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Martin A. Sullivan

Chief Economist


All Posts by Martin A. Sullivan

September 21, 2015 - 9:21 AM EDT
Donald Buffett?
Ever since Mr. 47 Percent with his 14 percent tax rate lost the 2012 presidential election, Republicans have made it their business to connect with working-class Americans. So supply-side economics and all its focus on tax breaks for businesses and investors had to make way for a new kind of thinki... [Read More]
July 27, 2015 - 12:13 PM EDT
Donald Trump vs. Tax Reform
“That deferral is a very valuable thing.” - Donald Trump, March 5, 2015 Donald Trump did not like the tax reform Ronald Reagan signed into law in 1986. In an op-ed in The Wall Street Journal, he called it “one of the worst ideas in recent history.” The reason for his dislike was that the reform... [Read More]
July 20, 2015 - 12:48 PM EDT
Capitalism for Workers: Can Hillary’s Plan for Profit Sharing Lift the Economy?
Inclusive capitalism. Can it possibly be as wonderful as its supporters claim? According to a report released in January by the Center for American Progress (CAP), the think-tank that is the source of many ideas for Hillary Clinton's presidential campaign, workers whose employers provide profit-sha... [Read More]
July 13, 2015 - 1:01 PM EDT
Tax Challenges for the Uber Economy
The sharing economy. The collaborative economy. The Uber economy. It goes by many names. Whatever you call it, the phenomenon of specialized on-line marketplaces connecting small businesses with customers is growing by leaps and bounds. The primary builders of these marketplaces are tech-savvy, ven... [Read More]
July 6, 2015 - 12:49 PM EDT
There Is a Bailout: Obscure Treasury Ruling Provides $8 Billion to Puerto Rico
“There's no one in the administration or in D.C. that's contemplating a federal bailout of Puerto Rico,” White House press secretary Josh Earnest told reporters on June 29. That statement is simply false. It may be true that the Treasury is not contemplating cash subsidies or loan guarantees for... [Read More]
June 8, 2015 - 2:49 PM EDT
Patent Box: Good Intentions Gone Bad
Tax reformers and economists usually hate tax breaks. The way they see it is like this: Unprincipled politicians can't resist giving away goodies. So our tax code is littered with complications designed to channel subsidies to the well-connected. This makes a mess of the free market. The economy'... [Read More]
June 1, 2015 - 12:40 PM EDT
How Grover Norquist's Pledge Can Hurt the Conservative Cause
The Taxpayer Protection Pledge was first sponsored by antitax activist Grover Norquist in 1986. No one who follows tax policy can deny that it has had enormous influence over the last quarter-century. Rather than incur the wrath of the media-magnetic Norquist, pledge signers avoid tax increases lik... [Read More]
May 18, 2015 - 1:00 PM EDT
As in Florida, Rubio Pursues 'Big, Hairy' Goals in the U.S. Senate
In his autobiography, Sen. Marco Rubio, R-Fla., describes two different types of legislation. A proposal can be a "B-HAG, a big, hairy audacious goal," or it can be a "Tallahassee Special" -- a proposal that politicians announce with great fanfare but that makes little real difference in people's l... [Read More]
May 4, 2015 - 9:50 AM EDT
Walker in Wisconsin: A $1 Sweater and $2 Billion in Tax Cuts
Since becoming governor of Wisconsin in 2011, Republican presidential hopeful Scott Walker has signed into law 15 tax bills that have reduced taxes by nearly $2 billion. "Every action of our administration should be looked at through the lens of job creation," Walker told lawmakers in early 2011. I... [Read More]
April 27, 2015 - 8:22 AM EDT
Bush Nomination Would Be Bad News for Tax Reformers
This is the story of how Jeb Bush killed tax reform when he was governor of Florida. In 2001 Florida Senate President John McKay, a Republican, had already announced he was not seeking reelection. McKay decided that before he left office, he would try to reform Florida's loophole-ridden sales tax.... [Read More]
April 20, 2015 - 9:58 AM EDT
As Governor, Jeb Bush Catered Tax Cuts to the Wealthy
When it comes to tax policy, the Bush family has one thing in common: They like to cut taxes on investors. Throughout his four years as president, the top tax policy priority for George H.W. Bush was to cut the capital gains tax rate. Even though a majority in Congress agreed with him, he was block... [Read More]
April 6, 2015 - 12:21 PM EDT
How Much Did Jeb Bush Cut Taxes In Florida?
During his first State of the State address in 1999, Florida Gov. Jeb Bush got a standing ovation when he announced his plan to cut Florida taxes by over $1 billion. “It's not our money,” he told the Republican-controlled Legislature, “it's the people's.” Seven years later, his message rema... [Read More]
March 23, 2015 - 12:53 PM EDT
U.S. Effective CorporateTax Rate Higher Than Foreign Competitors? Not Really
It's a rock-solid fact that the U.S. corporate statutory tax rate is the highest among developed nations and is significantly higher than the average. According to 2014 data from the OECD, the combined federal and state statutory corporate tax rate for the United States is 39.1 percent. The average... [Read More]
March 9, 2015 - 1:11 PM EDT
"Beep, Beep" -- Korean Singer YoonA Wins Model Taxpayer Award
YoonA is a K-pop star. She is 24 years old. She sings. She dances. She acts. She is a fashion icon for teen girls. She has appeared in a number of widely followed Korean serial dramas including Love Rain and The Prime Minister and I. She is one of eight members of the wildly popular band Girls Gene... [Read More]
March 2, 2015 - 12:41 PM EST
High Hopes for Highway Funding: A Bridge to Nowhere
We are driving more efficient vehicles and burning less fuel. Like longer life expectancy, this should be a good thing. But it is awful for government finances. That we live longer means more spending on healthcare. Burning less gas means lower fuel tax collections. As a result, the Highway Trust F... [Read More]
February 23, 2015 - 12:58 PM EST
The Tax Reform Supermarket
One year ago this month, then-House Ways and Means Committee Chair Dave Camp provided American businesses with a glimpse of what politically realistic income tax reform might look like, and they haven't liked what they've seen. They are pleased with the 25 percent corporate rate and the move to ter... [Read More]
February 9, 2015 - 9:10 AM EST
Bond Markets Are Watching: Will Puerto Rico Enact Sweeping Tax Reform?
The economic situation in Puerto Rico is desperate. The territory's more than $70 billion of bonds are junk-rated. New issues of its debt are being purchased by hedge funds rather than by traditional municipal bond investors. It is widely expected that despite plunging oil prices, on which Puerto R... [Read More]
February 3, 2015 - 8:15 AM EST
JCT Report Provides New Insight on Competitiveness
Do U.S. businesses suffer a disadvantage relative to competitors in other major economies? Usually the debate features conservatives pointing to the high U.S. statutory rate (Figure 1), while liberals focus on the effective corporate tax rate as a percentage of GDP (Figure 2). These data are far fr... [Read More]
January 26, 2015 - 2:18 PM EST
Is There Now a Window of Opportunity for Tax Reform?
Tax reform has been at the forefront of the debate about fiscal policy for over four years. In December 2010, at the behest of President Obama, Alan Simpson and Erskine Bowles issued their famous report (“The Moment of Truth”) that suggested getting rid of every tax break in the code and reducing... [Read More]
January 12, 2015 - 3:09 PM EST
Would Congress Dare Pass the Nunes Plan?
Most business tax reform proposals promise two things that American companies really want -- a lower corporate rate and exemption of foreign profits from U.S. tax. Republican Rep. Devin Nunes has a draft proposal, the American Business Competitiveness Act of 2014, that would provide a third major b... [Read More]
December 15, 2014 - 12:33 PM EST
Will Orrin Hatch Lead on Tax Reform?
On December 11 the incoming chair of the Senate Finance Committee, Sen. Orrin G. Hatch, R-Utah, released a 339-page tax reform report written by his staff. It was too short. It contained a lot of things we would expect from a Republican taxwriter: Tax reform should lower individual and corporate ra... [Read More]
December 9, 2014 - 9:31 AM EST
Rand Paul Puts Chokehold on Cigarette Taxes -- He's Got a Point
On December 3, on national television, Sen. Rand Paul blamed politicians who pass cigarette tax laws for the death of Eric Garner, who died in a struggle with New York City police officers after he was arrested for selling loose cigarettes. The junior senator from the Bluegrass State (the number tw... [Read More]
November 17, 2014 - 11:35 AM EST
Why the Upcoming Battle Over Expiring Tax Provisions Matters -- A Lot
In April the Senate Finance Committee agreed to a two-year extension of over 50 expiring tax provisions. The estimated cost is $88 billion over 10 years. Over on the House side, in a series of bills, the Ways and Means Committee approved the permanent extension of 11 expiring provisions. Nine of th... [Read More]
November 10, 2014 - 11:56 AM EST
Your Quick Guide to Dynamic Scoring in the Next Congress
We've been here before. A midterm election has handed Republicans control of both chambers of Congress, and at the top of their to-do list is getting the staff of the Joint Committee on Taxation to adopt dynamic scoring. It happened at the beginning of the 104th Congress in 1995, and all indication... [Read More]
November 3, 2014 - 1:29 PM EST
Immigration Reform in 2015? We Could Use the Money
President Obama would love to have immigration reform as part of his legacy. Republican leaders in Congress want their party to be competitive in the 2016 presidential election and to show they can get things done. So although the odds are steep -- especially if the president sparks the indignation... [Read More]
October 20, 2014 - 12:46 PM EDT
A Double Bias Against Infrastructure
One of the top priorities of Republicans in the next Congress will be the inclusion of macroeconomic feedback effects in the official revenue estimate of tax bills. If a tax change increases economic growth, that growth will increase overall tax revenues. Under current official procedures, these gr... [Read More]
October 6, 2014 - 3:05 PM EDT
Can Multinationals’ Offshore Cash Fund a U.S. Infrastructure Bank?
Increased infrastructure spending is economic nirvana. It gives the economy a supply-side boost by increasing capital formation while also providing a demand-side stimulus that creates jobs. It is one of the surest bets for jobs creation in the economics tool kit. But instead of moving ahead, we ar... [Read More]
September 29, 2014 - 1:27 PM EDT
Can Congress Pass Tax Reform That Would Stop Inversions?
Conservatives correctly point out that proposals to stop inversions from the Obama administration and Democrats in the House and Senate are only stopgap measures—a mere Band-Aid. If Congress were to tighten the anti-inversion rules first enacted in 2004 and further increase the foreign ownership r... [Read More]
September 22, 2014 - 3:19 PM EDT
Should We Give Up On Reagan Style Tax Reform?
This post is based on a September 17 presentation to the working group formulating the tax portion of the National Strategic Agenda for the No Labels Foundation. The landmark Tax Reform Act of 1986 is the inspiration for most tax reform efforts of the last decade, and with good reason. Against all... [Read More]
September 15, 2014 - 9:55 AM EDT
REIT Conversions: Good for Wall Street. Not Good for America.
Whenever one company or a small group of companies is able to wriggle free of the corporate tax, economists face a dilemma. On the one hand, there is some comfort in the fact that the impact of the corporate tax -- our most economically damaging tax -- has been lessened. On the other hand, there is... [Read More]
September 8, 2014 - 1:24 PM EDT
How Much Do Converted and Nontraditional REITs Cost the U.S. Treasury?
Like inversions by U.S. corporations that move their legal domicile outside the United States, conversions by U.S. corporations to real estate investment trusts are fundamental restructurings that provide major tax benefits. Upon announcing these deals, stock prices pop -- so Wall Street is anxious... [Read More]
August 4, 2014 - 2:16 PM EDT
Don’t Count on Tax Reform to Stop Inversions
In the press and on Capitol Hill, the conventional wisdom is that inversions occur because Congress has failed to enact tax reform. The United States has a high corporate tax rate and a worldwide system. Foreign countries have lower corporate tax rates and territorial systems. If the United States... [Read More]
July 28, 2014 - 12:47 PM EDT
A Bipartisan Approach to Stopping Corporate Expatriations
Democrats believe tax reform won't come fast enough to stop the new wave of inversions. And Republicans don't like the proposals by the Obama administration or by congressional Democrats to expand the foreign ownership requirements necessary to allow a corporation to expatriate. But that doesn't... [Read More]
July 21, 2014 - 9:18 AM EDT
Republican Populism and Inversions
There is an increasing gap between the thin slice of the U.S. population that enjoys fantastic wealth and the vast bulk of middle-income Americans whose paychecks have hardly grown at all in two decades. (See the figure below.) Unlike the past, however, Republicans are not minimizing the plight of... [Read More]
July 7, 2014 - 12:10 PM EDT
Will States Get a Multibillion-Dollar Windfall From Corporate Tax Reform?
