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Friday, April 17, 2015

House Votes To Repeal Estate Tax, Preserve Step-Up In Basis At Death

Estate Tax LogoFollowing up on Monday's post, the House voted 240-179 yesterday to repeal the estate tax and preserve step-up in basis at death:

April 17, 2015 in Congressional News, Tax | Permalink | Comments (5)

Monday, April 13, 2015

WaPo Fact Checker: Who Wrote the 'IRS Code'?

WaPo Fact CheckerWashington Post Fact Checker, Who Wrote the ‘IRS Code’? Hint: It Wasn’t the Internal Revenue Service:

On tax reform, we, right now, have more words in the IRS code than there are in the Bible — not a one of them as good.
–Sen. Ted Cruz (R-Texas), speech at International Association of Fire Fighters legislative conference, March 10, 2015

The Fact Checker previously wrote that Cruz’s comparison was ultimately meaningless — not worthy of a Geppetto Checkmark nor a Pinocchio — because saying one piece of text has more words than another doesn’t really tell you anything. A lot of readers responded to us via e-mail and social media — some critical, some appreciative and a few amused.

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April 13, 2015 in Congressional News, IRS News, Tax | Permalink | Comments (3)

Saturday, April 11, 2015

Joint Tax Committee: Choice Of Business Entity

The Joint Committee on Taxation yesterday released Choice Of Business Entity: Present Law And Data Relating To C Corporations, Partnerships, And S Corporations (JCX-71-15 ):

This document, prepared by the staff of the Joint Committee on Taxation, provides information about present law and data relating to C corporations, partnerships (including LLCs), and S corporations. Part A of this document provides background information on the choice of business entity in the United States, describes sole proprietorships and their Federal tax treatment, summarizes present law governing the Federal tax treatment of C corporations, partnerships, and S corporations, and presents a table of the principal differences in tax treatment of these three types of business entities. Part B of this document presents data concerning the distribution of business entities by number, size, industry, and net income.

Figure 1

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April 11, 2015 in Congressional News, Tax | Permalink | Comments (1)

Wednesday, April 8, 2015

Brown: The IRS Should Report on Tax Returns Filed by All 535 Members of Congress

535National Journal, Congressional Tax Returns Could Tell Us a Lot:

Dorothy Brown, a professor at Emory University who specializes in tax law, has proposed an idea to finally spur tax reform: examining the tax returns of all 535 members of Congress. I recently spoke with her about the proposal, which she calls "The 535 Report." Our conversation has been edited and condensed. ...

How long have you been talking about the 535 Report?

I spoke about this at a Pepperdine University Law School symposium in January 2013 [Tax Advice for the Second Obama Administration] and wrote a law-review article for the symposium that was published that April. [The 535 Report: A Pathway to Fundamental Tax Reform, 40 Pepp. L. Rev. 1155 (2013)] I study presidential tax returns, which are voluntarily disclosed, and I started thinking: Imagine what I'd find if I had congressional tax returns.

What needs to be done to take this idea further?

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April 8, 2015 in Conferences, Congressional News, Scholarship, Tax | Permalink | Comments (0)

Tuesday, March 31, 2015

The Bipartisan Push For Consumption Taxes As Path For Tax Reform

Wall Street Journal, Tax Proposals Would Move U.S. Closer to Global Norm; Proposals For a Consumption Tax Gain Traction in Both Parties:

U.S. lawmakers on both sides of the aisle increasingly are finding appeal in an ambitious concept for overhauling the nation’s income-tax system: a tax based on consumption, a tool long used around the world.

The tax-writing Senate Finance Committee is giving new consideration to the consumption-tax idea with the hope that its promised boost to economic growth would ease the way to a revamp.

As lawmakers have examined a tax overhaul, “it becomes extremely difficult to see a political path to accomplish it” within the confines of the current income-tax system, said Sen. Ben Cardin (D., Md.), co-chairman of a Finance Committee working group negotiating a possible overhaul of business taxes. As a result, the idea of a consumption tax “is getting a great deal more respect, and it is in the discussions,” he said.

Mr. Cardin introduced legislation last year to create a type of consumption tax known as a value-added tax and at the same time lower business taxes and scrap income taxes completely for lower-income Americans.

Republicans on the working group also are interested in the concept, including a proposal put forward recently by GOP Sens. Marco Rubio of Florida and Mike Lee of Utah. That plan would make several changes to the tax code that would move the nation closer to a consumption-based system. ...

The talks open up a possible new direction in slow-moving discussions about rewriting the U.S. tax system. Enactment of a broad-based federal consumption tax would align the U.S. with a global trend. In the U.S., most of those taxes now are in the form of state and local sales taxes.

WSJ

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March 31, 2015 in Congressional News, Tax | Permalink | Comments (3)

Joint Tax Committee: Overview Of The Federal Tax System

The Joint Committee on Taxation yesterday released Overview Of The Federal Tax System As In Effect For 2015 (JCX-70-15):

The current Federal tax system has four main elements: (1) an income tax on individuals and corporations (which consists of both a “regular” income tax and an alternative minimum tax); (2) payroll taxes on wages (and corresponding taxes on self-employment income) to finance certain social insurance programs; (3) estate, gift, and generation-skipping taxes, and (4) excise taxes on selected goods and services. This document provides a broad overview of each of these elements. 

JCT

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March 31, 2015 in Congressional News, Tax | Permalink | Comments (0)

Wednesday, March 25, 2015

House Ways & Means Committee Marks Up Tax Bills Today

Thursday, March 19, 2015

House, Senate GOP Tax Leaders Urge President Obama to Work With Congress on Tax Reform, Rather Than Take Unilateral Executive Action

Congress (2015)Following up on my previous post, President Obama Is 'Very Interested' in Raising Taxes Through 'Executive Action':  House Ways & Means Committee Chair Paul Ryan and Senate Finance Committee Chair Orrin Hatch yesterday sent this joint letter to Treasury Secretary Jack Lew "urging the Administration to tackle unfavorable provisions in the tax code by working with Congress on comprehensive tax reform instead of taking unilateral action":

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March 19, 2015 in Congressional News, Tax | Permalink | Comments (0)

Wednesday, March 18, 2015

House Holds Hearing Today on The Burden of the Estate Tax on Family Businesses and Farms

