Tax — Federal Archive
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Concerns about the State of the Economy Are Not a Good Reason to Waive Paygo for AMT Relief
December 6, 2007
Several weeks ago, the House of Representatives passed legislation that would provide Alternative Minimum Tax relief for 2007, extend other expiring tax provisions, and offset the cost with various revenue-raising measures. Some have argued that Congress should instead waive its Pay-As-You-Go (PAYGO) rules and deficit finance the cost of the AMT package. … -
The AMT's Growth Was Not "Unintended"
November 30, 2007
Various Administration officials, senators, and House members are urging Congress to waive its Pay-As-You-Go rules and deficit-finance the Alternative Minimum Tax (AMT) “patch.” The AMT’s explosive growth, they argue, was unanticipated and unintended, and so measures to prevent that growth should not have to be paid for. Even if the AMT’s growth were unanticipated, … -
A Tale of Two Bills: The Labor-HHS-Education and Defense Appropriations Bills
Revised November 16, 2007
President Bush has said he will veto the appropriations bill that funds the Departments of Labor, Health and Human Services, and Education for the coming fiscal year, while he plans to sign the bill funding the Department of Defense. The Administration says the funding Congress provides in the Labor-HHS-Education bill is … -
Labor-HHS-Education Bill – What’s at Stake
Revised November 16, 2007
Congress is poised to send the President a bill that provides funding for a broad array of domestic discretionary programs — that is, non-entitlement programs whose funding is provided each year through the annual appropriations process. The Senate on November 7 approved a bill (H.R. 3043) that includes funding for programs … -
Myths and Realities About Changing the Tax Treatment of Private Equity Fund Managers
November 8, 2007
Economists across the political system generally concur that eliminating the tax break for “carried interest” income, a form of compensation received by private equity fund managers, would improve the equity and efficiency of the tax system.[1] The tax code is more efficient when it creates a level playing field. The fact that carried interest income is taxed at the … -
House AMT "Patch" Bill is Fiscally Responsible
November 7, 2007
Later this week, the House of Representatives is expected to vote on legislation that would “patch” the Alternative Minimum Tax for 2007 (H.R. 3996). This analysis highlights three praiseworthy features of the tax package, which was adopted by the Ways and Means Committee November 1. The cost of the package is fully offset. Its adoption by the … -
What Would It Say about Congress’s Priorities to Waive PAYGO for the AMT Patch?
November 7, 2007
In January the House of Representatives reinstated “Pay-As-You-Go” (PAYGO) budgeting rules, and in May the Senate followed suit. PAYGO requires Congress to offset the cost of any legislation that increases entitlement spending or reduces revenues. As a CBPP analysis released today explains, Congress to date has complied with the PAYGO rules.[1] Both houses of … -
Ways and Means Committee Chairman Charles Rangel's Proposed Expansion of the EITC for Childless Workers
October 25, 2007
The tax reform plan released today by Ways and Means Committee Chairman Charles Rangel includes a sizable increase in the component of the Earned Income Tax Credit available to low-income working adults who are not raising minor children. Senators Barack Obama, Evan Bayh, and John Kerry and Representatives Bill Pascrell, John Yarmuth, and Keith … -
An Unlimited Estate Tax Exemption For Farmland Unnecessary, Open to Abuse, and Likely to Hurt, Rather than Help, Family Farmers
October 1, 2007
There is overwhelming evidence that the estate tax has never posed a significant problem for farmers. According to the Congressional Budget Office, only 1,659 farmers nationwide owed any estate tax in 2000, when the estate tax exemption stood at just one-third of its current level.[1] Some 1,521 of these estates — or 92 percent of them — had liquid assets that exceeded … -
Ensign Amendment Would Undercut Immigration Bill Goals by Imposing Unaffordable Tax Burdens on Many Immigrants
Revised September 28, 2007
An amendment to the Senate immigration bill filed by Senator John Ensign (R-NV) would prevent undocumented workers who are paying back taxes as part of legalizing their status from claiming the tax credits available to all other tax filers. It would also deny these workers any tax refunds the IRS might owe them because of overwithholding. As a result, undocumented workers seeking to … -
Higher Taxes on Carried Interest Would Be Borne By Investment Fund Managers
September 19, 2007
In the past few weeks, the Senate Finance and the House Ways and Means Committee have both held hearings investigating the tax treatment of carried interest, a form of compensation prevalent in the private equity industry. As part of their contractual arrangement with investors, the managers of a private equity fund typically … -
The Internet Tax Freedom Act and the "Digital Divide"
September 10, 2007
Congress is again considering whether to make the “Internet Tax Freedom Act” (ITFA) permanent. Enacted in 1998 and temporarily renewed in 2001 and 2004, ITFA banned new state and local taxes on “Internet access” services. States and localities were barred from imposing their sales taxes on the typical $10 to $50 monthly fee … -
CBO Analysis Shows Economic Benefits of Fiscal Sustainability Are Large and Nearly the Same Whether Taxes Are Raised or Spending Is Cut
September 10, 2007
