BNA reports that a part of the ill-fated "Trifecta" bill of this past summer--so named because it included a minor death tax reform, a minimum wage booster, and a mish-mash of tax "extenders"--may be on the table again during the lame duck Congress.

The new legislation would include only the tax extenders, which are a strange mix of special-interest subsidies, incentives for bad state-level tax policy, and handouts to business. Extending these things for a year would cost $15 billion, according to the JCT. Another year would add $10 billion to the price.

Bill Beach argues that these special exemptions and credits injure the cause of tax reform:

Our current tax code is riddled with enormous tax breaks for particular types of economic and social behavior, and subsidies that the code gives certain taxpayers is a major reason why our broken tax code remains unreformed. After all, why would anyone want to give up a claim to a big tax break? The “tax extenders” about to be considered by the Senate would perpetuate these tax subsidies and, in some instances, increase their value to taxpayers.

These extenders are basically special-interest pork masquerading as tax cuts. Real tax cuts that boost the economy are broad based, don't play favorites, usually don't make the tax code much more complicated, and reduce negative incentives on productive activity. The extenders package fails on all counts.

Congress would do far better to get the ball rolling on real tax reform. Really, even doing nothing would be a better course. And if the GOP is truly interested in reclaiming its mantle as the party for fiscal conservatives, Larry Kudlow has a proposal that would take a big step in that direction and maybe even put the heat on Democrats hoping to boost taxes over the next two years.

Posted by Andrew Grossman at 11:20 AM | Permalink | TrackBacks (0)

Arizona's Goldwater Institute has released a study that examines poverty at a state-by-state level. The key finding: "Using data from the U.S. Census Bureau, the pages that follow demonstrate that low-tax and -spending states enjoyed sizable decreases in poverty rates during the 1990s. High-tax and -spending states, meanwhile, suffered increases in poverty rates."

To complement this study, Goldwater has also unveiled an interactive map from which you can easily view the progress your state has made in reducing poverty. D.C. gets an "F."

The study and map should provide good rebuttals for those who argue that what's need to reduce poverty is big government, not low-tax free enterprise policies.

Posted by J. Lawrence Scholer at 02:54 PM | Permalink | TrackBacks (0)

From the Raising Farrahzona weblog:

I just finished an 8,459 page partnership tax return with 25 partners. Of those 8,459 pages only 602 relate to the actual tax return. The rest of the return is information the IRS requires to be filed. No impact on taxable income, just a document dump for the IRS. To make matters worse, with these type of disclosures, e-filing is practically impossible. It’s going to take 2 boxes and over $150 to mail the tax return to the IRS.

And lefties want the government to manage our health care? I shudder. I really do.

But don't its proponents take as a given that a government-run single-payer system would cut down dramatically on paperwork (e.g., here, here, and here)? Perhaps someone could direct us to a paper or study that makes this point as more than a bare assertion. For now, the balance of experience, such as recounted above, argues against it.

(via Club for Growth)

Posted by Andrew Grossman at 01:55 PM | Permalink | TrackBacks (0)

Many will remember the genesis of Ronald Reagan's support for tax reform. Jeffrey Birnbaum and Alan Murray describe it this way in their excellent Showdown at Gucci Gulch:

[Reagan] had a passionate desire for lower individual tax rates. he had vivid memories of his days as a young Hollywood actor, when he was reluctant to make too many movies in one year because more than 90 percent of his pay would go to the government. All other concerns paled in the presence of this obsession..

A simple and persuasive anecdote it is, but some are still unconvinced. Witness, for example, the great opposition from some political corners to dynamic scoring, which takes such individual responses into account when projecting revenues under different tax policies. Those who would raise taxes are loath to admit that raising rates or taxing capital would convince anyone to alter his or her behavior.

But that's daft, as even the French are learning. The Washington Post (vie Boudreaux) reports that the country's wealth taxes are causing a massive exodus of capital and entrepreneurial know-how:

On average, at least one millionaire leaves France every day to take up residence in more wealth-friendly nations, according to a government study....

