Taxes and Growth

2011: Year of the Tax Man

The current personal income tax rates will expire beginning January 1, 2011. If Congress does not act to extend the current tax rates, the tax burden will increase for all income levels, not just the wealthy.

The Disappearing Income Tax Cuts: The 2001 and 2003 Bush income tax cuts lowered tax rates throughout the income range and reduced capital gains taxes. But if the provisions are not made permanent, these reduced rates will expire soon. The tax bracket for the lowest income-earners will rise from 10 percent to 15 percent; the highest earners will face an increase from 35 percent to 39.6 percent. Data from the Joint Committee on Taxation shows that at least 55 percent of the revenue raised by increasing the top two rates would come from small business income. That amounts to an estimated $8.69 billion increase in small business taxes in 2011 alone. (See “Soaking the Rich and Drenching Small Business.”)

Read the full Special Publication, 2011: Year of the Tax Man

The Likely Effect of the Federal Budget Deficit

July 14, 2010

Many people are worried about the United States' federal budget deficit and accumulating debt burden. In 2009 the federal budget deficit reached a record $1.4 trillion, and public debt (U.S. Treasury securities held by institutions and individuals outside the federal government) is currently more than $8 trillion and growing.

The level of discourse is usually simple: "We're going bankrupt!" But what is the specific threat that the federal government's huge debt burden poses? 

Read the full analysis here.

Should Carried Interest Be Taxed as Ordinary Income?

July 01, 2010

Congress is debating a bill that would tax carried interest at higher rates. However, raising the tax rate on carried interest will not result in any net gain to the U.S. Treasury, but it will have negative impacts on productivity, wages and the cost of investment.

Read the full analysis here.

A Brief Analysis -- Obama's Tax on Job Creation

May 18, 2010

The landmark health reform law signed by President Obama will require small businesses to provide health insurance to their employees. This burden will be offset by a tax credit for each employee covered. However, the credit is arbitrarily reduced as firms grow, penalizing employers that hire more workers or increase their salaries. Thus, the credit may discourage firms from hiring more workers or higher-paid workers.

Read the full analysis here.