View Research by Author - Rachel M. Johnson

Publications

The Auto IRA could improve retirement security for millions of workers while boosting America's saving rate, leading to improved living standards for future generations.

Effective tax rates (ETRs) measure how much people pay in taxes as a percentage of their pretax incomes. That seems simple, but there’s an important complication: there are different ways to measure how much someone pays in taxes and how much he collects in pretax income. Those choices matter a great deal. As a result, it is essential to use the same ETR measure when comparing tax burdens across individual taxpayers or groups.

About 46 percent of American households will pay no federal individual income tax in 2011, roughly half of them because of structural features of the income tax that provide basic exemptions for subsistence level income and for dependents. The other half are nontaxable because tax expenditures— special provisions in the tax code that benefit selected taxpayers or activities—wipe out tax liabilities and, in the case of refundable credits, yield net payments from the government. Provisions that benefit senior citizens and low-income working families with children particularly affect households with income under $50,000 but other factors make higher-income households nontaxable.

The debate over extending the 2001–2003 tax cuts beyond 2010 has revolved around two options: extend all provisions for all taxpayers, and the president’s proposal to extend all provisions except those that apply only to high-income taxpayers. A third option has drawn attention: extend the 2001–2003 tax cuts fully for all taxpayers except those with income over $1 million. This paper explores alternate ways to structure an additional tax rate on millionaires (as defined by annual income, not wealth), but does not consider other alternatives, such as eliminating or reducing tax preferences, that would increase tax liabilities of millionaires without raising marginal tax rates.

In 2010, 45 percent of tax returns will either remit no federal income tax or receive a net tax refund. But this figure overstates the share of taxpayers who would be unaffected by higher income tax rates. Raising all rates by 1 percent would hold only 34 percent of tax returns harmless; others would either pay higher taxes or receive smaller net rebates.

To encourage better retirement saving, President Obama recently proposed policies that would require firms without retirement savings plans to automatically enroll their workers in IRAs. In addition, the president proposed an expansion of the Saver's Credit to be fully refundable and available to middle-income taxpayers. This report estimates the revenue costs and distributional effects of the president's proposals.

Overall, the federal tax system is progressive. On average, households with higher incomes pay taxes that are a larger share of their income. But barring legislative action, the numerous sunsets and phase-ins that Congress has written into the tax code will result in a tax system that is in a state of flux over the next few years. As a result, current law dictates significant changes in the degree of progressivity in the federal tax system between now and 2012. This paper summarizes the Tax Policy Center's latest estimates of the distribution of federal taxes for 2009 through 2012.

An informal chat with Tax Policy Center Director Len Burman. What is VAT (Value Added Tax) and how can it help solve some of our nation's financial dilemmas?

An informal discussion with Tax Policy Center Director Len Burman and Co-director Rosanne Altshuler. Why should you care about tax policy?

Research Assistant, Rachel Johnson, talks with Senior Research Fellow and editor of the TaxVox blog, Howard Gleckman, about the AIG bonuses and why they should not be excessively taxed.

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