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Tax Policy

The Center for a Free Economy believes that the best tax system is one which is pro-growth and pro-family. The tax base should be focused on consumption, not investment. Tax rates should be low. The tax code should not pick winners and losers. Taxes on capital should not be higher than taxes on labor, as is unfortunately the case today. A pro-family tax policy is not opposed to a pro-growth tax policy.

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Don’t listen to Kamala Harris about your tax refund

by Ryan Ellis 2020 Democratic presidential candidate Sen. Kamala Harris, D-Calif., on Monday tweeted out that the middle class got their taxes raised under President Trump’s signature Tax Cuts and Jobs Act. Her rationale? That preliminary reports from the IRS indicate that refunds are down very slightly on a very small sample of tax returns e-filed so far. This is an absurd, bad faith statement on at least two levels. The first problem is that a tax refund’s size has nothing to with whether or not one’s tax liability went up or down. Tax refunds are the product of overpaying the IRS, and therefore giving them an interest-free loan all year until you file your taxes and get your own money back. That number can go up or down every year for any number of reasons—for example, the IRS lowered the amount of tax withheld from paychecks in 2018 to account for the [...]

February 13th, 2019|Categories: Center for a Free Economy, Democrats, Middle Class, Ryan Ellis, Tax, Tax Jobs and Cuts Act|

Tax Reform Simplifies the Code for Middle Class but Future Reforms Should Kill Crony Capitalism

By Ryan Ellis The Senate Finance Committee this week held a hearing on the initial impacts of the Tax Cuts and Jobs Act of 2017. Helpfully, Congress' non-partisan Joint Committee on Taxation provided some tables to show the effects the new tax reform law will have on the tax landscape. In particular, JCT's analysis of itemized deductions stands out. Taxpayers can choose between taking a "standard deduction" ($12,000 for singles and $24,000 for married couples under the new tax law) and totaling together "itemized deductions" (mostly mortgage interest, charitable contributions, and up to $10,000 of state and local taxes). The tax law doubled the standard deduction to these current levels, and curtailed greatly the formerly-unlimited state and local tax deduction. As a result, the middle class will abandon itemizing in droves: As seen above, families making between $50,000 and $200,000 (a pretty good proxy for the middle class) sees a [...]

November 7th, 2018|Categories: Ryan Ellis, Tax, Tax Reform, Tax Reform 2.0|

The Politics and Economics of the Capital Gain Tax

By Alan Reynolds The Treasury Department is said to be studying the idea of providing some sort of inflation-protection (indexing) for the taxation of capital gains.  Rep. Devin Nunes (R-CA) has introduced a bill  (H.R. 6444) to do just that.   Predictably, Washington Post writer Matt O’Brien instantly dismissed the idea as “Trump’s new plan to cut taxes for the rich.” O’Brien relies on a two-page memo from John Ricco which yanks mysterious estimates out of a black box – the closed-economy Penn-Wharton Budget Model.   The “microsimulation model” predicts that the Top 1 Percent’s share of federal income taxes paid could fall from 28.6% to 28.4% as result of taxing only real capital gains.  “That’s real money,” exclaims O’Brien. No model can estimate how much revenue might be lost by indexing (if any) because that depends on such unknowable things as future asset values, future tax laws and future inflation.   Yet [...]

October 26th, 2018|Categories: Indexing Capital Gains, Tax|

New Tax Withholding Tables Are a Down Payment on Big Middle Class Tax Cuts

Ryan Ellis- The new IRS payroll withholding tables are out, and they are predictably being downplayed by the same mainstream media that didn't want to talk about tax relief for the middle class in the Congressional debate over the Tax Cuts and Jobs Act. In fact, the new withholding tables are an immediate pay hike for the middle class, and portend even bigger refunds to come. In order to put meat on the bones of how big a pay increase we're seeing, I took four typical household profiles as seen below. For each household, I assumed zero exemptions from withholding in both 2017 and 2018 (the exemption amount of $4050 did not change in the new tables). Thus, those with non-zero payroll exemptions would have less withheld in both the 2017 and 2018 scenarios. I've also limited the scenarios to a reasonable definition of middle class--if you're earning more than [...]

October 25th, 2018|Categories: Center for a Free Economy, Ryan Ellis, Tax, Tax Jobs and Cuts Act|

Trump’s middle-class tax cut election surprise

By Ryan Ellis Tax nerds in the Beltway went wild this past weekend with President Trump’s announcement of a new middle-class tax cut. First unveiled in a trademark Trump arena speech, and later clarified by the White House, the plan is to pass a 10 percent tax cut for the middle class on top of the large middle-class tax cut contained in the Tax Cuts and Jobs Act of last December. No one is quite sure of language, timetable, score, how to do this with Congress out campaigning, or virtually any other detail. The initial bit of context to recall is that the middle class has seen a sharp reduction in their income tax burden thanks to President Trump’s December 2017 tax cut. According to the liberal Tax Policy Center, the middle tier of taxpayers (those with incomes of $49,000 to $86,000) saw an average 2018 tax cut of $930, a 12.4-percent reduction [...]

October 23rd, 2018|Categories: Center for a Free Economy, Middle Class, Ryan Ellis, Tax, Tax Jobs and Cuts Act|

CFE joins 57 organizations supporting Tax Reform 2.0

Americans for Tax Reform today led a coalition of 58 conservative groups and activists in support of the Tax Reform 2.0 legislation set to be voted on by the House of Representatives later this week. This proposal is split into three pieces of legislation: H.R. 6760, the Protecting Family and Small Business Tax Cuts Act, H.R. 6757, the Family Savings Act, and H.R. 6756, the American Innovation Act. Most importantly, Tax Reform 2.0 strengths the gains made by the Tax Cuts and Jobs Act last year by making individual and small business tax cuts permanent. This tax reduction could not be made permanent when TCJA passed because of a combination of liberal obstructionism, arcane Senate rules, and an unwillingness to reduce out-of-control federal spending. The legislation also updates retirement, education, and family savings accounts and promotes innovation and entrepreneurship for small businesses. The full letter can be found here and is below. Dear Speaker Ryan and [...]

October 1st, 2018|Categories: Center for a Free Economy, Fiscal Policy, Tax, Tax Reform 2.0|
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