John Irons's Blog


Economic News, Data and Analysis

Must Read – Leamer on Friedman

I think I saw this on DeLong’s blog. In any case, it’s a very good read.
A Flat World, A Level Playing Field, a Small World After All,
or None of the Above?

Filed under: Economics

ThinkTankTown – Tax Reform

Comprehensive Tax Code Overhaul is Overdue
By John S. Irons
Special to
Monday, April 24, 2006; 12:00 AM
The tax code is ripe for comprehensive reform. There is no doubt that many specific areas in the tax code should be simplified and improved, but as a nation we also need to pursue broader reform. Many problems in the code can only be responsibly addressed in the context of comprehensive reform, and a piecemeal approach is not sufficient as a permanent fix.

Filed under: Economics

More on showtime

Our Events – Center for American Progress
Public Briefing: The Smithsonian/Showtime Controversy
Featured Speakers will include:
Ken Burns, Award-winning documentary filmmaker
Carl Malamud, Senior Fellow and Chief Technology Officer at the Center for American Progress
The Smithsonian Institution’s recent agreement with Showtime Networks to create a joint venture called Smithsonian Networks has raised enormous concern among filmmakers, historians, librarians, and others worried about public access to the nation’s premier collection of historical archives. The new joint venture has right of first refusal on any films that make more than “incidental” use of the Smithsonian collections or for interviews with Smithsonian staff. The Smithsonian Institution has refused to disclose the terms of this contract, which has prompted a formal Freedom of Information Act request.
Please join us to learn about the issues surrounding this new venture and their implications. This major change in policy has the potential to change how access to our collective heritage will be managed in the future.
(More information at the site.)

Filed under: Uncategorized

Showtime/Smithsonia Deal

In case you haven’t seen this. The Smithsonian is granting exclusive access and right of first refusal on documentaries using smisonain collections.

Filmmakers and Others Petition Against Smithsonian’s Showtime Deal – New York Times
Published: April 18, 2006
As the recent coupling between the Smithsonian Institution and Showtime Networks continues to roil the documentary film world, more than 215 filmmakers, television executives and academics have signed a letter demanding that the Smithsonian, a publicly financed museum, not only reveal financial details of the joint venture but also abandon it.

Filed under: Background

Cheney’s Refund

VP Cheney gets a $1.9 million refund.
Bush, Cheney’s taxes made public – Politics –
“As a result, the Cheneys are entitled to a refund of $1,938,930.”

Filed under: Economics

The Check Is in the Mail

Going up on the Center’s site today…
(See also Tax Reform is Dead…Long Live Tax Reform!” in Tax Notes.)

