The good folks at the Tax Policy Center have written yet another enlightening report on tax expenditures. This one, titled, "Curbing Tax Expenditures" analyzes the current mess that is the tax expenditure "budget". Tax expenditures -- the various credits, deductions and loopholes that are littered throughout our tax code -- tend to be expensive, regressive, and economically distortionary. Their existence comes at the expense of less debt and lower marginal tax rates.
The New York Times had two interesting op-eds over the weekend on two essential components of deficit reduction: tax reform and health care costs.
First, former CEA chair Greg Mankiw lays out what he considers to be four consensus principles for tax reform. Essentially, these are the principles that he thinks should be followed in order to design an optimal tax code. The principles are:
Alex Brill of the American Enterprise Institute (AEI) recently put out a tax reform plan that focuses on corporate taxes, but includes some individual provisions as well. The aims of his proposal, he says, are to "reduce tax rates for job creators, limit subsidies that promote excessive leverage, and phase out tax policies that encourage larger state and local governments."
As lawmakers slowly return to town this week and next week, there will be an increasing focus on possible offsets for any extensions to expiring policies. An Associated Press article today lays out some of the possibilities that Congress will have for nickle-and-diming their way to offsetting the extenders they must pass next month.
The Internal Revenue Service report on the 2006 tax gap, showing $385 billion (about 15 percent) of missing revenue, has made its rounds, sparking debate about the IRS budget. Just yesterday, National Taxpayer Advocate Nina Olson weighed in, saying that the IRS was over-burdened and under-funded for the job it was trying to do.
The most recent focus of President Obama's initiatives has been on "insourcing," or providing incentives to companies to bring jobs back to the US from overseas. According to CNN's article, the proposal, which will come in a few weeks and surely be included in the President's budget, will work on both sides of the equation: providing incentives to companies who bring business back home and eliminating incentives for companies that do the opposite.
Readers of this blog will be familiar with the Zero Plan from the Fiscal Commission's tax reform effort.
In evaluating the impact of Republican candidates' tax plans, Tax Policy Center has been an invaluable resource. After having scored Newt Gingrich's and Rick Perry's plans for revenue and distributional impact, they have done the same for Mitt Romney. The results are also similar, showing revenue losses even when compared against a baseline that extends the 2001/2003 tax cuts.