The economic benefits of reducing long-run deficits are very large, and there is only a modest difference between the economic effects of shrinking deficits by raising taxes and doing so by cutting expenditures. This is the key conclusion of a recent Congressional Budget Office response to a request from Senator Judd Gregg (R-NH), the ranking … -
Making the “Internet Tax Freedom Act” Permanent Could Lead to a Substantial Revenue Loss for States and Localities
Revised August 30, 2007
On May 23 and July 26, 2007, the Senate Commerce Committee and the Subcommittee on Commercial and Administrative Law of the House Judiciary Committee, respectively, held hearings on the “Internet Tax Freedom Act” (ITFA). ITFA was enacted in 1998 and renewed in 2001 and 2004. The law generally bars state and local taxation … -
Historical Averages Not a Meaningful Benchmark for Future Revenues
August 22, 2007
The “Mid-Session Review” that the Office of Management and Budget issued last month projects that revenues will be slightly above their 30-year average in 2007, measured as a share of the economy. The Administration and many of its supporters have cited this fact as evidence that current tax policies are generating an … -
Administration’s Proposed Tax Deduction for Health Insurance Seriously Flawed
July 31, 2007
In an attempt to revive its proposal to establish a new standard tax deduction for the purchase of health insurance, the Administration has injected the proposal into the congressional debate over renewing and strengthening the State Children’s Health Insurance Program (SCHIP). The Administration has threatened to veto the … -
An Analysis of the "Carried Interest" Controversy
July 31, 2007
This week, the Senate Finance Committee is scheduled to hold a second hearing on the tax treatment of “carried interest.” A carried interest is a right to receive a specified share (often 20 percent) of the profits ultimately earned by an investment fund without contributing a corresponding share of the fund’s financial capital. It is part of the standard … -
Would Tax Incentives Be an Effective Way to Expand Health Coverage for Low-Income Children and Families?
July 31, 2007
In recent weeks, the Administration has threatened to veto legislation in Congress that would reauthorize the SCHIP program and extend health coverage to several million uninsured children. As an alternative, the Administration has touted the virtues of the private insurance market and attempted to revive consideration of its proposal to … -
The Effects of the Capital Gains and Dividend Tax Cuts On the Economy and Revenues
Revised July 12, 2007
With the fourth anniversary of the 2003 capital gains and dividend tax cuts just past and the Office of Management and Budget’s Mid-Session Review released today, supporters of making these tax cuts permanent are reiterating their claim that the tax cuts boosted the economy and increased federal revenues. For example, a release from the Senate Republican Policy Committee contends … -
Analysis of Sessions Amendment to Deny the EITC to People Working Here Legally as a Result of the Senate Immigration Bill (Amendment # 1234)
Revised June 7, 2007
The Senate yesterday adopted an amendment to the Senate immigration bill offered by Senator Jeff Sessions (R-AL). Undocumented immigrants already are ineligible for the EITC. The Sessions amendment would deny this important tax credit to low-income workers who have legal status.[1] This approach is inequitable and unwise. It … -
Analysis of Sessions Amendment to Deny the Eitc to Many Legal Permanent Residents (Amendment # 1235)
June 6, 2007
Senator Sessions has filed an amendment to the Senate immigration bill that would deny the Earned Income Tax Credit to hundreds of thousands of taxpayers already working in the country legally. Under the amendment, legal permanent residents — often called “green card” holders — would be ineligible for the EITC for the … -
A Significant Number of Students in Every State Are Shut Out of Federal Higher Education Tax Credits
June 1, 2007
As early as next week, the Senate Finance Committee is expected to vote on legislation restructuring the higher education tax credits. The federal tax code includes two tax credits that offset tuition costs for students enrolled in higher education: the Hope Credit, worth up to $1,650, and the Lifetime Learning Credit, worth up … -
Making Higher Education Tax Credits More Available To Low- And Moderate-Income Students: How and Why
May 10, 2007
Senate Finance Committee Chairman Max Baucus has indicated that his committee will soon mark up education tax incentives. In addressing this issue, the Finance Committee should start by considering how to improve the existing tax credits for higher education. In particular, it should consider reforms that … -
Alternative Approaches to AMT Reform
Revised April 30, 2007
The Subcommittee on Select Revenue Measures of the House Ways and Means Committee recently held hearings on the Alternative Minimum Tax, and Subcommittee Chairman Richard Neal has said he is developing a proposal for permanent, revenue-neutral AMT reform. According to news accounts, the proposal will take the form of an AMT … -
What the 2007 Trustees' Report Shows about Social Security
April 24, 2007
Executive Summary On April 23, the Social Security Board of Trustees released the 67th annual report on the program’s financial and actuarial status. The report projects that Social Security’s trust fund reserves will be exhausted in 2041, one year later than in last year’s projection. In 2041, Social Security will be … -
Op-Ed: Are Americans Overtaxed?