House LogoThe Subcommittee on Select Revenue Measures of the House Ways & Means Committee holds a hearing today on The Burden of the Estate Tax on Family Businesses and Farms (links to statements and testimony below):

In connection with the hearing, the Joint Committee on Taxation has released History, Present Law, And Analysis Of The Federal Wealth Transfer Tax System (JCX-52-15):

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March 18, 2015 in Congressional News, Tax | Permalink | Comments (1)

Tuesday, March 17, 2015

Senate Holds Hearing Today on Building a Competitive U.S. International Tax System

Senate LogoThe Senate Finance Committee holds a hearing today on Building a Competitive U.S. International Tax System (links to statements and testimony below):

  • Orrin Hatch (R-UT), Statement
  • Ron Wyden (D-OR), Statement
  • Rosanne Altshuler (Professor of Economics and Dean of Social and Behavioral Sciences, Rutgers University), Testimony
  • Pamela F. Olson (U.S. Deputy Tax Leader & Washington National Tax Services Leader, PricewaterhouseCoopers), Testimony
  • Stephen E. Shay (Professor of Practice, Harvard Law School), Testimony
  • Anthony H. Smith (Vice President of Tax & Treasurer, Thermo Fisher Scientific), Testimony

In connection with the hearing, the Joint Committee on Taxation has released Present Law And Selected Policy Issues In The U.S. Taxation Of Cross-Border Income (JCX-51-15):

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March 17, 2015 in Congressional News, Tax | Permalink | Comments (0)

Monday, March 16, 2015

Joint Tax Committee: General Explanation of Tax Legislation Enacted in the 113th Congress

Joint Tax CommitteeThe Joint Committee on Taxation has released General Explanation of Tax Legislation Enacted in the 113th Congress (JCS-1-15) (287 pages):

This document, prepared by the staff of the Joint Committee on Taxation in consultation with the staffs of the House Committee on Ways and Means and the Senate Committee on Finance, provides an explanation of tax legislation enacted in the 113th Congress. The explanation follows the chronological order of the tax legislation as signed into law. 

For each provision, the document includes a description of present law, explanation of the provision, and effective date. Present law describes the law in effect immediately prior to enactment and does not reflect changes to the law made by the provision or by subsequent legislation. Reasons for change are included based on Committee report language for provisions reported by a Committee. For provisions enacted in bills that went directly to the House and Senate floors without a Committee report, no reasons for change are included in this document. 

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March 16, 2015 in Congressional News, Tax | Permalink | Comments (0)

Thursday, March 12, 2015

Senate Holds Hearing Today on Protecting Taxpayers from Schemes and Scams During the 2015 Tax Filing Season

Senate LogoThe Senate Finance Committee holds a hearing today on Protecting Taxpayers from Schemes and Scams During the 2015 Tax Filing Season (links to statements and testimony below):

  • Orrin Hatch (R-UT), Statement
  • Ron Wyden (D-OR), Statement
  • Caroline Ciraolo (Acting Assistant Attorney General, Tax Division, U.S. Department of Justice), Testimony
  • Timothy Camus (Deputy Inspector General for Investigations, Treasury Inspector General for Tax Administration, U.S. Treasury Department), Testimony
  • Mike Alley (Commissioner, Indiana Department of Revenue), Testimony
  • John Valentine (Commission Chair, Utah State Tax Commission), Testimony
  • Ellen Klem (Director of Consumer Outreach & Education, Office of the Attorney General, Oregon Department of Justice), Testimony

March 12, 2015 in Congressional News, Tax | Permalink | Comments (0)

Senate Seeks Input on Bipartisan Tax Reform

Senate LogoSenate Finance Committee Press Release, Hatch, Wyden Launch New Effort to Seek Input on Bipartisan Tax Reform:

Finance Committee Chairman Orrin Hatch (R-Utah) and Ranking Member Ron Wyden (D-Ore.) today announced a bipartisan effort to begin soliciting ideas from interested members of the public and stakeholders on how best to overhaul the nation’s broken tax code to make it simpler, fairer, and more efficient. The goal of this effort is to provide additional input, data, and information to the Committee’s bipartisan tax working groups, which are currently analyzing existing tax law and examining policy trade-offs and available reform options within each group’s designated area.

“By opening up our bipartisan working groups to public input, we hope to gain a greater understanding of how tax policy affects individuals, businesses, and civic groups across our nation,” Hatch and Wyden said. “In doing so, we will also equip our working groups with valuable input, and we hope these suggestions will help guide the groups through the arduous task of putting forth substantive ideas to reform the tax code in each of their areas.”

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March 12, 2015 in Congressional News, Tax | Permalink | Comments (1)

Tuesday, March 10, 2015

Senate Holds Hearing Today on Tax Complexity, Compliance, and Administration: The Merits of Simplification in Tax Reform

Senate LogoThe Senate Finance Committee holds a hearing today on Tax Complexity, Compliance, and Administration: The Merits of Simplification in Tax Reform (links to statements and testimony below):

  • Orrin Hatch (R-UT), Statement
  • Ron Wyden (D-OR), Statement
  • Carol Markman (CPA & Tax Director, EP Caine & Associates), Testimony
  • Mihir Desai (Professor, Harvard Law School), Testimony
  • Bruce Bartlett (Former Deputy Assistant Secretary, U.S. Treasury Department), Testimony
  • Keith Fogg (Professor and Tax Clinic Director, Villanova Law School), Testimony

In connection with the hearing, the Joint Committee on Taxation has released Complexity In The Federal Tax System (JCX-49-15):

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March 10, 2015 in Congressional News, Tax | Permalink | Comments (0)

Wednesday, March 4, 2015

Senate Report Blames Tax Pros for Unfair Tax Code

Senate LogoFollowing up on yesterday's post, Senate Holds Hearing Today on Fairness in Taxation:  Democratic Staff, Senate Finance Committee, How Tax Pros Make the Code Less Fair and Efficient: Several New Strategies and Solutions:

Have you ever heard of a collar? Or a basket option? Or a wash sale? Most people haven’t. But many taxpayers use these sophisticated transactions to cut the taxes they could owe in half, often paying effective rates far lower than people who earn a regular paycheck.

