Evaluating Broad-Based Approaches for Limiting Tax Expenditures (Research Report)
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 fixed-percentage amount, (4) limiting their tax saving to a maximum percentage of their dollar value, (5) replacing them 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.
State and Local Tax Deductions (Article/Tax Facts)
|Posted to Web: July 10, 2013||Publication Date: July 10, 2013|
Federal taxpayers choose between itemizing deductions and claiming the standard deduction. Itemizers can claim deductions for state and local income and property taxes paid. (Through 2013, taxpayers may deduct state and local sales taxes paid in lieu of income taxes.) In 2011, 46.6 million taxpayers claimed the deduction for state and local taxes paid, deducting almost $470 billion from their tax returns.
Limiting the Tax Exclusion of Employer-Sponsored Health Insurance Premiums: Revenue Potential and Distributional Consequences (Policy Briefs/Timely Analysis of Health Policy Issues)
|Posted to Web: July 01, 2013||Publication Date: July 01, 2013|
The exclusion of employer-sponsored health insurance premiums and medical benefits reduced federal tax revenues by $268 billion in 2011 alone-by far the largest federal tax expenditure. Moreover, the exclusion disproportionately subsidizes those with higher incomes. In this brief, we provide estimates of the revenue potential and distributional consequences of limiting the exclusion from income and payroll taxes at the 75th percentile of 2013 premiums, indexing by GDP. The policy would produce $264.0 billion in new tax revenues over the coming decade while preserving 93 percent of the tax subsidies available under the current policy.
Top Individual Income Tax Rates: How Does the U.S. Compare? (Article/Tax Facts)
|Posted to Web: May 08, 2013||Publication Date: May 08, 2013|
Discussions of the effect of taxes on international competitiveness usually focus on corporate income tax rates, but individual income tax rates may also affect a country’s (or state’s) ability to compete for workers.
Carbon Taxes and Corporate Tax Reform (Research Report)
|Posted to Web: April 03, 2013||Publication Date: March 18, 2013|
The revenues from a carbon tax could help finance lower corporate tax rates, extending business tax preferences, or other corporate tax reforms. Such a tax swap would reduce the environmental risks of carbon emissions and improve the efficiency of America’s corporate tax system. But it would also pose a significant distributional challenge. A carbon tax would fall disproportionately on low-income families, while corporate tax cuts would disproportionately benefit those with high incomes. Policymakers may want to use some revenue to offset those impacts. They may also want to use some carbon revenues for deficit reduction.
Today's Unsustainable Budget Policy: A Recount (Research Report)
|Posted to Web: February 11, 2013||Publication Date: February 11, 2013|
Although the recently passed American Taxpayer Relief Act instituted meaningful deficit reduction relative to previous policy, it still left the budget a far distance from any sustainable path. Under a plausible scenario, deficits never fall below 3.4 percent of GDP and rise to 5.4 percent of GDP by 2022. Given this baseline, an additional $150-$300 billion of annual deficit reduction, instituted after the economy has fully recovered, would put the budget on a stable path in the intermediate term while allowing for continued economic recovery. Yet even that path leaves longer-term budget problems unresolved. Without a more far-reaching agreement over such long-term issues, policymakers may have limited leeway to respond to new emergencies and meet the demographic pressures of the forthcoming decade.
Reforming the Charitable Contribution Substantiation Rules (Research Report)
|Posted to Web: January 30, 2013||Publication Date: January 30, 2013|
In May 2012, the Tax Court issued two decisions denying income tax deductions for gifts to charitable organizations because they failed to meet the requirements for a qualified appraisal. These cases lit a firestorm of outrage in various circles, raising questions of how strictly substation rules should be applied. This paper reviews the rationales behind the charitable contribution substantiation rules, sets out the complicated regime regarding these rules and applicable case law, and presents a number of possible reforms. Balancing the need to control overvaluation with the need to encourage legitimate charitable contributions is a difficult but important challenge.
What Does the Fiscal Cliff Deal Mean for Nonprofits? (Fact Sheet / Data at a Glance)
|Posted to Web: January 24, 2013||Publication Date: January 24, 2013|
This fact sheet examines the effects of the American Taxpayer Relief Act of 2012 (ATRA) on charitable giving. The major individual income tax provisions are estimated to increase giving by $3.3 billion or 1.5 percent, relative to 2012 law, mainly because of the increase in the top marginal tax rate. Numerous other smaller provisions will also affect charitable giving.
Dead Men Ruling: The Decline of Fiscal Democracy in America (Video / Commentary)
|Posted to Web: January 10, 2013||Publication Date: January 10, 2013|
On January 3, 2013, the 113th session of the U.S. Congress opened with a fiscal cliff averted, but a country still stuck in a less-recognized fiscal bind. In the first video of a three-part series, Urban Institute Fellow Eugene Steuerle, a former deputy assistant secretary of the Treasury for tax analysis and cofounder of the Urban-Brookings Tax Policy Center, explores one of the major reasons recent Congresses have been so dysfunctional: all, or almost all, the revenue to be collected by the Treasury Department was spent before lawmakers walked in the door. Steuerle further discusses how spending and tax subsidy programs on autopilot, along with a tax system inadequate to pay our bills and rife with gaping holes, handicap lawmakers' and the public's ability to set new goals for solving today’s and tomorrow's problems.
Evaluating the Charitable Contribution Substantiation Rules (Research Report)
|Posted to Web: January 04, 2013||Publication Date: January 04, 2013|
Two Tax Court decisions, including two from May 2012, demonstrate the concerns that arise both when the charitable contributions substantiation rules are strictly applied and when they are not. In order to address problems of valuation, the U.S. Congress has addressed the charitable substantiation rules five times in the past 30 years. Each time, Congress has strengthened the rules to try to prevent overvaluation, but the rules have not proved satisfactory. This brief suggests reasonable and fair reforms to substantiation rules.
|Posted to Web: December 19, 2012||Publication Date: November 30, 2012|