If Congress follows the classic approach to revenue-neutral corporate tax reform, it will broaden the tax base just enough to offset the revenue loss from lower rates. Many Republicans, like Ways and Means Committee Chair Dave Camp, are gunning for corporate tax reform with a rate reduction from 35... [Read More]
June 30, 2014 - 4:53 PM EDT
States Should Cede Some Taxing Power to the Feds
Economists of all political stripes will tell you that of all our taxes, the corporation tax is the biggest drag on economic growth. Unfortunately for the economy, it is not going away anytime soon. Taxing the profits of big corporations appeals to voters. And now, with the rise of anti-corporate p... [Read More]
June 16, 2014 - 10:39 AM EDT
Big Deal by Low-Tax Medtronic Has Even Bigger Implications
The U.S. corporate tax system is coming apart at the seams. It is built on the presumption that companies headquartered in the United States have their legal domicile in the United States. Twenty years ago it was unthinkable that any U.S. company would move abroad. Now under pressure from private e... [Read More]
June 9, 2014 - 12:09 PM EDT
How Not to Tax the Rich
During the Reagan era, the debate about corporate taxes was different than it is now. Back then, liberals wanted to keep taxes high on corporations because it was a good way to tax the rich. Conservatives countered that high corporate taxes reduced capital spending. With the debate framed in these... [Read More]
June 2, 2014 - 2:11 PM EDT
Corporate Expatriations: More Deals Are Likely
In a May 8 Wall Street Journal op-ed, the Senate's top taxwriter said action would be taken against U.S. businesses that planned to change their legal residence by merging with foreign companies. Finance Committee Chair Ron Wyden, said that any such inversion transaction taking place on or after Ma... [Read More]
May 6, 2014 - 9:13 AM EDT
Piketty, Zuckerberg, and a Plan to Tax Wealth That Conservatives Can Support
With all the books he is selling, Thomas Piketty may soon himself become a member of the 1 percent. His Capital in the Twenty-First Century is a rare phenomenon: a serious economics treatise that has caught the interest of the non-economist reading public. Moreover, its political implications are t... [Read More]
March 10, 2014 - 1:30 PM EDT
If the Camp Tax Reform Bill Won’t Pass, Why Is It So Important?
The conventional wisdom is that House Ways and Means Committee Chair Dave Camp's tax reform proposal (or anything like it) is not going anywhere soon. That conventional wisdom is correct. If anything, folks have been too optimistic. There is a 99.9 percent chance we won't have major tax reform bef... [Read More]
March 3, 2014 - 11:55 AM EST
25 Interesting Features of Camp’s New Tax Reform Plan
Writers tasked with summarizing complicated matters always face the dilemma of either oversimplifying the subject or overwhelming the audience. To be done right, some things take time -- like roasting a duck or exploring the Louvre or learning Italian. But the modern information marketplace has hei... [Read More]
February 28, 2014 - 9:37 AM EST
The Beginning of the End of Tax Reform
Editor's Note: The following post is an economic analysis from Tax Analysts' Tax Notes Today You can only stall so long on the details of tax reform. On February 26 the clock ran out. House Ways and Means Committee Chair Dave Camp, R-Mich., provided 194 pages of details, and now tax reform gold has... [Read More]
February 24, 2014 - 3:28 PM EST
Can Dynamic Scoring Save Tax Reform? Don't Count on It
House Ways and Means Chair Dave Camp's noble efforts to overhaul the U.S. tax system will reach a crescendo this week when he releases his tax reform plan. Unfortunately, over the last few years the merits of tax reform have been vastly oversold. So when Camp's draft makes plain the harsh reality... [Read More]
February 10, 2014 - 1:03 PM EST
Forget Obamacare for a Minute. Here's Some Good News About Health Policy
Until recently, the conventional wisdom among economists was that the cost of medical care always outpaces growth in the general price level. That's the main reason why healthcare as a percentage of total federal spending (excluding interest) is expected to grow from 24 percent now to 38 percent 2... [Read More]
February 3, 2014 - 2:01 PM EST
Top 10 Reasons There Is No Corporate Tax Reform
On January 29 the American Enterprise Institute and the business group known as the Alliance for Competitive Taxation held a conference in Washington on corporate tax reform. Alan Viard, an outstanding tax economist, was nice enough to ask me to be on a panel with NYU law professor Daniel Shaviro a... [Read More]
January 27, 2014 - 1:20 PM EST
The Obama Administration's Backdoor Bailout of Puerto Rico
Puerto Rico's economy and its government finances are in dire straits. The territory has had eight consecutive years of negative economic growth. Its official unemployment rate is nearly 15 percent. All three credit rating agencies have put its bonds just one notch above junk. Over the last decade... [Read More]
January 13, 2014 - 12:02 PM EST
Stop Beating on the IRS
Tax Analysts has been suing the IRS and pestering its leaders with pointed inquiries for four decades. Our goal has been to get more accountability and disclosure from the IRS. So I have no problem with any tough scrutiny and criticism of a powerful agency that has the potential to do much harm. De... [Read More]
January 6, 2014 - 1:29 PM EST
Goodbye Baucus, Hello Wyden
In 1976, when Daniel Patrick Moynihan was first elected to the Senate, he opted for a seat on the Senate Finance Committee. When asked why, he responded, Willie Sutton-like, “Because that's where the money is.” The Senate Finance Committee has jurisdiction over 99 percent of all revenue collect... [Read More]
December 9, 2013 - 12:19 PM EST
Farewell to Feel-Good Tax Reform
“The Ways and Means Committee will write, act on and pass comprehensive tax reform legislation in 2013 . . . Let me repeat that: We intend to move a comprehensive tax reform bill in 2013 — no matter what.” - Chair Dave Camp, Nov. 15, 2012 "We're running out of time, and I have no plan to introd... [Read More]
November 18, 2013 - 12:22 PM EST
The Quirky Economics of $2 Trillion in Offshore Cash
The prospects for any near-term meaningful progress on tax reform are fading fast. Some people say the Republican leaders have put tax reform on ice because they don't want any distractions to divert public attention from President Obama's health insurance debacle. In public, Ways and Means Committ... [Read More]
November 4, 2013 - 12:14 PM EST
Ireland Is a Bagel
It would be hard to overstate the importance of reputation in international tax. Cross-border tax planning involves extremely arcane and technical rules that only brainy experts can understand. But the opinion of regular people matters, too. If, as in the United Kingdom, the general public perceive... [Read More]
October 28, 2013 - 1:23 PM EDT
'Extortion' and the Research Credit
In a 2012 book from Yale University Press (Innovation Economics: The Race for Global Advantage), Robert Atkinson and Stephen Ezell explore the fascinating topic of innovation in the increasingly globalized modern economy and the government policies that can promote it. The authors got my attention... [Read More]
October 21, 2013 - 12:52 PM EDT
Tax Policy in a Knowledge-Based Economy
We need a new economics. Until the tech revolution of the 1990s, economists' conceptualization of production portrayed reality reasonably well. Businesses hired labor and purchased capital to make the things that improved consumers' well-being. To promote employment, productivity, and economic gro... [Read More]
October 7, 2013 - 12:19 PM EDT
Should Small Business Have Veto Power Over Corporate Tax Reform?
It just isn't paranoia. Small business has the right to feel persecuted. First, there has been a big push from all quarters over the last few years for corporate tax reform that would pay for lower rates by getting rid of business tax breaks. The problem is that businesses not subject to corporate... [Read More]
September 23, 2013 - 10:48 AM EDT
Built-In Biases Put Profits in Tax Havens
Civilians not enlisted in the armies of lawyers, accountants, and economists who battle over multinational taxes for a living must wonder, "Why is it so difficult for governments of advanced economies to prevent profit shifting to tax havens?" Part of the answer lies in the fact that long ago, gov... [Read More]
September 16, 2013 - 9:30 AM EDT
U.S. Tax Exceptionalism
The United States is the only nation of any significant size without a VAT. The United States also has the world's highest corporate tax rate. Those two facts are not unrelated. Despite ever-tightening budgets, governments around the world over the last two decades have steadily reduced their corpo... [Read More]
September 9, 2013 - 3:29 PM EDT
A Tax Reform Hero
In the gritty, grimy sausage factory of tax policymaking, it is rare to find a legislator who puts principle ahead of political gain. But if you were paying attention to the evolution of North Carolina's tax reform over the first six months of 2013 you would have been very pleasantly surprised. Se... [Read More]
August 26, 2013 - 9:40 AM EDT
New Hampshire’s Value Added Tax
New Hampshire has no income tax and no sales tax. So it should come as no surprise that the Granite State relies heavily on alternative sources of revenue. Two of those are the state's Business Profits Tax and Business Enterprise Tax. The Business Profits Tax is an 8.5-percent tax on the profits o... [Read More]
August 19, 2013 - 8:56 AM EDT
A Dark Cloud Over Silicon Valley
House Ways and Means Committee Chairman Dave Camp (R-Michigan) and Senate Finance Committee Chairman Max Baucus (D-Montana) are in San Francisco on Monday and Santa Clara on Tuesday to promote tax reform. On July 1 the pair was in Minnesota and on July 29 they visited small businesses in New Jersey... [Read More]
August 12, 2013 - 9:12 AM EDT
Cold-Hearted Tax Reform
Perhaps it still goes on: silk-suited, Gucci-clad lobbyists buttonhole legislators outside hearing rooms to remind them that their big business clients are funding their re-election campaigns. This is the image that tax reformers like to stir into the heads of the public when they are cheerleading... [Read More]
August 5, 2013 - 9:48 AM EDT
Tax Reform: Will the Chairmen Offer Real Plans or Gimmicks?
“Get rid of the deductions that don't affect me.” -small business owner speaking to Camp and Baucus It borders on the unbelievable that both Ways and Means Committee Chairman Dave Camp (R) and Senate Finance Committee Chairman Max Baucus (D) have vowed (here and here) to hold a markup of major t... [Read More]
July 22, 2013 - 9:21 AM EDT
How Will Business Lobbyists Spin the OECD Action Plan?
"This action plan, which we will roll out over the coming two years, marks a turning point in the history of international tax co-operation. It will allow countries to draw up the co-ordinated, comprehensive and transparent standards they need." --OECD Secretary-General Angel Gurria “They know the... [Read More]
July 15, 2013 - 8:34 AM EDT
Virginia Gas Tax Cut: Drivers Short-Changed at the Pump?
On July 1, Virginia's 17.5 cent per gallon gas tax was repealed. It was replaced with a 3.5 percent sales tax on the wholesale price of gasoline. The new sales tax on gas works out to be a levy of 11.1 cents per gallon. The net effect is a 6.4 cent tax cut. Unluckily for politicians in Virginia the... [Read More]
July 8, 2013 - 9:42 AM EDT
Effective Corporate Rate 13 Percent?
There are as many ways to calculate an effective tax rate as there are ways to order coffee at Starbucks. So when you hear reports about an effective tax rate, it can mean a lot of different things. Small changes in what may seem to be obscure details make a big difference. And because effective ta... [Read More]
July 1, 2013 - 8:08 AM EDT
Tax Reform: Coming Around the Clubhouse Turn?
Newspapers and other media outlets have a built-in bias to exaggerate. They know that no matter how true it may be, if a headline reads “Nothing Really Important Happened Today” their hit count and their ratings will drop. And so would their already fast-dwindling revenue. So editors and writers... [Read More]
June 24, 2013 - 9:51 AM EDT
Questions About Pfizer’s Taxes
Over the last five years American pharmaceutical giant Pfizer earned on average over $10 billion of annual worldwide pre-tax profits. How much of this profit was attributable to its U.S. operations? Answer: none. In fact, according to annual reports filed with the Securities and Exchange Commission... [Read More]
June 17, 2013 - 12:17 PM EDT
"We Want That Money Back"
There is a new corporate tax coalition in town. Such a statement would normally be as newsworthy as any other commonplace and irrelevant Washington phenomena such as "Congress is in session" or "President releases budget." But the newly-formed Alliance for Competitive Taxation has several features... [Read More]
June 10, 2013 - 9:33 AM EDT
Multinational Profits: Here, There, or Nowhere?
Two weeks ago the Senate Permanent Subcommittee on Investigation (PSI) had a hearing on Apple's ability to put a large portion of its worldwide profits outside the United States and in Ireland. Last week the OECD and a bunch of business groups held two-day conference in Washington DC on the OECD's... [Read More]
June 3, 2013 - 9:49 AM EDT
More than 80% of “Tea Party” Applications Should Have Been Reviewed Anyway
One part of the TIGTA report that has received scant attention in the press or during congressional hearings is its findings on the accuracy of the selection process used by the IRS to identify potential political cases. For a period of time, the IRS used name-based and policy-based criteria to sel... [Read More]
May 28, 2013 - 7:53 PM EDT
TIGTA Report Implies a Lot, Proves Little, About Bias at the IRS
The Treasury Inspector General for Tax Administration's report that is at the center of the current firestorm over potential political bias at the IRS asserts that the IRS used “inappropriate criteria” to choose applications for tax exempt status that would be subject to further review. These cr... [Read More]
May 20, 2013 - 9:14 AM EDT
Preview: Grilled Apple on the Menu
Tomorrow there will be two Senate hearings on taxation. The first is the Senate Finance Committee hearing on IRS inappropriate targeting of conservative groups applying for 501(c)(4) status. Although discrimination based on political belief is a serious problem, qualification for 501(c)(4) status i... [Read More]
May 13, 2013 - 9:24 AM EDT
Do U.S. Multinationals Have It Tough?
