The Tax Policy Blog

March 15, 2007

Over the last century the cost of complying with the federal income tax has risen drastically, due to the ever-increasing complexity of the tax code. In 2005 Americans spent an estimated 6 billion hours complying with the federal income tax code, with an estimated compliance cost of over $265.1 billion.

From Tax Foundation Special Report No. 138, The Rising Cost of Complying with the Federal Income Tax, which examines the cost of tax compliance in...

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March 14, 2007

We have posted an interview with U.S. Senator Orrin G. Hatch (R-Utah) as yesterday's Tax Policy Podcast. Sen. Hatch discusses the benefits of two types of health care reform: health savings accounts and the President's proposed plan to equalize the tax treatment of people who purchase health insurance on their own and those who receive it through their employers. The Senator addresses several criticisms of these plans and discusses the importance of reform.

To...

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March 14, 2007

Lawmakers looking for a way to raise tax revenue without increasing taxes have decided the pot of gold rests with closing the so-called "tax gap." The tax gap is the difference between what the IRS says people owe and what they pay.  Estimates of the tax gap are roughly $300 billion annually.

A number of proposals to address the problem have been floated, but no one has any solid estimates as to how much...

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March 12, 2007

It's exasperating to wait two years for preliminary data on income taxes, but 134.5 million tax returns can't be tallied overnight.

That's how many tax returns American individuals filed in the spring of 2006 when paying 2005's taxes, according to new data from the IRS's Statistics of Income Division.

Other important numbers for tax year 2005, compared to 2004:

Up 8.9 percent: Adjusted Gross...

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March 09, 2007

In his State of the State Address on Wednesday, Illinois Governor Rod Blagojevich put forth a tax increase to fund higher spending on children's health and education, which included the imposing of a gross receipts tax on the state (See blog post below). Regardless of how high the governor may want to increase spending (even if he wanted to triple it), a gross receipts tax is the one of the worst ways to raise the revenue for that spending.

In his...

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March 08, 2007

Typical reporting on the alternative minimum tax looks like this:

The AMT was created in 1969 to prevent a handful of the uberwealthy from being able to avoid paying federal income taxes, but due to [enter a host of reasons here], tens of millions of middle-class (or "middle-income") Americans will now be hit by the AMT.

It is...

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March 07, 2007

On Monday, the Joint Committee on Taxation released a new report on the Alternative Minimum Tax (AMT). The report highlights how the AMT, if left alone, would grow over the next three years, then fall dramatically in 2011 with the expiration of the Bush tax cuts, and then begin to rise again thereafter. The report was prepared by JCT for today's Ways and Means Committee...

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March 07, 2007

In his state of the state address today, Illinois Governor Rod Blagojevich proposed a new business gross receipts tax to raise $6 billion for general fund expenses (largely education and health care). While Illinois may need more money for public services, imposing a gross receipts...

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March 05, 2007

This is a letter-to-the-editor I sent to the DesMoines Register in response to columnist Gary Maydew's article To attract businesses, think beyond tax rates.

Gary Maydew may be an excellent accounting professor, but he needs to brush up on his statistics. He ran a simple correlation between the Tax Foundation's ranking of business tax friendly...

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February 28, 2007

Yesterday we posted a Tax Policy Podcast interview with Mark Weinberger, who is the Americas Vice Chairman for Tax Services at Ernst & Young and a former Assistant Secretary for Tax Policy at the U.S. Treasury. 

Weinberger discusses with Tax Foundation President Scott Hodge some of the more pressing tax policy problems our country faces today, as well as the necessity for cooperation--both between the parties and between Congress and the Administration--in...

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February 28, 2007

Senator Gordon Smith (R-OR) has suggested doubling the federal cigarette tax to help pay for expanding the State Children's Health Insurance Program.  S-CHIP pays for low-income children who are not covered by Medicaid. 

As far as we know, S-CHIP is not targeted at children who smoke or have smoking-related illnesses, so we are a...

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February 27, 2007

As March 1st approaches, most of the country's governors have submitted their budget proposals to their respective legislatures. Here is a quick rundown of some of the notable tax proposals. Those hyperlinked have been blogged on recently.

Connecticut: Governor Rell proposed to raise the state's income tax on income over $10,000 from 5 percent to 5.5 percent and raise the cigarette tax.

...

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February 23, 2007

North Carolina Governor Mike Easley announced yesterday that he wants to prevent small scheduled drops in his state's income and sales tax rates.

The small income tax cut from 8 percent to 7.75 percent is scheduled in law to take effect in 2008, and the scheduled drop in the state's sales tax rate from 4.25 percent to 4 percent is supposed to take effect on July 1, 2007. See article here.

...

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February 22, 2007

The State of Oregon is seeking to fund a new children's health care program, and debate is ensuing over how to fund it. The leading proposal has unfortunately become a common theme across the country as lawmakers are seeking to impose a tax on a select group (smokers) so as to not lose the support of the political majority. From the Seattle Post:

Breaking ranks from many in the...

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February 22, 2007

We've posted a new data set this afternoon with the complete history of AMT tax returns and liabilities from 1969 to 2005. Although it's not often reported in news stories on the AMT, the tax actually began as a 10 percent "minimum tax" in 1969, and wasn't fully replaced by the current "alternative minimum tax" until 1982. For a full legislative history of the tax, see the appendix at the end of our 2005 AMT backgrounder...

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