Eric Pinchet, author of a French tax guide, estimates the wealth tax earns the government about $2.6 billion a year but has cost the country more than $125 billion in capital flight since 1998.

The worst culprit (taxes are high all around, is the so-called "Solidarity Tax," a wealth tax that "is collected on top of income, capital gains, inheritance and social security taxes." It can hit innovators and business owners hard, a tech entrepreneur Denis Payre learned:

Payre said that when he decided to leave his high-tech company, Business Objects, in 1997, he owned shares that were worth $110 million -- on paper. French tax authorities required Payre to pay a wealth tax of 2.2 percent on the shares, based on what the shares would have been worth had he sold them at the market's highest point.

But Payre said that he didn't have access to them because of stock market regulations that limited his ability to sell and that, in any case, a market dip had devalued the shares below that peak.

Payre voices a universal concern about taxes that target entrepreneurs: "The loss in income for the government is the smallest part. The big issue is the loss of all that creative energy this country is dying for."

So what's the magnitude of the dynamic effect of this tax? That's the key question. France has undoubtedly lost out on tax revenues on the $125 (or so) billion that's left the country since 1998 due to the wealth tax, as well as revenue on the growth that was forgone due to that money being invested elsewhere. As well, many entrepreneurs left the country, slowing growth and shrinking the tax base from what it otherwise might have been. Just like Reagan the actor, other entrepreneurs no doubt slowed down their activities and scaled back their investment from what they otherwise would have been, chipping away further at growth and the tax base. Some put their money into second-best investments, like tax shelters, to reduce their tax burdens, causing deadweight economic losses and, once again, slower growth and a smaller base.

No, it's not hard to imagine a world in which France's wealth tax ends up costing the country more than it collects in revenue. But even if it comes out ahead, that's no guarantee that it is the most efficient (that is, least harmful) way to collect the net revenue that it does bring in.

With the Bush tax cuts set to expire in coming years, there are big lessons here for U.S. policymakers. As is often the case in economic affairs, the biggest one is, Don't be France.

Posted by Andrew Grossman at 12:36 PM | Permalink | TrackBacks (0)

Writing on the Heartland Institute's weblog, transportation expert (and sometimes Heritage adjunct) Wendell Cox argues that a dedicated tax for Washington's Metro, such as proposed by Rep. Tom Davis, would be a major mistake:

However, the most important problem with the proposed dedicated tax is that it is not needed at all. For more than two decades, the option of reducing costs through competitive contracting (competitive tendering) of services has been well known to policy makers. Competitive contracting would involve using private operators to provide transit services, through a coordinated system that would look no different to users, have a unified fare structure and cost taxpayers less. The world’s largest public bus system, the famous double-deck red London Transport system is virtually all competitively contracted. Over the past 20 years, the costs have declined $15 billion (that's billion with a "B") relative to inflation --- more than the cost of Washington’s 100-mile Metro subway system....

What stands in the way? In a word, politics. WMATA is controlled by its unions that virtually forbid cost effective operation, not to mention its ponderous bureaucracy. It is inconceivable for the taxpayers to cough up enough money to both satisfy these interests and provide meaningful new value for the riders. A new paradigm is needed --- a paradigm that places the interests of riders and taxpayers above the demands of managers and employees.

Not a penny more should be granted to WMATA until the regional and national political structure takes the steps necessary to put the riders and taxpayers first. There is no reason for transit service to cost more than necessary, and its excessive cost represents a drain on the regional economy. Early in my transit board career, I learned that the answer to every question in transit is “more funding.” This needs to change. The means of reform have been on the table for a quarter century. That’s time enough.

In a Heritage paper out this morning, Ron Utt takes a close look at the Davis legislation.