This report describes each of these little known tax avoidance strategies identified for Senator Wyden by the nonpartisan staff of the Joint Committee on Taxation (JCT) and outside independent experts, relying on memoranda, examples, and descriptions. A preliminary analysis indicates that reforms to rein in some of these strategies could reduce the amount of taxes avoided by tens of billions of dollars over the next decade while making the tax code fairer and simpler overall.

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March 4, 2015 in Congressional News, Tax | Permalink | Comments (2)

Tuesday, March 3, 2015

Senate Holds Hearing Today on Fairness in Taxation

Senate LogoThe Senate Finance Committee holds a hearing today on Fairness in Taxation (links to statements and testimony below):

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March 3, 2015 in Congressional News, Tax | Permalink | Comments (0)

Monday, March 2, 2015

Joint Tax Committee: The Top 1% Receives 19% Of All Income, Pays 49% Of All Income Taxes

Joint Tax CommitteeThe Joint Committee on Taxation has released Fairness and Tax Policy (JCX-48-15):

The Senate Committee on Finance has scheduled a public hearing on March 3, 2015, titled “Fairness in Taxation.” This document ... describes concepts of tax equity and provides data related to the current and historical distribution of income and taxes. ...

For 2015, the top 10 percent (in terms of income) of all tax returns receive 45 percent of all income and pay 82 percent of all income taxes. The top five percent of all tax returns receive 34 percent of all income and pay 71 percent of all income taxes. The top one percent of all tax returns receives 19 percent of all income and pay 49 percent of all income taxes. 

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March 2, 2015 in Congressional News, Gov't Reports, Tax | Permalink | Comments (14)

Friday, February 27, 2015

Republicans Name Keith Hall CBO Director, Replacing Doug Elmendorf

Hall 2Wall Street Journal, GOP Leaders Name Keith Hall as CBO Director:

Congressional Republican leaders named Keith Hall to a four-year term as the next director of the Congressional Budget Office, the influential nonpartisan budget scorekeeper for Congress.

Mr. Hall, a former White House economist who served as commissioner of the Bureau of Labor Statistics, will replace Doug Elmendorf starting April 1, GOP leaders said Friday.

Mr. Hall, who has served as chief economist of the International Trade Commission since September, headed the BLS, one of the government’s main economic-data-gathering agencies, from 2008 to 2012. He served as the chief economist for the White House Council of Economic Advisers from 2005 to 2008.

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February 27, 2015 in Congressional News, Tax | Permalink | Comments (0)

Thursday, February 26, 2015

Senate Holds Hearing on The Coming Debt Crisis

Senate LogoThe Senate Budget Committee held a hearing yesterday on The Coming Crisis: America’s Dangerous Debt (with links to testimony):

February 26, 2015 in Congressional News, Tax | Permalink | Comments (0)

Wednesday, February 25, 2015

Senate Holds Hearing on Tax Reform, Growth and Efficiency

Senate LogoThe Senate Finance Committee held a hearing yesterday on Tax Reform, Growth and Efficiency:

In connection with the hearing, the Joint Committee on Taxation released Economic Growth And Tax Policy (JCX-47-15):

This document ... includes an overview of economic growth and the impact that taxes may have on economic growth.

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February 25, 2015 in Congressional News, Tax | Permalink | Comments (0)

Tuesday, February 10, 2015

Senate Holds Hearing Today On Lessons From The 1986 Tax Reform

Senate LogoThe Senate Finance Committee holds a hearing today on Getting to Yes on Tax Reform: What Lessons Can Congress Learn from the Tax Reform Act of 1986?:

Press and blogosphere coverage:

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February 10, 2015 in Congressional News, Tax | Permalink | Comments (1)

Tuesday, January 27, 2015

TPC Program on Dynamic Scoring: Now What?

The Tax Policy Center hosted a program yesterday on Dynamic Scoring: Now What? (video here):

On January 26, the Urban-Brookings Tax Policy Center and the Hutchins Center on Fiscal and Monetary Policy at Brookings took a close look at how dynamic scoring is done, the models that JCT and CBO use for macroeconomic analysis of tax bills and other major legislation (immigration, Affordable Care Act, infrastructure), and how to communicate this analysis accurately.

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January 27, 2015 in Conferences, Congressional News, Tax | Permalink | Comments (0)

CBO Projects Tepid Economic Growth, Rising Deficits Despite Rising Revenues

Thursday, January 15, 2015

Testimony at House Hearing on Policies to Promote Job Creation and Economic Growth

House LogoTestimony at Tuesday's House Ways & Means Committee hearing on Moving America Forward: With a Focus on Economic Growth:

The first hearing of the 114th Congress focused on the state of the U.S. economy and policies that can promote job creation and economic growth.

January 15, 2015 in Congressional News, Tax | Permalink | Comments (0)

Monday, January 12, 2015

Republicans Retain Joint Tax Committee's Barthold (Unlike CBO's Elmendorf)

BarthBloomberg, Republicans Keep Tax-Bill Scorekeeper Picked Under Democrats:

U.S. congressional Republicans will retain Thomas Barthold as chief of staff of the Joint Committee on Taxation, which estimates the cost of tax legislation.

“Tom has been a strong, nonpartisan leader,” said a joint statement today from Senate Finance Committee Chairman Orrin Hatch and House Ways and Means Committee Chairman Paul Ryan. “He and his staff produce quality, objective reports and analyses that help shape the major policy debates that are important to hard-working American taxpayers. We look forward to continuing our work with him.”

Hatch of Utah and Ryan of Wisconsin are Republicans who are new to their jobs as chairmen of their respective chambers’ tax-writing committees. They could have used the moment to replace Barthold, whose analyses and estimates will be central to any effort to revamp the U.S. tax code.

Barthold is an economist and career Joint Committee employee who has had his job since May 2009. He was chosen when Democrats controlled the House and the Senate. He declined to comment today on the lawmakers’ statement. He’s the longest-serving Joint Committee chief since 1977 and leads a team of nonpartisan lawyers and economists.

The stability at the Joint Committee is in contrast to the potential change at the Congressional Budget Office, which creates estimates for non-tax legislation.

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January 12, 2015 in Congressional News | Permalink | Comments (0)

Driessen: Should Tax Lawyers Mount an Inchon Invasion at CBO?

