In response to your letter of May 11, 2007, the Congressional Budget Office (CBO) has reviewed the available data and analyzed the sources and underlying causes of the growth in revenues since 2003. This analysis shows that the overall increase in revenues as a share of gross domestic product (GDP) since 2003 is disproportionately accounted for by increases in corporate income tax revenues.
During fiscal year 2006, the federal government spent $92 billion on corporate welfare. In the policy analysis “The Corporate Welfare State: How the Federal Government Subsidizes U.S. Businesses,” the Cato Institute’s director of budget studies, Stephen Slivinski, finds that billions of dollars are annually spent to cushion America’s largest companies at the taxpayers’ expense.
Slivinski defines corporate welfare as “any federal spending program that provides payments or unique benefits and advantages to specific companies or industries,” justified as remedies to market failure. Special interests argue that without subsidies, competition or an industry’s viability would be jeopardized. However, Slivinski demonstrates that the “market failures on which the programs are predicated are either overblown or don’t exist.” Large corporations including Boeing, Xerox, Motorola, Dow Chemical and General Electric have received millions in taxpayer dollars while playing paupers to the federal government.
This analysis sets out three tests by which to judge different approaches to AMT reform. It also offers some preliminary thoughts on how the AMT patch and the emerging House proposal might fare on these tests.
Over the next several years, policymakers will face important choices about the level of government revenues. Since the government collects taxes in order to finance public services, it is useful to examine where tax dollars go when thinking about these crucial tax-policy decisions.
With the income-tax filing deadline approaching and many people focusing on how much they owe in taxes, it may come as a surprise that federal tax burdens for most income groups— and, in particular, for middle-income households — are at their lowest levels in decades, and were low by historical standards even before the 2001 and 2003 tax cuts.
In a new study, Thomas Piketty and Emmanuel Saez, economists who have done groundbreaking work on the historical evolution of income inequality in the United States, examine how the progressivity of the federal tax system has changed over time. Unlike previous analyses, theirs examines effective federal tax rates going back to 1960, including income, payroll, corporate, and estate taxes, and provides data for income groups reaching up to the top one-hundredth of one percent (.01 percent) of the population. Several crucial findings emerge from their study.
Poor families in many states face substantial state income tax liability for the 2006 tax year. In 19 of the 42 states that levy income taxes, two-parent families of four with incomes below the federal poverty line are liable for income tax. In 15 of the 42 states, poor single-parent families of three pay income tax. And 29 of these states collect taxes from families of four with incomes just above the poverty line.
Source: Joe Connor, Challenge: The Magazine of Economic Affairs, Vol. 50 no. 2, March-April, 2007
It is hard to find any evidence that tax increases reduce the work-effort of high-income earners, according to this economist. Meantime, traditional families in the lower-income half of our population have been faring badly for most of the past quarter century even without comparing them to the top fifth and especially to the top 5 percent who have done so well. The only good years the traditional family has had in the past twenty-five followed a tax increase in 1993. All those gains have been lost since the tax decrease in 2001.
Source: Dave McNeely, State Legislatures, Vol. 33 no. 4, April 2007
A commission, with business support, was able to do what the legislature couldn’t—change the tax structure in Texas.
After years of backing and filling, Texas lawmakers finally cut the state’s over-extended local property tax last year. The Texas Supreme Court made them.
Now that the Democrats run Congress, the question becomes, “What should they do?” Yes, raise the minimum wage. And yes, fix the Medicare drug program. But will this bind a new majority to the party?…
… But what the Democrats don’t have is a serious commitment—the political nerve—to make people happier in the only way they can: by raising people’s taxes. How happy more of us would be if only we could pay higher taxes! More of us at last could joyfully retire.
In May 2005, the Paris-based Organization for Economic Cooperation and Development (OECD) put out a sort of Michelin Guide to the pensions of the world’s 30 wealthiest nations: the United States, Ireland and their ilk. While the United States is rich, comparatively it’s a beggar at the bottom, with a Burger King-type pension, paying on average 39 percent of after-tax income at retirement. Others pay about 70 percent on average. Germany, Sweden: pick a country. Some pay even more.