Posted by Andrew Grossman at 09:18 AM | Permalink | TrackBacks (0)

James Taranto is a treasure:

You can see why Buffett would want to give his billions to charity. The federal death tax is currently being phased out, but it will reappear in 2011 unless Congress acts--which means that if Buffett lives that long, the government will confiscate 55% of his assets upon his death. But wait. Buffett is, as a New York Sun editorial notes, "an avowed supporter of the estate tax." As we noted in 2001, so is Bill Gates Sr., the Microsoft founder's old man, who is an executive of the Bill and Melinda Foundation. As the Sun notes:

Mr. Buffett could have let the government take its share of his estate after he dies. But just as Mr. Buffett has accumulated his vast wealth without paying much personal income tax, he has found a way to avoid the tax man in this maneuver as well, even writing in his letter to Bill and Melinda Gates that a condition of the gift is that the foundation "must continue to satisfy legal requirements qualifying my gifts as charitable and not subject to gift or other taxes." On the estate tax, watch what Mr. Buffett does, not what he says. The Gates Foundation isn't the only recipient of his largesse--three foundations headed by Mr. Buffett's three children, Susan, Howard, and Peter, will get hundreds of millions of dollars. Tax documents show that in 2004, Peter Buffett and his wife Jennifer each took a $40,000 a year salary for what they reported was 30 hours a week each of work on the foundation.

When billionaires back the death tax, keep in mind that they have no intention of actually paying it. They are being "generous" with other people's money. This is the way in which the superrich wage class warfare against the merely affluent.

Posted by Andrew Grossman at 04:26 PM | Permalink | TrackBacks (0)

The 2003 tax cuts lowered tax rates on capital. Opponents called the change a sop to the rich, while proponents argued that it would stimulate growth across the economy.

Soon after the cuts, capital investment roared back to life, and growth has been strong since. That trend continues.

A new report from the Treasury announces that the government's deficit over the first eight months of the fiscal year is 16.6 percent lower than the deficit over the same period last year. The deficit is not lower because the government cut spending--because it didn't. Spending is actually up 8 percent so far this year. Tax receipts, however, are up 13 percent for the year and an astounding 26 percent for May. Driving these gains are increases in capital gains collections and corporate tax collections, which are growing far faster than the economy's 7 percent nominal growth rate.

Lower tax rates on capital are what's behind this good news. But under current law, these cuts are set to expire in coming years. Last week, the Senate couldn't even muster enough votes to make repeal of the estate tax permanent. The economy is roaring ahead, for head. Congress needs to catch up.

Update: Betsy Newmark has more, from IBD.

Posted by Andrew Grossman at 08:18 AM | Permalink | TrackBacks (0)

NTU's John Berthoud makes an excellent point:

Among the many bogus arguments of Estate Tax supporters, as usual, the most annoying were the "fiscal responsibility" claims from Senators lamenting that Washington "can't afford" this tax cut. For example, the esteemed George Voinovich of Ohio opined, "We can't afford to lose a dime right now. What we ought to be doing is asking for a temporary tax increase to pay for the war."

So, according to Senator Voinovich, Washington is hurting for money.

However, according to the facts, that's not the case.

In its latest budget analysis (March 3, 2006), the Congressional Budget Office is projecting that the federal government will collect $2.3 trillion in 2006. That's a 59% increase over 1996! In other words, for every dollar we were collecting in 1996, the federal government will be collecting $1.59 this year.

Of course, Voinovich's is the 'moderate' position.

Posted by Andrew Grossman at 08:51 AM | Permalink | TrackBacks (0)

"We all pay for the estate tax." That is the conclusion (and title) of a new paper by Stephen Entin. The paper points out that the death tax hits the U.S. economy hard, drawing down GDP by an estimated $11 billion per year, costing 145,000 jobs, and hitting total personal income by $8 billion per year. That's a big downside for a tax that may--once avoidance behavior and dynamic effects are factored in, not to mention changes to capital gains realizations that are in the bill to repeal the death tax--actually cost the federal government revenues.

And as Entin points out,

One of the worst features of the estate and gift tax is that the smallest and newest businesses, those with the least cash, are the least able to survive the tax. These include a large share of the businesses created by minorities. The estate tax makes it harder for successful minority business owners to pass the business on to the next generation.

Find much, much more coverage on the Club for Growth's weblog.

Posted by Andrew Grossman at 10:16 AM | Permalink | TrackBacks (0)

Economist Greg Mankiw says yes.