At the behest of the G20 the OECD has launched a major effort to limit profit shifting by multinational corporations. Some in the U.S. have expressed concern that this OECD "BEPS" (base erosion and profit shifting) initiative has been motivated by foreigners and their governments' desire to bash U... [Read More]
May 6, 2013 - 8:44 AM EDT
Fast Track to Nowhere
Although the formal expiration of the debt limit is May 19, the ability of the Treasury Department to juggle some internal accounts is likely to extend the effective deadline until late summer. Nothing is certain, but the real deadline is likely to crop up in September or even October. This sets th... [Read More]
April 29, 2013 - 9:30 AM EDT
To Balance the Budget: Tax Sex Appeal
Sometimes it is said all philosophy is a footnote to Plato. Perhaps it should also be said that all political satire is a footnote to the Irish clergyman Jonathan Swift. In his many works, Swift unmercifully challenges the status quo with unsurpassed wit and humor. Though they have just as much raw... [Read More]
April 22, 2013 - 9:33 AM EDT
Horse Racing and International Tax
In international tax, determining whether the price is right is everything. A multinational can save hundreds of millions of dollars in tax by “selling” foreign rights to its intellectual property (IP) to a wholly-owned subsidiary in a tax haven. The key to success for a multinational is getting... [Read More]
April 15, 2013 - 9:29 AM EDT
OECD Doesn’t Want Politics to Interfere with Tax Policy
I was wrong. I thought that The Organisation for Economic Co-operation and Development (OECD) had shrugged off its cautious, conservative tendencies with the issuance of its February 12 report entitled "Base Erosion and Profit Shifting." After my first read of the 91-page document I believed the OE... [Read More]
April 8, 2013 - 9:50 AM EDT
How Should the U.S. Stop Profit Shifting?
Suppose the state police want to crack down on speeding, which the public is complaining has become rampant. But the police have a problem with enforcement. Some savvy entrepreneur has developed an anti-radar gun that blocks the ability of radar guns to measure speed. And separately, a court has ru... [Read More]
March 25, 2013 - 9:37 AM EDT
A New Proposal to Promote American Manufacturing
In recent years U.S. multinationals have restructured themselves in a manner that allows them to greatly reduce their worldwide tax bill. This restructuring has been described in detail by the OECD andil and by the Joint Committee on Taxation. In a March 15 presentation at a conference on taxation... [Read More]
March 18, 2013 - 2:38 PM EDT
Are Foreign Multinationals Paying Their Fair Share of U.S. Tax?
Vivid press reports of U.S. companies not paying their fair share of tax in the United Kingdom has motivated the Conservative-led government to take the lead on coordinating international efforts to curb aggressive tax avoidance. The last time the U.S. public got upset about foreign corporations no... [Read More]
March 11, 2013 - 10:16 AM EDT
Showdown in Kansas: Realtors vs. Governor
"In case there is any doubt I want you to know we will preserve the part of the American dream which the home mortgage interest symbolizes." -President Ronald Reagan to realtors, 1984 Founded in 1872 on the Santa Fe Trail and the Atchison, Topeka & Santa Fe Railroad, Dodge City--"the Cowboy Capita... [Read More]
March 4, 2013 - 9:47 AM EST
Red Hot REITs Fire-up Low Tech
Equipment vs. buildings. One of the long-standing debates in tax economics is whether or not investment incentives should be tilted in favor of equipment -- and, by implication, because of its disproportionate investment in equipment—manufacturing. The basic idea is that equipment investment is cl... [Read More]
March 1, 2013 - 8:34 AM EST
A Moral Obligation to Aggressively Lobby
In the United Kingdom a great debate is taking place about aggressive tax avoidance. On one side, David Cameron, the Conservative prime minister, says it is immoral. On the other side, most executives say they have a duty to their shareholders, and most practitioners say they have a duty to their c... [Read More]
February 18, 2013 - 10:49 AM EST
A Proposal to Get Tax Reform Back on Track
By closing some additional loopholes through tax reform — which Speaker Boehner has acknowledged can raise money in a sensible way — and by doing some additional cuts . . . we can arrive at a package that gets this thing done. --President Obama, Jan. 14 The President got his tax increases last ye... [Read More]
February 15, 2013 - 9:36 AM EST
Taxation of Intangibles: Still Hazy After All These Years
This week a lot of very smart people gathered at the Ritz-Carlton in Washington DC for a two-day conference on tax issues related to the taxation of patents, trademarks, know-how and all other types of intellectual property ("intangibles" in tax speak). If you think this an obscure topic let me put... [Read More]
February 11, 2013 - 8:46 AM EST
State of the Union: Stasis or Progress on Taxes?
Fresh from the Democratic retreat in Leesburg Virginia, Rep. Chris Van Hollen of Maryland, ranking member on the House Budget Committee, appeared in a C-Span interview this weekend. Twice he repeated the line we have heard recently from other Democratic leaders--including President Obama and New Y... [Read More]
February 8, 2013 - 9:21 AM EST
Tax Revolution in the Red States?
"Talk doesn't cook rice." -Chinese Proverb Has anybody else noticed the new fad in tax policy? Whet the public's appetite and grab headlines with a lot of loud and happy talk about your intent to dramatically cut tax rates. And then mumble some vague notions about ways to pay for those cuts. Mitt... [Read More]
February 4, 2013 - 9:17 AM EST
Watch Out for Tomorrow's CBO Budget Report
Tomorrow the Congressional Budget Office will release its semi-annual Budget and Economic Outlook. The report will provide the economic and budget projections that will be the basis of the contentious budget debate that will take place over the next few months. What may be surprising to some is tha... [Read More]
February 1, 2013 - 10:39 AM EST
Is Aggressive Tax Avoidance Moral?
In a cramped and drab committee room four highly-compensated tax partners from the world's largest accounting firms looked like they would rather be mopping floors than answering the questions of Committee Chair Margaret Hodge. The senior UK legislator did a good job of expressing the frustration o... [Read More]
January 28, 2013 - 11:00 AM EST
Taxing Financial Pollution
European finance ministers ("finance minister" is equivalent to our Treasury Secretary) voted on January 22 to move forward with a plan to tax trades of stock, bonds, and other financial instruments. As a result a financial transactions tax will likely become law in eleven countries--including Germ... [Read More]
January 25, 2013 - 10:22 AM EST
UK Conservative Policies in Trouble
This morning UK GDP figures for the 4th quarter of 2012 were released and the news is bad: the economy shrank by 0.3 percent. After the mini-burst of growth due to the Olympics, the UK economy is back in the doldrums. Some are calling it a triple dip recession. The chart below shows why the UK voti... [Read More]
January 21, 2013 - 9:07 AM EST
“Now it's about loopholes.”
After a post-fiscal-cliff lull, the talk about tax reform has picked up again (here, here, and here). But we are no closer than before because of the fundamental irreconcilable differences between the parties. The President and congressional Democrats are insisting on revenues in addition to the $6... [Read More]
January 14, 2013 - 8:56 AM EST
IRS: Women At Work
"“It's embarrassing as hell. " That's what senior House Democratic tax-writer Charlie Rangel said last week about President Obama's white-male dominated second term cabinet. Perhaps Mr. Rangel can take some solace in the fact that the agency that adminsters the laws he has been so instrumental in... [Read More]
January 11, 2013 - 8:43 AM EST
Tax Reform Muddle
According to many commentators the prospects for tax reform are plummeting (Fiscal Times, Reuters, Politico). Although it is always a good bet to be pessimistic about the chances for tax reform, I'd say these writers are overstating the effects of the fiscal cliff on the prospects for tax reform. L... [Read More]
December 14, 2012 - 1:28 PM EST
Capital Gains Frustration for Tax Reformers
The Treasury tax expenditure budget tallies the cost of the 15-percent preferential rate on capital gains at $62 billion in 2013. That's a nice chunk of change that could be used for deficit reduction or lowering rates. And because the super rich get a lot of their income in the form of capital gai... [Read More]
December 10, 2012 - 9:17 AM EST
Is the Charitable Deduction a Sacred Cow?
For the federal government the price tag on the charitable deduction was approximately $36.3 billion in 2010. And, as shown in the chart below, 58 percent of that accrued to the benefit of taxpayers with over $200,000 of income. But there is a halo around this tax break. After all, it subsidizes m... [Read More]
December 7, 2012 - 11:40 AM EST
The Most Important Intangible Asset: Reputation
"The main point is not that accusations are often unjustified, but the fact that they are made at all. Tax has news value now and, although often unfounded, 'naming and shaming' attacks on alleged tax avoiders can damage their reputations in the eyes of important stakeholders, which can lead to sha... [Read More]
December 4, 2012 - 8:40 AM EST
Democrats Needlessly Insisting on Rate Hikes
The lead editorial in this morning's New York Times perpetuates a myth that has become a needless sticking point in the current budget debate. It states: If Mr. Boehner had used a calculator, for example, he would have discovered it is impossible to produce $800 billion in revenue from eliminating... [Read More]
December 3, 2012 - 1:10 PM EST
Will Republicans Limit Mortgage Interest?
Until recently it was just a few wild-eyed tax reformers (like myself) who wanted to take away your mortgage interest deduction. Now that Republicans have drawn a no-tax-rate-increase line in the sand over which they will not cross, leading Republicans now find themselves in the position where they... [Read More]
November 30, 2012 - 8:47 AM EST
How To Limit the Deduction for State and Local Taxes
In October 1985 the Ways and Means committee was in turmoil. Chairman Rostenkowski was desperately trying to get votes to pass his version of President Reagan's plan for tax reform. To pay for lower rates the plan from the White House included complete elimination of the state and local tax deducti... [Read More]
November 26, 2012 - 8:36 AM EST
Should CEOs Lobby for a Carbon Tax?
It seems like a million years ago that John McCain was a leading advocate of cap-and-trade, the economic equivalent of a carbon tax. In 2003 he said: “It is time for the United States government to do its part to address this global problem, and a discussion of mandatory reductions is the form of... [Read More]
November 15, 2012 - 12:31 PM EST
The Hidden Economic Damage of Deduction Caps
Prominent Democrats like former Clinton Treasury Secretary Robert Rubin and current New York Senator Charles Schumer are all reading from the same talking points: They are asserting that without rate hikes on the wealthy it is not possible to raise enough revenue--we're talking in the neighborhood... [Read More]
November 9, 2012 - 7:14 AM EST
Tax Reform 2.0
All the public hears -- and all the politicians want it to hear -- is the siren song of lower rates and implausibly easy deficit reduction through "closing loopholes." And many commentators like to remark that there is bipartisan consensus for tax reform -- especially corporate tax reform -- implyi... [Read More]
November 8, 2012 - 7:32 AM EST
Wanna-Be Tax Reformers Need a Dose of Reality
The table below summarizes some of the more prominent tax reform plans under discussion in recent years. To make life simpler, let's divide the plans getting the most attention into two categories. In the first category, we have two plans proposed not as stand-alone tax reform but as adjuncts to ma... [Read More]
November 7, 2012 - 8:16 AM EST
Tax Reform 1986 Is No Model for 2013
Everybody knows tax reform was an extremely difficult political exercise. But as hard as it was in 1986, tax reform would be much more difficult now. First, the tax system had more potential for reform back in 1986. We had the investment tax credit and unseemly individual tax shelters. The repeal o... [Read More]
November 5, 2012 - 9:18 AM EST
The Post-Election Fiscal Mess
No doubt we are in for some unexpected twists and turns after the election tomorrow. But despite the uncertainty about the outcome of the election and the exact actions the winner will take, much of the immediate future of fiscal policy is predictable. That's because no matter who gets the most ele... [Read More]
October 26, 2012 - 5:00 PM EDT
Cantor Rejects Most of Bowles-Simpson
As Richard Kogan at CBPP recently pointed out in an eye-opening paper, the Bowles-Simpson plan does not work as advertised with $4 trillion of total deficit reduction of which only $1 trillion takes the form of tax hikes. The reality is Bowles-Simpson assumes (1) that the Bush tax cuts are not exte... [Read More]
October 26, 2012 - 8:45 AM EDT
A Watershed Moment: CEOs Say Raise Taxes
As noted in prior posts the critical sticking point on a grand bargain to put government finances on a sustainable path is the intransigence of House Republicans to agree to any tax increases. (Senate Republicans numerous times have signalled willingness to compromise on taxes.) The crystal clear r... [Read More]
October 12, 2012 - 6:45 AM EDT
Business Overstates Its Case on International Taxation
In an op-ed in this morning's Wall Street Journal former Michigan governor and current president of the Business Roundtable John Engler writes that "U.S. companies don't get a tax break for moving plants overseas." It is true, as Mr. Engler states, that the U.S. corporate rate--currently the world'... [Read More]
October 11, 2012 - 8:03 AM EDT
Don't Count on Dynamic Scoring
In this morning's Wall Street Journal David Wessel gives a very nice summary of the issues surrounding dynamic scoring of tax bills. As Republicans have in so many prior episodes of tax controversy, and as they did during the August 2011 failed budget negotiations, Mitt Romney is invoking the growt... [Read More]
October 10, 2012 - 8:43 AM EDT
Schumer's Reality Check
We've heard it many times before: a group of Senators--this time the Gang of Eight meeting in Mt. Vernon, Virginia--are negotiating a "grand bargain" deficit reduction plan. Unless they've got something new up their sleeves, this plan will probably include spending cuts of about $3 trillion and tax... [Read More]
October 9, 2012 - 8:28 AM EDT
Election is a Referendum on Tax Hikes
As noted in a prior post, the critical question for the degree of progress on fiscal policy after the election is the Republican stance on tax increases. This morning's Financial Times reports "a senior Republican aid" in the House arguing that if Obama is elected "we're not going to have much leve... [Read More]
October 5, 2012 - 8:53 AM EDT
Ways and Means Chairman To Cut Corporate Interest?
