About Stuart Levine

Federal Tax Issues

October 12, 2008

Ewe Reinhardt provides a swift antidote to those who believe that (i) taxes in the U.S. are high,and (ii) taxes, in and of themselves, have a negative impact on investment.

As to the first proposition, he points to this chart showing that tax rates in the U.S., relative to GDP, are among the lowest in the industrialized world:

Comparative International Tax Chart

As to the second proposition, he offers this chart showing the relative total private investment as a percentage of U.S. GDP in the years 1980-2008.

Investment to GDP Chart

Note that non-residential investments, as a percent of GDP, feel during the Regan, Bush I, and Bush II administrations, but rose during the Clinton Administration.

September 27, 2008

At the first presidential debate last evening, Sen. McCain stated that the U.S. had the highest corporate income taxes in the world. Consonant with the BISM principle, that statement was false.

According to a 2007 study by the Treasury Department: "it appears that, despite its high statutory [Corporate Income Tax] rate, the United States takes a below-average share of corporate income in taxes (at least, at the corporate level)." Here's a chart from the report showing the relative tax burden amount advanced industrial countries:

Comparative Corporate Tax Chart

July 13, 2008--Distributional Effects of Bush Tax Cuts

The Brookings Institution has published a paper on the distributional effects of the 2001 and 2003 tax cuts.

Table 4 (page 20 of the paper) has a chart that shows the "Composition of Distributional Effects of the 2001 and 2003 Tax Cuts with Equal-Dollar Financing and Behavioral Responses." The last column of the chart shows the total effect of the tax cut. The three lowest quintiles of earners actually lost money. The 90-99 percentile made an average of $5,234. The top one percent made $107,910.

John McCain thinks that this is just dandy.

January 26, 2008--Cui Bono Department

The Tax Policy Center cranked the numbers on the proposed stimulus proposal and discovered, surprise, that the lion's share of the benefits under the proposal go to the well-to-do. The study is here. Paul Krugman here created a easy to read chart showing the results:

Krugman Stimulus Chart

As Krugman points out, the skewing of the benefits of the stimulus package to the wealthy is not only unfair, but it reduces the effectiveness of the proposal since "the top two quintiles are unlikely to be liquidity-constrained."

As the CBO Reported, extending or expanding unemployment benefits and temporarily increasing food stamp benefits would both be very effective, have a short period of time before the effect took hold, and the certainty of these effects is very high.

Conversely, the CBO report also finds that across the board tax cuts (which is fairly close to the manner in which the proposal is structured), will have only a small stimulative effect, although it would kick in quickly. CBO's confidence in this estimate is low, however. (The reason for the limited effect is, as the CBO reports, "Much of the tax reduction goes to upper-income people, who are less likely to spend it.")

January 20, 2008

From Paul Krugman, this chart showing real revenue per capita:

Krguman Per Capita Revenue Graph

December 30, 2007--Why the FairTax Won't Work

Bruce Bartlett has published Why the FairTax Won't Work.

November 2, 2007

The Tax Policy Center of the Urban Institute and the Brookings Institution has published this analysis of the Rangle tax bill making it clear that the bill is not a tax increase. Some (i.e., the rich) do pay more in taxes, but the rest of us pay less.

October 12, 2007

This chart was published in today's NYT and was derived from an analysis of IRS figures by Citizens for Tax Justice:


October 6, 2007--Wrong End of the Telescope

The Tax Foundation summarizes the latest federal individual income tax data here. The second paragraph is truly remarkable:

This year's numbers show that both the income share earned by the top 1 percent and the tax share paid by the top 1 percent have reached all-time highs. In 2005, the top 1 percent of tax returns paid 39.4 percent of all federal individual income taxes and earned 21.2 percent of adjusted gross income, both of which are significantly higher than 2004 when the top 1 percent earned 19 percent of AGI and paid 36.9 percent of federal individual income taxes.

Poor little rich boys and girls. Their share of income tax paid reached an all time high. But wait, so did their share of income. The logical next question, a question the Tax Foundation never asks, are income growth and relative income tax burden moving up together or is one moving faster than the other?

Some quick arithmetic shows that between 2004 and 2005, the income of the top 1% of all taxpayers increased by 11.58%. Yet, their share of the income tax burden increased by only 6.78%. In other words, as to the top 1%, there was a decrease in progressivity. Of course, we're only measuring the income tax burden. Other Federal taxes, most notably Social Security and Medicare, are essentially regressive.

changed October 13, 2008