DriessenTaxProf Blog op-ed:  Should Tax Lawyers Mount an Inchon Invasion at CBO?, by Patrick Driessen (former revenue estimator, Joint Committee on Taxation and Treasury Department):

The two top tax policy positions in the federal government, the Chief of Staff of the Joint Committee on Taxation and the Assistant Secretary for Tax Policy at the Treasury Department, are occupied by economists Tom Barthold and Mark Mazur. With the exception of Larry Woodworth (who held both positions consecutively in the 1960s and 1970s), up until now JCT and Treasury heads were esteemed tax lawyers. Although Barthold and Mazur have been known to frequent with lawyers and in the past both have undertaken typical legal tasks like statutory drafting and long footnoting, make no mistake about it: The current top JCT and Treasury tax staffers are economists through and through -- they likely believe in the concept of imputed rental value of home ownership, the marginal disutility of income, and yes, notwithstanding what happened to Larry Summers, maybe even the theoretical possibility of exporting pollution from the United States (provided there are proper side payments).

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January 12, 2015 in Congressional News, IRS News, Tax | Permalink | Comments (0)

Tuesday, December 9, 2014

Sen. Coburn Releases 300-Page Tax Decoder


Senator Tom Coburn (R-OK) today released Tax  Decoder:

This report, Tax Decoder, is intended to decode the tax code for every taxpayer. It reveals more than 165 tax expenditures costing over $900 billion this year and more than $5 trillion over the next five years.

It is nearly impossible to know who is benefiting from the tax code because it lacks any real transparency or accountability. This is not unintentional. The Senate Finance Committee recently rejected an amendment that would have required the recipients of some tax credits to be publicly listed in the USAspending.gov website.10 The recipients of these tax breaks know who they are, so it seems reasonable for those who are paying the taxes to provide the benefits should know as well. 

Tax Decoder attempts to provide a detailed and comprehensive overview of the code for all taxpayers. It includes the background, cost, and primary beneficiaries of each provision along with specific examples of some of the recipients of certain tax breaks. It covers well known tax provisions as well as others that are more obscure. ...

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December 9, 2014 in Congressional News, Gov't Reports, Tax | Permalink | Comments (0)

Thursday, December 4, 2014

CRS: Federal Proposals to Tax Marijuana

CRS LogoCongressional Research Service:  Federal Proposals to Tax Marijuana: An Economic Analysis, by Jane G. Gravelle & Sean Lowry (R43785) (Nov. 13, 2014):

The combination of state policy and general public opinion favoring the legalizing of marijuana has led some in Congress to advocate for legalization and taxation of marijuana at the federal level. The Marijuana Tax Equity Act of 2013 (H.R. 501) would impose a federal excise tax of 50% on the producer and importer price of marijuana. The National Commission on Federal Marijuana Policy Act of 2013 (H.R. 1635) proposes establishing a National Commission on Federal Marijuana Policy that would review the potential revenue generated by taxing marijuana, among other things.

This report focuses solely on issues surrounding a potential federal marijuana tax. First, it provides a brief overview of marijuana production. Second, it presents possible justifications for taxes and, in some cases, estimates the level of tax suggested by that rationale. Third, it analyzes possible marijuana tax designs. The report also discusses various tax administration and enforcement issues, such as labeling and tracking.

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December 4, 2014 in Congressional News, Gov't Reports, Tax | Permalink | Comments (0)

Friday, November 21, 2014

CBO: Options for Reducing the Deficit, 2015 to 2024

Congressional Budget Office, Options for Reducing the Deficit: 2015 to 2024:

This document provides estimates of the budgetary savings from 79 options that would decrease federal spending or increase federal revenues over the next decade. 

36 of these 79 options are tax increases:

Individual Income Tax Rates
1.  Increase Individual Income Tax Rates
2.  Implement a New Minimum Tax on Adjusted Gross Income
3.  Raise the Tax Rates on Long-Term Capital Gains and Dividends by 2 Percentage Points

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November 21, 2014 in Congressional News, Gov't Reports, Tax | Permalink | Comments (0)

Wednesday, November 12, 2014

CBO: The Distribution of Household Income and Federal Taxes, 2011

Congressional Budget Office, The Distribution of Household Income and Federal Taxes, 2011:

Overall, federal taxes are progressive, meaning that average tax rates generally rise as income increases. Households in the lowest income quintile paid about $500 in federal taxes in 2011, on average, which amounted to an average federal tax rate of about 2 percent, CBO estimates. Households in the middle quintile paid about $7,000 in federal taxes, and households in the highest quintile paid about $58,000 in federal taxes, which results in average federal tax rates of approximately 11 percent and 23 percent, respectively.

As a result of the progressive federal tax structure, households in the highest quintile of before-tax income paid a greater share of federal taxes in 2011 than they received in before-tax income, while households in each of the other quintiles paid a smaller share of federal taxes than they received in before-tax income (see figure below). Households in the highest income quintile received a little more than half of total before-tax income and paid more than two-thirds of all federal taxes in 2011. In contrast, households in the lowest income quintile received approximately 5 percent of total before-tax income in 2011 and paid less than 1 percent of all federal taxes, CBO estimates.

Chart 1A

CBO estimates that average federal tax rates under 2013 law would be higher—relative to tax rates in 2011—across the income spectrum. The estimated rates under 2013 law would still be well below the average rates from 1979 through 2011 for the bottom four income quintiles, slightly below the average rate over that period for households in the 81st through 99th percentiles, and well above the average rate over that period for households in the top 1 percent of the income distribution.

Chart 2A

Government transfers and federal taxes lessen income inequality because federal taxes are progressive and payments from government transfer programs generally decline as a share of income as income rises. Between 1979 and 2011, government transfers reduced income inequality to a greater extent than federal taxes, based on a standard measure of inequality known as the Gini index. In 2011, government transfers accounted for approximately two-thirds of the reduction in income inequality observed between market income and after-tax income.

Chart 18

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November 12, 2014 in Congressional News, Tax | Permalink | Comments (0)

Monday, October 13, 2014

Congress, GAO Target ‘Supersize’ IRAs

Super Size MeFollowing up on my previous posts:

Wall Street Journal Tax Report:  Washington Scrutiny of ‘Supersize’ IRAs, by Laura Saunders:

Washington is taking a hard look at tax-sheltered retirement accounts, especially “supersize” ones worth millions of dollars. Savers should consider what it could mean for them.

