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Economic News, Data and Analysis

Tax gap at $1 trillion!

Here is the report from BEA.
And a short Tax notes article… :

From Tax Notes:
Government Report Shows $1 Trillion Escaped Tax in 2003
by Allen Kenney
A new government report reveals that U.S. taxpayers paid no tax on more than $1 trillion of income in 2003.
Date: Dec. 21, 2005
A new government report reveals that U.S. taxpayers paid no tax on more than $1 trillion of income in 2003.
The Commerce Department study details the differences between the Bureau of Economic Analysis’s “personal income” figure and the IRS’s adjusted gross income amount — known as the “AGI gap” — in 2003, the most recent data available. While AGI consists only of taxable income, personal income also takes into account tax-exempt income and adjustments attributable to “misreporting” (underreported and unreported income). Personal income also includes income that is partially taxed, such as Social Security benefit payments. (For the report, see Doc 2005-25612 Database ‘Tax Notes Today’, View ‘(Number’ [PDF].)
Commerce determined that almost $425 billion of the $1 trillion gap could be attributed to misreporting. The remainder of the difference, roughly $620 billion, had no “easily identifiable” explanation, according to Commerce.
The 2003 figure represents a 10 percent increase over 2002’s level of $943 billion. The overall gap has grown steadily since 1999, when it was just under $700 billion.
The amount of the 2003 AGI gap represents almost 15 percent of the bureau’s total personal income figure for that year.

Filed under: Economics

House passes budget

House passes controversial, partisan budget bill by 6 votes – no Dems supported.

House Approves $39.7 Billion Spending Cut
House Approves $39.7 Billion Spending Cut
Authority Also Granted to Open Alaskan Wilderness to Oil Drilling
By Jonathan Weisman and Shailagh Murray
Washington Post Staff Writers
Monday, December 19, 2005; 1:54 PM
In a bleary, pre-dawn vote today, the House narrowly passed a sweeping, five-year budget plan for cutting spending for Medicare and other entitlement programs by $39.7 billion, shortly after voting to open the Alaskan wilderness to oil drilling.
[…]
The final budget deal envisions more than $10 billion in savings over 10 years by allowing states to raise co-payments and deductibles for many recipients of Medicaid, the state and federal health program for the poor. An additional $6.1 billion in savings would come from health-benefit reductions, according to Congressional Budget Office documents.
Tens of thousands of low-income Americans are likely to lose health coverage under the measure, and many millions will face premiums, deductibles and co-payments for the first time, said Jocelyn Guyer, senior program director of the Georgetown University Center for Children and Families.
Negotiators bowed to White House pressure and dropped a Senate-passed provision that would have saved billions of dollars by eliminating a fund set up to lure private insurance companies into the Medicare prescription drug program. But another private-insurance subsidy was dropped to save $6.5 billion.
The final deal would shave $1.5 billion over five years from child support enforcement aid to local governments, down from the House-passed $5 billion level.
Stringent new work requirements for welfare recipients could shift considerable costs onto state governments. The CBO estimates that state governments may have to spend $8.4 billion over the next five years to finance welfare-to-work programs to meet the new requirements.
And in one of the most controversial provisions, the agreement would shave $12.7 billion out of the federal student loan program, in large part by locking in interest rates often at a higher level than the current variable rates.

Filed under: Economics

Tax Reform

Looks like I have some reading to do…
The Economists’ Voice
VOLUME 3, ISSUE 1
A Special Issue on Tax Reform

Columns
Edward P. Lazear and James M. Poterba (December 13, 2005) Reforming Taxes to Promote Economic Growth
Michael J. Boskin (December 12, 2005) A Broader Perspective on the Tax Reform Debate
Aaron S. Edlin (August 31, 2005) The Choose-your-Charity Tax: A Way to Incentivize Greater Giving Features
Alan J. Auerbach (December 13, 2005) The Tax Reform Panel’s Report: Mission Accomplished?
Leonard E. Burman and William G. Gale (December 13, 2005) Some Good Ideas, but Show Me the Money
Michael J. Graetz (December 12, 2005) Tax Reform: Time For a Plan C?

Filed under: Economics

No tax reform push?

Looks like administration officials are backing off tax reform. The below is from Time, but Bloomberg and Reuters have run with the story as well.

TIME.com: Tax Reform: A Balk? — Dec. 12, 2005 — Page 1
President Bush may have drawn cheers at campaign rallies last year by calling the federal income tax code “a complicated mess” and promising to make its “million pages” simpler and fairer. But H&R Block can breathe easy for another season. Bush aides tell TIME that the President is likely to postpone any big push for comprehensive tax reform–which looked like it would be a centerpiece of next year’s agenda–until ’07 or ’08. In the meantime, he will probably start small by mentioning the issue in the State of the Union and other addresses next year. Tax reform tested poorly with a Republican-financed focus group, showing more groundwork needs to be laid. The official White House stance is that Bush has not decided whether to pursue the idea next year, but aides say they doubt they could attract Democratic support in a midterm-election year. And the G.O.P. is gun-shy after the Social Security debacle. “No one wants to put something out there that’s not going to go anywhere,” a White House official said. But House Republicans are still likely to pass a simplification measure by April 15 so they can bash the IRS on the campaign trail.

Filed under: Economics

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