April 24, 2014

Posts on tax policy

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Monday, September 13, 2010 - 3:44 PM

The media is buzzing about how House Minority Leader John Boehner and President Obama might be ready to "compromise" on what to do about the Bush tax cuts.  From a story by Shailagh Murray and Lori Montgomery in Monday's Washington Post:

House Minority Leader John A. Boehner (R-Ohio) surprised Democrats on Sunday when he said he might not oppose President Obama's plan to extend the cuts for all but the wealthiest households, although he reiterated his preference for keeping the lower rates in place for all income groups.

Boehner's comments, made on the CBS program "Face the Nation," altered the landscape of the tax debate by suggesting that Republicans might not obstruct Democratic efforts to raise taxes on the top earners - a move advocated by Obama and many other Democrats as necessary to lowering the record deficit.

But read on in the same story.  Boehner did not say he would support letting the top-end cuts expire.  He said he wouldn't oppose extending all the rest of the tax cuts that President Obama is already proposing to extend:

"If the...

Sunday, September 5, 2010 - 9:54 PM

The Obama Administration is now considering a new set of tax cuts, primarily aimed at businesses, to further stimulate the economy.  It's reported that a permanent extension of the research and experimentation tax credit is one of these new proposals.  This is just the latest sign that the Administration is stuck in its own "deficit-financed tax cuts box."

My first complaint about these new ideas for tax cuts is that they're not really new at all; they're repeats of essentially permanent tax cuts that are repeatedly renewed.  They are "temporary" in name only. The administration seems to have adopted the mindset that many policymakers in Congress (and not exclusively those from one side of the aisle) have long had -- that the prescription for any kind of economic ailment should be more deficit-financed tax cuts.  But given the fiscal and economic outlook, and how the CBO explains they interact over the longer term (large deficits reducing economic growth), there's no justification for deficit financing permanent tax cuts. That's true even for tax cuts that may be good for longer-term growth (via the supply side of the economy) like the research tax credit.  Deficit-financing is only justified for policies that are designed to effectively and immediately boost...

Monday, August 23, 2010 - 2:17 PM

One of my Concord colleagues recently relayed the following "old joke" to me, remarking that a fiscal policy issue we had been discussing reminded him of it.  But when he said it, it reminded me instead of a different fiscal policy issue (and my favorite): the Bush tax cuts and the impending "fork in the road" for them -- whether they will largely endure as the "Obama tax cuts," or whether they will be allowed to expire as scheduled under current law, at least partially and/or eventually.

"Could you loan me ten dollars but just give me five? That way you'll owe me five, I'll owe you five, and we'll be even."

Conveniently, last week the Congressional Budget Office released their update to their budget and economic outlook, so I have some updated numbers for my Bush/Obama tax cuts version of that joke:

President Obama: "Could you loan me ten dollars $2.65 trillion for 10 years' worth of all of the Bush tax cuts but just give me five...

Monday, August 2, 2010 - 10:58 AM

Below are several developments we have been following since the last edition of the Washington Budget Report (sign up here) was published.

FY 2011 APPROPRIATIONS:  Prior to departing for the August recess, the House passed the first two FY 2011 appropriations bills. The Military Construction-Veterans Affairs bill passed by a vote of 411-6 and the Transportation-HUD bill passed by a vote of 251-167. House subcommittees reported the...

Monday, July 26, 2010 - 3:34 PM

Prime Minister David Cameron’s visit last week to the United States underscored the important relationship between the U.S. and Britain, both politically and economically.

Britain’s new coalition government faces tremendous challenges, many of which are similar to the United States’ problems.  Britain’s public debt was 68 percent of GDP at the end of 2009; the comparable figure for the U.S. was 53 percent.

Cameron’s coalition aims to slash government spending over the next five years.  The eventual goal is to cut Britain’s annual budget deficits in half over five years, which will mean some ministries will face funding reductions of up to 40 percent.  Even the popular National Health Service (NHS) will be ordered to make personnel cuts, although overall it will face much lighter cuts than other ministries.  About 75 percent of deficit reduction will be achieved with budget cuts while the other quarter presumably will come from raising revenues.