The U.S. Government Accountability Office, an arm of Congress, recently released a report on individual retirement accounts, requested by Senate Finance Committee Chairman Ron Wyden (D., Ore.). Its publication coincided with Senate hearings on retirement savings held last month.

The GAO study addressed questions many people asked after disclosures that former presidential candidate Mitt Romney had a traditional IRA worth as much as $101 million and technology entrepreneur Max Levchin put more than 13.3 million shares of Yelp YELP -5.11% stock in a Roth IRA before the firm went public in 2012.

How many supersize IRAs are there? The GAO estimates more than 300 individuals or families have IRAs with balances greater than $25 million, while more than 9,000 have IRAs worth more than $5 million. The GAO wasn’t able to distinguish between regular and Roth IRAs, given the data. ...

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October 13, 2014 in Congressional News, Gov't Reports, Tax | Permalink | Comments (0)

Monday, September 29, 2014

Graetz: The Bipartisan 'Inversion' Evasion: Meaningful Tax Reform Requires a Different President and a Different Congress

Wall Street Journal op-ed:  The Bipartisan 'Inversion' Evasion: Neither the White House Nor Congress Seems Interested in Tax Reform That Would Make Companies Want to Stay Here, by Michael J. Graetz (Columbia):

Tennessee Williams was famous for concocting American dramas where something is terribly wrong but no one is willing to talk about the underlying problem. That is exactly where we are now with the Obama administration's attack on "corporate inversions"—transactions where a U.S. company merges with a foreign company and locates the parent company abroad to reduce taxes.

This week Treasury Secretary Jack Lew announced new regulations that "will significantly diminish the ability of inverted companies to escape U.S. taxation." For some U.S. companies considering inversion, he said, the new measures will mean inverting will "no longer make economic sense." He admitted, however, that Treasury's moves are just a stopgap measure until Congress enacts corporate tax reform.

President Obama, Mr. Lew and just about everyone in Congress agree that the laws governing corporate taxation need rewriting. Members of both parties say they support reforms that will lower the corporate tax rate—now the highest statutory rate among developed nations—and make our corporate tax system more "competitive." The president points to his Framework for Business Tax Reform, announced in February 2012. Republicans take their cues from a comprehensive tax-reform plan issued in February by outgoing House Ways and Means Committee Chairman Dave Camp. Mr. Obama's plan would lower the corporate tax rate to 28% from 35%. Mr. Camp's plan would lower it to 25%. Both would impose a "minimum" tax rate of around 15% on the foreign earnings of a U.S. multinational corporation.

The Treasury's new regulations are aimed at hindering inverted companies' ability to bring cash back to the U.S. free of corporate taxes. And they would require the new foreign parent to be engaged in real business activities. But the new regulations do not address one of the advantages of inversion—the inverted companies' ability to use debt from their foreign parent to increase interest deductions as a way to strip earnings out of the U.S. ...

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September 29, 2014 in Congressional News, Tax | Permalink | Comments (0)

Wednesday, August 27, 2014

CBO: An Update to the Budget and Economic Outlook

Congressional Budget Office, An Update to the Budget and Economic Outlook (Aug. 2014):

Figure 1-1

 

August 27, 2014 in Congressional News, Gov't Reports, Tax | Permalink | Comments (1)

Tuesday, August 5, 2014

Joint Tax Committee Releases Tax Expenditure Estimates for 2014-2018

The Joint Committee on Taxation yesterday released Estimate of Federal Tax Expenditures for Fiscal Years 2014-2018 (JCS-97-14):

Joint Tax CommitteeTax expenditure analysis can help both policymakers and the public to understand the actual size of government, the uses to which government resources are put, and the tax and economic policy consequences that follow from the implicit or explicit choices made in fashioning legislation. This report1 on tax expenditures for fiscal years 2014-2018 is prepared by the staff of the Joint Committee on Taxation. ...  As in the case of earlier reports, the estimates of tax expenditures in this report were prepared in consultation with the staff of the Office of Tax Analysis in the Department of the Treasury (“the Treasury”).

The Joint Committee staff has made its estimates (as shown in Table 1) based on the provisions in Federal tax law enacted through June 30, 2014. Expired or repealed provisions are not listed unless they have continuing revenue effects that are associated with ongoing taxpayer activity. Proposed extensions or modifications of expiring provisions are not included until they have been enacted into law. The tax expenditure calculations in this report are based on the January 2014 Congressional Budget Office (“CBO”) revenue baseline and Joint Committee staff projections of the gross income, deductions, and expenditures of individuals and corporations for calendar years 2013-2018.

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August 5, 2014 in Congressional News, Tax | Permalink | Comments (0)

Senate Finance Committee Unanimously Approves Tax Court Nominee Pugh

PughThe Senate Finance Committee on Friday unanimously approved the nomination of Cary Douglas Pugh to the U.S. Tax Court: (June 6, 2014):

Cary Douglas Pugh is currently Counsel in the tax department at Skadden, Arps, Slate, Meagher & Flom, L.L.P., a position she has held since 2005. From 2002 to 2005, Ms. Pugh was the Special Counsel to the Chief Counsel of the Internal Revenue Service. From 1999 to 2002, Ms. Pugh served as Tax Counsel for the Senate Committee on Finance, where she was responsible for advising committee members on individual and corporate tax issues. Ms. Pugh was an associate at Vinson & Elkins, L.L.P. from 1995 to 1999 and Judicial Clerk to the Honorable Jackson L. Kiser on the U.S. District Court for the Western District of Virginia from 1994 to 1995. Ms. Pugh received a B.A. from Duke University, an M.A. from Stanford University, and a J.D. from the University of Virginia School of Law.

Pugh will join the Tax Court once she is confirmed by the full Senate, along with pending nominees Tamara Ashford and L. Paige Marvel.

August 5, 2014 in Congressional News, Tax | Permalink | Comments (0)

Monday, August 4, 2014

NPR: Tax Extenders Bill Killed by Politics on Capitol Hill

NPR -- It's All Politics,  A Tax Bill Killed By The Push And Pull Of Politics On The Hill:

NPRA few months back, Sen. Ron Wyden, a Democrat from Oregon, brought a bill to the floor that basically offered tax incentives to businesses and individuals. Those incentives are called tax extenders.