In today's Washington Post Harvard professor Robert Pozen suggests, as I have in a previous post, that a lower corporate rate could be paid for with a limitation in the deduction on corporate interest payments. But who cares what two tax experts think? As I was surfing the net the other day I disco... [Read More]
October 3, 2012 - 8:57 AM EDT
Romney's Intriguing Idea
Cutting tax breaks one-by-one is trench warfare with some of America's most powerful political lobbies. That's why real world tax reformers always eventually start looking at limits that hit all tax breaks a little bit. The complexity, the diffused effect, and the idea of shared sacrifice all seem... [Read More]
October 2, 2012 - 7:56 AM EDT
Romney Advisor Advocates Tax Hikes
The latest "news" from this morning's New York Times is the same old stuff: Senators are considering a bipartisan "grand bargain" deficit reduction plan of about $4 trillion over 10 years. House Republicans will not consider tax increases. President Obama will not consider a deal without tax increa... [Read More]
October 1, 2012 - 7:54 AM EDT
Wrong Turns At the Fiscal Cliff
I often hear informed individuals shrug off concerns about the fiscal cliff. It is true that the expiration of the Bush tax cuts will only have lasting effects if they are not extended for the whole year. Because the bulk of tax cuts (that is, for families over $250,000) will almost certainly be ex... [Read More]
September 26, 2012 - 8:02 AM EDT
Capital Gains: The Missing Link to Tax Reform?
The big stir about Romney's tax plan--that if you fill in the blanks with likely revenue raisers the plan will result in tax increase for the middle class--all stems from the fact that tax breaks are not evenly spread over income categories. Proportionately, the poor benefits most from the EITC, t... [Read More]
September 24, 2012 - 8:41 AM EDT
The Critical Question
In this morning's Washington Post columnist E.J. Dionne ponders what will happen after the election. He asks the critical questions: "Will Republicans give up on obstruction and the reckless use of the filibuster? Will they be open to compromise on the budget?" According to one theory--favored by... [Read More]
September 22, 2012 - 9:18 AM EDT
Will Obama Victory Kill Tax Reform?
At the moment all the chatter in tax news is about the release of Romney's 2011 tax return. That's politics. Left unnoticed and buried in the middle pages of the Washington Post is an article with huge implications for future policy. In "GOP Retreat on Taxes Likely if Obama Wins" Lori Montgomery an... [Read More]
September 21, 2012 - 6:07 AM EDT
Transfer Pricing and Common Sense
Using its prestige and its unique powers of subpoena, the Senate Permanent Subcommittee on Investigations yesterday afternoon put the spotlight on the billions U.S. multinationals are saving with sophisticated tax planning. Committee Chairman Carl Levin (D-Michigan) and Ranking Republican member To... [Read More]
September 19, 2012 - 8:36 AM EDT
Simple Minded Economics in WSJ Op-Ed
In today's Wall Street Journal former hedge-fund manager Andy Kessler makes the age-old argument that redistribution from rich (job creators) to poor hurts the poor. Indeed, there is an element of truth to his line of reasoning. If the wealthy do more and better investing, the economy can grow and... [Read More]
September 18, 2012 - 4:29 PM EDT
Growing Interest in Trading Rate Hike on Capital Gains for Corporate Rate Cut
In today's Financial Times former Clinton economic advisor Laura D'Andrea Tyson made the case for lowering corporate tax rates and paying for those rate cuts by raising the current 15-percent rate on capital gains (instead of broadening the corporate tax base). "A more efficient and progressive way... [Read More]
September 17, 2012 - 10:00 AM EDT
President Romney's Tax Reform
They'll have to eliminate so many deductions, like the ones for home mortgages and charitable giving, that middle-class families will see their tax bill go up $2,000 a year while people making over $3 million a year will still get a $250,000 tax cut. -- Former President Clinton, Sept. 5 I refuse to... [Read More]
September 4, 2012 - 9:39 AM EDT
The Effects of Interest Allocation Rules in a Territorial System
Most Republicans have proposed that the United States adopt a territorial system of international taxation. However, even if Mitt Romney wins the November election, unprecedented long-term budget pressures will make it difficult for Congress to enact any territorial system that is as generous as bu... [Read More]
August 6, 2012 - 9:21 AM EDT
Treat Corporate Interest Deductions Like Any Tax Expenditure
Should interest expense costs be deductible? To business owners, accountants, and tax lawyers, the question seems totally out of left field. In their eyes, the cost of borrowing money is an expense like any other. Of course it should be deductible. The owner's share of business receipts is what's l... [Read More]
July 2, 2012 - 10:46 AM EDT
The Economic Case for Unlocking Foreign Profits
The WIN America Campaign did not win. The group formed solely for the purpose of securing a repeat of the one-time tax holiday for repatriated foreign profits has little chance of success anytime in the foreseeable future. "For the time being, WIN has ceased lobbying activities given that we're hea... [Read More]
June 29, 2012 - 3:01 AM EDT
The Great Anti-Climax: Using Tax Law to Deliver Economic Incentive is Constitutional
In the Roberts opinion the so-called “individual mandate” is not viewed any differently than hundreds of other provisions in the tax law where Congress uses monetary incentives to do its bidding. As with any other tax incentive, if you do not do what Congress wants—in this case, buy health insur... [Read More]
May 21, 2012 - 12:05 PM EDT
Are You Ready for Taxmageddon?
A combination of spending cuts and tax increases could bring the economy to its knees at the end of 2012. By our count, the economy must deal with nine significant fiscal events that will be automatically triggered by current law if Congress and the president take no action. Together these events c... [Read More]
April 30, 2012 - 11:20 AM EDT
If Romney Wins . . .
Right now voters are leaning toward reelecting President Obama. An average of the latest public opinion polls gives Obama a lead of 48 percent to 44 percent over former Massachusetts Gov. Mitt Romney. Polls also show that Obama is favorably viewed by 50 percent of voters compared with 35 percent fo... [Read More]
April 23, 2012 - 10:06 AM EDT
U.K. Road to Competitiveness Is Paved With Tax Increases
It has been the stated policy of the United Kingdom's Conservative-led coalition government "to create the most competitive corporate tax regime in the G20." Chancellor of the Exchequer George Osborne reiterated this policy -- expanded to include all noncorporate business -- in his 2012 budget spee... [Read More]
April 16, 2012 - 11:33 AM EDT
Busting Myths About Rich People's Taxes
There are good reasons for the government to keep its hand out of the pockets of the wealthy. For example -- and this will be a shocker to most liberals out there -- it is a basic tenet of tax economics that an efficient system should eliminate all taxes on capital income. That translates into big... [Read More]
April 10, 2012 - 9:30 AM EDT
Don't Be Fooled: Buffett Rule Raises Big Revenue
This week President Obama wants to put the spotlight on his proposal to impose a 30 percent minimum tax on incomes in excess of $1 million--the so-called Buffett Rule. Because of the 15 percent preferential rate on capital gains and most dividends--and because a lot of income of rich people comes f... [Read More]
April 9, 2012 - 11:08 AM EDT
Was the VAT a Money Machine for Europe?
In 1965 there was not a big difference between the level of taxes in the United States and in Western Europe. Then the Europeans put their VATs into high gear. Virtually nonexistent in 1965, Western European VATs had an average rate of 11 percent by 1976 and 20 percent by 2007 (Table 1). As VATs be... [Read More]
April 2, 2012 - 11:59 AM EDT
If Mandate Is Struck Down, Are Tax Incentives Next?
For lawyers and political junkies, it is the Super Bowl: three days of Supreme Court arguments over one of the biggest domestic policy changes in decades. But we economists can only scratch our heads. Why are we in court? What's the big deal? It's called an "individual mandate." Sounds ominous. But... [Read More]
March 27, 2012 - 9:12 AM EDT
Will Rate Changes Transform C Corps Into Tax Shelters?
In the days before the Tax Reform Act of 1986, when the top individual rate was above the corporate rate, wealthy owners of closely held businesses kept as much money as possible in subchapter C corporations. That was basic tax planning, but it was a hassle. Practitioners made small fortunes helpin... [Read More]
March 19, 2012 - 8:42 AM EDT
Tax Reform Goals Differ for Corporate Coalitions
When it comes to taxes, corporate America is divided into two parts. First, there are companies that pay full freight. Their effective tax rates are close to the statutory 35 percent rate. They tend to be low-tech and labor-intensive, and -- most of all -- they have most of their profits in the Uni... [Read More]
March 14, 2012 - 5:48 PM EDT
Tax Breaks Destroy Jobs
Most members of Congress say they want tax reform that (1) lowers the base and (2) broadens the base. But mostly they just talk about lowering the rate--the easy part--and ignore the tough choices required to broaden the base. Worse still, they are continuously urged to move in the exact opposite d... [Read More]
February 28, 2012 - 10:58 AM EST
Should the Government Tax Companies It Bails Out?
During the thrift crisis of the 1980s the government poured tens of billions into failing thrift institutions. This was followed by a huge debate about whether tax benefits given to those firms should be revoked. Now we have another crisis and the same issue arises. After the TARP funds saved the b... [Read More]
February 27, 2012 - 12:44 PM EST
A Grown-Up Conversation About Corporate Tax
Nothing is more fun for liberals than to catch a big multinational abusing U.S. tax laws. Google, Cisco, General Electric, and Apple -- to name a few -- now have public relations problems because the press has put a spotlight on their use of offshore tax havens. The tax dodging is disgraceful. The... [Read More]
February 22, 2012 - 11:17 AM EST
Top 0.1%, By Zip Code
This table is made possible by the IRS Statistics of Income division which has just published 2008 data for 29,000 codes on its website. This information, which in prior years used to cost $500, is now available for free. (Click on table to enlarge.)... [Read More]
February 21, 2012 - 8:18 AM EST
Eliminate Everybody's Loopholes Except Mine
Until he talked about tax reform, Treasury Secretary Timothy Geithner's spirited defense of administration policy was making a lot of sense. The scene was the venerable Senate Finance Committee hearing room the day after the release of President Obama's fiscal 2013 budget. Tough old Republican sena... [Read More]
February 13, 2012 - 9:49 AM EST
Apple Reports High Rate but Saves Billions on Taxes
By taking advantage of lax U.S. transfer pricing rules, Apple Inc., the world's most valuable company, cut its federal tax bill by billions of dollars in 2011. Moreover, by taking advantage of flexible accounting rules, the company masked its tax avoidance by reporting a relatively high effective t... [Read More]
February 7, 2012 - 2:11 PM EST
Say Bye-Bye to Reform: Obama Becomes Clinton
There has been no shortage of encouraging words about tax reform from the White House. Just last week the press office apprised us: Over the nearly three decades since the last comprehensive reform effort, the tax system has been loaded up with special deductions, credits, and other tax expenditure... [Read More]
February 7, 2012 - 5:19 AM EST
Minimum Tax on Foreign Profits: Good Idea
In his 2012 State of the Union Address, the President re-iterated his pledge to reform the corporate tax by lowering the rate and broadening the base. One of his proposals to help pay for the rate reduction is a minimum tax on foreign profits: The President is proposing to eliminate tax incentives... [Read More]
February 5, 2012 - 11:14 AM EST
Zuckerberg's Effective Tax Rate: 7.6%
Thank God for Mark Zuckerberg and America's other high-tech entrepreneurs who grow our economy in leaps and bounds. But please don't feel sorry for the 28-year old billionaire who will be facing what is likely to be a record setting $1.65 billion federal tax bill. That's 35 percent on the estimated... [Read More]
February 5, 2012 - 10:40 AM EST
Misplaced Subsidies for Manufacturing
In this morning's New York Times Christina Romer, Chair of President Obama's Council of Economic Advisors until leaving in September 2010, argues that the value of subsidies for manufacturing are not justified by economics. Her article is essential for readers who want to get beyond all the recent... [Read More]
January 29, 2012 - 8:42 PM EST
More Talk about Limiting Corporate Interest Deductions
Is it just a coincidence? Or is there growing interest in limiting interest deductions on corporate debt? My prior post made the case. And over the last few days there has been a lot of supportive talk from a variety of sources for limiting interest deductions . First, the latest issue of The Econo... [Read More]
January 23, 2012 - 10:01 AM EST
Romney's Other Tax Break
Was it creative destruction or vulture capitalism? Whatever you call what Mitt Romney did at Bain Capital, it is now a multi-pronged challenge to his presidential aspirations. Just the mention of investment shops like Bain can stir up resentment with the voters still looking for jobs and seething o... [Read More]
January 17, 2012 - 11:31 AM EST
When Should Small Businesses Get a Tax Break?