Posted by Andrew Grossman at 02:15 PM | Permalink | TrackBacks (0)

As an article in today's Wall Street Journal explains, repealing the death tax would actually increase federal revenues almost immediately. No, this isn't just due to supply-side effects or anything like that.

Critics of repeal are correct to say that, in a static analysis, a simple repeal would cost the federal government money. But they overlook that the actual legislation for repeal embodies a compromise: the legislation would also eliminate step-up basis for capital gains at death. The Journal explains what this means:

Under current law, the value of inherited assets -- say, General Electric shares -- is "stepped up" to the market price at the time of death. This means that no capital gains tax is applied to the increase in the value of the stock or business over the original owner's lifetime. So if grandma bought GE at $5 a share and the price at her death is $50 a share, her heirs pay no capital gains tax on the $45 increase in value.

By the Joint Committee on Taxation's own estimates, this change would bring in $293 billion over 10 years. That's $12 billion more than the $281 billion it estimates would be lost by repealing the death tax. But the JCT's summary numbers don't reflect this, for reasons that remain somewhat hazy.

As we discussed last week, on its own, the estate tax may be a revenue loser, once real-world dynamic effects are factored in.

Update: With a vote in the Senate on the death tax coming up on Thursday, Andy Roth promises a "Death Tax Blog Marathon." Excellent.

And Andrew Chamberlain of the Tax Foundation take a look at their poll numbers, which show that the death tax is, according to the public, the least fair tax and that 68 percent favor eliminating it permanently.

Posted by Andrew Grossman at 09:18 AM | Permalink | TrackBacks (0)

Nobel laureate economist Edward Prescott defends the estate tax repeal in this morning's Wall Street Journal. The Tax Foundation has a long excerpt on its weblog, including this nugget:

And that gets to our first point about the supposed budgetary benefits of such a tax. Since an estate tax is really just another name for a tax on capital income, then there is certainly no justification for such a tax. I, and others, have written before in these pages about the inefficiency of capital income taxes, and there's no need to revive those arguments here, except to say that we can only grip the neck of our vibrant economic goose so tightly before it eventually dies and quits laying those golden eggs. And many of those golden eggs come in the form of capital that allows descendants to keep family businesses intact, or to begin new businesses that fuel our economy.

Besides, even if estate taxes were not inefficient and could be construed as fair, they would still do little to address the budget deficit. In 2003, net estate taxes accounted for $20.7 billion, a drop in the bucket of an $11 trillion economy. Clearly, we are not going to balance the budget by grave robbing.

Economist Greg Mankiw, former head of the President's Council of Economic Advisers, adds this on the repeal's effect on charitable donations:

I am puzzled by those who say that the repeal of the estate tax will hurt charitable giving. Repeal has two opposing effects: a substitution effect (it raises the relative price of giving to your favorite charity rather than to your heirs) and an income effect (you have more to give). Critics of repeal seem to assume that the substitution effect dominates the income effect. I am not convinced that is right.

Imagine a wealthy Harvard alum. His will says, "Give each of my 10 heirs $10 million after taxes, then the rest to Harvard." If he faces an estate tax rate of 50 percent, then funding the heirs will cost an extra $100 million, which will all come at Harvard's expense. Isn't something along these lines plausible?

The Tax Foundation has a history of the estate tax, which backs Prescott's point that it is not a big revenue raiser. A Foundation brief argues that the estate tax may be, on net, a revenue loser.

Cato's Alan Reynolds runs through the research in a piece from last summer and reaches the same conclusion:

In 1987, a study in Tax Policy and the Economy by Douglas Bernheim of Stanford concluded that "available evidence suggests that, historically, true revenues associated with estate taxation may well have been near zero, or even negative." The estate tax results in lower income taxes through such means as giving stocks and bonds to heirs in lower tax brackets, funding M.D. degrees for grandchildren, deducting tax-avoiding life insurance premiums from business income and setting up tax-exempt foundations.

Supply-side effects make it even less likely that the estate tax raises any revenue. As a July Congressional Budget Office (CBO) study notes, an estate tax can "lead people to invest less than they would otherwise" and "reduce entrepreneurial efforts."