They include big stuff and small stuff — tax breaks for wind farms, tax breaks for schoolteachers who buy their own supplies. Tax breaks for rum producers in Puerto Rico, people who make movies, race track owners, even some breaks for people who bike to work. In other words, something for every lawmaker to take home.

This should have been a slam dunk. And at first, it was. Ninety-six senators gathered in the chamber shortly after Wyden's speech, and all voted in favor of moving the bill forward. But two days later, this bill, with 96 out of 100 supporters, was stopped cold. To anyone watching, it might have looked like some special kind of insanity.

But Howard Gleckman, a senior fellow with the tax policy center at the Urban Institute, says look closer.

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August 4, 2014 in Congressional News, Tax | Permalink | Comments (1)

Tuesday, July 22, 2014

Senate Report Criticizes Hedge Funds' Use of Basket Options Tax Strategy

Senate LogoSenate Permanent Subcommittee on Investigations, Committee on Homeland Security and Governmental Affairs, Abuse of Structured Financial Products: Misusing Basket Options to Avoid Taxes and Leverage Limits (97 pages):

For the last decade, the U.S. Senate Permanent Subcommittee on Investigations has presented case histories showing how financial institutions, law firms, accountants, and others have designed and implemented complex financial structures to take advantage of and, at times, abuse or violate U.S. tax statutes, securities regulations, and accounting rules. This investigation offers yet another detailed case study of how two financial institutions – Deutsche Bank AG and Barclays Bank PLC – developed structured financial products called MAPS and COLT, two types of basket options, and sold them to one or more hedge funds, including Renaissance Technologies LLC and George Weiss Associates, that used them to avoid federal taxes and leverage limits on buying securities with borrowed funds. While that type of option product was identified as abusive in a public memorandum by the IRS 2010, taxes have yet to be collected on many of the basket option transactions and its use to circumvent federal leverage limits has yet to be analyzed or halted. 

July 22, 2014 in Congressional News, Tax | Permalink | Comments (0)

Senate Holds Hearing Today on The Taxation of Income of U.S. Multinational Enterprises

Senate LogoThe Senate Finance Committee holds a hearing today on The U.S. Tax Code: Love It, Leave It or Reform It!:

  • Mihir Desai (Harvard University)
  • Peter Merrill (PricewaterhouseCoopers)
  • Leslie Robinson (Dartmouth College)
  • Pascal Saint-Amans (OECD)
  • Allan Sloan (Fortune)
  • Robert Stack (U.S. Treasury Department)

In connection with the hearing, the Joint Committee on Taxation has released Present Law and Background Related to Proposals to Reform the Taxation of Income of Multination Enterprises (JCX-90-14) (99 pages):

This document ...  includes a description of present law, background on recent global activity related to the taxation of cross-border income, and descriptions and a comparison of recent proposals to reform the U.S. international tax system. ...

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July 22, 2014 in Congressional News, Tax | Permalink | Comments (0)

Tuesday, June 24, 2014

Senate Holds Hearing Today on Student Loans and Tax Policy

Senate LogoThe Senate Finance Committee holds a hearing today on Less Student Debt from the Start: What Role Should the Tax System Play?:

  • Mark J. Mazur (Assistant Secretary for Tax Policy, U.S.Treasury Department)
  • Jayne Caflin Fonash (Director of School Counseling, Loudoun Academy of Science, Sterling, VA)
  • Scott A. Hodge (President, Tax Foundation, Washington, D.C.)
  • Amber Lee (Graduate, Willamette High School, Eugene, OR)
  • Dean Zerbe (National Managing Director, alliantgroup, Washington, D.C.) 

In connection with the hearing, the Joint Committee on Taxation has released Background And Present Law Related To Tax Benefits For Education (JCX-70-14) (June 20, 2014):

This document ... includes a description of present law and analysis relating to tax benefits for education.

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June 24, 2014 in Congressional News, Tax | Permalink | Comments (0)

Wednesday, June 11, 2014

CRS: Tax Issues in Corporate Expatriation, Inversions, and Mergers

CRS LogoDonald J. Marples & Jane G. Gravelle, Corporate Expatriation, Inversions, and Mergers: Tax Issues, Cong. Res. Serv. (R43568) (May 27, 2014):

News reports in the late 1990s and early 2000s drew attention to a phenomenon sometimes called corporate “inversions” or “expatriations”: instances where U.S. firms reorganize their structure so that the “parent” element of the group is a foreign corporation rather than a corporation chartered in the United States in order to reduce the effect of the U.S. corporate income tax. These corporate inversions apparently involved few, if any, shifts in actual economic activity from the U.S. abroad, at least in the near term. Bermuda and the Cayman Islands—countries with no corporate income tax—were the location of many of the newly created parent corporations, and tax savings were the principal objective.

These types of inversions largely ended with the enactment of the American Jobs Creation Act of 2004 (JOBS Act, P.L. 108-357), which denied the tax benefits of an inversion if the original U.S. stockholders owned 80% or more of the new firm. The Act effectively ended shifts to tax havens where no real business activity took place.

However, two avenues for inverting remained. The Act allowed a firm to invert if it has substantial business operations in the country where the new parent was to be located; the regulations at one point set a 10% level of these business operations. Several inversions using the business activity test resulted in Treasury regulations in 2012 that increased the activity requirement to 25%, effectively closing off this method. Firms could also invert by merging with a foreign company if the original U.S. stockholders owned less than 80% of the new firm.

Two features made a country an attractive destination: a low corporate tax rate and a territorial tax system that did not tax foreign source income. Recently, the UK joined countries such as Ireland, Switzerland, and Canada as targets for inverting when it adopted a territorial tax. At the same time the UK also lowered its rate (from 25% to 20% by 2015).

Recently, several high profile companies have indicated an interest in merging or plans to merge with a non-U.S. headquartered company, including Pfizer and Chiquita. Pfizer, for example, was interested in merging with a smaller British firm, AstraZeneca, and moving headquarters to the UK. For Pfizer, which has accumulated substantial profits in subsidiaries in low tax foreign countries that would be taxed if paid to the U.S. parent, the territorial tax system is likely the most important tax benefit from such a merger. This “second wave” of inversions again raises concerns about an erosion of the U.S. tax base.