April 17, 2007
No one likes paying taxes – least of all Americans. But, despite well-worn assertions to the contrary, Americans are not paying too much – at least not by historical standards, not compared to other developed countries, and most importantly, not in light of the revenues needed to maintain the size of government that … -
CBO Provides New Evidence That the 2001 And 2003 Tax Cuts Have Only Modest Economic Effects and Do Not Pay For Themselves
April 13, 2007
A new analysis by the Congressional Budget Office finds that extending the 2001 and 2003 tax cuts could result in a modest increase in the number of hours that people work. However, any “dynamic” revenue gains associated with the resulting increase in wages and salaries would pale in comparison with the cost of extending the tax cuts. Those … -
CBO Provides New Evidence That the 2001 and 2003 Tax Cuts Have Only Modest Economic Effects And Do Not Pay For Themselves
March 29, 2007
In a new study, Thomas Piketty and Emmanuel Saez, economists who have done groundbreaking work on the historical evolution of income inequality in the United States, examine how the progressivity of the federal tax system has changed over time.[1] Unlike previous analyses, theirs examines effective federal tax rates going back to 1960, including income, payroll, corporate, and estate taxes, … -
New Study Finds "Dramatic" Reduction Since 1960 In The Progressivity of the Federal Tax System
March 29, 2007
In a new study, Thomas Piketty and Emmanuel Saez, economists who have done groundbreaking work on the historical evolution of income inequality in the United States, examine how the progressivity of the federal tax system has changed over time.[1] Unlike previous analyses, theirs examines effective federal tax rates going back to 1960, including income, payroll, corporate, … -
Tax Foundation Figures Do Not Represent Typical Households' Tax Burdens
Revised March 29, 2007
Each year, the Tax Foundation releases a report projecting “Tax Freedom Day,” which it describes as the day when “Americans will finally have earned enough money to pay off their total tax bill for the year.” Over the years, many pundits and policymakers have misinterpreted the Tax Foundation’s report as reflecting the tax … -
State Earned Income Tax Credits and the "Overpayments" Issue
March 28, 2007
The federal Earned Income Tax Credit is a tax credit for low- and moderate-income working families. The EITC is widely hailed for its success in subsidizing work, reducing poverty and making the tax code fairer. For these reasons, 20 states have enacted EITCs that piggyback on the federal credit and thereby further its successes. … -
The Alternative Minimum Tax, The President's Budget, and the Congressional Budget Resolutions
March 28, 2007
This week, the House of Representatives will consider the budget resolution that the House Budget Committee approved March 22. The House Budget Committee plan adheres to the Pay-As-You-Go (PAYGO) budget rules that have been in force in the House since January. These rules require that the cost of any legislation that increases entitlement spending or reduces revenue be offset. … -
Key Argument Against Applying Pay-As-You-Go To Tax Cuts Does Not Withstand Scrutiny
March 22, 2007
In early January the House of Representatives instituted a “pay-as-you-go” rule, under which entitlement expansions and tax cuts — including the extension of expiring provisions of law that expand entitlement programs or cut taxes — must be paid for through offsetting entitlement reductions or tax increases. (PAYGO rules do not … -
The 2001 and 2003 Tax Cuts and Small Business
March 21, 2007
The Bush Administration and Congressional supporters of the 2001 and 2003 tax cuts have often asserted that these tax cuts, and especially the reductions in the top two income tax rates, are of great value to small business. They argue that failure to extend these tax cuts would cause significant harm to small business owners. An examination of the relevant data demonstrates, … -
Economic Effects of the Pay-As-You-Go Rule
March 19, 2007
The budget resolution approved March 15 by the Senate Budget Committee would reinstate in the Senate the Pay-As-You-Go budget rule that was in force during the 1990s. (The House of Representatives reintroduced the PAYGO rule several months ago.) PAYGO requires that the costs of any legislation that increases entitlement spending or decreases revenues be offset. Thus, if adhered … -
Have the 2001 and 2003 Tax Cuts Made The Tax Code More Progressive?
