The Tax Policy Blog

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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January 17, 2008

Senator John McCain today added his voice to the growing chorus calling for a lower U.S. corporate income tax rate. The senator and presidential hopeful suggested that the rate be cut to 25% (from 35%) as part of a package that would help the slowing U.S. economy. He rightly states that cutting the corporate rate would "spur investment and innovation and make American business more competitive in the global marketplace...

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January 17, 2008

CongressDaily reported this morning that Democrats in Congress are seeking to help prop up the housing market as a way of helping a weakening economy. From CongressDaily AM:

Top Democrats are weighing the need for a rescue package for the nation's battered housing industry, exploring the possibility of allowing state housing authorities greater ability to go into distressed areas to finance the purchase of foreclosed homes and creating a temporary government agency that...

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January 17, 2008

We have posted a new Tax Foundation Podcast interview with Dr. William Gentry. a professor of economics at Williams College in Massachusetts. Dr. Gentry recently wrote a paper for the Treasury Department titled A Review of the...

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January 17, 2008

Vermont is one of a dozen states that are considering leasing or selling their lotteries. Yesterday, Alicia Hansen, author of the Tax Foundation Background Paper Gambling with Tax Policy: States' Growing Reliance on Lottery Tax Revenue, testified before the Vermont Legislature's Ways and Means Committee on the merits and drawbacks of different types of lottery privatization.

She explained that selling the lottery to a private...

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January 16, 2008

The tax fraud trial of Wesley Snipes began this week in Florida, and the actor faces up to 16 years in prison for his failure to file tax returns between 1999 and 2004, or pay tax on the estimated $38 million he earned in that period.

Snipes faces an uphill battle, as few succeed in convincing juries of a genuine, good-faith belief that he or she had no obligation to pay income taxes. Snipes has...

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January 15, 2008

We've written before on Virginia's "abusive driver fees" and "civil remedial fees," and why they are just a tax on traffic offenses. Because the revenue goes to general state spending, they are properly called a "tax" and not "fees." We've covered how this is an example of politicians targeting easy revenue sources for punitive taxes, the public outcry over the huge assessments, and finally, the...

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