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June 11, 2014 in Congressional News, Tax | Permalink | Comments (1)

Wednesday, April 23, 2014

GAO: Budget Cuts Hurt IRS's Performance

GAO,  GAO LogoInternal Revenue Service: Absorbing Budget Cuts Has Resulted in Significant Staffing Declines and Uneven Performance (GAO-14-534) (Apr. 21, 2014):

IRS’s appropriations have declined to below fiscal year 2009 levels and FTEs have been reduced by about 8,000 since fiscal year 2009. Planned performance in enforcement and taxpayer service has decreased or fluctuated; for example, in the fiscal year 2014 congressional justification the audit coverage target for individual examinations was 1.0 percent for fiscal year 2014, however, the target was lowered to 0.8 percent in the fiscal year 2015 congressional justification. Amidst lower demand, IRS’s telephone level of service performance (the percentage of callers seeking live assistance and receiving it) was 73 percent from January 1 through March 15, 2014 compared to 69 percent during the same period last year. However, between fiscal years 2009 and 2013, IRS’s telephone level of service fluctuated between 61 percent and 74 percent. Average wait times have almost doubled since fiscal year 2009—from 8.8 minutes to 16.8 minutes as of mid-March 2014.

Not including other budgetary resources such as user fees, the fiscal year 2015 budget request for IRS is $12.5 billion, which is an increase of 10.5 percent ($1.2 billion) in funding and 8.3 percent in staffing (6,998 FTEs) over fiscal year 2014. According to the President’s budget, of the requested $1.2 billion, $480 million is predicated on a cap adjustment—funding above the discretionary spending limit—and largely covers enforcement and infrastructure initiatives. IRS’s workload has increased as a result of legislative mandates and priority programs, such as work related to the Patient Protection and Affordable Care Act and identity theft.

IRS has absorbed approximately $900 million in budget cuts since fiscal year 2010 through savings and efficiencies and by reducing, delaying, or eliminating services. For example, IRS delayed two information technology projects (Information Reporting and Document Matching and Return Review Program) and substantially reduced employee training. To help improve operations, the President requested a large budget increase for IRS in fiscal year 2015. However, additional funding is not the only solution. We have open recommendations on IRS’s operations that may help it achieve efficiencies over time, such as developing a long-term plan to improve web services.

IRS Enacted Appropriations, FY 2009-2014, and Fiscal Year 2015 Request

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April 23, 2014 in Congressional News, Gov't Reports, IRS News, Tax | Permalink | Comments (0)

Wednesday, April 9, 2014

Testimony in Yesterday's Congressional Tax Hearings

Capitol HillSenate Budget Committee, Supporting Broad-Based Economic Growth and Fiscal Responsibility through a Fairer Tax Code:

  • John L. Buckley (Former Chief Counsel, House Ways & Means Committee and former Chief of Staff, Joint Committee on Taxation)
  • Jane Gravelle (Senior Specialist in Economic Policy, Congressional Research Service)
  • Diana Furchtgott-Roth (Senior Fellow, Manhattan Institute for Policy Research)

Senate Finance Committee, Protecting Taxpayers from Incompetent and Unethical Return Preparer: (detailed coverage here):

House Ways & Means Committee, The Benefits of Permanent Tax Policy for America’s Job Creators:

April 9, 2014 in Congressional News, Tax | Permalink | Comments (0)

Tuesday, April 1, 2014

Senate Holds Hearing Today on Caterpillar's Tax Reduction Strategies

CaterpillarThe Permanent Subcommittee on Investigations Subcommittee of the Senate Homeland Security and Governmental Affairs Committee holds a hearing today on Caterpillar's Offshore Tax Strategy (webcast):

Panel #1:

Panel #2:

  • Thomas F. Quinn (PricewaterhouseCoopers, Chicago)
  • Steven R. Williams (PricewaterhouseCoopers, McLean, VA)
  • James G. Bowers (PricewaterhouseCoopers, Dallas)

Panel #3:

  • Julie A. Lagacy (Finance Services Division, Caterpillar)
  • Robin D. Beran (Chief Tax Officer, Caterpillar)
  • Rodney Perkins (Former Senior International Tax Manager, Caterpillar)

Press and blogosphere:

April 1, 2014 in Congressional News, Tax | Permalink | Comments (0)

Monday, March 31, 2014

Joint Tax Committee Releases Overview of the Federal Tax System as in Effect for 2014

Joint Tax CommitteeThe Joint Committee on Taxation has released Overview of the Federal Tax System as in Effect for 2014 (JCX-25-14) (Mar. 28, 2014):

This document ... provides a summary of the present-law Federal tax system as in effect for 2014.

The current Federal tax system has four main elements: (1) an income tax on individuals and corporations (which consists of both a “regular” income tax and an alternative minimum tax); (2) payroll taxes on wages (and corresponding taxes on self-employment income) to finance certain social insurance programs; (3) estate, gift, and generation-skipping taxes, and (4) excise taxes on selected goods and services. This document provides a broad overview of each of these elements.

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March 31, 2014 in Congressional News, Tax | Permalink | Comments (0)

Thursday, February 27, 2014

Editorial Page Reactions to the House GOP Tax Reform Plan

Tax Reform LogoEditorial page reactions to the House GOP tax reform plan from

  • Bloomberg
  • New York Times
  • Wall Street Journal
  • Washington Post
  • USA Today

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February 27, 2014 in Congressional News, Tax | Permalink | Comments (0)

Wednesday, February 26, 2014

House GOP Releases Tax Reform Plan

Tax Reform LogoThe House Ways & Means Committee Republicans today released a tax reform plan, The Tax Reform Act of 2014:

Press and blogosphere coverage:

February 26, 2014 in Congressional News, Tax | Permalink | Comments (2)

Mays Receives 2014 Pillar of Excellence Award

Janice Mays, Democratic Staff Director, Chief Counsel, and Former Chief Tax Counsel of the House Ways & Means Committee received the 2014 Pillar of Excellence Award at the Tax Council Policy Institute's 15th Annual Tax Policy & Practice Symposium in Washington, D.C.:

MaysThe 2014 award is given to Mays based on her extraordinary dedication and contribution to the field of tax law and policy. ... "Janice Mays embodies all the characteristics the Pillar of Excellence Award was designed to recognize," said Lynda K. Walker, executive director and general counsel of TCPI. "For more than three decades she has been a driving force behind federal tax policy development and is both widely regarded as a thoughtful expert and highly respected on both sides of the aisle for her leadership on Capitol Hill. We are honored to present the award to Janice, who has dedicated her career to shaping sound and fair tax policy."

