Tax Expenditures

Goodbye State Tax Deduction

Ron Tang — Thu, 08 May 2008 00:52:00 -0400

The 1984 Treasury Department report (PDF) that laid the foundation for the base broadening and rate reductions of the Tax Reform Act of 1986, called for complete repeal of the itemized deduction for state and local taxes. Citing similar reasons, the 2005 final report of the President’s Advisory Panel on Federal Tax Reform also called for repeal. Yet, there are also proposals to make permanent the ability to deduct either state income or sales tax (for example, HR 3592, 110th Congress).

Below we’ll get some background on the state and local tax deduction and then… more

Maya MacGuineas in The Washington Times | Making Tax Day Less Painful

Communications — Wed, 26 Mar 2008 14:52:00 -0400

New America in the News:

Making Tax Day Less Painful (The Washington Times)

. . . Maya MacGuineas of the Committee for a Responsible Federal Budget says that these $800 billion a year in "tax expenditures are really spending programs designed to look like tax cuts." . . . more

Total Tax Credit

Ron Tang — Wed, 19 Mar 2008 21:00:00 -0400

The Social Security payroll tax hurts working Americans -- and it’s getting worse. Because the tax (a flat levy of 15.3 percent, combining the nominal employer portion with the nominal employee portion) applies to income only up to $97,500 (with a scheduled increase to $102,000 this year), it is inherently, grossly regressive, falling far more heavily on working Americans than on the rich. At the same time, as a result of rising pre-tax wage inequality, the payroll tax system is growing dramatically more regressive. In 1983, 90 percent of wages and salaries were subject to payroll taxation; today, thanks to… more

What's Your Tax System IQ?

Ron Tang — Wed, 12 Mar 2008 02:00:00 -0400

While tax season tests our technical tax knowledge daily, here is an opportunity to take a break and test your knowledge about our federal tax system.

Answers to this quiz can be found at the bottom of this article.

Questions IRS tax revenue collections for fiscal year 2006 were approximately $______ trillion. The individual income tax was the largest portion of these tax collections, representing ___% of the total. For 2005, _____ million individual tax returns were filed showing combined taxable income of $_____ trillion. 108; 2.8 124; 3.5 134; 5.1 149; 6.8 For… more

Tough Tax Questions for Presidential Candidates

Ron Tang — Thu, 14 Feb 2008 00:00:00 -0500

The current crop of Presidential candidates sound a lot like they did in prior years with promises of new targeted tax breaks, loophole closures, increased taxes on the rich and new spending programs. Have the candidates not read the doom and gloom budget reports from the Government Accountability Office (GAO), Congressional Budget Office (CBO) and others?

The fiscal agenda for the next President and Congress must include some very difficult decisions that go beyond just tweaking the tax system. Below, we’ll look closer at some key fiscal issues that have tax implications. Questions are posed that could help gauge how… more

'Spending Problem?' Some of it's Hidden in our Tax Laws

Ron Tang — Sun, 10 Feb 2008 00:00:00 -0500

Gov. Arnold Schwarzenegger's diagnosis of California's $14.5 billion budget shortfall: a "spending problem." His remedy: 10 percent across-the-board spending cuts. What about a second opinion?

A spending problem is a chronic condition that warrants more than unfocused across-the-board cuts. Eliminating unnecessary spending would be a more reasonable and lasting treatment. The first step is identifying that wasteful spending -- not always an easy task. The task is made even trickier when some of it is hidden in our tax laws. Removing the spending waste in our tax laws can provide partial relief for our spending problem, reduce the chance of recurrence… more

Simplicity and Transparency Versus the Dread AMT

Ron Tang — Fri, 07 Dec 2007 00:00:00 -0500

No doubt, taxes are complicated. A good example of this complexity is the Alternative Minimum Tax or AMT which is part of our income tax. This is a flawed tax that ignores principles of good tax policy and generates revenue beyond expectation. While Congress is currently trying to keep millions of individuals from paying AMT in 2007, outright repeal would be best.

The income tax has always had "preferences" that reduce one's tax bill. Today these include deductions for dependents, mortgage interest, state income taxes, manufacturing and charitable contributions. Preferences also include tax credits that are dollar-for-dollar reductions in tax… more

Strategy for Major Tax Reform

Ron Tang — Thu, 08 Nov 2007 00:00:00 -0500

On October 25, 2007, House Ways and Means Committee Chair Charles Rangel introduced H.R. 3970 (text, summary (PDF)), the Tax Reduction and Reform Act of 2007, a bill he informally calls the “mother of all tax reforms.” Based on what we have learned from the last major reform effort -- the Tax Reform Act of 1986, are we likely to see H.R. 3970 enacted?

Strategy

Briefly described below are actions and techniques that can improve the chances of a major income tax reform proposal becoming law. These features are also compared with TRA ’86 and H.R. 3970… more

Smarter Tax Treatment of Health Insurance

Communications — Mon, 02 Jul 2007 23:06:00 -0400

A New America Event
07/13/2007 - 10:00am

In August of 1994, with the prospects of health reform all but vanishing, Sen. Robert Bennett (R-UT) stood on the Senate floor and asked three fair questions: Why have we talked so much about insurance and health care instead of better health? Why have we not adequately explored what role markets can and cannot play in health care reform? And why do we fail to recognize that when employers or governments spend money on health care it is not their money, but our money?

The Healthy Americans Act is the first legislative proposal to answer these questions. Now, almost 13 years later, Sens. Wyden and Bennett have introduced the first bipartisan, comprehensive health care reform proposal since the Clinton-era reforms. The core of their proposal not only restructures the tax system to end the current regressive treatment of health insurance, but also provides revenue to help insure all Americans. By putting more money in the hands of the consumer, rather than the employer, these tax code changes would increase efficiency, portability, and access within the health care system.

At this New America event, cosponsored with the Heritage Foundation, Sens. Wyden and Bennett discussed the Healthy Americans Act and their commitment to utilizing private sector forces while covering all Americans. Sen. Bennett discussed how the current health care system distorts market forces. He emphasized that severing the link between employers and health care will realign market incentives as employees, rather than employers, will be empowered to act as the consumer and choose a health plan tailored to their individual needs. Sen. Wyden highlighted the need to cover absolutely everyone, as people who are uninsured shift their costs to people who are insured.

The current health care income tax exclusion subsidizes the top two-thirds of the income scale; the Healthy Americans Act would reverse that regressive subsidy by subsidizing the bottom two-thirds. New America Health Policy Director, Len Nichols discussed tax reform as the key to affordable health system reform -- it allows us to capture money within the existing system and redirect it towards subsidies for low income individuals. The Healthy Americans Act takes this concept a step further by creating a marketplace that would work for everyone, and requiring (with subsidies for the low-income) everyone to obtain health insurance. Stuart Butler, Vice President, of Domestic and Economic Policy Studies at the Heritage Foundation, applauded Sens. Wyden and Bennett for their bipartisan effort, and emphasized that correcting the perverse incentives created by the current tax code should be the central focus in the health care reform debate.

Freakopolitics

Articles — Sun, 01 Apr 2007 22:05:00 -0400

If you start to read the policy proposals of the Democratic presidential candidates and the mainstream Democratic think tanks, you will quickly get the impression that, while Democrats see lots of problems, there’s always just one solution: a tax credit.

John Edwards proposes an "American Dream Tax Credit" -- up to $1,000 a year for five years to help buy a first home. Barack Obama has a new tax credit to promote fatherhood. Outside of the candidates, competition for the tax-credit championship is fierce: The leaders are Senator Chuck Schumer’s four-part "Middle-Class Opportunity Act," which has new child-tax credits, a new… more