Month: May 2006

May 18, 2006 03:45 PM | Permalink |

Congressional Republicans are now trying to claim that the tax cut they recently enacted on capital gains and dividends actually favored low-income Americans. The May 17 release from the Senate Finance Committee is an exercise in outrageous statistical chicanery.

To defend their preposterous conclusion, GOP lawmakers apparently started with a reasonable estimate of the effects of the capital gains and dividends tax cut by the Joint Committee on Taxation. The implied (but unpublished) JCT figures appear to be similar to those published by Citizens for Tax Justice — which is to be expected since they were calculated on very similar computer tax models.

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May 12, 2006 03:50 PM | Permalink |

Even as the ink dries on a new federal tax cut for wealthy investors, Congressional tax writers are poised to extend a controversial, recently-expired corporate tax break, the Research and Experimentation (R&E) Tax Credit. The R&E credit has no proven track record of encouraging corporate research—and the extension currently under discussion would ensure that this track record remains unsullied by success.

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May 12, 2006 03:47 PM | Permalink |

Yesterday, Congress completed action on a tax bill that offers large new tax breaks to the wealthy, but virtually nothing to average taxpayers.

The two key elements of the bill, which President Bush will sign, are:

• Tax cuts on dividends and capital gains. The bill extends the 2003-enacted 15-percent top tax rate on dividends and capital gains into 2009 and 2010. Under prior law, this tax break was slated to end after 2008. The two-year cost of the extension is officially estimated to be $51 billion—although the actual cost may be considerably larger.
• AMT relief. The bill extends and slightly enhances the temporary increase in the Alternative Minimum Tax exemption, which had expired at the end of 2005. This provision applies to 2006 only. The one-year cost of this change is $34 billion.

The bill also includes a number of special-interest tax breaks, such as a corporate tax loophole, worth almost $5 billion over the next five years, that allows companies such as General Electric and Citigroup to avoid taxes on U.S. profits that they have artificially shifted off-shore.

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May 12, 2006 02:13 PM | Permalink |

Republican leaders in Congress are poised for a new push to repeal the federal estate tax—even as a new report from the Federal Reserve Board (FRB) reminds us of the critical role the estate tax plays in reducing the concentration of wealth in a few hands. The new report shows that the wealthiest one percent of Americans own more than a third of the net wealth in America—more than the poorest ninety percent of Americans put together—and this inequality has grown worse over the past fifteen years.

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