The proposed cuts in Britain stand in stark contrast to the three-year freeze on domestic discretionary spending President Obama has proposed.  Although broad generalizations cannot—and, indeed, should not—be drawn from these figures, it is clear that both the U.S...

Monday, July 26, 2010 - 10:14 AM

Below are several developments we have been following since the last edition of the Washington Budget Report (sign up here) was published.

COMMITTEES REPORT ADDITIONAL FY 2011 APPROPRIATIONS BILLS:  Last week the House Appropriations Committee continued to make progress on the FY 2011 bills.  The full committee reported the Military Construction-Veterans Affairs bill as well as the Transportation- Housing and Urban Development bill.  Both bills are expected...

Monday, July 19, 2010 - 3:51 PM

Last week President Obama nominated Jacob “Jack” Lew to be the new head of the Office of Management and Budget (OMB), replacing Peter Orszag, who is stepping down at the end of July. OMB is primarily responsible for developing the President’s budget.

If confirmed by the Senate, as expected, Lew will become OMB director for the second time. He served as President Clinton’s director from 1998 through the end of the Clinton administration in 2001.

While Lew is familiar with the job, the budget picture has changed considerably. Lew was OMB director during the only four years of budget surpluses since the late 1960’s. He was also a key negotiator on the bipartisan balanced budget agreement in 1997. Now the budget environment is even more partisan and the country is experiencing the largest deficits since the end of World War II.

The change in OMB leadership provides an opportunity to review the changes that have taken place since Lew’s last stint as budget director and also gives us another chance to review the major decisions looming for the federal budget.

The final budget presented by Lew for the Clinton administration in February of 2000 (FY 2001)...

Monday, July 19, 2010 - 3:22 PM

The International Monetary Fund has given Americans a tough-minded analysis of the challenges we face in putting the country on a more responsible fiscal course. While a recent IMF report points to some bright spots in the U.S. economy and praises federal policies in some key areas, it offers less upbeat predictions than the Obama administration has issued. More belt-tightening, the international organization warns, will be needed in the next few years and beyond.

“The (U.S.) authorities’ commitment to halve the budget deficit by 2013, and intention to stabilize public debt at just over 70 percent of GDP by 2015 are welcome, although much remains to be done to achieve these aims,” the report says. “Given that we use less optimistic economic assumptions than the (Obama) administration, we see the need for more ambitious adjustment to stabilize debt than that envisioned by the authorities . . . “

The IMF praises the Obama administration’s plans for a freeze on non-security domestic spending. But it also cautions that more tax revenue will be necessary as well. The report bolsters The Concord Coalition’s long-standing contention that both spending cuts and tax increases will likely be needed...

Monday, July 19, 2010 - 10:34 AM

Below are several developments we have been following since the last edition of the Washington Budget Report (sign up here) was published. 

2011 APPROPRIATIONS PROCESS MOVES FORWARD AS TIME STANDS STILL FOR THE 2010 SUPPLEMENTAL: Last week the House Appropriations Committee continued to make progress on the FY 2011 bills. House subcommittees reported the Military Construction and Veterans Affairs; Energy and Water; and...

Thursday, June 24, 2010 - 10:00 AM

A Washington Post editorial today sums up a bunch of different strands of thinking about the federal budget that Concord has been writing about and talking about a lot recently. One is that the country can "walk and chew gum" at the same time when it comes to short-term actions to help the economy that may involve increased deficits and long-term planning to confront the nation's real fiscal challenges. Another is that the current debate in Congress over the cost of tax-extenders is failing to focus on their merits while the overall fiscal challenge continues to go unexamined. A third is that we generally do know what actions need to be taken to reform federal programs over the long run -- but that members of Congress lack the political courage to act, and hopefully the President's fiscal commission can begin to...