March 19, 2007
With debate beginning on the Senate budget resolution, congressional supporters of the 2001 and 2003 tax cuts have begun recycling old arguments for extending all of these tax cuts. Among these is the claim that the tax cuts have made the tax code more progressive. The reality is that the tax cuts have made the tax code more regressive. A progressive tax code is one that makes the … -
"Small Business" Tax Package in Senate Minimum Wage Bill Poses Fiscal Risks
February 27, 2007
On February 1, the Senate passed a minimum wage bill that includes a package of business tax cuts. The cost of these tax cuts is $8.3 billion over the ten years from 2007 to 2016. On February 16, the House of Representatives passed a much smaller package of business tax cuts, the cost of which is $1.5 billion between 2007 and 2016 (and $1.3 billion between 2007 and 2017[1]). … -
Why The Cost of AMT Relief Should Be Included in Estimates of the Cost of Extending the President's Tax Cuts
Revised February 20, 2007
The President’s budget estimates that extending the 2001 and 2003 tax cuts would cost $1.7 trillion over the next decade (2008-2017). (A figure of $1.6 trillion has been cited by a number of media outlets, but this number leaves out the increased outlays that will result from extending the refundable tax credit expansions enacted in 2001; the Administration’s estimate of the … -
A State EITC Is a Cost-Effective Way to Ease Hawaii’s High Income Tax Burden on the Poor
February 14, 2007
Hawaii continues to impose a higher income tax burden on low-income working families than almost any other state. A costly tax cut enacted in 2006 did little to address this problem. As a result, Hawaii continues to collect income tax from families with income thousands of dollars below the poverty line. And families in poverty … -
Myths and Realities About the Alternative Minimum Tax
February 14, 2007
The Alternative Minimum Tax was created in 1969 to ensure that the highest-income households could not exploit loopholes, exclusions, and deductions to avoid paying any federal income tax. The AMT acts as a stop-gap tax system, with taxpayers owing their regular income tax or AMT liability, whichever is higher. Because … -
How Much Would A State Earned Income Tax Credit Cost in 2008?
February 7, 2007
This report was updated on March 5, 2008 to reflect new data. Click here to view the new analysis. Twenty states have enacted tax credits for low- and moderate-income working families based on the federal Earned Income Tax Credit. A number of additional states are considering enacting EITCs in the 2007 legislative session. … -
Revenue Losses from Repeal of the Alternative Minimum Tax Are Staggering
Revised February 1, 2007
As is increasingly well known, a growing number of taxpayers will become subject to the Alternative Minimum Tax over the next ten years if relief from the tax (which has been provided by Congress on a year-to-year basis) is not extended. A growing fraction of those affected by the AMT will be middle- or upper-middle class families. The Urban … -
Two High Income Tax Cuts Not Yet Fully in Effect Will Cost Billions Over the Next Five Years Freezing the Tax Cuts at 2007 Levels Would Yield Significant Savings
February 1, 2007
On January 5, the House of Representatives voted to reinstate the “Pay-As-You-Go” (PAYGO) budgeting rule, and Democratic leaders have promised that the Senate will follow suit. Because PAYGO requires that legislation that increases entitlement spending or reduces revenues be paid for, the rule increases the need to find offsets to pay for high priority legislation and to … -
Testimony of Robert Greenstein on Economic Security and Long-term Budget Projections
January 30, 2007
I appreciate the invitation to appear before you today. I direct the Center on Budget and Policy Priorities, a nonprofit policy institute that conducts research and analysis on fiscal policy matters, as well as on programs and policies for low-income families and individuals. Last winter, the Center was asked by the Carnegie Roundtable on Economic … -
The Long-Term Fiscal Outlook Is Bleak
January 29, 2007
In 2006, the federal government ran a deficit of $248 billion, or about 2 percent of the economy. Deficits are projected to average about 2 percent of GDP over the next ten years, assuming the 2001 and 2003 tax cuts are extended. After that, the fiscal situation is expected to deteriorate markedly. In this analysis, we present new projections for the … -
If You're Going to Do Social Policy Through the Tax Code, Do it Right
January 24, 2007
The most contentious issues in tax policy are not going to be settled in the next two years. President Bush and the Democratic Congress are unlikely to come to a sustainable, long-term agreement on the level of revenue — debates on extending the tax cuts or letting some of them expire are likely a matter for the next president and the next Congress. … -
New CBO Report Shows Only Modest Fiscal Improvement
January 24, 2007
Several key findings and conclusions emerge from the new Congressional Budget Office report on the budget and the economy issued today.[1] The CBO report shows significant improvement in the ten-year budget outlook, but the improvement is not nearly as large as a casual reader of the report might think. Part of what appears to be an … -
Research Findings Cast Doubt on Argument That Estate Taxes Harm State Economies
January 9, 2007
In June 2001, President Bush signed federal legislation to phase out the federal estate tax. This legislation repeals the federal estate tax by 2010 and also effectively repealed by 2005 the state “pickup” taxes through which states share in federal estate tax collections. States can prevent this loss of revenue by …