So where does repeal stand, politically? Under current law, the estate tax will expire for one year, 2010, and then skyrocket to a top rate of 60 percent in 2011. The House has, several times, voted to make repeal permanent. The Senate, however, has had a majority in favor of repeal, but not the required supermajority to block filibuster. This remains the case.

According to BNA, the Senate is working out another strange "compromise" that would "impose a higher estate tax rate on larger estates, with the top rate at 35 percent." More: "he plan could exempt estates below $3.5 million--the same exemption that will take effect in 2009--while taxing estates just above that amount at 15 percent, a middle range of estates at 25 percent, and those above a certain threshold at the top rate." This would be an improvement over current law, but it would continue all the negative effects of the estate tax. And critics of repeal call this "compromise" just as bad as an outright repeal, anyway, in terms of its (static!) revenue effects.

One observer tells BNA that the competition between Sen. Jon Kyl's outright repeal bill and this "compromise" is intense. "The only question is 'Who can get 60 votes?,'" he said. "And my judgment is that Kyl and his proposal have the best chance to get 60 votes"

It is disappointing that so much strategy and maneuvering is necessary to kill off a wildly unpopular and unfair tax that raises little money and may even cost the government revenue. The reason, of course, is that proponents of the tax consider it a strong wedge issue for a voting base that responds positively to class warfare. Apparently, for some, that's reason enough to keep the estate tax on the books indefinitely.

Posted by Andrew Grossman at 10:42 AM | Permalink | TrackBacks (0)

Heritage's Bill Beach speaks to the Journal about the appointment of Henry Paulson as Secretary of the Treasury:

What does Paulson's nomination mean for the markets and the economy?

Beach: It seems to me there's very little of the Bush administration that's left from a policy standpoint, except their economic policy … If you look over into the other areas, from education, to disaster recovery, to defense policy, the Bush people are heavily blocked-in [and] stymied. But in the economic area they still seem to have that aura of leadership. So it's really a great opportunity for Paulson, he may have sensed that … even though the rest of the ship was tilting toward the waterline, this part of the ship was solid and he could in fact affect the rest of it by being a strong leader on the economic side.

Will Paulson have more influence than his predecessors on policy making?

You certainly have seen the center of gravity in economic policy shift from Treasury and Commerce to the national economic council and the council of economic advisors. So it's shifted from the departments back to the White House. Now, it goes and it comes. Over the course of the past 60 years, there's been an ebb and flow. And this time it has flowed toward the White House. The president has wanted to have policy reins in his own hands … Now, the white House economic team is not as deep as it once was. A lot of the really talented people have burned out, they've gone on to K Street or back to the academy, and so I think it is almost inevitable that for the next two years Treasury will play a larger role than it has in the past. The talent is in treasury, not at the White House. Not to say the White House doesn't have good people they just don't have very many of them. And I do expect now some resurgence in the leadership of the Treasury Department.

What are the responsibilities of the Treasury Secretary?

The Treasury Secretary is the trustee of our monetary system, our banking system. More so than just being an administrator of programs and a policy chief, there is a special responsibility that goes only with a few departments, to maintain and preserve. And that's a big job for the Treasury Secretary … The Treasury Department has a major judicial role to play. It defends our monetary system against counterfeiting which continues to be an enormous problem. It defends our banking system against fraud, our credit system against abuse, our Internet and Web services against financial phishing.

All of these sorts of things that are more of police powers are surprisingly there. The U.S. Marshall's service is part of the Treasury Department so they're responsible for a lot of our air traffic safety and the transport of prisoners. So he has those kinds of jobs in addition to ... administering the world's largest tax system and being one of the permanent trustees of the world's largest retirement system. I think he is the principal trustee of the federal government's employee retirement system, which is a very, very large system indeed.

Just the fact that he has to review and authorize every single debt instrument deployed by the U.S. to fund those activities that are not paid for by taxes, is a huge responsibility. So you don't want to put someone in there who has not had big weight on their shoulders, because they'll just crumble.

Do you expect to see policy shifts as a result of Paulson's nomination?

