The Tax Policy Blog

January 23, 2008

Following the president's news conference outlining his thoughts on fiscal stimulus, Senator Hillary Clinton released a statement saying, among other things:

"For the White House to propose spending over $100 billion to jumpstart the economy, while shortchanging assistance to the 50 million families who are struggling the most and are most likely to inject those funds into the economy makes no sense...

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January 23, 2008

Baltimore might be the next jurisdiction to fall prey to the idea of state-run gambling as a budget panacea. A mayoral task force has reported that slot machines, if voters approve them in November, and full-fledged casinos may be a good way to reduce property taxes in the city.  From the Baltimore Sun:

Relying on gambling revenue...

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January 23, 2008

With all the recent heated debate and turmoil over taxes, and the frantic rush to stimulate the economy, one might almost think this is the first time the country has faced less-than-ideal economic conditions. 

Sometimes it helps to take a step back and remind ourselves of the resiliency of the economy and the fiscal challenges the country has faced in the past.

Following is an excerpt from...

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January 22, 2008

From Daily Tax Report's Kathy Lundy Springuel:

Maryland Comptroller Peter Franchot (D) weighed in Jan.1 8 against extension of the state's 6 percent sales tax to cover computer services, calling it an "attack on our knowledge-based economy" that will "damage our long-term economic success."

Franchot said he intended to "work with a broad grassroots coalition" to repeal the computer services...

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January 22, 2008

Radio host Jerry Bowyer criticized the FairTax proposal in the Wall Street Journal last week, in part because it would exempt business-to-business transactions to prevent pyramiding (taxes on taxes):

In addition to the colossal job of selling America on a zero tax rate for business, a rigorous definition of the term "business transaction" would have to be...

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January 21, 2008

We've been following Virginia's new tax on traffic offenses, which went into effect January 1.  They are another example of legislators targeting random activities for punitive taxation, solely to raise revenue.  Other recent examples include cigarettes, alcohol (to fund public transit), bottled water, and even video games (to fund...

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January 21, 2008

With all the talk about passing legislation that will cause a stimulus for the economy and put a cash infusion into the economy, including possible tax rebate checks (which are actually more like prebates), there is one point that seems to have been overlooked: this spring, billions of dollars of tax rebate checks are already set to be sent out to people.

The president is quoted as wanting $100 billion of rebate checks to be sent out to taxpayers in order to provide a stimulus for...

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January 21, 2008

"Stimulus" is the word of the day in Washington. And tax rebate checks have been the most frequently cited possibilities for financing such a stimulus. But in order for a supposed stimulus to "work," tax rebate checks must lead to short-term real increases in consumption. So will they?

We can let recent history be our guide. Below are links to some academic papers on the question of whether or not people spent their rebate checks they received in 2001.

"...

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January 21, 2008

Nearly a century after the passage of the 16th Amendment, a handful of Americans still believe that no one is legally required to pay income taxes. Others acknowledge that the Constitution does allow collection of income taxes, but still look for sneaky ways to beat the system. Some people even make big money selling books that claim to teach others how to...

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January 18, 2008

President Bush has put forth a stimulus package designed to increase short-run consumption in the macroeconomy. Something is likely to happen given that the Democratic leadership in Congress appears to be on board with trying to stimulate the weakening economy.

But does it work? Under a pure rational expectations economic theory, it may not work. Other theories explain how it could. What does the empirical literature say? For those interested, here is a collection of academic...

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January 18, 2008

News reports of the President's proposed stimulus plan have given us three major pieces of information. First, there would be approximately $50 billion in tax relief for businesses, mostly relating to more friendly treatment of depreciation. Second, the 10% marginal income tax rate would be adjusted. And third, possibly $800 rebate checks for singles and $1,600 for married couples would be sent out.

While we could find no news report stating exactly how this would work, it...

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January 18, 2008

The new edition of Tax Watch, the Tax Foundation's bimonthly newsletter, is now available.  Tax Watch presents Tax Foundation research and analysis in a simple, non-technical format—ideal for the non-economist looking for a clear explanation of current tax issues.

Highlights from the January-February 2008 issue include:

  • What Do Corporate Income Taxes Cost American Families?
  • Some States Win, Others Lose from Federal Taxing...
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January 18, 2008

President Bush's 2001 tax rebate eventually got mostly good reviews, even grudging praise from the Washington Post editorial board. And so it would be unsurprising if, as media reports suggest, the president now proposed that a new fiscal stimulus be administered the same way: by cutting the lowest income tax rate for the current year, then pre-paying the tax savings.

[The Tax...

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January 18, 2008

The Tax Foundation has estimated what the revenue impact of an income tax rebate of the 10% rate would be in 2008. Media reports suggest this may be one component of President Bush's plan to stimulate the economy. Taxpayers would receive a rebate check, likely based on their 2006 tax returns. The 10% rate would be set to zero when taxpayers file returns for tax year 2008. The summary of our results:

  • Under a baseline assumption of no AMT patch (current law), reducing...
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January 17, 2008

In a Washington Post chat yesterday, Virginia Governor Tim Kaine reiterated his recent decision to seek repeal of Virginia's abusive driver surcharges, which we mentioned earlier this week:

Alexandria, Va.: When exactly will the abusive driver law be repealed and will it be retroactive?

...

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