Tax Distribution and Economic Trends

The U.S. faces a large medium-term federal budget deficit and an unsustainable long-term fiscal gap. Left unattended, these shortfalls will hobble and eventually cripple the economy. The only plausible way to close the gap is through a combination of spending cuts and/or tax increases. This paper discusses why a federal Value Added Tax (VAT) should be part of a constructive solution to the fiscal problem.

Policymakers should be thinking hard about low-income families with children and the tax code. In 2010, the federal income tax system will deliver substantial assistance to these families through refundable tax credits. The Tax Policy Center estimates a third fewer children would be in poverty if tax credits were counted in a person’s available resources when measuring poverty. They are among the most potent anti-poverty programs for families with children. In 2011, some aid targeted to the poorest families will disappear as the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) and the American Recovery and Reinvestment Act (ARRA).

Donald Marron's testimony before the Senate Committee on Finance on the individual tax system.

Leonard Burman's testimony before the Senate Committee on Finance on whether and how to extend the 2001 and 2003 tax cuts.

The Wyden-Gregg tax reform proposal would represent a broad reform of the federal income tax system. This paper examines the plan's impact on individuals' effective marginal tax rates (EMTR), the incremental amount of tax owed on an additional dollar of income. We examine the impact on the EMTR for both wage income and realized capital gains against current law and current policy baselines. We find the Wyden-Gregg plan would lower the overall average EMTR on wages relative to both current law and current policy, but would raise the overall average EMTR on gains when compared with those same two baselines.