I'm hopeful that they'll just deliver on what the president has been pronouncing for the past many years and that is a better tax system one that's more fair and more pro-growth. I think that's crucial … I don't think they're going to shift. I think it's too late for shifts. But I think there are some things they can accomplish.

Posted by Andrew Grossman at 09:24 AM | Permalink | TrackBacks (0)

According to Wikipedia,

Cognitions which contradict each other are said to be "dissonant," while cognitions which agree with each other are said to be "consonant."... Dissonance can be reduced either by eliminating dissonant cognitions, or by adding new consonant cognitions. The maximum possible dissonance is equal to the resistance to change of the less resistant cognition; therefore, once dissonance reaches a level that overcomes the resistance of one of the cognitions involved, that cognition will be changed or eliminated, and dissonance will be reduced.

This leads some people who feel dissonance to seek information that will reduce dissonance and avoid information that will increase dissonance.

Many on a certain side of the political spectrum seem to have latched onto the fact that denizens of the upper echelons of the income-distribution curve are paying less as a share of federal taxes now than they were back in 2000. They consider this fact to be extremely significant and, often, somehow morally repugnant. But they tend to miss a crucial point.

First off, the contention that the rich are paying less, proportionally speaking, is true. Bizzyblog looks at some CBO data and finds that the top 10 percent of earners are paying about 3 percentage points less of total federal revenues than they were in 2000. And hold onto your hat, the top 1 percent are paying 3.4 percentage points less than in 2000.

We read lots and lots about the President's tax cuts shifting the tax burden onto the middle class but much less often do those leveling such charges report the absolute levels of tax burden by income group. For example, while it is true that the top 10 percent of earners are paying less, proportionally, than in 2000, they still shoulder 65 percent of the tax burden. Right about now is when the dissonance kicked in; some of you probably won't even remember that number from the last sentence. The top 20 percent of earners pay 80 percent of the total federal take.

And what about the middle class? The middle 60 percent of Americans by income pay, altogether, 21.2 of total federal tax revenues. (How does that add up if the top 20 percent pay 80 percent of revenues? Easy--the bottom 20 percent face a negative income tax burden.)

No, this isn't a complex point at all, but it is surprisingly often overlooked. Sure, the rich are paying a lower share, but they're still paying the overwhelming bulk of federal taxes. And while the middle-class, may be paying a bit more proportionally than before, with the dynamic benefits in jobs and growth of the Bush tax cuts, it's hard to say definitively that they're worse off.

But if you've made it this far, this is just preaching to the choir.

The full CBO table is in the extended entry.

Continue reading "Several Not Inconsistent Facts That Seem to Cause Lower Vertebrates Cognitive Dissonance and Make Their Heads Explode" »

Posted by Andrew Grossman at 11:13 AM | Permalink | TrackBacks (0)

It is always invigorating to see one's policy ideas signed into law. Some of Heritage's top tax experts went over to the White House today to see the President sign the Tax Increase Prevention and Reconciliation Act of 2005 (H.R. 4297).

Why is this such a big deal? The bill extends the President's tax cuts on capital gains and dividends, which were key to boosting business investment and reinvigorating the economy. Letting them lapse would have been a big mistake. (And conversely, making them permanent would have been an even bigger gain). Here's what economist Tracy Foertsch has to say:

Extending JGTRRA’s preferential rate structure on capital gains and dividend income will have small—but positive—effects on both gross domestic product (GDP) and employment. Personal consumption and business fixed investment are also likely to post modest gains as a result of H.R.4297. These gains will be modest because H.R. 4297 is only a temporary extension of an expiring provision. Real GDP, consumption, and investment would all respond far more positively to a permanent extension of JGTRRA’s preferential tax rates on capital gains and dividend income.

H.R. 4297’s capital gains and dividend provisions are likely to influence economic activity through two primary channels. They will increase personal disposable income by lowering federal tax payments. And they will reduce the cost of capital to businesses by raising the value of U.S. equities. Higher personal disposable income is likely to provide an immediate boost to economic activity. The lower cost of capital is likely to provide economic benefits over the medium term.

This was a necessary first step towards continuing the strong growth sparked by the cuts and eventually making them permanent.

