The Tax Policy Blog

December 10, 2014

The Treasury Inspector General for Tax Administration (TIGTA) this week released yet another report on the issue of improper payments in refundable tax credits. Improper payments are any sort of payment made by the IRS in error – whether from an honest mistake or from deliberate fraud by the tax filer. The report concluded that “significant changes in IRS compliance processes would be necessary to make any...

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December 10, 2014

On Tuesday night, the House of Representatives and the U.S. Senate agreed to terms on a spending bill that will fund the federal government through September 30, 2015. Congress must pass the bill by Thursday to avoid a government shutdown.

The...

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December 09, 2014

Photos from the Tax Foundation’s 77th Annual Dinner are here!

We’d like to thank everyone who attended for joining us on such a special and exciting evening. We had a wonderful time and we hope you did, too. We’re already looking forward to our 78th Annual Dinner in 2015 and hope to see you there!

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December 08, 2014

For many decades, Congress has used static scoring for tax legislation, which assumes taxes have no impact on the overall economy. That is hard to defend, especially among those who were taught in economics that prices matter. This is why there has been a push for dynamic scoring which takes into account how taxes affect incentives to work and invest. Dynamic scoring will tell you, for instance, that if tax rates are raised to 100 percent, don’t expect everyone to just keep on working and...

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December 08, 2014

You might be tempted to say, “a non-existent tax” is the simplest, though that would not accurately answer the question. Instead, a per-person or lump-sum tax is arguably the right answer.

Economist Joel Slemrod provided this answer in his chapter in Henry Aaron and William Gale’s book, Economic Effects of Fundamental Tax Reform. The topic of tax complexity was an important part of the discourse concerning fundamental tax reform at that time, and still is today. Nonetheless...

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December 05, 2014

In November, the Congressional Budget Office (CBO) released the latest annual edition of its report on the distribution of household income and federal taxes, with data for 2011. The CBO study confirms that the federal tax system is progressive. It further shows that government transfers to households are also progressive. (For a brief overview of CBO’s findings, see...

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December 04, 2014

On Wednesday of this week, the U.S. House of Representatives passed a $42 billion package that would extend the nearly 50 tax provisions in the “tax extenders” bill through the end of 2014.

The one year extension came following a veto threat from the president that halted talks between Senate Majority Leader Harry Reid (D-NV) and House Ways and Means Chairman Dave Camp (R-MI) on a $...

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December 03, 2014

Her Majesty’s Treasury in the UK released its autumn statement today with changes to the Stamp Duty Land Tax (SDLT), which is a tax on the purchase or transfer of property or land. The changes reduce taxes for 98 percent of those who pay the tax but increase the effective tax on all sales above £2,100,000, roughly $3,300,000.

The key provision is a switch from a...

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December 03, 2014

This week, Bloomberg Businessweek reported that corporate tax inversions will cost the U.S. Treasury $2.2 billion in corporate tax revenue in 2015. According to the report, this is double what they cost the Treasury this year, and inversions will continue to cost $2 billion a year into the future. While $2.2 billion is nothing to scoff at, the report gives no context to this...

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December 03, 2014

The New York Times yesterday published an op-ed criticizing bonus depreciation, one of the extenders that Congress is considering renewing. The piece takes an accusatory tone, calling the policy “audacious dishonesty” and a “license to steal,” but the policy is a great deal more in...

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November 26, 2014

In the Tuesday Wall Street Journal, Professor Alan Blinder wrote of his puzzlement at the very slow growth of productivity in the last three years. There is really no mystery. The rate of growth of investment in equipment in this economic recovery has lagged far behind that of a normal rebound. As a result, the workforce is not getting much additional capital to work with, wages are...

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November 26, 2014

The Washington Post’s Wonkblog yesterday got to write a dramatic lede: “This is what oligarchy looks like.” The data described in the blog post are, in fact, fairly dramatic, but Wonkblog does not do a good job describing the data.

The problem starts with the headline: “The top 400 households got 16 percent of all capital gains in 2010.” While...

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November 26, 2014

While over 90 percent of all firms have between 0 and 20 employees, these firms only employ 19.2 percent of all private sector workers. These small firms can be anything from coffee shops to small car dealerships and are organized as both pass-through businesses and C corporations.

On the other hand, while only 0.4 percent of all firms have over 500 employees, this small group of businesses employs 50.6 percent of the nation’s private sector workforce, with most of those employees...

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November 26, 2014

In the debate over the tax extenders, the 55 or so tax provisions that need to be extended year after year, it’s easy to just throw up your hands and say: “let’s just get rid of them all- they are just a bunch of wasteful loopholes that benefit the few at the expense of the many.” This is likely something you hear from proponents of a flat tax: a tax system with few loopholes and deductions.

It is easy to understand where proponents of a flat tax are coming from. A lot of our tax...

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November 25, 2014

The most immediate issue in U.S. Federal tax policy today is the issue of the “tax extenders:” orphaned, temporary tax provisions that get their name from the way they are “extended” by Congress on an ad-hoc basis.

They are likely to be used as bargaining chips against other temporary expansions of refundable tax credits that the Obama administration would like to keep. They...

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