Mays is the first woman and fifth overall recipient of this award, which honors individuals who consistently go above and beyond what is required, proving to be true leaders in their field. ... Qualifications for the Pillar of Excellence Award include playing a key role in tax policy; its impact on the tax business and national economy; participation in knowledge-sharing opportunities; and demonstration of the overall understanding of tax policies among professionals, executives and policymakers.

Mays joined the Committee staff in 1975 after receiving her undergraduate degree (cum laude) from Wesleyan College in Macon, Ga., and her juris doctorate from the University of Georgia College of Law.  She also holds a Master of Law in taxation from the Georgetown University School of Law.

February 26, 2014 in Congressional News, Tax | Permalink | Comments (1)

Senate Charges Credit Suisse With Helping U.S. Clients Evade U.S. Taxes

Tuesday, February 25, 2014

House GOP Releases Tax Reform Plan

Tax Reform LogoThe House Ways & Means Committee Republicans today released a tax reform plan, Making Today’s Tax Code Simpler and Fairer while Creating More Jobs and Higher Take Home Pay for American Workers:

The Ways and Means Committee has held more than 30 separate hearings on comprehensive tax reform over the last three years and released three discussion drafts.

1.  Simplifying taxes for small business and their employees:

This draft is specifically focused on reducing the burden the tax code imposes on small businesses and their workers.  With about half of the private sector workforce employed by a small business – a total of nearly 60 million Americans –  every dollar spent on complying with an overly complex, burdensome and broken tax code is a dollar that cannot be used for investment, hiring and higher wages for American workers.

The discussion draft contains several core components that simplify tax compliance for small businesses and provide certainty with respect to the ability of small businesses to recover certain costs immediately.  These include widely supported reforms such as permanent section 179 expensing and expansion of the “cash accounting” method, amongst other provisions.  The discussion draft also includes two separate options designed to achieve greater uniformity between S corporations and partnerships – one that revises current rules and a second that replaces current tax rules with a new unified pass-through regime.

2.  Making Wall Street play by the rules:

The proposal seeks to modernize tax rules to minimize Wall Street’s ability to hide and disguise potentially significant risks through the abuse of derivatives and other novel financial products – an activity that was a contributing factor to the 2008 financial crisis.  The discussion draft also outlines changes to tax rules designed to provide greater simplicity and uniformity.

3.  Helping America compete and win when doing business overseas:

Despite losing jobs to foreign competitors, America is still using an outdated international tax system designed nearly 60 years ago.  Yet, in recent years, virtually every one of our major competitors around the globe has been actively reforming their tax laws.  Even our closest neighbors are getting ahead of us, as Canada has already reformed its tax code and Mexico is doing so right now.  If we don’t take action, we risk falling further behind.

An American tax code should make it easier for American companies to bring profits earned overseas back home to the U.S. – so they can be invested here – and that is the purpose of the international tax reform draft.

Press and blogosphere coverage:

February 25, 2014 in Congressional News, Tax | Permalink | Comments (0)

Friday, February 7, 2014

CRS: Tax Rates and Economic Growth

CRS LogoCongressional Research Service, Tax Rates and Economic Growth (R42111) (2014):

This report summarizes the evidence on the relationship between tax rates and economic growth, referring in a number of cases to other CRS reports providing more substance and detail. Potentially negative effects of tax rates on economic growth have been an issue in the debates about whether to increase taxes to reduce the deficit and whether to reform taxes by broadening the base to lowering tax rates.

Initially, it is important to make a distinction between the effects of policies aimed at short-term stimulation of an underemployed economy and long-run growth. In the short run, both spending increases and tax cuts are projected to increase employment and output in an underemployed economy. These effects operate through the demand side of the economy. In general, the largest effects are from direct government spending and transfers to lower-income individuals, whereas the smallest effects are from cutting taxes of high-income individuals or businesses.

Long-run growth is a supply-side phenomenon. In the long run, the availability of jobs is not an issue as an economy naturally creates jobs. Output can grow through increases in labor participation and hours, increases in capital, and changes such as education and technological advances that enhance the productivity of these inputs.

Historical data on labor participation rates and average hours worked compared to tax rates indicate little relationship with either top marginal rates or average marginal rates on labor income. Relationships between tax rates and savings appear positively correlated (that is, lower savings are consistent with lower, not higher, tax rates), although this relationship may not be causal. Similarly, during historical periods, slower growth periods have generally been associated with lower, not higher, tax rates.

A review of statistical evidence suggests that both labor supply and savings and investment are relatively insensitive to tax rates. Small effects arise in part because of offsetting income and substitution effects (which make the direction of effects uncertain) and in part because each of these individual responses appears small. Institutional constraints may also have an effect. Offsetting income and substitution effects also affect savings. Capital gains taxes are often singled out as determinants of growth, but their effects on the cost of capital are quite small. International capital flows also appear to have a small effect. Most expenditures that affect the productivity of labor and capital inputs (research and development, education, or infrastructure) are already tax favored or provided by the government. Small business taxes are also sometimes emphasized as important to growth, but the evidence suggests a modest and uncertain effect on entrepreneurship.

Claims that the cost of tax reductions are significantly reduced by feedback effects do not appear to be justified by the evidence, where feedback effects are in the range of 3% to 10% and can, in some cases, be negative. Because of the estimated realizations response, capital gains tax cuts have in the past been estimated to have a large revenue offset (about 60%), but more recent empirical estimates suggest one of about 20%. In general, for stand-alone rate reductions the additions to the deficit would cause tax cuts to have a larger cost both because of debt service and because of crowding out of investment, which would swamp most behavioral effects.

(Hat Tip:  Bruce Bartlett.)  Prior TaxProf Blog posts:

February 7, 2014 in Congressional News, Tax | Permalink | Comments (1)