Category Archives: Taxation

Big Bank Tax Drain: How Wall Street Speculation and Tax Avoidance are Starving Public Revenues

Source: National People’s Action (NPA), Public Accountability Initiative (PAI), March 2011

From the summary:
Wall Street banks caused the economic crisis that has left millions unemployed, foreclosed-on, and without prospects in the worst economy since the Great Depression. This crisis has, in turn, caused massive tax revenue shortfalls for the federal government and for state governments across the country: nearly $300 billion combined for 50 states in the years since the crisis began. To deal with these budget woes, politicians are cutting public spending: laying off teachers, attacking public sector workers, raiding pensions, closing hospitals, and eliminating essential services for children, veterans, and the elderly.

Raising revenue from the wealthy, bailed-out banks that caused the crisis would be a far more sensible way to address these budget woes. This report analyzes data from the latest financial filings by the six big banks — Bank of America, Wells Fargo, JPMorgan Chase, Citigroup, Goldman Sachs, and Morgan Stanley — to expose the ways in which they continue to avoid taxes and add to government deficits, rather than support an economic recovery that will put people to work, keep people in their homes, and preserve the safety net.

Quantifying the Role of Federal and State Taxes in Mitigating Wage Inequality

Source: Daniel H. Cooper, Byron F. Lutz, and Michael G. Palumbo, Federal Reserve Board, 2012-05, January 12, 2012

From the abstract:
Wage inequality has risen dramatically in the United States since at least 1980. This paper quantifies the role that the tax policies of the federal and state governments have played in mitigating wage inequality. The analysis, which isolates the contribution of federal taxes and state taxes separately, employs two approaches. First, cross-sectional estimates compare before-tax and after-tax inequality across the 50 states and the District of Columbia. Second, inequality estimates across time are calculated to assess the evolution of the effects of tax policies. The results from the first approach indicate that the tax code reduces wage inequality substantially in all states. On average, taxes reverse approximately the last two decades of growth in wage inequality. Most of this compression of the income distribution is attributable to federal taxes. Nevertheless, there is substantial cross-state variation in the extent to which state tax policies compress the income distribution. Cross-state differences in gasoline taxes have a surprisingly large impact on income compression, as do sales tax exemptions for food and clothing. The results of the second approach indicate that the mitigating influence of tax policy on wage inequality has increased very modestly since the early 1980s. The increase is due to the widening of the pre-tax wage distribution interacting with a progressive tax structure. In contrast, legislated tax changes over this period decreased income compression somewhat.

One Seneca Falls – from Concept to Reality

Source: Scott Sittig, Center for Governmental Research, Policy Wonk blog, February 29, 2012

On January 1, 2012, the Town of Seneca Falls became a unified municipality for the first time since 1831. Communities across New York State have their eye on Seneca Falls to see what lessons can be learned from the dissolution of the historic village. As the largest village to dissolve in New York State, the process and outcomes will serve as a great test case for many years to come. However, some may be prone to draw conclusions from the outcomes that aren’t warranted.

Three Big Tax Lies

Source: David Cay Johnston, American Prospect, Vol. 23 no. 2, March 2012

If the last ten years of debt and jobs destruction have taught us anything, it’s that we must change our tax system and soon, or face economic disaster. Instead of maintaining our infrastructure, we are consuming it. Instead of investing in education and research with an eye to later wealth, we’re cutting our way to a poorer future.

Yet concerning taxes, which finance our civilization and distribute the cost, three great lies permeate society, all of which delay our doing what needs to be done. The first lie, with a nod to comedic candidate Jimmy McMillan, is that the tax is just too damn high. The second lie is that if you cut the rates, revenues will increase. The third lie is that taxes have become too complex for even an Einstein to understand.

The Budget and Economic Outlook: Fiscal Years 2012 to 2022

Source: Congressional Budget Office, Pub. No. 4474, January 2012

From the summary:
CBO projects a $1.1 trillion federal budget deficit for fiscal year 2012 if current laws remain unchanged. Measured as a share of the nation’s output (gross domestic product, or GDP), that shortfall of 7.0 percent is nearly 2 percentage points below the deficit recorded in 2011, but still higher than any deficit between 1947 and 2008. Over the next few years, projected deficits in CBO’s baseline decline markedly, dropping to under $200 billion and averaging 1.5 percent of GDP over the 2013-2022 period.
See also:
CBO Confirms US Corporations Pay Mere Fraction of Statutory Tax Rate; Revenues Reach Historic Low
Source: Citizens for Tax Justice, February 3, 2012

Bill for Inadequate Unemployment Insurance Taxes Now Coming Due in Many States

Source: Michael Leachman, Center on Budget and Policy Priorities, Off the Charts Blog, January 30, 2012

Businesses in 20 states must make the first payment tomorrow on about $35 billion that these states have borrowed from the federal government in recent years to help pay unemployment insurance (UI) benefits.

Most of this borrowing happened because many states kept the business taxes that fund UI benefits too low before the recession, leaving their UI reserves ill prepared for an economic slump.

Local Option Income Taxes in Indiana

Source: Dagney Faulk, Kevin Kuhlman, Hikoyat Salimova, Srikant Devaraj, Policy Brief, Ball State University, Center for Business and Economic Research, March 2011

With the implementation of property tax caps, local governments in Indiana are considering options other than property taxes for increasing local revenue. This brief discusses the use of local option income taxes to increase local revenue and their role in local government.

Flexible Social Security and Medicare Payroll Tax Rates for Different Times: Achieving Multiple Benefits

Source: Leonard Santow and Mark Santow, Challenge, Volume 55, Number 1, January-February 2012
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From the abstract:
Here is some fresh thinking on using our tax system more flexibly to create different incentives under differing conditions. Why not a flexible payroll tax, which could raise adequate money over time to finance Social Security but also reduce taxes when needed to create incentives to hire? This father and son, an economist and a historian, present an interesting and novel approach.

Curbing Tax Expenditures

Source: Daniel Baneman, Joseph Rosenberg, Eric Toder, Roberton Williams, Urban-Brookings Tax Policy Center, January 30, 2012

This paper takes a broad look at tax expenditures in the context of revenue raising tax reform.It first reviews how tax expenditures have changed over the past 25 years and provides estimates of the distribution of tax savings resulting from tax expenditures today. The paper then examines three comprehensive approaches for applying across-the-board limits to a selected group of the largest and most widely utilized tax preferences. The three options–a fixed percentage credit, a cap based on income, and a constant percentage reduction–can all be designed to raise significant revenue for deficit reduction. While the effects of the options vary across the income distribution and depend on the types of tax expenditures subject to the limitations, variants of all three options can be designed to be progressive in the sense that the limits would reduce after-tax income for higher income taxpayers by more than they would reduce incomes of lower-income taxpayers.

Do Income Taxes Affect the Progressivity of Social Security?

Source: Norma B. Coe, Zhenya Karamcheva, Richard Kopcke, and Alicia H. Munnell, Center for Retirement Research at Boston College, IB#12-3, January 2012

From the abstract:
Policymakers have designed Social Security to be a progressive retirement program that replaces a larger share of monthly earnings for low- and middle-income workers than for high earners. However, previous research has found that, although the Disability Insurance (DI) component of Social Security is very progressive, the Old-Age and Survivors Insurance (OASI) component may be less progressive than intended. One reason is that high earners tend to live longer than low earners. Since Social Security pays an annuity that lasts throughout retirement, it benefits high earners with greater longevity.
See also:
Working paper