More About Chuck Marr

Chuck Marr

Chuck Marr is the Director of Federal Tax Policy at the Center on Budget and Policy Priorities.

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


IRS Commissioner Confirms House-Passed Cuts to IRS Budget Could Be “Catastrophic”

August 25, 2014 at 3:48 pm

IRS Commissioner John Koskinen said, according to Tax Notes, that the effects of House-passed IRS budget cuts would be “very serious if not catastrophic” to the agency’s ability to collect revenue and provide taxpayer services, adding: “I no longer want people to think that if we get less money it doesn’t make any difference.  It makes a big difference on taxpayers, on tax preparers, on tax compliance, on tax enforcement.”

As we have written, the House bill would cut IRS funding by $1.5 billion in 2015, including a $1.2 billion reduction in the agency’s enforcement budget, relative to 2014 funding.  The enforcement budget is crucial to the IRS’ ability to collect revenue and pursue tax cheats.  As Commissioner Koskinen affirms, reducing the IRS enforcement budget actually increases the deficit because it prevents the agency from thwarting tax fraud, evasion, and other illegal behavior, thus reducing federal revenue:

Congress is starving our revenue-generating operation. If voluntary compliance with the tax code drops by 1 percent, it costs the U.S. government $30 billion per year.  The IRS annual budget is only $11 billion per year.

And the House cuts would come on top of years of IRS budget cuts that have already weakened enforcement and harmed taxpayer services.  Funding for the IRS fell by 14 percent (after accounting for inflation) between 2010 and 2014 (see chart).  These cuts forced the agency to reduce its workforce by over 10,000 employees and have led directly to a significant decline in the quality of taxpayer services.

For example, millions of taxpayers depend on IRS assistance over the telephone, yet in 2013, a typical caller to the IRS waited on hold for about 18 minutes for an IRS representative, and about 40 percent of calls were never answered.  This is a sharp decline from 2010, when the IRS answered three-quarters of calls and had an average wait time of just under 11 minutes.

Commissioner Koskinen was frank about the impact of continued cuts:

You cannot continue to reduce our resources and ask us to do more things.  The blind belief in Congress that they can continue to cut funding and we will just become more efficient is not the case.  We are becoming more efficient but there is a limit.  Eventually the effects will show up.  We are no longer going to pretend that cutting funding makes no difference.

Policymakers must give the IRS the resources it needs to fulfill its tax-collecting mission and provide the services taxpayers depend on.  The first step is for the Senate and the President to reject the reckless House cuts.

Reagan’s Actions Made Him a True EITC Champion

August 1, 2014 at 11:03 am

We’ve noted that the Earned Income Tax Credit (EITC), which reduces poverty while encouraging and rewarding work, has enjoyed broad support over the years.  One of its champions was President Reagan, who proposed and then signed a major expansion of it in the 1986 Tax Reform Act.

While Reagan is often quoted as calling the EITC “the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress,” he was, as Tax Policy Center director Len Burman blogged this week, actually referring to the 1986 tax reform as a whole, not just its EITC component.  But that takes nothing away from Reagan’s role in strengthening the EITC.

Burman correctly notes that “Republican icon Ronald Reagan supported the Tax Reform Act of 1986’s expansion of the EITC.”   Indeed, Reagan did more than support the EITC increase; he proposed it.

The tax proposals that President Reagan submitted to Congress in 1985 included a proposal to phase in the credit more quickly as a worker’s income rises, expand the maximum EITC, phase the credit out more slowly so that more families would be eligible, and index these parameters for inflation.  The final legislation included the Reagan-proposed phase-in (14 percent) and phase-out (10 percent) rates, as well as his proposed indexation.  Congress went even further on its increase in the maximum credit.

There’s no question that Ronald Reagan’s actions secured his place as a strong advocate of the EITC.

