Archive for the ‘Tax Expenditures’ Category

Senator Lee’s New Reform Plan Focuses on Young Children

At an AEI panel discussion earlier this week, Senator Mike Lee (R-Utah) unveiled the Family Fairness and Opportunity Tax Reform Act. The centerpiece is an additional $2,500 tax credit for all children under age 17. The plan retains the $1,000 child tax credit under current law. Unlike the current credit, the new credit would not […]

How Do High-Income People Avoid Paying Federal Income Tax?

Most of the 43 percent of Americans who the Tax Policy Center projects will pay no federal income tax this year make very little money. Some are middle-income households that qualify for enough tax preferences to zero out their tax bills. But more than 70,000 households with income over $200,000 will pay no federal income […]

Beware of Tax Reform That Promises Deep Rate Cuts

Two new studies show just how hard a time Congress will have trying to slash tax rates without adding trillions of dollars to the budget deficit and producing a massive tax windfall for the highest-income American households. Last week, the congressional Joint Committee on Taxation estimated that a tax plan that cuts individual rates to […]

Not All Curbs on Tax Preferences Are Created Equal

Because politicians seem unwilling to confront specific individual tax preferences, it is likely that any broad-based tax reform will be based on across-the-board curbs on deductions, credits, and exclusions. That’s how lawmakers could generate the revenue they need to reduce tax rates and (perhaps) help reduce the deficit without seeming to tackle popular tax subsidies […]

Can The Baucus-Hatch Blank Slate Plan Jump Start Tax Reform?

Senators Max Baucus (D-MT) and Orrin Hatch (R-UT), the chairman and senior Republican on the Senate Finance Committee, tried to jump-start the drive towards tax reform today with what they call a blank slate rewrite plan. Trouble is, it is not exactly a plan. And it isn’t quite a blank slate. Their idea is to get senators […]

Let Legal Marijuana Dispensaries Deduct Their Business Expenses

Firms can legally sell medical marijuana in 19 states and the District of Columbia and recreational weed in two. They must pay federal income taxes, but unlike all other businesses they are prohibited from reducing their taxable income by deducting business expenses. It is, to say the least, an odd state of affairs. Almost all […]

Who Benefits from Tax Preferences? You Do.

The Congressional Budget Office report on the distribution of tax expenditures is getting lots of buzz, nearly all of it positive. This is a gratifying and somewhat surprising outcome. The paper confirms many of the findings of my Tax Policy Center colleagues who have done similar analyses in recent years. The basic story is pretty […]

The Challenge of Cutting Deductions to Lower Tax Rates

Two interesting new papers from the Congressional Research Service highlight a major challenge faced by any tax reform that reduces itemized deductions to help pay for lower tax rates—lots of middle-income people would lose at least some benefits from scaling back those deductions. It isn’t a new lesson, but it is one that bears repeating. For instance, […]

How to Improve the Tax Subsidy for Home Ownership

Last week, at the request of the House Ways and Means Committee, I testified on how Congress could reform the mortgage interest deduction, a popular tax expenditure provision with a big sticker price. The congressional Joint Committee on Taxation estimates the mortgage interest deduction will cost $380 billion over the next five years, making it […]

Will the Retirement of Max Baucus Open the Door to Tax Reform?

It has become conventional wisdom in Washington that the just-announced retirement of Senate Finance Committee Chairman Max Baucus (D-MT) boosts chances for tax reform in the short term. I’m not so sure. The upbeat argument goes like this: By announcing that he will not run for reelection in 2014, Baucus is free from the pressures of […]