The Tax Policy Blog

December 31, 2008

Beginning tomorrow (2009), the federal estate tax will have a rate of 45 percent combined with a generous exemption level of $3.5 million. That's until Dec. 31, 2009. 

On Jan. 1, 2010, the federal estate tax rate is scheduled to be zero. That's until Dec. 31, 2010.

On Jan. 1, 2011, the federal estate tax rate is scheduled to be 55 percent with an exemption level of only $1 million.

(Note in 2010 the unlimited step-up-in basis will also cease as there will...

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December 31, 2008

New regulations from the California State Board of Equalization (BOE) are supposed to clarify how grocers should tally their tax-exempt sales. Instead they inadvertently make a good argument for abolishing the tax exemption entirely.

Grocery tax exemptions have been sweeping the country on the flimsy argument that state sales taxes applied to groceries are unfair to the poor. In fact, the poor's groceries, when purchased...

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December 31, 2008

In yesterday's Los Angeles Times, the editorial board rails against Grover Norquist and his famous "pledge" that elected officials often take, promising not to raise taxes.

Republican members of the Assembly and state Senate signed pledges to oppose any tax increase, and so far they have...

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December 31, 2008

During times of economic hardship, is it better to put money toward necessities and savings or to risk some in the hopes of winning more, e.g. playing the lottery?

Lottery agencies have recently been hoping customers would choose the latter, and it seemed at first that they would get their wish. In a 1994 study, Prof. John L. Mikesell of Indiana University found that...

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December 31, 2008

Gov. Kathleen Sebelius (D) announced recently that the state's budget this year faces a $211 million shortfall, and the 2010 budget faces a shortfall of over $1 billion (out of $10 billion total). In addition to ordering...

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December 31, 2008

In December, Gov. Chet Culver (D) outlined $75 million in spending cuts to cover a $38 million drop in expected revenue and unexpected spending on disaster relief (a total $100 million shortfall in the $6.05 billion budget). The largest items are the cancellation of a $37 million office building for state...

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December 31, 2008

After announcing that the current $13.3 billion 2009-11 biennial budget faced a shortfall of $763 million, Gov. Mitch Daniels (R) proposed a 3% cut in executive agency budgets (on top of a 7% cut earlier imposed), a 3% reduction in grants and subsidies, a ban on out-of-state travel unless approved by budget officials, spending and hiring restrictions, and a pay freeze for 2009. Daniels promised...

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December 30, 2008

William McGurn, a former Newscorp executive and former speechwriter for President George W. Bush, penned his "Main Street" column in the Wall Street Journal this morning, urging President-Elect Obama to make a specific New Year's resolution: "I will not allow America to become New Jersey."

Providing his thoughts on the consequences...

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December 30, 2008

Last night, Senior Economist Gerald Prante appeared on CNN's Lou Dobbs Tonight to discuss President-Elect Obama's plans to first repeal the Bush tax cuts on the top two income brackets, then deciding to let them expire in 2011, then apparently changing his mind again through his adviser David Axelrod.

...

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December 30, 2008

Last week on his blog, Greg Mankiw made the most important point of this entire question of fiscal stimulus policy: GDP is not a perfect proxy for economic well-being.

Usually, GDP is a reasonable proxy for economic well-being, so more is better, but that is not true in this example. Part of the problem here is that GDP includes government purchases at cost. If the...

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December 30, 2008

Rep. Richard Neal of the Ways and Means Committee (a winner of the Tax Foundation's Distinguished Service Award) wants to expand the tax exemption for private-activity municipal bond interest, making it exempt from the AMT. This income source is already exempt from regular tax rates, although Tax Foundation economists have argued that it should not be.

Neal's justification is that it would be...

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December 29, 2008

Yesterday, Tax Foundation Tax Counsel and Director of State Projects Joseph Henchman went on C-SPAN's Washington Journal to talk about budget shortfalls that are hitting most states, discussing what different tax/spending plans governors and state legislators are proposing. 

Click here to see the video.

Stay updated through the Tax Foundation's Tax Policy Blog...

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December 29, 2008

Lawmakers have approved $134 million in cuts recommended by Gov. Jennifer Granholm (D), including closing one prison. The shortfall now stands at somewhere around $106 million (as estimated by Granholm) to $266 million (legislative estimate), out of the state's $9.7 billion budget. Granholm opposes new taxes, having...

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December 29, 2008

Gov. Deval Patrick (D) in early December ordered cuts to close a $1.4 billion shortfall in the current budget. The cuts included several programs and $624 million in "9C" cuts whereby the governor can reduce spending without legislative approval. The current budget is $1.3 billion larger than the previous budget. For future years, Patrick has indicated...

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December 29, 2008

In early 2008, Maryland raised just about every state tax to raise $976 million to fund additional spending and close a "structural" budget shortfall (the current budget is $827 million larger than the previous budget, or a 4.16% spending increase). Officials now estimate a $415 million shortfall this year...

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