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Pre-2005 Content Archive

Report

Podcast: Key Differences in the House and Senate Stimulus Plans

This podcast featuring Robert Greenstein and Len Burman (Co-director, Urban Institute-Brookings Institution Tax Policy Center and Senior Fellow, Urban Institute) discusses the key differences between the House and Senate economic recovery packages in both the tax and spending areas and address how Congress should resolve them.

Duration: 25:23

Report

Measure in House Recovery Package — But Not Senate Package — Would Help Unemployed Parents Receive Health Coverage

Key Findings

  • Without federal action, a large number of parents who are laid off during this recession and fall into poverty will be uninsured. In more than half of the states, unemployed parents cannot qualify for Medicaid until their family’s income has sunk below half the poverty line.
  • The House recovery bill would address this problem by temporarily allowing states to provide Medicaid coverage to certain workers and their families who become unemployed during this recession. (The federal government would pay 100 percent of the costs through December 2010.) The Senate bill lacks this provision.
  • The House and Senate bills also would reduce the cost of COBRA health coverage for unemployed workers. But this is no substitute for the House Medicaid provision. Most low-income workers are not eligible for COBRA, and many who are eligible could not afford it even with the assistance in the bills.
Report

Podcast: Reality Check on the Stimulus Debate

This podcast featuring Robert Greenstein discusses whether stimulus proposals being offered in the Senate this week would make the overall recovery package more or less effective in boosting the economy. He also addresses a number of misconceptions circulating around the House and Senate recovery packages.

Duration: 16:50

Report

Proposed Tax Break For Multinationals Would Be Poor Stimulus

Key Findings

  • Some have proposed resurrecting a temporary 2004 measure allowing firms to bring foreign-generated profits to the U.S. at a greatly reduced tax rate. But that measure failed as stimulus when it was tried before. Firms mostly used the earnings not to invest in U.S. jobs or growth but effectively for purposes Congress sought to prohibit, such as repurchasing their own stock.
  • There is no reason to believe that this tax holiday would be more successful now. Since consumer demand is weak, firms would likely retain the repatriated earnings and accompanying tax windfall rather than spend them on domestic investment or hiring.
  • Problems in the credit markets do not justify the tax holiday either. The tax benefits would not be targeted on the firms that are the most credit-constrained and might actually spend the cash.
  • In 2004, Congress explicitly warned that the tax holiday should not be repeated, since this would encourage multinationals to shift U.S. earnings and jobs overseas in anticipation of future tax holidays.
Report

House and Senate Recovery Packages Would Improve Higher-Education Tax Credits

Key Findings

  • The House economic recovery package would help make college affordable, or more affordable, for millions of low- and moderate-income students by strengthening the Hope Tax Credit. This would also help boost U.S. competitiveness by enabling workers to obtain education and skills to improve their productivity. The Senate Finance Committee package is similar.
  • Currently, education tax credits are not available to the students who most need them to afford college: those with low or moderate incomes. The House and Senate packages would extend the Hope Credit to 3.8 million low-income students by making it partially refundable.
  • The package also would expand the maximum credit from $1,800 to $2,500 and modestly broaden the education-related expenses it can offset. This would help millions of students from moderate- and middle-income families who already qualify for the credit.
  • These improvements are particularly important given the current recession. When the labor market is weak, one of the best long-term investments the nation can make is upgrading the skills of its workforce. The more people who go to college and improve their skills, the better positioned the nation will be when the economy begins to rebound.
  • The modest increase in Pell Grants in the House and Senate packages are not a substitute for improving the Hope Credit. Even with the Pell Grant increase, the large majority of low-income students will have substantial unmet financial need.
Report

Big Misconceptions about Small Businesses and Taxes

Key Findings

  • Supporters of various tax benefits for high-income households often claim that failure to maintain them would have an undue effect on many small businesses. But even assuming a broad definition of “small business,” these claims are very often exaggerated or false.
  • Only 1.9 percent of taxpayers with small-business income face either of the top two income tax rates. Thus, allowing the 2001 reductions in these rates to expire as scheduled in 2010 would not affect most small-business owners. Strengthening the Earned Income Tax Credit could help more than seven times as many small businesses as extending the reductions in the top rates.
  • Claims that the estate tax must be largely or entirely eliminated to protect small businesses are misleading as well. According to the Tax Policy Center, in 2009 only 0.003 percent of all estates — that is, the estates of three out of every 100,000 people who die this year — will be small business estates that owe any estate tax.
  • The typical small business is not a wealthy hedge fund. Closing a lucrative tax loophole used by hedge fund managers would have no effect on “mom and pop” businesses.
Report

