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Tax Policy Center: Economic Stimulus
Tax Policy Center reports on: Economic Stimulus - The Tax Policy Center is a joint venture of the Urban Institute and Brookings Institution. The Center is comprised of nationally recognized experts in tax, budget, and social policy who have served at the highest levels of government.

• McCain's Gas-Tax Plan is On Empty
  Presumptive Republican presidential nominee Sen. John McCain wants to suspend the federal gas tax for the summer travel season. Truckers say they like the idea. In this Marketplace commentary, Len Burman, Director of the Tax Policy Center explains why Senator McCains proposal wont get us where he wants to go. http://marketplace.publicradio.org/display/web/2008/04/17/burman_commentary/
• Some Ignored Costs of Bonus Depreciation
  As part of the recent stimulus bill, Congress and President Bush decided to try to grant businesses bonus depreciation allowances for new purchases of equipment. For each $100 spent in 2008 on equipment expected to last at least five years, businesses would be able to deduct the vast majority of costs in the first year $600, versus $240 under the old law. At a 35 percent corporate tax rate, for instance, corporations can get checks from the IRS for $210 instead of $84 in the first year for each $1,000 invested. There is one catch: They must have $210 of taxes already due to get $210 back, or $600 of profit against which to take a $600 deduction. Otherwise they will have to delay taking the deduction which is the world they were already in.
• Make the Tax Cuts Work
  New York Times, January 23, 2008 - Since 2001, official Washington's answer to every policy question has been the same. What should we do with a big surplus? Tax cuts. How do we beat back global terrorism? Tax cuts. Increase energy independence? Rebuild New Orleans? Expand health insurance coverage? Tax cuts, tax cuts, tax cuts. Now comes another question to which taxes have long been at least part of the answer. How do we stimulate the economy to prevent or shorten a recession?
• Lower Taxes and Economic Growth: Response to a Flawed Analysis
  When the Speaker and other leaders of Florida's House of Representatives released their plan to roll back property taxes and place a tight growth limit on state and local revenues, they included a report in their release by the firm Arduin, Laffer and Moore that claims lower taxes will lead to higher economic growth. We examine and point out the flaws in this analysis and show the authors' fundamental result is due to how they constructed their data and an elementary statistical mistake.
• Contrary to President's Claim, Large Majority of Americans Ultimately Are Likely to Lose From Tax Reconciliation Bill
  In his recent statement responding to the tax reconciliation bill conference agreement, President Bush asserted that failure to extend the tax cuts contained in the bill would be "disastrous" for "all working Americans." In this analysis, we consider three possible approaches to paying for the tax cuts: one that approximates financing largely through cuts in federal programs, one that approximates financing through a combination of program cuts and progressive tax increases, and a third that approximates financing entirely through progressive tax increases. Under all three scenarios, the average household with income below $100,000 would lose from the tax bill.
• Dynamic Scoring: Not so Fast!
  Using dynamic scoring to weigh the effects of tax and spending proposals poses a high risk that ideological biases will pollute the analysis, senior fellow Rudolph Penner warns in a <em>Ripon Forum</em> commentary. The former director of the Congressional Budget Office also points out that consistent dynamic scoring is logistically impossible given current technology.
• Do Incentives Affect Behavior? Would an Economist Know?
  In recent decades, economists have acquired great weight in debates over incentives. When it comes to examining the effect of policy incentives on behavior, the theory is relatively straightforward. However, many factors, especially non-financial, have been ignored for sometimes very legitimate reasons. Still, I have long believed that the failure to take into account other psychological and sociological motives for behavior, as well as the effect of complexity on the behavior that results, is a fundamental source of error in much of the economics literature. At the same time, I have come to believe in the great power of some incentives even if they cant be measured well. As for how much incentives change behavior, that is less clear to me.
• Under the Sheltering Lie
  [Marketplace] The White House says lowering taxes on capital gains and dividends will create jobs and opportunity. Tax analyst and commentator Len Burman thinks not.
• Capital Gains Tax Rates, Stock Markets, and Growth
  Claims that increasing capital gains tax rates will adversely impact stock markets and economic growth are not strongly supported by empirical data. Over the last half-century, the correlation between the maximum capital gains tax rate and the ratio of the S&P index to GDP has been about -0.35. Also, capital gains rates display little evidence of correlation with economic growth.
• Setting the Stage for Tax Reform--A Tax Policy Center Forum
  This Urban-Brookings Tax Policy Center forum discussed issues that the new tax reform commission will have to grapple with in setting forth proposals to advance tax reform. Pamela Olson of Arps, Slate, Meagher & Flom, LLP and former Assistant Treasury Secretary for tax policy explained the goals of the tax system and presented some of the basic principles guiding tax reform, Gene Steuerle of the Urban Institute and the Tax Policy Center explained the need for reforming the tax policy process and William Gale of Brookings Institution and the Tax Policy Center discussed the question of whether to make tax cuts permanent or not.
• Interview with Eugene Steuerle
  The main purpose of a tax system is to provide revenues to support government functions. It is not to cut taxes. At the same time one wants to create a tax system that supports efficient and fair government and to distort as little as possible the behavior of individuals who are subject to tax. The role of both tax cuts and tax increases is to move toward some optimal level of taxation needed for this time and place. People now use the tax system for a wide variety of reasonsreally too many. [ NewsQuarterly]
• The American Jobs Creation Act of 2004 : Creating Jobs for Accountants and Lawyers
  The American Jobs Creation Act of 2004 will repeal an export tax incentive (called ETI) that the World Trade Organization has ruled illegal. Yet the legislation also risks undermining the integrity of the U.S. tax system in important ways. While the bill is ostensibly aimed at promoting job creation and international competitiveness, the legislation is not an effective way to achieve these aims. As it stands, the main impact of the legislation will be to make the corporate income tax system more complex, less efficient, and less fair.
• Bush Administration Tax Policy: Summary and Outlook
  This is the eighth and final installment in a series that evaluates tax policy in the Bush Administration, covering the years 2001 to 2004. The paper summarizes our principal findings, and discusses some of the key tax and fiscal issues facing the Administration in its second term.
• Bush Administration Tax Policy: Short-Term Stimulus
  This paper examines the effects of recent tax cuts as a short-term economic stimulus. The passage of the tax cuts was well-timed to offset economic downturns, but several elements of the structure of the tax cuts were poorly designed to provide short-term stimulus. For example, the tax cuts were predominantly back-loaded and did not channel funds toward groups with the highest marginal propensity to consume additional resources. Many provisions were intended