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Best of Both Worlds on High-Income Tax Cuts

July 27, 2010

Even some key members of Congress who agree that President Bush’s tax cuts for people making over $250,000 are unaffordable have raised concerns that letting them expire in December would slow the already weak economy. Fortunately, Congress can boost short-term growth and help reduce long-term deficits: sunset the high-income tax cuts on schedule, re-channel the near-term revenues to far more efficient ways to generate growth and jobs, and use the long-term savings to reduce the deficit.

The Latest on the Estate Tax

July 22, 2010

A couple of promising developments occurred on the estate tax front yesterday. The Senate soundly defeated (59-39) an effort by Sen. Jim DeMint (R-SC) to repeal the tax permanently. (It expired at the end of 2009 but is scheduled to return in much larger form next year when the 2001 tax cut expires.) And at a teleconference sponsored by United for a Fair Economy, former Treasury Secretary Robert Rubin called on Congress to reinstate a robust estate tax.

Better Uses for Tax-Cut Dollars

July 19, 2010

Former Federal Reserve vice chairman Alan Blinder makes an excellent suggestion in today’s Wall Street Journal: Congress should let the Bush tax cuts for people earning over $250,000 expire in December and use the savings to pay for jobless benefits and other programs that “put more spending into the economy than the tax hike takes out, thus creating jobs.”

Required Reading for Tomorrow’s Senate Tax Cut Hearing

July 13, 2010

Tomorrow morning the Senate Finance Committee begins debate on what to do with the Bush tax cuts, which are set to expire at the end of the year. Here’s some homework to prepare for this important hearing:

Taming the Deficit? Hardly!

July 1, 2010

My colleagues and I have written repeatedly (for instance, here, here, and here) about the need for Congress to enact another round of stimulus legislation that would extend unemployment benefits and provide additional fiscal relief to states, both of which would help strengthen the fragile recovery.

Senate Moving Backwards on Jobs Bill

June 18, 2010

With the country facing high unemployment and a weak economy in the short term and severe budget problems in the long term, you’d think that senators negotiating a jobs bill would be trying to maximize both its short-term economic boost and its long-term budget savings. You’d be wrong.

Why Closing the S Corporation Loophole Is a Good Move

June 16, 2010

The House-passed tax extenders legislation, which the Senate is now considering, would partially close a loophole that allows shareholder-employees of S corporations to avoid paying payroll tax. These people receive both wages from the firm and a share of the firm’s profits, but they pay payroll tax only on their wages, which gives them a huge incentive to underreport the share of their income that consists of wages in order to reduce their payroll tax liability.

Opponents of Closing “Carried Interest” Loophole Actually Make Opposite Case

June 11, 2010

Policymakers would be well-advised to read a new Tax Notes piece by Douglas Holtz-Eakin, Cameron Smith, and Winston Stoody, which argues against closing a tax loophole that enables investment fund managers to pay taxes on their income – their “carried interest” – at the preferential capital gains rate rather than ordinary income tax rates.

Carried Interest Doesn’t Deserve a Special Tax Break

May 26, 2010

The private equity industry has descended on Capitol Hill to preserve the lower tax rate for something known as “carried interest,” as compared to the tax rate Americans normally pay on the income they earn. While many interest groups try to convince lawmakers that they deserve special treatment, the proponents of this lower tax rate make a particularly unconvincing case.

On Estate Tax, Lawmakers Partying Like It’s 2001

May 13, 2010

Commenting on Senate negotiations over cutting the estate tax below last year’s already-low level, the Wonk Room correctly noted, “We need to be looking at ways to responsibly raise revenues and find cuts in spending that won’t harm already vulnerable residents, not cut taxes for those at the very top of the income scale.”