More About Chye-Ching Huang

Chye-Ching Huang

Chye-Ching Huang is a tax policy analyst with the Center’s Federal Fiscal Policy Team, where she focuses on the fiscal and economic effects of federal tax policy. You can follow her on Twitter @dashching.

Full bio and recent public appearances | Research archive at CBPP.org


Just the Basics: Tax Expenditures

April 10, 2014 at 3:00 pm

Tax expenditures — subsidies delivered through the tax code as deductions, exclusions, and other tax preferences — have been in the news as many policymakers have proposed cutting them to reduce the deficit, finance investments, reduce tax rates, or a combination of those goals.  As Tax Day approaches, we’ve updated several backgrounders that explain how the federal government and states collect and spend tax dollars.  Today, we review our revised tax expenditures backgrounder.

Tax expenditures reduce the amount of tax that households or corporations owe.  To benefit from a tax expenditure, a taxpayer must undertake certain actions or meet certain criteria.  For example, some households with a mortgage can reduce their taxes by claiming a tax deduction for their mortgage interest, and corporations can receive a tax subsidy for investing in machinery.

In fiscal year 2013, tax expenditures reduced federal income tax revenue by over $1.1 trillion, and they reduced payroll taxes and other revenues by an additional $120 billion.  For comparison, just the federal income tax expenditures together cost more than Social Security, or the combined cost of Medicare and Medicaid, or defense or non-defense discretionary spending (see chart).

Click here to read the full paper.  For more on how deductions and credits work, see our related Policy Basics:  Tax Exemptions, Deductions, and Credits.

New York Times Calls Senate Finance Committee “Extenders” Vote Fiscally “Imprudent”

April 9, 2014 at 4:37 pm

The Senate Finance Committee has voted to reinstate dozens of temporary tax breaks that expired at the end of 2013 — without offsetting their cost.  A recent must-read New York Times editorial called the vote “imprudent.”  Indeed, we find it fiscally unsound.

The Senate Finance Committee bill would cost more than $85 billion to extend the so-called “tax extenders,” which are mostly corporate tax breaks that Congress has routinely extended year after year.  But that misrepresents the true cost of these tax breaks, because the bill would extend them for only two years.

Indeed, if Congress repeatedly renewed the extenders without offsets, they would cost $484 billion over the next decade.  That’s the equivalent of “giving back” more than half of the revenue from the “fiscal cliff” budget deal of late 2012, when policymakers raised tax rates on very high-income taxpayers (see chart).

This total excludes the costs of continuing of bonus depreciation, a provision that allows businesses to take bigger upfront tax deductions for certain new investments, on the assumption that Congress would let this stimulus measure expire, as it has in the past, once the economy strengthens.  That would be the right step, as we’ve explained.

If instead, Congress continued this provision, the ten-year cost of making the tax extenders permanent would rise to $747 billion — eroding nearly all of the fiscal cliff revenue savings.  (The Finance Committee bill includes a two-year extension of bonus depreciation.)

Policymakers’ current approach to extenders is not only fiscally unsound, but the New York Times highlights that it also represents a fiscal double standard:

For the past few years, Democrats have gone along with the Republicans’ refusal to incur debt for programs that are far more effective than tax cuts at boosting the economy and far more urgent — like jobless benefits and spending on education and infrastructure. Instead of borrowing to pay for such needs, lawmakers have coupled most new outlays with spending cuts elsewhere in the budget. . . . In contrast, borrowing to finance the tax cuts basically transfers money to corporate owners and executives, with no reduction demanded in other forms of government aid to business and with future taxpayers left to pay the bill.

Congress has better choices:  for example, House Ways and Means Committee Chairman Dave Camp’s tax plan includes provisions that limit or eliminate dozens of special interest revenue raisers, providing a roadmap on how to pay for any extenders that policymakers think are worth continuing.

Just the Basics: Payroll Taxes

April 9, 2014 at 11:51 am

As Tax Day approaches, we’ve updated several backgrounders that explain how the federal government and states collect and spend tax dollars.  As policymakers and citizens weigh key decisions on how best to shape our future federal government, it’s helpful to examine where the dollars that comprise the budget come from and where they go.

The next in our series of revised “Policy Basics” backgrounders explains federal payroll taxes.

The federal government levies payroll taxes primarily on wages and self-employment income and uses most of the revenue to fund Social Security, Medicare, and other social insurance benefits.  In fiscal year 2013, federal payroll taxes generated $947 billion, or 34 percent of all federal revenues.  (When the Social Security tax was introduced in 1937, it accounted for 11 percent of federal revenues.)

Find out more about who pays payroll taxes and what they fund in our full paper.

Just the Basics: Sources of Federal Revenues, Explained

April 8, 2014 at 2:20 pm

As Tax Day approaches, we’ve updated several backgrounders that explain how the federal government and the states collect and spend tax dollars.  As policymakers and citizens weigh key decisions on how best to shape our future federal government, it’s helpful to examine where the dollars that comprise the budget come from and where they go.

The next in our series of revised “Policy Basics” backgrounders explains where our federal revenues come from.

In fiscal year 2013, the federal government spent $3.5 trillion on the services it provides, such as national defense, health care programs like Medicare and Medicaid, Social Security benefits for the elderly and disabled, and investments in infrastructure and education, in addition to interest on the debt.  Federal revenues financed close to $2.8 trillion of that spending; borrowing financed the remaining $680 billion.

The three main sources of federal tax revenue are individual income taxes, payroll taxes, and corporate income taxes; other sources include excise taxes, the estate tax, and other taxes and fees (see chart).

Over recent decades, the share of federal revenues coming from individual income plus payroll taxes has grown, while the share from corporate taxes and other revenues has fallen.  The Great Recession and the policies enacted to combat it, including temporary tax cuts, depressed federal revenues below the typical levels of recent decades.  Revenues fell from 17.9 percent of gross domestic product in 2007 (the last fiscal year before the recession) to 14.6 percent in 2009 and 2010.  In 2013 they were 16.7 percent.  As the economy recovers, federal revenues are projected to return to higher levels.

Click here to read the full paper.  For more detail on the tax rates that Americans pay, read our related Policy Basics:  Marginal and Average Tax Rates.

Just the Basics: Where Our Federal Tax Dollars Go

April 7, 2014 at 2:59 pm

As Tax Day approaches, we’ve updated several backgrounders that explain how the federal government and states collect and spend our tax dollars.  As policymakers and citizens weigh key decisions on how best to shape our future federal government, it’s helpful to examine where the dollars that comprise the budget come from and where they go.

The first of our revised “Policy Basics” backgrounders explains what federal taxes pay for.  In fiscal year 2013, the federal government spent $3.5 trillion — 21 percent of the nation’s gross domestic product — on the critical services it provides, such as national defense, health care programs like Medicare and Medicaid, Social Security benefits for the elderly and disabled, and investments in infrastructure and education, in addition to interest on the debt.

As the chart shows, three major areas of spending each make up about one-fifth of the budget:  defense and international security assistance; Social Security; and Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP).

Together, two other categories account for another fifth of spending:  the first is safety net programs, including critical programs like unemployment insurance and SNAP (formerly known as food stamps), which protect people through difficult financial times, and the refundable portion of the Earned Income Tax Credit and the Child Tax Credit, which lift millions of people out of poverty each year; and the second is interest on the national debt.  The remaining fifth supports a variety of other public services (see chart).

Click here to read the full paper, which gives more detail about what’s in each of these categories of spending.