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Tax Distribution and Economic Trends


 
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Taxes and Inequality (Research Report)
Leonard E. Burman

This paper reviews historical trends in economic inequality and tax policy’s role in reducing it. It documents the various reasons why income inequality continues to rise, paying particular attention to the interplay between regressive and progressive federal and state taxes. The report also considers the trade-off between the social welfare gains that a more equal distribution of incomes would provide, and the economic costs of using the tax system to reduce inequality, highlighting the fact that income inequality reflects an amalgam of factors. The optimal policy response reflects that complexity.

Posted to Web: March 20, 2014Publication Date: March 20, 2014

Preliminary Analysis of The Family Fairness and Opportunity Tax Reform Act (Research Report)
Leonard E. Burman, Elaine Maag, Georgia Ivsin, Jeff Rohaly

Senator Mike Lee's Family Fairness and Opportunity Tax Reform Act (S.1616) would significantly expand tax benefits for children, repeal the alternative minimum tax, and repeal the Affordable Care Act surtaxes on earnings and net investment income. To partially offset the cost of these provisions, the plan would consolidate filing statuses and tax brackets and repeal itemized deductions other than those for charitable contributions and home mortgage interest. TPC estimates that the plan would reduce tax revenues by $2.4 trillion over the ten-year budget period, 2014-2023, and remove roughly 12 million tax units from the federal income tax rolls in 2014.

Posted to Web: March 04, 2014Publication Date: March 04, 2014

Redistribution Under the ACA is Modest in Scope (Policy Briefs/Timely Analysis of Health Policy Issues)
Stan Dorn, Bowen Garrett, John Holahan

Claims that the ACA involves "the largest income transfer in American history" are exaggerated. Low- and moderate-income people receive benefits equaling 0.9 percent of GDP, a fraction of spending on Medicare, Social Security, and tax preferences for employer-sponsored insurance. The affluent contribute just 0.2 percent of GPD, with taxes limited to 2.4 percent of tax-filers, who pay an average of 0.5 percent of income. Nearly three-quarters of ACA's funding comes, not from the wealthy, but from the health care industry, through reimbursement cuts or taxes and fees. However, these contributions are offset by new revenue from people gaining health insurance.

Posted to Web: February 12, 2014Publication Date: February 14, 2014

Evaluating Broad-Based Approaches for Limiting Tax Expenditures (Research Report)
Eric Toder, Joseph Rosenberg, Amanda Eng

This paper evaluates six options to achieve across-the-board reductions to a group of major exclusions and deductions in the income tax: (1) limiting their tax benefit to a maximum percentage of income; (2) imposing a fixed dollar cap; (3) reducing them by a fixed-percentage amount; (4) limiting their tax saving to a maximum percentage of their dollar value; (5) replacing preferences with fixed rate refundable credits; and (6) including them in the base of the existing Alternative Minimum Tax (AMT). We discuss issues of design, implementation, and administration, and simulate the revenue, distributional, and incentive effects of the various options.

Posted to Web: February 06, 2014Publication Date: December 31, 2013

Changes in the Organization of Business Activity and Implications for Tax Reform (Research Report)
George A. Plesko, Eric Toder

This paper documents the increased role of pass-through entities and the associated decline in use of the taxable corporate form since the Tax Reform Act of 1986 (TRA86) and discusses implications for the design of tax policy. We show how significant reductions in the corporate tax rate, absent changes in the personal tax rate, would reverse the organizational form incentives that have existed since TRA86. If the loss in revenue from a rate reduction is offset by a broadening of the tax base, most business entities, comprising most business income, will face an overall increase in their tax burden.

Posted to Web: February 06, 2014Publication Date: December 31, 2014

Corporate Income Tax Reform: Dreaming On (Article)
Eric Toder

Both political parties are calling for corporate tax reform without agreement on specifics. Proposals to broaden the corporate tax base to pay for lower rates or to eliminate taxes on corporate repatriations while trying to prevent income shifting do not address the main problems of taxing multinational corporations in a global economy. This article discusses the need for more fundamental structural reforms and offers up two ideas – securing international agreement on better rules to allocate profits of multinationals among taxing jurisdictions or, alternatively, replacing the U.S. corporate tax with full taxation of dividends and accrued capital gains of U.S. shareholders.

Posted to Web: January 28, 2014Publication Date: January 28, 2014

The War on Poverty Moves to the Tax Code (Article/Tax Facts)
Leonard E. Burman, Elaine Maag

In 1975, the federal income tax code joined the "War on Poverty" with the enactment of the earned income tax credit (EITC). Today, tax credits form some of the largest and most effective anti-poverty programs in the US. In 2012, the Census Bureau estimated that tax credits cut poverty (under a broad measure that includes the effect of programs like Supplemental Nutrition Assistance Program benefits and the EITC) by 3 percentage points – more than SNAP (1.6 points) and TANF (0.2 points). The tax credits cut child poverty by a whopping 6.7 percentage points.

Posted to Web: January 07, 2014Publication Date: January 06, 2014

Residential Property Taxes in the United States (Research Report)
Benjamin H. Harris, Brian David Moore

This brief presents an overview of residential property taxes. The brief considers recent trends in aggregate property tax revenues and examines the property tax at the county level. Property taxes are an important source of revenue for local governments, though effective property tax rates vary substantially by state and region. The counties with the highest property tax burdens tend to be in New York and New Jersey, while the counties with the lowest property tax burdens are located in Alabama and Louisiana. Most counties levy property taxes that are around $1,000 per homeowner and below 1 percent of house value.

Posted to Web: November 18, 2013Publication Date: November 18, 2013

SOI Releases New Data From Form W-2 (Article/Tax Facts)
Jim Nunns

Newly released W-2 data from the Statistics of Income (SOI) Division of IRS describe in detail the wages and retirement contributions of workers from 2008 through 2010. SOI economists Kevin Pierce and Jon Gober provide an overview of the data and compare them with (much less detailed) data for prior years in an SOI Bulletin article. Three charts illustrate the depth and usefulness of the data.

Posted to Web: October 07, 2013Publication Date: October 07, 2013

Who Pays No Income Tax? A 2013 Update (Article/Tax Facts)
Roberton Williams

TPC estimates that 43 percent of Americans will pay no federal income tax this year, down from the peak of 50 percent in 2008 and 2009.

Posted to Web: September 30, 2013Publication Date: September 30, 2013

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