If you listen to the politicians, you might think all would be right with the world if we just had more small businesses. There would be more innovation. More jobs. More entrepreneurship. More growth. If you sign on to this worldview -- as most of the public is inclined to do -- it naturally follow... [Read More]
January 10, 2012 - 10:36 AM EST
Start-Ups, Not Small Businesses, Are Key to Job Creation
In an October 23, 2011, op-ed in The New York Times, Jared Bernstein neatly laid out some earthshaking facts. The former economic adviser to Vice President Joe Biden summarized recent research that says small business is not the engine of job creation that politicians and the press repeatedly claim... [Read More]
January 4, 2012 - 10:11 AM EST
New Research Weakens Case for Small Business Tax Relief
Next to support for the troops, nothing is more sacrosanct on Capitol Hill than support for small business. As community leaders and campaign contributors, small business owners have always been near and dear to the hearts of politicians in both parties. The recession has only heightened their stat... [Read More]
December 10, 2011 - 8:56 AM EST
We Should Tax the Banks, But Do it Right
Rising populism and the desperate need for revenues have sparked renewed interest in a financial transactions tax. Cash-strapped Italy is adopting one. The leaders of France and Germany support the idea of an FTT on an EU-wide basis. In Congress, Democrats in both the House and the Senate have intr... [Read More]
December 2, 2011 - 2:24 PM EST
25 Percent Corporate Rate Not Likely Any Time Soon
It is hard to be optimistic about the prospects for corporate tax reform. It was difficult in 1986 and the conditions for corporate tax reform were much more favorable in 1986 then they are now. In the second half of the 1980s our deficit was under control and the economy was growing. We had a popu... [Read More]
November 23, 2011 - 9:45 AM EST
Why Should Americans Promote Foreign Job Creation?
U.S. multinational corporations play an invaluable role in the American economy. They are research and export intensive, and they provide tens of millions of high-paying jobs. Their worldwide distribution networks increase demand for domestic research, high-tech manufacturing, and management servic... [Read More]
November 7, 2011 - 9:57 AM EST
WSJ Reports Republicans Ready for Tax Hikes
Talk about burying the lead! In this morning's Wall Street Journal Stephen Moore reports in the 4th paragraph of an op-ed that super-committee co-chairman Jeb Henserling (R-Tex.) told him: "We have no interest in raising rates--period." (Emphasis added here.) This could imply there is interest in... [Read More]
November 4, 2011 - 2:49 PM EDT
The Flat Tax is a VAT . . . in 90 Seconds
Republicans despise the value-added tax. But the flat tax they admire so much is nothing more than a value-added tax split into two parts. A value-added tax is a tax collected from business. The tax base is the difference between business receipts minus purchases from other businesses. There is no... [Read More]
October 31, 2011 - 9:17 AM EDT
To Hell With Tax Reform -- For Now
I hate to drag you away from your fascination with Herman Cain's 999 plan and Rick Perry's flat tax, but if we are going to make real progress, we can't fixate on every overhyped, half-baked tax slogan that comes along. Sooner or later we must get back to basics. Here's the main question: Should ta... [Read More]
October 26, 2011 - 6:05 PM EDT
Camp's 'Territorial' Proposal . . . In Three Paragraphs
The proposal would eventually eliminate U.S. tax on foreign source income from active business. But the exemption would be limited to 95 percent of foreign profits. (The five percent "haircut" that the Japanese have but the British don't is meant to be a rough-justice substitute for rules to limit... [Read More]
October 26, 2011 - 9:45 AM EDT
Time for a Little Class Warfare?
The evidence is overwhelming that America's rich are getting much richer while income growth for low- and middle-income earners has stagnated. The share of income and wealth concentrated in the hands of America's superrich is high by both historical and international standards. These facts are hard... [Read More]
October 24, 2011 - 7:58 AM EDT
Life Without Stimulus
Republicans constantly remind us that the Obama stimulus--the American Recovery and Reinvestment Act of 2009--did not work. They voted against it. In the United Kingdom the government is led by Conservative Prime Minister David Cameron. His government did not adopt stimulus. Instead it boldly enact... [Read More]
October 20, 2011 - 5:25 AM EDT
Is Class Warfare Justified?
Who Has Benefited from Economic Growth? Source: Anthony Atkinson, Thomas Piketty, and Emmanuel Saez, "Top Incomes in the Long Run of History," Journal of Economic Literature, 49(1), 2011, 3-71, Table 1. These data are from a recent edition of the prestigious Journal of Economic Literature. The firs... [Read More]
October 17, 2011 - 1:35 AM EDT
Cain's 9-9-9 in 90 Seconds
Cain gets rid of the entire current system—income, corporate, payroll, and estate taxes. In its place he would institute three new taxes. His “9% business flat tax” is simply a value-added tax dressed up to look like a corporate tax. His “9% individual flat tax” is a payroll tax where wages ar... [Read More]
October 12, 2011 - 12:55 PM EDT
Are Capital Gains Double Taxed?
The very rich get most of their income from capital gains. Republicans have tried to sidestep this fact, but you can see it for yourself in the chart below. So any discussion of efforts to increase progressivity -- such as President Obama's so-called Buffett rule -- must include raising the current... [Read More]
October 3, 2011 - 10:45 AM EDT
Last Class Before the Deficit Exam
OK, class, settle down. Judging from the less than stellar work you've handed in so far, it looks like most of you have been studying cable TV news instead of the assigned reading. I'm not optimistic about your chances on next week's exam. So I'll tell you what I will do. You will still have to str... [Read More]
September 26, 2011 - 2:53 PM EDT
The Small Business Love-Hate Relationship With Corporate Tax
A small business can easily avoid double tax and retain all-important liability protection either by incorporating under state law and adopting subchapter S status for federal tax purposes or by forming a limited liability company under state law and filing as a partnership. So shouldn't every righ... [Read More]
September 12, 2011 - 9:42 AM EDT
The Myth of Mom-and-Pop Businesses
It is common practice for politicians and the press to use the term "small business" to describe passthrough businesses -- sole proprietorships, partnerships, and subchapter S corporations. From the perspective of economics, this highly inaccurate label is of little significance because -- despite... [Read More]
September 6, 2011 - 5:41 PM EDT
Should We Raise Tax Rates on Wealthy Employers?
While the big shots in Washington politics were on vacation, the hardworking economists at Treasury released a technical study shining new light on the employment effects of allowing the top individual rates to return to 36 and 39.6 percent. Using 2007 data, the study shows that between 35 and 47 p... [Read More]
August 3, 2011 - 6:30 AM EDT
Battle of the Baselines: Sperling vs. Ryan
Will the new Select Joint Committee on Deficit Reduction raise taxes? Probably not. That's because it would require at least one Republican to agree to tax hikes and the Republican leadership has vowed not to appoint any member to the Committee who vote to raise taxes. However, down the road, as th... [Read More]
August 1, 2011 - 2:59 PM EDT
$5.6 Trillion Tax Cut Automatic in Budget Deal?
At about 2pm Fox News reported that Speaker Boehner told his caucus that the Bush tax cuts, extension of AMT relief, and other expiring provisions are all included in the baseline of the second stage of the plan. If true, tax hikes will never be part of the second stage because the Republicans get... [Read More]
August 1, 2011 - 11:33 AM EDT
Baseline Blues in Budget Fix
Without clarification, the deal on the table as of August 1 makes no sense. If the CBO baseline assumes current law, and under current law the Bush tax cuts expire at the end of 2012, extending the Bush tax cuts will be scored as a revenue LOSS and moves us AWAY from second round deficit reduction... [Read More]
July 25, 2011 - 11:28 AM EDT
Foreign Tax Profile of Top 50 U.S. Companies
In 2010 America's 50 most profitable companies generated nearly $600 billion of profits before taxes -- 38 percent of all U.S. profits. The average effective corporate tax rate reported to shareholders was 26 percent. Foreign profits comprised 50 percent of worldwide profits, and the average foreig... [Read More]
July 18, 2011 - 11:41 AM EDT
What the Debt Limit Debacle Teaches Us About Tax Reform
"None of us are fond of loopholes." -- House Speaker John A. Boehner, R-Ohio, July 11 _____________________________________________________________________ Tax reform will not be a part of the legislation that raises the debt limit. Congress and President Obama cannot even agree on the broad outlin... [Read More]
June 27, 2011 - 2:46 PM EDT
'Stateless Income' Is Key to International Reform
Next time you hear multinationals talk about international tax reform -- which they equate to an exemption system that does not deny deductions for expenses allocable to foreign income -- notice that there is no mention of profit shifting. They routinely present a picture of a simple world in which... [Read More]
June 14, 2011 - 12:29 PM EDT
Why Not Tax Large Passthroughs as Corporations?
Most large profitable American businesses must pay the corporate income tax. Others are completely exempt from it. The unfairness of this is so plain even a 5-year-old can understand it. If that's not high enough authority for you, please consult the first commandment of tax economics: Thou shalt t... [Read More]
May 23, 2011 - 1:30 PM EDT
Why Obama's Corporate Tax Reform Will Fail
A large reduction in the U.S. corporate tax rate is inevitable. It can't miss when proponents have an easy-to-understand talking point: The United States will soon have the highest corporate tax rate in the world. If it weren't for the Japanese earthquake, we would already have the number one spot.... [Read More]
April 7, 2011 - 10:35 AM EDT
Get Tax Reform Out of the Budget Debate
As somebody who has spent his professional career advocating for tax reform -- that is, lowering the rates and broadening the base-- I welcome any excuse to give the topic some attention. But recent developments make it more clear than ever that politicians are taking advantage of citizens' desire... [Read More]
April 5, 2011 - 5:59 AM EDT
Why Ryan Matters
In a few hours House Budget Committee Chairman Paul Ryan will release his deficit reduction plan that will cut Medicare, Medicaid, and dozens of other programs. (There is tax reform but no tax increase.) Now Democrats will have to admit their only viable option for long-term deficit reduction is ra... [Read More]
March 30, 2011 - 9:50 AM EDT
Time for an American VAT
For decades the conventional political wisdom has been that a VAT will never be enacted in the United States because liberals view it as a tax targeted on the poor and conservatives view it as a money machine. And in response to this observation pundits would quip: a VAT will be enacted when libera... [Read More]
March 29, 2011 - 4:21 PM EDT
Corporate Tax Reform: Time to Think Outside the Box
Thanks to President Obama, corporate tax reform has gone prime time. Major news outlets are reporting on closed-door discussions involving Treasury officials, congressional staff, and industry representatives and on any utterance from members of Congress on the topic. But progress is slow, and most... [Read More]
March 21, 2011 - 11:18 AM EDT
Sarah Palin Is Wrong: We Need "Death Panels"
A lot of high-profile disputes like funding NPR are only distractions from the really important budget issues. Every expert will tell you that government funded health care is THE cause of our long-term budget problems. As medical technology prolongs life, we as a nation must delve deeply into issu... [Read More]
March 18, 2011 - 11:27 AM EDT
We Must End Federal Funding of NPR
Of course Republicans despise any radio that espouses views that are more moderate than those of Rush Limbaugh and Michael Savage. So when they desperately needed spending cuts, eliminating $432 million of annual subsidies was an easy target for House Republicans. The House voted to defund NPR by a... [Read More]
March 16, 2011 - 10:22 AM EDT
Lost in Fiscal Space
"Fiscal space" is a term you hear mostly in Europe as governments there try to figure out if they have the borrowing capacity to provide stimulus and to lend to huge failing banks. Nobody really knows how much government debt is "too much." Some economists say gross government debt should not exce... [Read More]
March 15, 2011 - 3:18 PM EDT
Memo to Republicans: You Still Need $386 Billion of Budget Cuts
The debate on Capitol Hill is now raging over the budget for the current fiscal year (ending September 30). House Republicans are hoping for about $60 billion of cuts for the remainder of the fiscal year--which translates into about $100 billion for a full year. Assuming this is the high water mark... [Read More]
March 14, 2011 - 1:56 PM EDT
Grover is Right: "Tax Reform" is Really a Tax Hike
On Fox New Sunday Senator Saxby Chambliss, R-Georgia, did a lot of double talk. He explained to interviewer Chris Wallace that he was against tax hikes but was also simultaneously looking at "revenue and reform of our complicated tax code in a major way" to reduce the deficit: You judge for yourse... [Read More]
March 6, 2011 - 7:14 PM EST
Mortgage Interest 90210
Beverly Hills 90210 and Clarksdale, Mississippi 38614 both have a population a little above 20,000. But that’s where the statistical similarities end. IRS data show that in 2007 adjusted gross income in 90210 was $5.6 billion, more than 20 times larger than the $266 million reported in 38614. In B... [Read More]
March 2, 2011 - 2:41 PM EST
GOP Spin on GAO Report Ignores Tax Reform and Tax Hike Proposals
The five press reports I've read about the new General Accountability Office study ignore the GAO's numerous recommendations to cut targeted tax benefits and to reduce tax evasion by increasing IRS enforcement. The study is being portrayed as a clarion call for cutting wasteful government spending.... [Read More]
February 28, 2011 - 4:43 PM EST
Policy in Reverse: Clean Vehicle Credits Increase Emissions
All of Washington is looking to reduce the deficit and reform our tax system. Tax credits for alternative energy increase the deficit and make the tax code more complicated and unfair. We've made those points before. But did you know green tax credits can actually defeat the policy goals of environ... [Read More]
February 17, 2011 - 2:17 PM EST
At the Helmsley Building, the Little People Pay the Taxes
Leona Helmsley was the billionaire real estate baroness New Yorkers loved to hate. She was famous for humiliating her household help and staff at her hotels. When it came to home improvement, she routinely charged it as a business expense or simply left her contractors unpaid. Her greed eventually... [Read More]
February 15, 2011 - 8:03 AM EST
An Easy Fix to the Questioned Constitutionality of the Individual Mandate
As seasoned observer of tax policy, I can only stare in slack-jawed wonder at all the hubbub over the constitutionality of the so-called “individual mandate.” Congress has decided to provide a tax incentive for people to buy health insurance. How can this be an issue? Using the tax code to provid... [Read More]
February 14, 2011 - 7:38 AM EST
America's Top 20 Zip Codes and the Taxes They Pay
The good folks at the Statistics of Income Division of the IRS compile individual tax returns by zip code. They take a lot of steps to preserve confidentiality: no zip codes with less than 10 filers are included. And if any one return dominates a data entry that return is either dropped or merged i... [Read More]
February 8, 2011 - 3:24 PM EST
The Great Myth About Oil Tax Breaks
President Obama and liberal Democrats are gunning to raise oil company taxes to reduce the deficit and to pay for tax breaks for green energy. They are tapping into the public's natural hostility to the companies' that Americans pay $50 every time they fill up their gas tank. Oil companies are big.... [Read More]
February 8, 2011 - 9:56 AM EST
Tight Budgets: Time to Expand or Contract the IRS?