The Check Is in the Mail
By John S. Irons
April 14, 2006
OK, I admit it. I like doing my taxes. This annual ritual gives me the chance to sit down and reflect on the financial year that just passed and to think about my family’s financial future. Tax time reminds me to spend a bit less and put a bit more into savings.
Filing your taxes is also one of the few common experiences that virtually all Americans share, and complaining about tax day and the IRS — in a somewhat perverse way — brings all of us closer together.
But unlike most Americans, I also have a professional interest in the tax code. As an economist and tax analyst, part of my job is to keep an eye on the tax code and tax revenue and to think about how to make the tax code better. By filing my own taxes (and not using a paid preparer like half of tax filers (PDF) do), I try to get a better sense of where things should be changed.
There’s no question that the tax code does need to be improved. But we must also take time to marvel at what it does accomplish. In 2005, the federal government raised over $2 trillion, about half of which came from individual income taxes. Social Security taxes made up a good share of overall revenue (about $800 billion), with corporate taxes, excise taxes (on goods like alcohol, tobacco, and phone services), and the estate tax making up most of the rest. (See figure below.)
The nation’s ability to raise this revenue means that we can, as a country, pursue national goals, such as providing for national security, building bridges and roads, investing in scientific and medical research, supporting our elderly, and educating our children. Maintaining these public structures with adequate funding is part of what keeps our economy and our nation strong.
Most Americans realize the importance of fiscal responsibility and the need to pay for national expenses. In a recent poll by the Pew Research Center, 79 percent of respondents said that “not reporting all income on your taxes” was morally wrong. Just five percent believe it is morally acceptable.[1]
But there is also much that can and should be improved about the code. During the last holiday season, my wife and I decided we wanted to help start a college fund for a new nephew. Writing a check was the easy part, and we knew that there was probably some kind of tax-advantaged educational savings programs that might be available. Now, I’m a tax expert, and the baby’s father is a schoolteacher, so you’d think we’d be able to easily figure out how to best navigate the tax incentives for education. But you’d be wrong. The complexity of tax incentives for higher education is mind-boggling — just take a look at the 82-page IRS Publication 970 (PDF). For example, there is the federal Coverdell account program, and each state has its own “529” plan (and several states have more than one). There are various contribution limits, withdrawal penalties, fees, and other rules to figure out. The system is a giant catch-22 — you need to have a college degree to figure out how to get to college.
And this is just one example of many. There are several, equally complicated tax-preferred ways to save for retirement. Also, low-income taxpayers, who cannot afford some of life’s basics, nevertheless find it necessary to pay private companies to fill out their tax returns — nearly 70 percent of those receiving the Earned Income Tax Credit use a paid preparer, which is more than the population as a whole.
Beyond having an overly complicated tax code, there is also a basic notion of fairness that is violated in the current system. Since most people do not itemize, most deductions in the tax code are simply benefits for other people. And those in higher tax brackets receive a greater benefit from these deductions as well.
A solution to some of these problems would be to simplify the code by consolidating the tax treatment for education, retirement savings, and in numerous other areas. And we should adhere to the principle that everyone should be eligible for a tax incentive at the same rate, no matter your income. In tax speak, this means changing deductions into refundable credits. (The Center for American Progress recently held a tax conference to highlight several suggestions for tax reform; click here for more information.)
Most of what I said above is about fixing the details of the code, not about the overall level of revenues. But we cannot ignore the fact that the country is not raising enough revenue to finance our national priorities. The president and his Congressional allies have turned a record surplus into a massive deficit of close to $400 billion, and experts all agree that the imbalance will not simply go away without major changes in policy.
As a further issue of fairness, it needs to be recognized that once the payroll tax is factored in, the wage income of average taxpayers can easily be taxed at twice the rate that millionaires pay on income from their wealth. This is because employees and their employers must each pay 7.65 percent in payroll taxes — a combined 15.3 percent — on top of their income taxes, and millionaires pay a maximum rate of just 15 percent on their income from capital gains and dividends.[2]
The Bush administration’s radical tax policy has created or made worse these problems, and we need a fiscally sound change in direction. This means reversing the tax cuts for those at the top, ensuring that hard work is rewarded, and making the tax code work for low- and middle-income taxpayers, not against them.
This year, the downside of filling out my own taxes was finding that my wife and I had not been withholding enough throughout the year, and that we will have to write a sizeable check to the IRS. Like millions of others, I will curse the IRS on April 17. But for the rest of the year, I will be proud that I did my part.
And in case the IRS is reading this: The check is in the mail.
John S. Irons, Ph.D., is Director of Tax and Budget Policy at the Center for American Progress.
[1] There appears to be a growing bipartisan agreement that the IRS must be given the resources to track down those that cheat and to close the gap between actual incomes and what is reported.
[2] The payroll tax includes a Social Security tax of 6.2 percent and 1.45 percent for Medicare taxes. For most people, payroll taxes payments exceed their income tax liability.

Filed under: Economics

TRAC prevails on IRS data

Good news…

Data Expert Prevails in Lawsuit Against IRS Secrecy
IRS Must Abide by 1976 Agreement and Provide Performance Data by Tax Deadline
SEATTLE, WA – A federal court has ruled in favor of a widely recognized researcher seeking detailed statistics from the Internal Revenue Service (IRS) about how the agency enforces the nation’s tax laws. Judge Marsha Pechman of the U.S. District Court for the Western District of Washington ordered the IRS to turn over statistical data to Susan B. Long, a professor at Syracuse University and co-director of the non-profit research organization Transactional Records Access Clearinghouse (TRAC).
Long had sought monthly statistical reports from the IRS under the terms of a court order issued in 1976 in a case she filed to compel disclosure of IRS audit and examination data. After the 1976 court order, Long used IRS data to report on, and often criticize, the IRS’s performance for nearly 30 years. In mid-2004, however, the agency stopped complying with the longstanding court order and refused to disclose the information. Long returned to court in January 2006, represented by Scott Nelson, with Public Citizen in Washington, D.C., and Eric M. Stahl and Michele Earl-Hubbard with Davis Wright Tremaine LLP in Seattle.
Pechman ruled Monday that the 1976 order remains enforceable and that IRS claims that producing the data it regularly compiles would be burdensome are unsupported. The court rejected the IRS’s argument that the production of statistical data would violate a statute prohibiting public release of tax return information about individual taxpayers, because there was no evidence that the statistics could be used to identify any taxpayer. The ruling stated that, “[b]ecause Ms. Long seeks to disseminate the information sought in this proceeding to the public, there would be a public benefit from disclosure of the records sought.” It also found that, “Ms. Long’s interest in this matter stretches back 30 years and has both public interest and scholarly components.”
Pechman ordered production of the requested reports within 14 days, placing the IRS under the same compliance deadline (April 17) that the rest of the nation faces for tax returns. The court also ruled that Long is entitled to an award of attorneys’ fees for enforcing the order.

Filed under: Economics