what can happen with a European-style Value-Added Tax run amok, courtesy of our friends at TaxProf. In a paper presented Nov. 18 at the University of Connecticut Tax Lecture Series, Oxford University's Rita de la Feria described the amusing but instructive case of Jaffa Cakes. If these confections were indeed cake, they would be treated as food and thus exempt from the VAT. If, however, they were cookies, they would be subject to the full 17.5 percent rate.
Federal Budget and Economy

What Should Obama’s Stimulus Look Like?

November 25, 2008 –
Barack Obama has set quite a goal for himself: He wants a fiscal stimulus that will both boost today's economy and lay the groundwork for "long-term sustained… growth." Doing both will not be easy. In fact, it may not be possible. So which is more important?
Federal Budget and Economy

A Commissar of Cars

November 18, 2008 –
The debate over bailing out the auto industry is producing a veritable fleet of Pinto-like policy prescriptions. And they get worse by the day. First, an aide to Barack Obama hints the President-elect is considering an auto czar who'd have the authority to force the industry to retool in return for billions in taxpayer assistance. The Russian image is a good start, but the czar thing may be historically premature. Maybe better to call him the Commissar of Cars.
Federal Budget and Economy

Bailing Out Detroit: Just Say No

November 11, 2008 –
Note to President-Elect Obama: Don't do it. I understand the politics. I even get the symbolism—iconic industry and all that. But the economics is really bad. Here are five reasons why:
Federal Budget and Economy

The Last Bubble

November 7, 2008 –
In a remarkable year, we have seen financial bubbles burst throughout the world. It is, say the market gurus, a deleveraging of historic proportions, unwinding decades of overreliance on easy money. But one bubble remains. It is the U.S. fiscal bubble. While other borrowers around the world are getting crushed by the sudden disappearance of credit, the U.S. Treasury is tapping bond markets at a once-unimaginable pace. On Nov. 3, Treasury announced it would have to raise $550 billion in the quarter ending Dec. 31. That is on top of the $530 billion it raised from July to September. More than $1 trillion in new debt. In six months.
Federal Budget and Economy

Does Divided Government Guarantee Fiscal Responsibility?

October 27, 2008 –
The ordinarily very astute EconomistMom blithely asserted that there is "a lot of historical evidence suggesting that one-party government tends toward fiscal irresponsibility." Maybe not. Some time ago, I asked Urban Institute RA, Sonya Hoo, to review the evidence from states, over time, and across countries. She found the evidence of such an effect to be quite ambiguous.