In this morning's New York Times you can read how Wall Street is lobbying against SEC budget cuts.Yes, regulated industries well understand that a poorly funded regulator can be as dangerous and as insensitive to your needs as a wounded bear. You see a lot of the same thing in the tax world. Practi... [Read More]
February 6, 2011 - 9:03 AM EST
Last Chance for Corporate Tax Reform
His budget will not be released until February 14, but if President Obama has any sweets to deliver to the business community he will surely do it at his speech tomorrow to the U.S. Chamber of Commerce. In his State of the Union message--as part of his charm campaign with corporate America--the Pre... [Read More]
January 25, 2011 - 10:50 AM EST
Mortgage Deduction Heavily Favors Blue States
Fairness is a big issue on Capitol Hill. That's especially true when it comes to handing out the goodies. For example, aid to the states in the 2009 stimulus legislation was spread evenly -- no less than $194 per person (in Florida) and no more than $226 per person (in Utah). A good policy reason i... [Read More]
January 24, 2011 - 11:02 AM EST
Mr. Immelt's $84 Billion
GE is one of the biggest beneficiaries of the current corporate tax system. If the President's pick to lead his new Council on Jobs and Competitiveness, GE CEO Jeffrey Immelt, gets his way his company will benefit even more. GE is renowned for having one of the most sophisticated tax departments i... [Read More]
January 21, 2011 - 2:51 PM EST
Corporate Tax Reform Must Come at a Price
I had the privilege of testifying before the Ways and Means Committee yesterday. Below is the text of my oral testimony. The official witness testimony along with footnotes can be found here. Good morning, Chairman Camp, Ranking Member Levin, and other members of the Committee. Thank you for this... [Read More]
January 10, 2011 - 8:19 AM EST
The Fate of Tax Reform Depends on the Tea Party
A new day is dawning, and on Capitol Hill, conservatives must make a choice. Will they follow the easy path of politics as usual, or will they practice what they preach and adhere to their core principles? The high-profile controversy over earmarks in appropriations bills is a prime example of this... [Read More]
January 3, 2011 - 7:45 AM EST
Tax Reformers, Beware! Bipartisan Energy Policy
"The death of cap-and-trade clears the way for a passel of subsidies and incentives for exploration and innovation." -Dan Schnur, political analyst, in Sunday's Washington Post America's conservatives and the business community are pleased with themselves for thwarting any chance of a reasoned poli... [Read More]
December 27, 2010 - 10:23 AM EST
Japan Cuts Its Corporate Tax Leaving US with the World’s Top Rate
On December 24 the Japanese cabinet headed by Prime Minister Naoto Kan agreed to a budget including a cut in the corporate tax rate, effective April 1, 2011, from 39.5 percent to 35 percent. Barring unforeseen circumstances the Japanese parliament will approve this plan early in 2011. After this ch... [Read More]
December 22, 2010 - 10:18 AM EST
Twelve Steps to Tax Reform
The first five suggestions are crucial for getting conservatives to be the driving force behind tax reform. (1) Get conservatives to recognize tax expenditures as government spending. Relabel "tax expenditures." Call them "tax earmarks." This first point is absolutely critical. Once conservatives... [Read More]
December 20, 2010 - 10:37 AM EST
Tax Triangulation
Earlier this year the British Labour Party was staging a comeback in the polls when--in the name of austerity--it proposed a payroll tax hike. That was the last nail in the coffin on its 13 years in power. No rational or successful politician will propose a middle-class tax hike going into an elect... [Read More]
December 15, 2010 - 7:34 AM EST
Winter Wonderland
Newsflash: We interrupt the Capitol Hill Chorus Holiday Special featuring traditional favorites of “O Holy Tax Reform” “Happy Christmas (Deficit is Over)” and “Have Yourself a Merry Little Tea Party” to bring you this breaking news: There will be no pain on Capitol Hill this holiday season. F... [Read More]
December 8, 2010 - 10:17 AM EST
Keynes Reborn: Stimulus Tailored to Republican Tastes
Basic economics tells us (1) America needs larger deficits in the short-term to fight unemployment and (2) America needs massive deficit reduction to promote long-term economic growth and prevent a Greek-Irish style fiscal meltdown. The Obama-Republican tax plan achieves the first goal admirably. T... [Read More]
November 18, 2010 - 9:53 AM EST
Tax Reform Fantasy
The most difficult thing to understand about the President's deficit reduction commission is its love affair with tax reform. Under one proposal it would cut $1.1 trillion in tax expenditures, but only $80 billion of that would be for deficit reduction. So, less than 10 percent of the revenue for b... [Read More]
November 14, 2010 - 7:30 AM EST
Beware the Treasury-Financial Complex
In this post-crisis world governments and big banks are joined at the hip. There is no line between conventional lenders and lenders-of-the-last resort. Banks like Bank of America are really becoming banks of America. The Irish government has guaranteed all of the massive liabilities of its bubble-... [Read More]
November 10, 2010 - 10:15 AM EST
Bubble Over Washington
This may sound snobby and elitist—but there’s no avoiding it: Americans need a good lesson in basic economics. How can we say such a terrible thing? Here’s how: every poll and every politician in every congressional district says the nation’s number one problem is lack of jobs. But they will no... [Read More]
November 8, 2010 - 11:28 AM EST
Fiscal Crisis, Part 2: Catastrophe
Last week we talked about the first stage of the U.S. fiscal crisis: the slow erosion of long-term growth because of mounting government debt. This phenomenon arises from a straightforward application of conventional supply-side economics. Government borrowing absorbs private saving that would othe... [Read More]
November 1, 2010 - 2:01 PM EDT
The Slow Descent to Second-Class Status
It is undeniable that we are on the path to fiscal collapse. This decline will occur in two stages. First there is the decay as the swelling national debt wears away the economy's foundations and commits more and more future income to foreign creditors. We are already in stage one. In stage two a l... [Read More]
October 27, 2010 - 11:26 AM EDT
The Opposite of Tax Reform
Some folks are getting excited about tax reform. The sweeping Wyden-Gregg plan is getting attention. And there are a reports (for example, here and here) that the President's deficit reduction commission could propose cutting back prominent middle class tax benefits--like the mortgage interest dedu... [Read More]
October 25, 2010 - 9:58 AM EDT
Transfer Pricing for the Common Man
In an expertly choreographed effort to win public sympathy, (articles here, here, and here) our nation's largest and most profitable companies are lobbying Congress to enact special tax relief for "trapped" foreign profits. But how did the money get there in the first place? Answer: The multinatio... [Read More]
October 18, 2010 - 10:51 PM EDT
Before Fiscal Collapse: The Slow Decline
Economists Carmen Reinhart and Kenneth Rogoff have written several papers and a book reporting on their research that gross public debt in excess of 90 percent of GDP severely hinders economic growth--perhaps by more than one percentage point per year. Separate research by Caner, Grennes, and Koehl... [Read More]
October 18, 2010 - 7:51 AM EDT
Fixing the Deficit Problem is More than Arithmetic
Americans are overweight and so is their government. The diet plans are proliferating. Here are some of the latest. The Bowles Diet. I shall weigh 180 pounds for my whole adult life. Erskine Bowles is the Democratic co-chairman of the President's deficit reduction panel (scheduled to release its fi... [Read More]
October 15, 2010 - 11:01 AM EDT
Debt Clock Ticking: How Much Time is Left?
Economists at Congressional Budget Office are doing their best to educate their bosses about the dangers of rising government debt. In a recent report they warn that debt crowds out private capital formation, that it increases the likelihood of inflation, that it increases the possibility of a fisc... [Read More]
October 13, 2010 - 7:34 AM EDT
Tax the Poor to Promote Growth?
In today's Wall Street Journal Sen. Jon Kyl of Arizona offers his cure for joblessness ("A Growth Agenda for America"). After the now-familiar Republican rants about the failure of Keynesian economics (at odds with what most economists think) and the need to reduce the size of government (but witho... [Read More]
October 12, 2010 - 7:39 AM EDT
Something Impossible Is Going to Happen
Raise the social security retirement age and start scaling back benefits for high-income recipients. That’s impossible. Put a lid on Medicare and Medicaid spending that is growing faster than anything in the economy. That’s impossible. Scale back the size of the military and end the U.S. role as... [Read More]
October 6, 2010 - 7:17 AM EDT
Rising Class Warfare
In today's Washington Post Steven Pearlstein puts the spotlight on rising income inequality. The main source of his information is a new study using new data through 2008. More recent data are not yet available but it's a safe bet that the distance between rich and poor has only increased since the... [Read More]
October 5, 2010 - 7:03 AM EDT
Will Indebted Ireland Be Forced to Raise its Corporate Tax Rate?
With newly released estimates of the bailout of Anglo Irish Bank the Irish government is staring down the barrel of a budget deficit equal to a whopping 32 percent of GDP. Ireland does not want a Greek-style foreign bailout and it does not want to default or restructure its own sovereign debt or th... [Read More]
October 4, 2010 - 6:13 AM EDT
Tax Cuts Kill Jobs, Part 2
In a recent post we talked about the best kept secret in Washington: supply-side effects of debt-financed tax cuts are negative. To back this up we cited a just-released CBO study and 2003 report from the Joint Committee on Taxation. Here's some additional supporting research: (1) In a 2002 article... [Read More]
October 1, 2010 - 11:07 AM EDT
The Simplest Plan to Tame the Deficit
Nobody talks about balancing the budget anymore. It’s a nice clear-cut idea. But it's so far off the charts you would be called a lunatic for even making the suggestion. It can be a goal but it can never be portrayed as a viable policy outcome. It is like talking about zero tolerance for drugs. We... [Read More]
September 30, 2010 - 7:29 AM EDT
Tax Cuts Kill Jobs
In the mainstream media and on Capitol Hill it is accepted as gospel that tax cuts are always good for the economy. (That's why the title to this blog post is so grating.) But it simply ain't so. In a May 2003 report requested by Republicans, the Joint Committee on Taxation estimated that the long-... [Read More]
September 6, 2010 - 10:08 PM EDT
Obama Proposes Massive Business Tax Cuts
Reports are just coming in (here and here) that Obama will propose that businesses be allowed to write-off the entire cost of investment in plant and equipment in the year it is placed into service. The provision will be in effect from the date of announcement until the end of 2011. Also being prop... [Read More]
August 9, 2010 - 12:57 PM EDT
Tea Party Trash
Here is the formula: Somebody in the Obama Administration once said X. This reveals the true nature of the Obama agenda to destroy the Constitution and take away our freedom. This is a fundamental threat to our way of life and we should be extremely angry. As bad as this tripe is, it is less gratin... [Read More]
July 26, 2010 - 12:57 PM EDT
Business Should Lead on Deficit Control and Tax Reform
America's tax system faces two great challenges in the 21st century. It must generate enormous amounts of revenue to prevent the national debt from spiraling out of control, and it must generate that revenue in a manner that will interfere least with the market economy. The nonstop antitax bluster... [Read More]
July 23, 2010 - 11:27 AM EDT
Transfer Pricing Abuse is Job-Killing, Corporate Welfare
I had the privilege of testifying before the Ways and Means Committee yesterday. Below is the text of my oral testimony. The official witness testimony can be found here. And the excellent pamphlet by Joint Committee on Taxation is here. Mr. Chairman, Ranking Member Camp, members of the committee:... [Read More]
July 17, 2010 - 4:46 AM EDT
Obama Proposal to Tax Multinationals' IP Consistent with International Norms
Following up on his campaign promises, President Obama's first two budgets have included a package of tax hikes on multinationals intended to close loopholes and level the playing field between foreign and domestic investment. Among those proposals, the one that is getting the most attention is the... [Read More]
July 12, 2010 - 1:01 PM EDT
Transfer Pricing Rules Don't Work. Should We Care?
