A Federal Reserve working paper released on June 14 looked at the 2003 cut in the federal tax rate on dividends, which is widely credited by conservatives with having raised dividend payouts. However, this paper argues that it had only a very modest effect because the ratio of dividends to earnings changed little afterwards.
A June 7 study by the Tax Foundation looked at the effects of allowing tax cuts on dividends to expire at the end of the year, as is now scheduled. Since the U.S. also has one of the highest corporate tax rates in the world, the combined maximum tax rate on dividends will rise to 68% next year from 50% this year. (Corporate profits are taxed twice in the U.S.—first at the corporate level and again when those profits are paid out to the corporation’s owners, the shareholders.)
Also on June 7, economist Roberton Williams examined the distribution of tax filers with no federal tax liability by income class in 2009. Looking at both the income tax and the payroll tax, 22.9% of tax units paid nothing or had a negative liability due to refundable credits. This included 2% of units with incomes between $50,000 and $100,000, and 0.6% of units with incomes over $100,000.
On June 5, two University of Zurich economists posted the results of a 2008 experiment in Switzerland designed to identify how much taxpayers were willing to pay to redistribute income. They conclude that the marginal willingness to pay is 21% of GDP, well below the 25% of GDP then devoted to welfare state spending in Switzerland.
A June 2 study by economists Tino Sanandaji and Björn Wallace looked at why taxes are so high in Sweden. Based on a new survey, they conclude that Swedes tend to greatly underestimate the amount of taxes they pay.
A June 1 International Monetary Fund study looked at the necessity of raising taxes after an economic crisis. Such crises reduce revenues substantially even in the absence of legislated tax cuts, and even when revenue growth returns to pre-crisis levels the tax/GDP ratio may remain well below pre-crisis levels for many years. Therefore, higher revenues are essential for putting the debt/GDP ratio on a sustainable path.
A May 26 Tax Foundation analysis looked at taxes in 2011 on various taxpaying groups under three scenarios: expiration of all Obama and Bush tax cuts, extension of only the Bush tax cuts, and extension of all tax cuts. Elimination of all expiring tax cuts would increase effective tax rates for every group.
A May 25 report by the National Association for the Self-Employed complains about the paperwork burden imposed by a recent tax change requiring businesses to submit 1099 forms not only for contractors but for every vendor that is paid more than $600 in the course of a year.
On May 24, the Tax Policy Center issued an analysis of the Wyden-Gregg tax reform proposal. It finds that it would be roughly revenue-neutral over 10 years and would slightly increase tax progressivity.
In a May 19 briefing, Congressional Budget Office director Doug Elmendorf discussed various issues in tax policy. Key point: the main impact of enactment of President Obama’s proposals would be to lower the tax rate on labor income; there would be little impact on capital income either way.
Bruce Bartlett is an American historian and columnist who focuses on the intersection between politics and economics. He has written for Forbes Magazine and Creators Syndicate, and his work is informed by many years in government, including as a senior policy analyst in the Reagan White House. He is the author of seven books including the New York Times best-seller, Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy (Doubleday, 2006)
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June 15: Focus on National Security
