Understanding the Federal Tax Debate

September 21, 2012 at 1:07 pm

Below is a compilation of key CBPP analyses, blog posts, and graphics that provide context for the debate around federal taxes.

Overview

  • Policy Basic: Where Do Our Federal Dollars Go?
    August 13, 2011

    The federal government collects taxes in order to finance various public services. As policymakers and citizens weigh key decisions about revenues and expenditures, it is instructive to examine what the government does with the money it collects.

  • Policy Basic: Where Do Federal Tax Revenues Come From?
    August 20, 2012

    In fiscal year 2011, the federal government spent $3.6 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.  Of that $3.6 trillion, $2.2 trillion was financed by federal tax revenues and $83 billion by excess profits on assets held by the Federal Reserve.  The three main sources of federal tax revenue are individual income taxes, payroll taxes, and corporate income taxes; other sources of tax revenue include excise taxes, the estate tax, and other taxes and fees.

  • Analysis: Misconceptions and Realities About Who Pays Taxes
    September 17, 2012

    Close to half of U.S. households currently do not owe federal income tax.  The Urban Institute-Brookings Tax Policy Center estimates that 46 percent of households will owe no federal income tax for 2011.   A widely cited figure is a Joint Committee on Taxation estimate that 51 percent of households paid no federal income tax in 2009.  (The TPC figure for 2009 also is 51 percent.)  These figures are sometimes cited as evidence that low- and moderate-income families do not pay sufficient taxes.  Yet these figures, their significance, and their policy implications are widely misunderstood.
  • Blog Post: Top Ten Federal Tax Charts
    April 17, 2012

    A collection of our top ten charts related to federal taxes.  Together, they provide useful context for the coming debates about how to reduce soaring budget deficits and reform the tax code.

Individuals and Families

  • Blog Post: Reality Check on Who Pays Taxes
    Updated September 18, 2012

    Have you heard that close to half of U.S. households currently don’t owe federal income tax?  Does that mean, as some policymakers and pundits claim, that low- and moderate-income families don’t pay taxes, or don’t pay enough of them?  Not at all, as our updated analysis of this widely misunderstood issue explains.  This post relies in large part on data from the Urban-Brookings Tax Policy Center.

  • Blog Post: Meet Some Makers
    September 25, 2012
    The idea that this nation is divided into “takers” (that is, non-taxpayers) and “makers” is just plain wrong. For example, the largest category of people who didn’t owe federal income tax last year is working-class people who go to work each day to support their families and who contribute much to our society.
  • Blog Post: Who Pays Income Taxes? A Lifetime Perspective
    September 20, 2012

    People are much less likely to owe income taxes at the end or the beginning of their careers.  Many non-income taxpayers are age 55 and over and have paid considerable income taxes during their younger, working years.  Others are students under age 25 who will pay income taxes when they complete their education and enter the full-time workforce.

  • Analysis:  Studies Show Earned Income Tax Credit Encourages Work and Success in School and Reduces Poverty
    June 26, 2012

    Some 27 million working adults with low and moderate incomes, most of whom are raising children, received the Earned Income Tax Credit (EITC) in 2009 to reduce their taxes and supplement their earnings.   Studies have found that the EITC encourages work, reduces poverty, helps families meet basic needs, and improves children’s achievement in school and likely increases their earnings as adults.  The Child Tax Credit, a related tax credit designed to help offset the cost of raising children, also plays a pivotal role in helping low-income families

Taxes and the Economy

  • Blog Post: New Study: No Evidence that High-End Tax Cuts Help the Economy
    September 19, 2012

    Many policymakers cite as fact that cuts in the top income and capital gains tax rates spur much greater economic growth and that increases in those tax rates significantly hurt growth.  A new Congressional Research Service report suggests, however, that such easy assumptions are highly problematic.  The report found no statistically significant correlation, all the way back to 1945, between the top capital gains or top marginal income tax rates and:  (1) economic growth (in real per capita GDP); (2) private saving; (3) investment; or (4) growth in labor productivity.

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4 Comments Add Yours ↓

Comments are listed in reverse chronological order.

  1. Steven Haynes #
    1

    The United States should flatten the income tax and make the payroll tax progressive, straight to the Treasury. The Corporate Income Tax ought to be lowered but the capital gains tax needs to be increased. Then the government needs to enact a Property tax, Carbon Tax, and a Value Added Tax. The Federal Government’s revenue portfolio can be diverse. Or it can rely on just a few taxes. But each of these taxes serves a purpose that helps the government with important objectives it wants to meet to take care of us citizens, the environment, healthcare, etc. I mean, if the economy really performed up to its capability, the GDP would be very high and be enough to raise revenues on its own without any tax revenues other than current taxes and maybe a VAT. But what about reducing carbon emissions? Need a Carbon Tax for that. Then Property Taxes are controversial and it’s like, “What’s the government need to tax property for!?” But those revenues will probably be of more benefit than we think, especially, for the purposes of law and order and a basic income for all the people.

    In the end, the government needs to have a diverse revenue portfolio and a strong economy to get the most out of those tax dollars.

  2. 2

    The U.S. needs to restructure for competitive success in this era of globalization. The Corporate Income Tax, riddled with loopholes, collects only 8% of total federal revenues, down from one-quarter of revenues in 1952. The CIT should be replaced by a Value Added Tax, which is border adjustable and used by all our trading partners and over 150 countries…to subtract the cost of government from the price/value relationship of goods in international trade. This change, VAT replacing CIT, would remove a competitive disadvantage to the U.S., and would grow both manufacturing jobs and the economy. See the video with Bill Clinton explaining the benefits of VAT, a bold strategy for growth: http://wp.me/p18NCA-pV

    • Henry Bennett #
      3

      Steve, I strongly disagree with your recommendation. A VAT would fall most harshly n the poorest Americans who can least afford it. Instead we should simply eliminate ALL the corporate loopholes and increase the top marginal tax rates to at least the level they were at during the Clinton Administration. Furthermore, history has shown that lowering and/or eliminating taxes does NOTHING to grow the economy. In fact, recent history suggests exactly the opposite. Under George W Bush we had two significant tax cuts, and the result was total trashing of our economy!

      • 65snake #
        4

        Yes, under Bush we had two significant tax cuts…and of course those didn’t work, because we are still operating under “trickle down” economic theory. That model, combined with deregulation of wall street is what caused our economic crash.



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