The biggest tax issue for big business is transfer pricing and various other methods of shifting profits from high-tax countries to low-tax countries. For the U.S. government this has resulted in huge revenue losses. Estimates vary between $30 billion and $60 billion annually. For multinationals th... [Read More]
July 1, 2010 - 11:08 AM EDT
While Japanese Business Leads on Tax Reform, American Business Wimps Out
Yesterday there was another meeting of the President's deficit reduction panel. Murdoch's unabashedly biased Wall Street Journal took the opportunity to spin the non-event into a story of its liking ("Deficit Panel Stresses Spending Cuts") . At the meeting there was a lot of self-congratulatory but... [Read More]
June 16, 2010 - 4:34 PM EDT
Oil Drillers Gain Billions from 'Immoral' Tax Break
Deepwater drilling can lead to monumental disaster. That our business and government experts did not fully comprehend that is a sure sign that our vital domestic oil and gas industry is broken. The catastrophe in the Gulf of Mexico has exposed how too much cost cutting and too little oversight can... [Read More]
April 2, 2010 - 11:58 AM EDT
Cluster Bomb of a Tax
A few years ago Congress gave a subsidy and a tax break for companies that provide prescription drug benefits to retirees. To help reduce the costs of health care reform Congress repealed the tax break. The estimated impact of this provision is about $500 million a year once it takes effect in 2013... [Read More]
February 25, 2010 - 7:52 AM EST
Mind Boggling Tax Hikes on the Horizon
The President has issued an executive order that calls for an 18-member bipartisan commission to offer a plan to cut the deficit 3 percent of GDP by 2015. How hard will it be to reach this target? To answer this question we first need to know to what we are comparing the proposal. In other words, w... [Read More]
February 23, 2010 - 9:29 AM EST
Why Obama's Health Care Plan is Likely to Pass
A lot of pundits think President Obama's just-released uncompromising health care proposal does not have a chance. For example, Gerald Seib of the Wall Street Journal thinks the proposal is "not . . .much of a basis for a deal." Yes, the politics have not changed. If anything, the wind is blowing... [Read More]
February 22, 2010 - 6:54 AM EST
Tea Party Logic vs. Republican Opportunism
It is clear the Republicans are taking full advantage of freedom from the responsibility of being in power. From the bleachers they can rail against the mildly unpopular $787 billion stimulus and the wildly unpopular $700 billion bank bailout. Politically this is smart. Economically it is irrespons... [Read More]
February 13, 2010 - 8:28 AM EST
Controversy Over Payroll Tax Relief in Senate Bill
The lead provision in the Senate jobs bill now being debated is temporary payroll tax relief for employers who hire the unemployed. This proposal (S. 2983) originated with Senate Finance Committee members Chuck Schumer (D-New York) and Orrin Hatch (R-Utah). I criticized this proposal in a prior pos... [Read More]
February 12, 2010 - 10:33 AM EST
Outrageous Giveaway in Senate Jobs Bill
"Contrary to Congressional intent." "An unintended loophole." That's what Senators Max Baucus (D-Montana) and Chuck Grassley (R-Iowa), the leaders of the Senate Finance Committee, called the use of the alternative fuels tax credit for black liquor--a by-product of the paper pulping process. And tha... [Read More]
February 5, 2010 - 5:19 AM EST
Multinationals and Jobs
In Wednesday’s Wall Street Journal Matthew Slaughter of Dartmouth Business School unloaded a broadside against the proposed $100 billion-plus tax hike on U.S. multinationals (“How to Destroy American Jobs,” February 3, 2010.) Slaughter cites aggregate data from the U.S. Commerce Department as... [Read More]
February 1, 2010 - 7:09 AM EST
Sins of Commission
All press reports in this morning's papers indicate the President will fall far short of his oft-stated goal of stabilizing the deficit over the long-term at 3 percent of GDP. That's a minimum standard. It is what is required to keep the deficit "sustainable"--that is, to prevent the debt from blow... [Read More]
January 31, 2010 - 7:41 AM EST
Rumor of Radical Change in the President's Budget
A totally unverifiable report from a not-so-sure source told me that the budget to be released this Monday a.m. will include a proposal to end the favorable U.S. tax treatment for foreign profits generated in low-tax jurisdictions like Ireland, Switzerland, Bermuda, and the Cayman Islands. If true,... [Read More]
January 29, 2010 - 7:01 AM EST
Fear of Borrowing
Paul Krugman's column this morning echoes the very sensible economic advice we have heard for decades: "We should combine actions that create jobs now with other actions that reduce deficits later." Unfortunately, because of the 2007-09 financial meltdown, many countries can't wait until later. So... [Read More]
January 26, 2010 - 6:44 AM EST
Sorry, Payroll Tax Break Proposal is a Loser
In this morning's New York Times Senators Chuck Schumer, D-NY, and Orrin Hatch, R-Utah, put aside their partisan differences and propose a targeted payroll tax cut to spur job creation. At first glance it looks very good: businesses that hire workers who have been unemployed for 60 days are exempt... [Read More]
January 25, 2010 - 10:49 AM EST
Republican Wimps
In case you forgot, this morning's Wall Street Journal reminds us that conservatives favor tough limits on government spending. But no matter how loud they sing this popular tune, it is all just prancing down the path of political least resistance. It is easy to be against government spending in th... [Read More]
January 20, 2010 - 8:12 AM EST
Brown Wins, Capitol Shudders
Soon Senator-elect Scott Brown will drive his GMC pickup 450 miles through the Democratic Northeast into the Capitol Beltway and into history. . . From the state of the original Tea Party . . . . From the state that in 2006 pioneered compulsory health insurance coverage for most of its citizens - s... [Read More]
January 15, 2010 - 1:20 PM EST
Unions Get a Questionable $60 Billion Concession
This morning's papers are buzzing with news that Big Labor is getting five extra years of transition relief from the new tax on Cadillac health plans. That's the unions' payback for their energetic support of Democrats in elections. It's a maneuver no different than business makes when faced with a... [Read More]
January 14, 2010 - 11:36 AM EST
Bank Tax: It's About Time
In times of war governments impose excess profit taxes. Why? The government's extraordinary need during an emergency can make some segments of the population very wealthy. This is morally unacceptable because war requires huge personal and financial sacrifices from most citizens. The financial cris... [Read More]
January 8, 2010 - 11:54 AM EST
Beware of Fair Weather Keynesians
Liberal analysts are bellowing loudly for continued fiscal stimulus. Among the most prominent are Nobel laureates Paul Krugman and Joseph Stiglitz. And the Economic Policy Institute has just issued a similarly themed briefing paper. All this is necessary counterpoint to Republicans' ridiculous anti... [Read More]
December 26, 2009 - 8:40 AM EST
Green Subsidies Kill Job Creation
A thoughtful letter in this morning's Washington Post warns citizens to be on guard against politicians selling "green" snake oil. Tax subsidies for energy efficiency are economically inefficient. The alternative approach is a tax on energy--take your pick: gas tax, BTU tax, carbon tax, or cap-and... [Read More]
December 16, 2009 - 2:04 PM EST
No Happy New Year for Dysfunctional Congress
As I write this the estate tax is 15 days away from expiring and the Finance Committee Chairman is on the Senate floor pleading for a unanimous consent agreement to avoid the "massive confusion" that will ensue if a temporary extension of the tax is not granted. The Republican leader--holding all t... [Read More]
December 14, 2009 - 12:23 PM EST
A Tale of Two Budgets
Despite all the hullabaloo over the proposed one-time 50 percent tax on bank bonuses, the controversial "supertax" is not the most important feature of the December 9 preview of the UK budget. It's what the report did not say that deserves our attention. In the face of upcoming elections in the sp... [Read More]
December 9, 2009 - 2:05 PM EST
Capitalists and Workers
Yesterday's post illustrating the relatively low tax rates paid by the super rich was cross-linked to blogs at the New York Times, the Wall Street Journal and CNN. Today' post follows up with a look at the huge differences in the composition of income among income classes. All data are for 2007 and... [Read More]
December 9, 2009 - 9:54 AM EST
Stimulus to Cure the Deficit? Talk About the Audacity of Hope
Because Congress will have months to reject and rework Obama's latest job creation proposals, the details of his speech yesterday don't matter. The central point is that Obama has signaled his willingness to grant Congressional Democrats their fond wish for a jobs bill in 2010. On top of that he wi... [Read More]
December 8, 2009 - 10:00 AM EST
U.S. Income Tax Not Progressive at High End
The latest data from the IRS show that as income rises, effective tax rates also rise -- up to a point. The effective income tax rate levels off at 24.1 percent for incomes between $1 million and $1.5 million. For higher incomes the rate declines. For incomes above $10 million the rate is 19.4 perc... [Read More]
December 7, 2009 - 1:40 PM EST
Both U.K. Parties Looking at New Bank Taxes
In dire need of cash and politically palatable tax cuts, U.K. politicians are looking at new taxes on banks. According to reports from many sources -- including the BBC, the London Times, the Financial Times, and Bloomberg -- the soon-to-be-released U.K. Pre-Budget Report may include a one-time win... [Read More]
December 7, 2009 - 9:44 AM EST
Tax Rates for Millionaires Continue to Fall
Households with incomes over $1 million paid income tax equal to 22.1 percent of their adjusted gross income in 2007. This is down from 23.4 percent in 2004. And from 30.8 percent in 1996. See the chart below. The 2007 data were just released by the Statistics of Income Division of the IRS. The mai... [Read More]
December 2, 2009 - 11:17 AM EST
Debt Fears Increase, UK Could Limit Interest Deductions
If there is another financial crisis no one can claim they were not warned. In the minutes of its November Federal Open Market Committee meeting, some board members worried about "the possibility that some negative side effects might result from the maintenance of very low short-term interest rates... [Read More]
November 30, 2009 - 9:42 AM EST
Millionaires on Unemployment
As Jackie Calmes reports in this morning's New York Times, a top priority for this Congress is to extend unemployment benefits before year end. For millions of families that depend on these benefits this will be welcome holiday news. But not all recipients of unemployment benefits deserve our sympa... [Read More]
November 23, 2009 - 11:59 AM EST
Who's Afraid of Risky Government Debt?
No less than four articles in this morning's papers discuss rising risks on debt issued by governments of developed nations. In the Wall Street Journal you can read ("EU's Weakest Draw New Scrutiny") about the rising cost of insuring debt issued by the struggling Irish and Greek governments. This i... [Read More]
November 20, 2009 - 12:22 PM EST
A Windfall Profits Tax on Banks
The Financial Times' Martin Wolf is one of the world's best and most influential economic columnists. He is no liberal. I would label him a cautious pragmatist. So today when he argues for a windfall profits tax on banks we cannot dismiss his idea as the product of knee-jerk populism or partisan po... [Read More]
November 19, 2009 - 10:37 AM EST
Getting to 3 . . . Eventually
One reason the Democrats need to finish health care reform this year is that starting in January, the Administration will begin its big push on deficit reduction. January is the State of the Union address. February is the release of the budget. In the first Obama budget the stated goal was cutting... [Read More]
November 17, 2009 - 4:58 PM EST
On China Policy, Be Careful What You Ask For
Nobody likes the sound of a "weak" dollar. But it provides the economy with a lot of benefits. Most importantly, it makes U.S. exports cheaper for foreign purchasers--boosting U.S. trade. This is why U.S. manufacturers and their employees are mad as hell that China does not allow its currency to ap... [Read More]
November 17, 2009 - 8:06 AM EST
The Buyout of America
In the late 1980s Ways and Means Chairman Dan Rostenkowsi proposed a bill that would limit tax deductions for interest on debt to finance corporate takeovers. That bill died when the market crash of 1987 scared Congress away from any get-tough policies on Wall Street. But scandal and overreaching e... [Read More]
November 13, 2009 - 12:02 PM EST
Blowing Bubbles, Appeasing Unions, and Talking About Jobs
To save the economy from collapse the Fed has printed money and cut interest rates like never before. But the benefits of this policy are not spread evenly over the economy. Two columns in today's papers make this point. In the Financial Times, Samuel Brittan writes:"Unfortunately, instead of being... [Read More]
November 10, 2009 - 10:15 AM EST
Yankee Fans Give Wall Street a Bronx Cheer
Professional politicos always enjoy putting down academic-types who dare to dabble in policy. Quoted in today's New York Times on the subject of health care reform, the White House Chief of Staff had these words of wisdom: “The goal isn’t to see whether I can pass this through the executive board... [Read More]
November 9, 2009 - 10:10 AM EST
Offshore Evasion Bill Fails to Deliver Knockout Punch
Instead of just huffing and puffing, Congress may be getting serious about deterring offshore tax evasion. Building on years of groundwork by Senator Carl Levin, House Ways and Means Committee Chairman Charles Rangel (who himself has been caught evading taxes in an offshore jurisdiction) and Senate... [Read More]
November 6, 2009 - 8:04 AM EST
Time to Cut Tax Subsidies for Corporate Leverage
As Charlie Gasparino explains ("Three Decades of Subsidized Risk") in today's Wall Street Journal, Fed-subsidized rock-bottom interest rates and implicit government guarantees for those too big to fail fueled a corporate borrowing binge that almost brought the U.S. economy to its knees. The tax bia... [Read More]
November 2, 2009 - 10:07 AM EST
Who Pays for Health Care? The Over-Insured or the Super-Wealthy?