House GOP Follows Ryan Anti-Poverty Plan With Pro-Poverty Legislation

July 25, 2014 at 11:12 am

House Budget Committee Chairman Paul Ryan (R-WI) extolled the anti-poverty effects of the Earned Income Tax Credit (EITC) and, in his new poverty proposal, wisely proposed expanding it for childless adults (including non-custodial parents).  The praise that Chairman Ryan correctly gave the EITC also applies to the refundable portion of the Child Tax Credit (CTC).  Both of these essential tax credits encourage work, expand opportunity, and reduce poverty.

Today, however, House Republicans are considering on the House floor permanent CTC legislation — a bill for which Rep. Ryan voted as a Ways and Means Committee member — that would lead to more poverty, not less.  The bill permanently alters the CTC by extending it higher up the income scale so that more families with six-figure incomes can benefit from it, while failing to make permanent a key CTC improvement from 2009 for working-poor and near-poor families that’s slated to expire at the end of 2017.  Census data show that letting the CTC improvement for low-income working families expire after 2017 would push 12 million people — including 6 million children — into or deeper into poverty (see chart).

As we have explained, the House bill raises the income levels at which the CTC begins to phase out and indexes those thresholds to inflation.  Couples with two children making between $150,000 and $205,000 would become newly eligible for the credit; a family making $160,000, for example, would receive a new tax cut of $2,200 in 2018.  But because the bill fails to make permanent the 2009 reduction in the CTC’s earnings threshold after 2017, a single mother with two children who works full time throughout the year at the minimum wage and earns $14,500 would lose her entire CTC of $1,725 in 2018.

The bill also indexes the current maximum credit of $1,000 per child to inflation, but that would not help most working families with low or moderate incomes because it benefits only those with incomes high enough to receive the maximum credit.  If the credit’s $3,000 earnings threshold (the level of family earnings at which the credit starts to phase in) is allowed to expire at the end of 2017, the threshold will nearly quintuple — and families making less than about $14,500 will lose their CTC altogether.  In addition, many working families with incomes somewhat above $14,500 will have their CTC cut substantially and no longer receive the maximum credit, making the inflation adjustment meaningless for them.  Under the House bill, indexing would not benefit a family with two children in 2018 until the family has earnings of at least $28,050 — nearly double full-time work at the minimum wage.

Chairman Ryan’s colleagues should consider the poverty-fighting effects of tax credits such as the CTC for low-income working families.  Then they should reverse course and put these families’ needs first, rather than last.

Ryan Adds Momentum to Expanding EITC for Childless Workers

July 24, 2014 at 4:56 pm

House Budget Committee Chairman Paul Ryan highlighted the Earned Income Tax Credit (EITC) today as one of the most effective anti-poverty programs and joined growing bipartisan calls to expand it for childless adults (including non-custodial parents), the lone group that the federal tax system taxes into poverty.  We applaud this step, though we encourage him to reconsider some of his proposals to offset the cost — which would hit vulnerable families — and his opposition to a much-needed increase in the minimum wage.

Ryan proposes lowering the eligibility age for the EITC for workers not raising minor children from 25 to 21, doubling the maximum credit to about $1,000, and phasing in the credit more quickly as a worker’s income rises.

Ryan’s poverty proposal makes a strong, and broadly shared, case for these changes:

  • It notes that young adults’ labor force participation has dropped precipitously in recent years and their unemployment rate is very high.  “[T]he sooner young adults join the workforce, the more experience they will gain and the stronger their attachment will be,” it points out.
  • It cites the findings by the University of Wisconsin’s John Karl Scholz, one of the country’s top EITC experts, that strengthening the EITC for childless workers could lower unemployment, promote marriage, and reduce incarceration rates.  (See our report for more on these issues.) 

President Obama has proposed a very similar EITC expansion, and Senator Marco Rubio (R-FL) has highlighted the need to increase wage subsidies for childless workers.  Congressional Democrats have also championed substantial improvements to the EITC for childless workers.