Payroll Tax Holiday a Poor Stimulus Idea

Key Findings

  • The proposal to suspend the Social Security payroll tax would be costly — a two-month suspension would cost about $120 billion. Yet it would be less effective as stimulus than many other measures, for two reasons.
  • First, too little of the benefit would go to lower-income households, a group that would spend much of any tax cut it receives, while too much of the benefit would go to higher-income taxpayers, a group likely to save much of its tax cut. A worker earning $100,000 would receive ten times as big a tax cut as one earning $10,000.
  • Second, half of the cost of the payroll tax holiday would go for a tax break for businesses. But giving these tax cuts to businesses wouldn’t increase the amount of goods or services that the firms can sell, so most firms would retain (i.e., save) these tax cuts, rather than use them to hire more workers or purchase more products.
  • The Obama Making Work Pay tax cut would provide more “bang for the buck” as stimulus. It focuses solely on workers (rather than firms) and is better targeted on low- and moderate-income households.
Report

Most Large North Carolina Manufacturers Are Already Subject To "Combined Reporting" In Other States

Key Findings

Former Governor Easley and tax policy study groups in North Carolina have periodically called for the enactment of “combined reporting” (CR), a corporate income tax reform aimed at nullifying tax shelters used by large multistate corporations. Some current legislators may be concerned that this could lead companies to leave the state or shun it for new investments. However, an investigation of the location decisions of the 75 largest North Carolina manufacturers demonstrates that such concerns are unwarranted:

  • 60 of the 75 have chosen to maintain facilities in at least one combined reporting state.
  • Almost half have facilities in 5 or more CR states, 17 have facilities in 10 or more, and 1 has facilities in every one of the CR states.
  • 18 have long-maintained their headquarters in CR states, including Cisco Systems, Freightliner, and Georgia-Pacific.
  • Several opponents of CR have facilities in numerous CR states, including Smithfield and Baxter Healthcare.
Report

Number of Homeless Families Climbing Due To Recession

Key Findings

  • New data show that homelessness among families with children is already mounting due to the recession.
  • If unemployment reaches 9 percent, as some experts predict, the ranks of the poor could expand by up to 10 million and the ranks of the very poor by up to 6 million (including up to 1 million very poor families with children), based on the relationship between unemployment and poverty in past recessions. Large increases in homelessness could result.
  • The housing market crisis adds to the risk of increased homelessness. Foreclosures have pushed many families into the rental market, driving up rents in many areas and making housing less affordable.
  • Congress should include in the forthcoming recovery package one-time funding for 200,000 new, non-renewable housing vouchers, along with a substantial increase for HUD’s Emergency Shelter Grant program to prevent an additional several hundred thousand families from becoming homeless. At a cost of one-half of one percent of the overall package, these measures would substantially diminish the increase in homelessness during the recession while also providing effective short-term stimulus. Congress can design these provisions in a way that does not create budget pressures after 2010.
Policy Basics

Property Tax Caps

The property tax is a major source of funding for public safety, schools, roads, libraries, and other services in most American communities.  In recent decades, concern over rising property tax...
Testimony

http://www.cbpp.org/3-25-99socsec.htm

 Mr. Chairman and Members of the Subcommittee on Social Security:I very much appreciate your invitation to testify on the subject of the overall budget framework and Social Security program's...
Report

Recession Could Cause Large Increases in Poverty and Push Millions into Deep Poverty

[T]he current downturn is likely to cause significant increases both in the number of Americans who are poor and the number living in "deep poverty," with incomes below half of the poverty line...There are a series of steps that federal and state policymakers could take to soften the recession’s harshest impacts and limit the extent of the increases in deep poverty, destitution, and homelessness.