Like a tractor trailer stuck at a railroad crossing, the House health care reform bill sits on the track waiting for the Senate freight train to come smashing through. Ideologues of both parties want you to believe the big issue is the fate of the public option. But the real battle, as usual, will... [Read More]
October 26, 2009 - 10:32 PM EDT
In Germany Deficits Can Wait
"I am fully convinced that not only the year 2010 but also the year 2011 will be strongly marked by this crisis." With these words German Chancellor Angela Merkel announced the start of her new fiscal program. At the core are big tax cuts and spending hikes. Never mind the high levels of public de... [Read More]
October 23, 2009 - 10:26 AM EDT
Forget the Second Stimulus, Get Ready for the Second Bailout
You have cause to be worried. The Dow is rallying but nobody is feeling good. And we're not just talking about the pain felt by the nation's 15.1 million unemployed and the anxiety of all those who fear they might be next. Two articles in this morning's papers should make even elite capitalist inve... [Read More]
October 20, 2009 - 10:43 AM EDT
Going in Circles on the Deficit
On a twin-screw powerboat you can spin your vessel endlessly around its pivot point by putting one engine in forward and the other in reverse. You get nowhere and you look ridiculous. Unfortunately America's fiscal policy has one engine in forward and one in reverse. We want to increase the deficit... [Read More]
October 15, 2009 - 9:25 AM EDT
New $25 Billion Tax Windfall for Paper Companies
When Congress passed its latest farm bill in 2008, it included a new $1.01 per-gallon tax credit for ethanol produced from cellulose. The intended beneficiaries of the $1.01-per-gallon credit were companies that use expensive, cutting-edge technologies to distill ethanol from plant materials inste... [Read More]
October 13, 2009 - 10:08 AM EDT
Nobel Prize Highlights Value of Traditional Banking
Economists have faith in the marketplace but once in a while some heretic will express doubts on its infallibility. Oliver Williamson, co-winner of this year's Nobel prize in economics, is no radical. But the life work of the 73-year old UC Berkeley professor shows how transaction costs and lack of... [Read More]
October 12, 2009 - 9:48 AM EDT
Subprime Tax Laws
Many years ago I worked in the private sector in one of the most lucrative areas of tax consulting: transfer pricing. By adjusting transfer prices -- for example, by raising prices paid by a U.S. parent company for products from its subsidiary in low-tax Ireland -- a multinational could save a fort... [Read More]
October 5, 2009 - 11:06 AM EDT
Do Tax Rules Encourage Risky Mortgage Securitization?
The U.S. government encourages corporations to issue as much debt as possible, to pay their executives more for excessive risk taking, and to load up company pension plans with company stock rather than create a diversified portfolio. It encourages banks to set up innumerable subsidiaries in tax ha... [Read More]
September 30, 2009 - 9:40 AM EDT
A California VAT: Sweeping Reform for a Troubled State
The Parsky Commission has just released its much awaited tax reform report. Governor Schwarzenegger has called (yet another) special session of the legislature in hopes of getting the reform plan, which he says he will sign, enacted before the end of this year. The centerpiece of the commission's p... [Read More]
September 29, 2009 - 10:36 AM EDT
Should Tax Havens Pay for Bank Bailouts?
Cloudy, with a chance of meatballs. That's the current box-office hit out of Hollywood. It is also a good forecast for the future of bank regulation in the United States and around the world. On Capitol Hill the intellectually daunting task of designing a shock-proof financial system has been dumbe... [Read More]
September 25, 2009 - 10:38 AM EDT
Oh, No! The Recession is Almost Over
There is a good chance that before lawmakers finish their work this year they will pass a tax bill that temporarily extends dozens of perennially expiring tax provisions. "Extenders" -- as they are called on Capitol Hill -- include the research credit and individual relief from the ever-encroaching... [Read More]
September 23, 2009 - 9:39 AM EDT
VAT Rising
Last year many nations -- most notably, the United Kingdom -- cut rates on their value-added taxes to provide economic stimulus. But as the recession ebbs the clear trend around the world is toward increasing value-added taxes. A partial list of recent actual and imminent VAT rate hikes includes: H... [Read More]
September 21, 2009 - 1:44 PM EDT
Prospects for Corporate Tax Hikes in U.S. and Germany
After the September 27 election Angela Merkel is likely to retain her hold on leadership of the German government. The burning question is whether the Chancellor's conservative CDU party will continue the "grand coalition" with its main rival, the center-left SPD. The other likely possibility is a... [Read More]
September 18, 2009 - 9:27 AM EDT
Tax Trick Not Working, Healthcare Deal Unraveling
Economists universally endorse limiting the $250 billion of tax benefits provided annually for employer-provided health insurance. The long-awaited plan from Senate Finance Committee Chairman Max Baucus includes a modest limitation of those benefits. But today we are reading in the New York Times... [Read More]
September 15, 2009 - 10:00 AM EDT
Taxes and the Financial Meltdown: A Two-Way Street
The near-death experience of the world's financial markets and the accompanying recession set in motion a worldwide wave of tax hikes. In the U.K. the Labour government wants top income tax rates to rise from 40 to 50 percent. The Conservative Party is expected to win the upcoming election and rais... [Read More]
September 14, 2009 - 8:37 AM EDT
Tax Big Banks: Two Birds With One Stone
The President is pushing financial reform to prevent another market meltdown. The President needs new revenue sources to put federal finances back on a sustainable path. Maybe one day the tax people at Treasury can get together with the financial stability people in the same building and develop a... [Read More]
September 11, 2009 - 7:24 AM EDT
Even Tax Havens Are Raising Taxes
Suffering the double whammy of a depression in tourism and financial services, the Cayman Island government is going broke. The initial solution proposed by the Cayman Government was a $372 million emergency loan from local banks. Because Cayman is an "Overseas Territory" of the United Kingdom, suc... [Read More]
September 9, 2009 - 7:18 AM EDT
Baucus Trumps Obama
Obama is August. Baucus is September. Obama is still talking about a government option. Baucus has a real plan. Obama is hope. Baucus is pragmatism. The most important document so far in this year's health care debate hit cyberspace yesterday. It is not the text of Obama's super-hyped speech tonigh... [Read More]
September 8, 2009 - 11:39 AM EDT
Capping Compensation: Good Economics or Pitchfork Populism
G20 finance ministers meeting in London last week agreed to continue developing proposals to the limit the pay of finance executives. And the topic will be on the agenda when their bosses meet in Pittsburgh on Sept 24-25. This a hot button issue that probably gets more air time than it deserves. So... [Read More]
August 6, 2009 - 9:06 AM EDT
Obama Adopts Reagan Tax-Hike Tactics
Karl Rove’s Wall Street Journal columns often are nothing more than well-informed rants about why conservatives should hate the Obama administration more than they already do. But in today’s installment “The Architect” of President Bush’s 2000 and 2004 campaigns gives the White House some well... [Read More]
August 5, 2009 - 8:29 AM EDT
Healthcare Hype and Deficit Denial
As summer lingers, lobbyists are spending tens of millions to get their healthcare message through to a nation on vacation. And Finance Committee Chairman Max Baucus--the senator at the center of the healthcare storm, leader of the only congressional committee seeking bipartisan reform--reports tha... [Read More]
August 3, 2009 - 8:09 AM EDT
Tax Only the Rich: For How Long?
After getting an earful from the Chinese last week about keeping their $800 billion investment safe and sound, Treasury Secretary Timothy Geithner on Sunday made his strongest pitch to-date on the necessity of putting a limit on Uncle Sam's credit card: GEITHNER: . . .it is absolutely right and ve... [Read More]
July 31, 2009 - 10:10 AM EDT
GDP Down, Delmonico's Up
The new GDP numbers are out and the preliminary figure for second quarter growth is negative one percent. That's the fourth consecutive negative quarter--the first time that has happened since 1947. The unemployment rate is 9.5 percent and rising. The government is selling record amounts of debt. S... [Read More]
July 30, 2009 - 1:33 PM EDT
Jobs and Con Jobs
A fundamental flaw with America’s healthcare system is its tangled relationship with the job market. Lose your job, lose your health care. Really, why should that be the case in a system heavily subsidized by the government? But union-backed Democrats are strongly inclined to perpetuate this flawe... [Read More]
July 29, 2009 - 9:57 AM EDT
Future Shock
Fast forward to November: Congress passes a respectable but downsized health care reform financed with spending cuts and a miscellany of revenue hikes. These include new taxes on high-end insurance plans and a modified version of the President’s plan to trim the value of itemized deductions. The H... [Read More]
July 28, 2009 - 3:16 PM EDT
California's Trendy Business Tax Proposal
Now that Governor Schwarzenegger and the legislature have completed another painful round of budget negotiations, lawmakers can give some attention to the work of California's tax reform commission. The most interesting proposal under consideration would replace California's corporate and sales tax... [Read More]
July 23, 2009 - 11:06 AM EDT
New Twist on Healthcare Financing
The first neat thing they teach you in economics school about taxes is that it does not matter if tax is imposed on a buyer or a seller. It all comes out in the wash. For example, suppose apples sell for $10 a bag. If a $1 dollar tax is imposed on sellers, the market price may rise -- depending on... [Read More]
July 23, 2009 - 8:25 AM EDT
Beyond Healthcare Reform: Obama's Vision
In an interview with the Washington Post, President Obama reveals how he wants to lay a "foundation" for deficit reduction "either at the end of this year or early next year." He is looking to reform Social Security first and then move on to a revenue-raising tax reform that lowers tax rates and b... [Read More]
July 20, 2009 - 9:58 AM EDT
Confidence Game
Fresh mint juleps in frosted glasses should be on hand today when the nation's governors finish their meetings in Biloxi. Imagine four summer days in Mississippi and nothing but trading stories about budget problems. And to make matters worse, Congress could soon be adding to their troubles with an... [Read More]
July 17, 2009 - 9:33 AM EDT
An Unlikely Hero
He's skinny, wears professor glasses, and looks like the guy in high school all the bullies hated because they knew someday he'd be their boss. But don't mess with Douglas Elmendorf. He's one tough son of a bitch. Bloomberg and the New York Times report that House Speaker Nancy Pelosi and Senate Ma... [Read More]
July 15, 2009 - 9:09 AM EDT
To Fund Healthcare "Other" Proposals are More Likely Than Rate Hikes
The $544 billion tax rate hike on high-income taxpayers proposed by Rangel & Co. won't be part of any healthcare bill that passes this Congress. Think of the move as an opening bid in a long negotiation. Conservative House Democrats will never stick their heads out to vote for rate hikes unless the... [Read More]
July 14, 2009 - 10:34 AM EDT
Probable Cause?
The deficit smashed through the trillion-dollar barrier this week on its way to a projected total of $1.825 trillion for the 2009 federal fiscal year ending September 30. As the Chicago Tribune points out: "A deluge of debt, looming on the horizon, threatens to wreak frightful damage on our econom... [Read More]
July 13, 2009 - 9:43 AM EDT
Sacrificing Tax Reform for Healthcare Reform
On caffeine and adrenaline, the White House staff is working 24-7 to keep the ambitious Obama agenda alive. Actor-economist Ben Stein worries this may not make sense: "We have an administration that is simultaneously seeking to end the recession, discussing drastic changes to laws on foreclosures a... [Read More]
July 6, 2009 - 10:47 AM EDT
Healthcare First, Deficit Second
The healthcare reform coaster is clacking to the top before its first big drop. Here we go for five weeks until the August congressional recess. It's an ego-trip for Democratic leaders who have dreams of making history. It's a gravy-train joy ride for lobbyists cashing in on old friendships. It's a... [Read More]
July 1, 2009 - 9:40 AM EDT
'There Will Be No Economy on Monday'
It was only last fall that Fed Chairman Ben Bernanke uttered those terrifying words to congressional leaders, warning them of what would happen if they failed to take radical steps to support the financial sector. Most of the world is still reeling from the Great Panic of 2008. The U.K. is bracing... [Read More]
June 29, 2009 - 8:59 AM EDT
How Should We Tax Wall Street?
An 80 percent tax on short term capital gains! Sounds like the liberals are taking over, doesn't it? But this radical proposal was not offered by Ralph Nader or It came from a former CEO of one of the nation's largest and most prestigious corporations. On June 25 Bloomberg reported that... [Read More]
June 25, 2009 - 5:45 PM EDT
CBO Makes It Official: Major Fiscal Pain Is in Our Future
The just-released Congressional Budget Office "Long-Term Budget Outlook" is a document of major historical significance. It's 82 pages long but the cover says it all (as shown below). Disregard the lower dashed line portraying the official -- but meaningless -- baseline scenario. The top line shows... [Read More]