Taxes and the Economy
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Bonus Depreciation Tax Cut Unlikely To Provide Effective Economic Stimulus
September 10, 2008
Stimulus legislation enacted in February included a provision that increased the tax deduction which businesses can claim when they purchase certain types of equipment and place it in service during the 2008 tax year. Suggestions are being made that this “bonus depreciation” provision — a form of accelerated … -
How Robust Was the 2001-2007 Economic Expansion?
Updated August 29, 2008
Proponents of the 2001 and 2003 tax cuts often argue that the economic and employment growth of the past several years establishes that these tax cuts “worked” and had strong beneficial effects. More recently, some have also argued that, with growth slowing, new tax cuts are needed and would reinvigorate the economy. It now appears likely that the economic expansion that … -
Evidence Shows That Tax Cuts Lose Revenue
Revised July 21, 2008
The claim that tax cuts “pay for themselves” — i.e., cause so much economic growth that revenues rise faster than they would have without the tax cut — has been made repeatedly in recent years and is one of the many tax policy issues that is likely to receive renewed attention in light of the upcoming … -
Smaller Deficit Estimate No Surprise: New OMB Estimates Do Not Support Claims About Tax Cuts
Revised July 13, 2008
The Office of Management and Budget today released a report estimating that revenues for the current fiscal year will be higher, and the deficit lower, than the administration and the Congressional Budget Office projected five months ago. OMB now estimates that the deficit for fiscal year 2007 will be $205 billion, down from the $244 billion estimate in the President’s budget in … -
House-Passed Housing Tax Package Improves Significantly on Senate Version: But Addressing the Foreclosure Crisis Will Require Other Measures
Revised June 17, 2008
On April 10, the Senate passed a bill comprised largely of housing-related tax cuts. [1] Six weeks later, the House passed its own housing legislation including its own package of housing-related tax measures. Some of the provisions in House-passed housing tax package have merit, and the House-passed tax package represents a … -
Well-Designed, Fiscally Responsible Corporate Tax Reform Could Benefit the Economy: Unpaid-For Rate Cuts Would Likely Hurt Most Americans in the Long Run
June 4, 2008
Over the past year, proposals for federal corporate tax cuts and corporate tax reform have received increasing attention. The corporate income tax appears to have joined the long list of tax issues likely to be addressed, or at least debated, over the next few years. Already, two different approaches have emerged. In … -
Claims That a Modest Tax Surcharge on Millionaires Would Damage Small Businesses and the Economy Do Not Withstand Scrutiny
Revised May 22, 2008
Supplemental appropriations legislation that the House of Representatives approved last week (H.R. 2642) would impose a modest income tax surcharge on couples with adjusted gross income above $1 million (and singles with AGI above $500,000) to fund an expansion of higher education benefits for veterans.[1] The surcharge would be … -
Senate Housing Legislation Highly Disappointing: Less Than One-Fourth of Cost of Senate Bill Goes for Provisions That Will Actually Help Address the Foreclosure Crisis
Revised May 12, 2008
On April 10, the Senate passed legislation that its supporters say will help struggling families hold on to their homes and assist the communities hit hardest by the foreclosure crisis. Measures that would help achieve these goals, however, account for less than one-fourth of the bill’s cost. The remainder of the cost comes … -
Tax Cuts: Myths and Realities
Updated May 9, 2008
Since 2001, the Administration and Congress have enacted a wide array of tax cuts, including reductions in individual income tax rates, repeal of the estate tax, and reductions in capital gains and dividend taxes. Nearly all of these tax cuts are scheduled to expire by the end of 2010. Making them permanent would cost about $4.4 trillion over the next decade (when the cost of … -
Net Operating Loss Measure under Consideration In Senate Has Low Bang-For-The-Buck As Stimulus: No Justification for Waiving PAYGO for the Provision
February 26, 2008
According to news accounts, the Senate will soon consider a housing stimulus package (S. 2636), introduced by Senator Reid earlier this month.[1] While the package primarily targets the housing market, it also includes a measure dealing with business net operating losses. A business experiences a “net operating … -
Senate Rebate Proposal Targets More Funds to Low-Income Households, Boosting Stimulus Impact: Lifting Income Cap Reduces Bang-for-the-Buck, But Changes Are an Improvement Overall
Revised February 1, 2008
The stimulus legislation that was adopted by the Senate Finance Committee on Wednesday would make several changes to the House-passed stimulus package, including significant changes to the tax rebate proposal that on balance would make the rebate more effective as stimulus. While retaining the House rebate’s basic structure, the Finance … -
Senate Action Will Not Delay Rebates
January 31, 2008
The facts are clear: Senate action on the stimulus package will not delay the rebates by a single day. The earliest that the IRS can begin to send out rebates is mid-May. No matter how fast Congress enacts the stimulus package, the IRS cannot start issuing the rebates any sooner because it must first process the 2007 … -
Repatriation Measure Unlikely to Stimulate the U.S. Economy or Boost U.S. Investment — But Will Promote Investment in Tax Havens and Undermine the Corporate Income Tax
January 30, 2008
When the Senate Finance Committee considers stimulus legislation today, Senator John Ensign is expected to offer an amendment dealing with repatriated foreign earnings. Modeled on a provision included in the 2004 American Jobs Creation Act, Senator Ensign’s amendment would create a tax holiday during which repatriated … -
President's Expected Push to Make Tax Cuts Permanent is Irresponsible Fiscal and Economic Policy
January 28, 2008
In his State of the Union address this evening, President Bush is expected to renew his push to make his signature tax cuts permanent. In recent weeks, Administration officials have offered three major arguments for this policy — (1) the tax cuts yielded strong economic growth over the past few years, (2) extending them … -
An Analysis Of The Rebate Proposal In The Announced Stimulus Deal
January 25, 2008
The centerpiece of the stimulus deal announced yesterday by House Speaker Nancy Pelosi, House Minority Leader John Boehner, and Treasury Secretary Henry Paulson is a proposal to send rebate checks to 117 million U.S. households. The structure of the proposed rebate, while not ideal from a stimulus standpoint, is far superior to the … -
Another Misdiagnosis: Marginal Rate Reductions and Extensions of Tax Cuts Expiring in 2010 Not the Right Medicine for the Economy’s Current Ills
January 15, 2008
Six months ago, the economy was growing steadily, and the President gave an address in which he claimed that the 2001 and 2003 tax cuts had brought about strong economic growth and should be made permanent to ensure strong growth over the long run.[1] Prominent conservatives recommended a corporate rate cut to make U.S. businesses … -
The Four Pieces of Effective Fiscal Stimulus
January 14, 2008
Recent evidence that the economy has weakened significantly has sparked discussion of possible fiscal stimulus measures. To be effective, such measures must be timely, targeted, and temporary. Timely measures are those that, once triggered, stimulate new spending quickly so that … -
Principles for Fiscal Stimulus Economic Policy in a Weakening Economy
Revised January 11, 2008
The weak December jobs report that the Labor Department issued January 4 is the latest evidence the economy has weakened significantly and is now growing quite slowly. A number of economists continue to believe this slow growth will continue into 2008, but that the economy will avoid slipping into a recession.[1] Some …
