The Tax Policy Blog

January 25, 2008

Regardless of whether one supports a stimulus package, the agreed-upon package by the House leadership and the White House could almost rival AMT in terms of the amount of complexity it adds to the 2008 tax system. Not only do we have the government sending out checks to those who have no income tax liability (thereby requiring some method to reduce their tax liability), the proposal calls for yet another child tax credit. Yes. Make it three child tax credits.

We have the regular...

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January 25, 2008

"Why does a slight tax increase cost you two hundred dollars and a substantial tax cut save you thirty cents?"
            —Peg Bracken

"The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing."
           — Jean Baptiste Colbert, Minister of Finance under King Louis XIV of France

"A fine is a tax for doing something wrong. A tax is a fine for doing something right."...

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January 24, 2008

Based on the reported agreement between House Speaker Pelosi and House Minority Leader Boehner, it is apparent that fiscal stimulus may not be provided as the much touted tax rebates, but instead as simple cash payments to most working Americans. The cash payments would be set at $600 for individuals, $1200 for married couples who pay income taxes. Workers with at least $3,000...

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January 23, 2008

An editorial in yesterday's Investor's Business Daily argues that the income tax code has become more progressive in recent years, not less, citing Tax Foundation research that a growing number of Americans pay no income taxes at all:

Republicans say the rebates should go to taxpayers only—which makes sense, since they are "tax" rebates....

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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

"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 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 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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