Responses to Tax Incentives in a Complex and Uncertain Tax Law : Before the Senate Committee on Finance
Eric Toder’s testimony before the before the Senate Finance Committee on how tax law complexity limits the effectiveness of tax incentives.
How Large Are Tax Expenditures?
Tax expenditures are getting increased scrutiny from budget hawks and tax reformers. New Treasury estimates, released as part of President Obamas recent budget, indicate that these tax preferences will reduce individual and corporate income tax revenues by almost $1.1 trillion in 2011. Those provisions will also increase spending on refundable tax credits by $108 billion and will reduce payroll and excise tax receipts by $111 billion. Together, the tax expenditures identified by Treasury will total almost $1.3 trillion this year.
Tax Simplification: Clarifying Work, Child, and Education Incentives
The federal income tax code is riddled with complex provisions concerning children. Families with children qualify for and receive substantial assistance, but the provisions are difficult for parents to understand and for the IRS to administer. This article proposes making uniform the definition of child under age 19, regardless of student status for the key child benefits: the earned income tax credit, the dependent exemption, head of household filing status, and the child tax credit. Savings from the proposal could be used to subsidize higher education, particularly for low-income families that would lose assistance from the EITC. The proposal would simplify the tax system, clarify incentives, and set the stage for broader reform.
Methodology for Distributing a VAT
The Tax Policy center has developed a new method for estimating the distributional effects among income groups of a broad-based consumption tax, such as a value-added tax (VAT). The new method provides separate measures of the long-run and transitional effects of introducing a VAT. In the long-run, taxpayers bear the VAT burden in proportion to the sum of their labor compensation, transfer payments, and super-normal returns to capital, but normal investment returns would be exempt. In the transition, an additional burden would be imposed on the spend-down of existing wealth, but indexed transfer payments would be exempt.
Any Difference Between Tax Breaks and Spending Programs?
In a contribution to the Christian Science Monitor, Donald Marron discusses the recent Supreme Court ruling that state tax breaks are different from spending programs, but the effect of each is the same
Libya Turmoil Highlights US Military Spending. Next Step: Cuts.
In a contribution to the Christian Science Monitor, Donald Marron discusses America’s renewed concern about defense spending in light of US military action in Libya.
Capital Income Taxation and Progressivity in a Global Economy
The increase in international capital mobility over the past two decades has put pressure on the tax treatment of corporate equity income.Corporate-level taxes distort investment flows across locations and create opportunities for tax avoidance by shifting income across jurisdictions. This paper explains why there may be both efficiency gains and increases in progressivity from shifting taxes on corporate equity income from the corporate to the shareholder level.We estimate that taxing capital gains and dividends as ordinary income could finance a substantial cut in the corporate tax rate and make the tax system more progressive.
A Reference Manual for Child Tax Benefits
The individual income tax contains multiple provisions that favor families with children. They range from credits targeted towards low-income families to deductions that favor higher income families. Some provisions benefit a family by virtue of the family having children, others try to incentivize behavior such as work and going to school. This paper describes the various child-related provisions and shows the distribution of who benefits from the provisions. Benefits can be substantial. For example, a single parent with two children could receive a tax subsidy worth almost $9,000. The rules governing the provisions are complex and ripe for reform.
Who Benefits from Tax Expenditures?
The federal income tax is replete with tax expenditures, provisions that grant special benefits to selected taxpayers or for selected activities. Exclusions and deductions reduce taxable income, preferential rates cut the tax on specific types of income, and tax credits are subtracted directly from tax liability.
Cut the deficit? Go after tax breaks. Yeah, tax breaks.
In a contribution to the Christian Science Monitor, Donald Marron discusses the hundreds of billions of dollars in spending plans that masquerade as tax breaks, and why these provisions need greater scrutiny.