Category Archives: Taxation

CBO Analysis Shows Economic Benefits Of Fiscal Sustainability Are Large And Nearly The Same Whether Taxes Are Raised Or Spending Is Cut

Source: Chad Stone, Center on Budget and Policy Priorities, September 10, 2007

Key Findings

•Most assessments of the long-run fiscal outlook conclude that higher revenues will need to be a part of any serious effort to prevent budget deficits from growing to unsustainable levels.
•A recent CBO analysis shows that the economic benefits of achieving fiscal sustainability are substantial, and that the difference between the economic effects of reducing the deficit through tax increases and doing so through spending cuts would likely be very small by comparison.
•CBO also finds that any negative economic effects of tax increases can be mitigated by relying more on policies that broaden the tax base than on increases in marginal tax rates. CBO suggests that the economic effects of raising revenue by broadening the tax base can be similar to the effects of cuts in government benefit programs.
•CBO’s analysis also indicates that no policy to restore long-term fiscal sustainability is likely to be successful if the rate of growth in health care expenditures is not reduced.

Tax Fairness, the 2001-2006 Tax Cuts, and the AMT

Source: Leonard E. Burman, The Urban Institute, Testimony before the Committee on Ways and Means, September 6, 2007

From the summary:
In this testimony Burman discusses the issues of tax fairness, the 2001 to 2006 tax cuts, and the individual alternative minimum tax. Burman argues that while the federal tax system mitigates economic inequality, the recent tax cuts have disproportionately benefited those at the top, while also increasing the number of people potentially subject to the AMT. He concludes with a brief discussion of how to fix the AMT in a fiscally responsible manner.

Related articles:
The Effect of the 2001-06 Tax Cuts on After-Tax Incomes
Source: Jason Furman, The Brookings Institution, Testimony Before the U.S. House Committee on Ways and Means, September 6, 2007

Statistics of Income Bulletin — Summer 2007

Source: Internal Revenue Service, Vol. 27 no. 1, Summer 2007

From press release:
The Internal Revenue Service today announced the release of the summer 2007 issue of the Statistics of Income Bulletin, featuring data from 21.5 million individual income tax returns that reported non-farm sole proprietorship activity in tax year 2005.

Profits from all non-farm sole proprietorships totaled $269.9 billion in 2005, up 9 percent from tax year 2004. After adjusting for inflation, profits rose by 5.5 percent in 2005, which is the biggest year-to-year increase since a 7.2 percent gain in 1998.

All but one sole proprietor industrial sector saw an increase in profits in tax year 2005.

The real estate and rental leasing sector posted a 19.4 percent gain in profits, which was the biggest in percentage terms among the sector categories. Transportation and warehousing was second highest with a 15.5 percent profit gain. Retail trade was third with a 14.6 percent increase. (The sector-specific figures have not been adjusted for inflation.)

Wholesale trade (merchant wholesalers) was the only sole proprietor industrial sector to post a profit decline in tax year 2005 of 3.5 percent.

Recent/Updated CRS Reports: Health Insurance, Medicare and Social Security

Source: Congressional Research Service (via OpenCRS)

American taxpayers spend nearly $100 million a year to fund the Congressional Research Service, a “think tank” that provides reports to members of Congress on a variety of topics relevant to current political events. Yet, these reports are not made available to the public in a way that they can be easily obtained. A project of the Center for Democracy & Technology, Open CRS provides citizens access to CRS Reports that are already in the public domain and encourages Congress to provide public access to all CRS Reports.
Integrating Medicare and Medicaid Services Through Managed Care
Medicare Prescription Drug Benefit: Low-Income Provisions
Primer on Disability Benefits: Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI)
Social Security Administration: Administrative Budget Issues
Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI): Proposed Changes to the Disability Determination and Appeals Processes
Supplemental Security Income (SSI): Accounts Not Counted As Resources
Tax Benefits for Health Insurance and Expenses: Overview of Current Law and Legislation

The Problems with Property Tax Revenue Caps

Source: Karen Lyons and Iris J. Lav, Center on Budget and Policy Priorities, June 21, 2007

Several states (Connecticut, Florida, Minnesota, New Jersey, Rhode Island, and Texas) have recently considered imposing severe caps on property tax revenue. These caps restrict the amount that property tax revenue can increase from year to year to a low fixed percentage, a formula based on the inflation rate, or some combination of the two.