A couple pictures from the ceremony are in the extended entry.

Continue reading "A Beautiful Day for a Signing Ceremony" »

Posted by Andrew Grossman at 02:54 PM | Permalink | TrackBacks (0)

We inaugurate this new monthly feature with a comment from Thomas Bingel of Heritage's Center for Data Analysis:

The Congressional Budget Office (CBO) in its latest Monthly Budget Review projects that the 2006 federal deficit will come in below $350 billion—perhaps even as low as $300 billion. Based on the data from the first seven months of this fiscal year, Heritage’s Center for Data Analysis estimates that the deficit might come in below last year’s of $318 billion. Compare that to the Office of Management and Budget’s estimate of $423 billion made this past February—not bad. The driver is higher-than-expected tax revenues.

Corporate income tax receipts rose by 29 percent, year-to-April, to $174 billion, far exceeding CBO’s projections. How did that happen? CBO, it seems, significantly underestimated the profitability of the corporate business sector. This is not a new thing; CBO has consistently underestimated or ignored the large dynamic effects of pro-growth changes to the tax code and so its revenue projections come in low. And thanks to low unemployment and rising wages, individual income tax and payroll tax receipts grew by 10 percent and 7.2 percent, respectively. On-budget receipts (mostly taxes) are about $112 billion higher than during the same period last year.

On the outlay side, two major categories stand out. Medicare is up by 9 percent, year-to-April, to $209 billion, and net interest on public debt is up by 23 percent. CBO states that about half of the increase in Medicare is due to the new prescription drug benefit. Net interest payments jumped almost $30 billion above the same period last year, to $213 billion. Except for Medicaid spending, which fell slightly, all other major spending categories are growing at about 5 to 6 percent.

FEMA saw its outlays increase by $27 billion dollars in the first seven months of 2006 over last year due to disaster relief and national flood insurance expenses in the wake of last year’s hurricanes. See the Treasury’s monthly report for more information.

Posted by Andrew Grossman at 03:49 PM | Permalink | TrackBacks (0)

Tim Phillips of Americans for Prosperity is ecstatic over the passage of legislation to extend the most important of the President's 2003 tax cuts. But, he reminds us, this victory may be short-lived:

However, the fact that Congress has been on an irresponsible, years-long spending spree made this tax relief extension much harder to achieve politically than it ever should have been. If Congress doesn’t get wasteful spending and pork-barrel earmarks under control very soon, it is going to be even harder to make President Bush’s pro-growth tax relief permanent down the road.

A good way to start building momentum for permanent tax relief would be for Congress to strip the wasteful pork-barrel earmarks out of the pending Iraq/Katrina emergency spending bill and to pass meaningful earmark reform legislation. The sooner Congress gets wasteful spending under control, the sooner the American taxpayers will reap the benefits of permanent tax relief through better jobs and a stronger economy.

Posted by Andrew Grossman at 05:19 PM | Permalink | TrackBacks (0)

We see via Porkopolis that our colleague Dan Mitchell joined Bob Bixby, Robert Greenstein, and William Niskanen on the Diane Rehm Show today to discuss the pending extension of the President's tax cuts and tax policy going forward.

Listen online: Realaudio, Windows Media.

Posted by Andrew Grossman at 02:48 PM | Permalink | TrackBacks (0)

This is not surprising:

Three of the four top lawmakers on the Senate Finance and House Ways and Means committees, which are in charge of writing tax laws, pay a professional to file their annual tax returns with the Internal Revenue Service.

This is not surprising either:

The exception is the Ways and Means chairman, Rep. Bill Thomas, R-Calif. The former college professor said he has prepared his own return "forever" and that he waits until close to the deadline to file. Monday is the filing deadline for most people.

Nor this:

New York Rep. Charles Rangel, the top Democrat on the Ways and Means Committee, and Sens. Charles Grassley, R-Iowa, and Max Baucus, D-Mont., the Finance Committee chairman and ranking Democrat, all depend on professional tax preparers.

No, not surprising in the least.

Posted by Andrew Grossman at 01:42 PM | Permalink | TrackBacks (0)