Unfortunately, Ryan’s proposal has two serious flaws.

First, he would pay for it in part by eliminating the refundable part of the Child Tax Credit for several million children in low-income immigrant working families, including citizen children and “Dreamers,” thereby pushing many of them into — or deeper into — poverty. He would also eliminate the Social Services Block Grant, a flexible funding source that helps states meet the specialized needs of their most vulnerable populations, primarily low- and moderate-income children and people who are elderly or disabled.  (This program provides the kind of services and state flexibility that Ryan says we need more of when he promotes other parts of his plan that would enable states to cut food stamps and rental assistance and shift the resources to services.)

Also among the programs that Ryan would end is one that provides fresh fruits and vegetables primarily to children in schools in low-income areas.  By contrast, the President would pay for his EITC expansion by closing tax loopholes for wealthy taxpayers.

Second, Ryan presents the proposal as an alternative to raising the minimum wage, which has lost 22 percent of its value since the late 1960s due to inflation.  As we have explained, it takes both a strong EITC and an adequate minimum wage to ensure that work “pays” adequately for those in low-wage jobs.  The two policies should be seen as complements, not substitutes.

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House Should Reject Backwards Child Tax Credit Bill

July 18, 2014 at 2:11 pm

The full House next week will consider the Ways and Means Committee’s recently passed Child Tax Credit (CTC) bill.  A recent Tax Policy Center (TPC) analysis confirms our previous critical assessments of the proposal, finding that it would make many relatively affluent people better off while making low-income working families poorer.

As we explained, the bill makes three main policy decisions that, taken together, constitute poor policy:

  1. It extends the Child Tax Credit higher up the income scale — on a permanent basis — so more families with six-figure incomes will benefit.  The bill raises the income levels at which the CTC begins to phase out.  (It also indexes those thresholds to inflation.)  Couples with two children making between $150,000 and $205,000 would become newly eligible for the credit; a family making $150,000 a year would receive a new tax cut of $2,200 in 2018. 
  2. It fails to make permanent a key CTC provision for working-poor families that will expire in 2017 unless Congress acts.  The provision, which was enacted in 2009, made more working-poor families eligible for the CTC and enlarged it for other working-poor families who had been receiving only a partial credit, by phasing in the credit as a family’s earnings rose above $3,000.  If this low-income provision expires on schedule — as the Ways and Means bill allows — a single mother with two children who works full time throughout the year at the minimum wage and earns $14,500 would lose $1,725 in 2018, as her CTC would be eliminated. 
  3. It indexes the current maximum credit of $1,000 per child to inflation.  This provision benefits only those with incomes high enough to receive the maximum credit.  If the low-income provision is allowed to expire in 2017, millions of working-poor families would either lose their CTC altogether or have their CTC cut and no longer receive the maximum credit, which would make the inflation adjustment meaningless for them.  Under the bill, indexing wouldn’t benefit a family with two children in 2018 until it has earnings of at least $28,050 — nearly double what full-time minimum-wage work pays an individual, as we have explained. 

TPC’s analysis illustrates how the combined effects of these policy decisions harm low-income families while benefiting many with higher incomes.  As the first chart below shows, families with children that have incomes between $100,000 and $200,000 would gain, on average, nearly $550 apiece in 2018, while families with incomes below $40,000 would lose, on average.

The Ways and Means bill’s effects on households’ after-tax incomes are also striking.  As the next chart below shows, households earning less than $20,000 in 2018 would face, on average, a drop in their after-tax income of more than 3 percent while those with incomes between $100,000 and $200,000 would get a boost in their after-tax earnings.

TPC’s analysis underscores the downsides of the Ways and Means bill for low-income working families.  These are parents who work for low or modest wages as cashiers, waitresses, home health aides, and day laborers; they clean office buildings or perform other low-paid work.  Policymakers should reverse course and put these families’ needs first, rather than last, when the full House considers the bill.