While such caps may hold down property taxes, they are likely to impair local governments’ ability to provide education, public safety, and other services residents demand and need. They also are likely to make the local revenue system more regressive.

Property tax caps do nothing to change the main drivers behind higher property taxes. They cannot slow the increase in the cost of health care or fuel, for example, which reflects forces outside of the control of local officials. Nor do they change the demand for local public services, such as quality K-12 education, public safety, and good roads.

Fixing the Tax System: Support Fairer, Simpler, and More Adequate Taxation

Source: William G. Gale, Opportunity 08: A Project of the Brookings Institution, 2007

A good tax system raises the revenues needed to finance government spending in a manner that is as simple, equitable, stable, and conducive to economic growth as possible. But the challenge for the next President will be to make reform work not just in the abstract, but in the real world, where special interests often rule the roost. The next President should support reforms that would tax all income once (only) at the full tax rate, simplify and streamline the tax code, and, of course, raise sufficient revenues. To achieve these goals, the package of specific reforms proposed in this paper would:

tax all new corporate investment income only once
remove all corporate subsidies in the Code and strengthen corporate anti- sheltering provisions
integrate payroll and income taxes for individuals
introduce return-free filing for many taxpayers
consolidate and streamline tax subsidies for education, retirement and families
eliminate or revise various tax deductions
create a value-added tax that would, eventually, raise 5 percent of the gross domestic product (GDP) in revenues
+ Fact Sheet

The Importance of the EITC to Urban Economies

Source: Alan Berube, The Metropolitan Policy Program, The Brookings Institution, July 13, 2007

Though most do not recognize it as an “urban” program, the Earned Income Tax Credit provides significant benefits to families in cities and suburbs, and stimulates local economic activity. In this presentation to Congressional staff organized by Living Cities, Alan Berube examines what Members can do to maximize the benefits of the EITC for lower-income families and communities in their districts.

Joint Committee on Taxation Description Of Present Law Relating To Section 501(C)(3) Organizations

Source: Joint Committee on Taxation, JCX-53-07, July 19, 2007

The House Committee on Ways and Means, Subcommittee on Oversight, has scheduled a public hearing for July 24, 2007, regarding an overview of tax-exempt charitable organizations.
This document, prepared by the staff of the Joint Committee on Taxation, provides a brief description of present law provisions relating to organizations described in section 501(c)(3) of the Internal Revenue Code of 1986 (the “Code”), and provides a summary description of the section 501(c)(3) organization-related provisions of the Pension Protection Act of 2006 and related proposed legislative proposals.

Making the “Internet Tax Freedom Act” Permanent Could Lead to a Substantial Revenue Loss for States and Localities

Source: Michael Mazerov, Center on Budget and Policy Priorities, July 11, 2007

Key Findings
+ Making the 1998 “Internet Tax Freedom Act” permanent — as proposed by S. 156/H.R. 743 — could adversely affect state and local government revenues, and therefore the availability of funds for important services like education, health care, and law enforcement, in three ways:
+ Potentially block states and localities from extending their normal sales taxes to music, movies, and television programming delivered over the Internet, which is rapidly becoming a major marketplace for such services.
+ Allow Internet access providers to try to escape a host of general taxes that other businesses must pay, such as sales taxes on equipment purchases;
+ Deprive nine states of $80m-$120m in annual revenues from non-discriminatory and heretofore grandfathered taxes on Internet access services;
+ The enactment of this legislation is unwarranted:
+ Studies by GAO and U. of Tennessee economists show that existing taxes on Internet access have not adversely affected household subscriptions to access or the availability of broadband access in particular locations.
+ All of the 14 developed nations that outrank the U.S. in broadband adoption do tax Internet access services. Taxation is not the issue.